##### Table of Contents

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, 2015

OR



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

FOR THE TRANSITION PERIOD FROM
                     TO

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.)



|                                         |  |           
|---------------------------------------- |  | ----------
|201 Rouse Boulevard                      |  |           
|Philadelphia, Pennsylvania               |  | 19112     
|(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 316,039,315 shares of common stock outstanding as of May 4, 2015.



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TABLE OF CONTENTS



|                             |  |                                                                                                               |  |      |    | 
|---------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                             |  |                                                                                                               |  | Page |   
|PART IFINANCIAL INFORMATION | 
|ITEM 1.                      |  | FINANCIAL STATEMENTS                                                                                          |  |      |    | 
|                             |  | Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014                            |  |      | 1  | 
|                             |  | Unaudited Consolidated Statements of Operations for the three months ended March 31, 2015 and
2014            |  |      | 2  | 
|                             |  | Unaudited Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2015 and 2014 |  |      | 3  | 
|                             |  | Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and
2014            |  |      | 4  | 
|                             |  | Consolidated Schedules of Investments as of March 31, 2015 (Unaudited) and December 31,
2014                  |  |      | 5  | 
|                             |  | Notes to Unaudited Consolidated Financial Statements                                                          |  |      | 29 | 
|ITEM 2.                      |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                         |  |      | 67 | 
|ITEM 3.                      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                    |  |      | 91 | 
|ITEM 4.                      |  | CONTROLS AND PROCEDURES                                                                                       |  |      | 92 | 
|                             | 
|PART IIOTHER INFORMATION    |  |                                                                                                               |  |     
|ITEM 1.                      |  | LEGAL PROCEEDINGS                                                                                             |  |      | 93 | 
|ITEM 1A.                     |  | RISK FACTORS                                                                                                  |  |      | 93 | 
|ITEM 2.                      |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                   |  |      | 93 | 
|ITEM 3.                      |  | DEFAULTS UPON SENIOR SECURITIES                                                                               |  |      | 93 | 
|ITEM 4.                      |  | MINE SAFETY DISCLOSURES                                                                                       |  |      | 93 | 
|ITEM 5.                      |  | OTHER INFORMATION                                                                                             |  |      | 93 | 
|ITEM 6.                      |  | EXHIBITS                                                                                                      |  |      | 94 | 
|                             |  | SIGNATURES                                                                                                    |  |      | 99 | 



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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, 2015(Unaudited) |           |   | December 31,2014 |  
|Assets                                                                                                                                                 |  |                           |           |   |                  |   |           |  
|Investments, at fair value (amortized cost$4,596,281 and $4,409,806, respectively)                                                                    |  | $                         | 4,581,492 |   |                  | $ | 4,396,228 |  
|Cash                                                                                                                                                   |  |                           | 232,750   |   |                  |   | 224,583   |  
|Collateral held at broker for open credit default swap contracts                                                                                       |  |                           |          |   |                  |   | 37,951    |  
|Receivable for investments sold and repaid                                                                                                             |  |                           | 72,427    |   |                  |   | 3,698     |  
|Interest receivable                                                                                                                                    |  |                           | 68,974    |   |                  |   | 56,320    |  
|Deferred financing costs                                                                                                                               |  |                           | 7,799     |   |                  |   | 7,728     |  
|Prepaid expenses and other assets                                                                                                                      |  |                           | 251       |   |                  |   | 1         |  
|Receivable on credit default swaps                                                                                                                     |  |                           |          |   |                  |   | 62        |  
|                                                                                                                                                       |  |                           |           |   |                  |   |           |  
|Total assets                                                                                                                                           |  | $                         | 4,963,693 |   |                  | $ | 4,726,571 |  
|                                                                                                                                                       |  |                           |           |   |                  |   |           |  
|Liabilities                                                                                                                                            |  |                           |           |   |                  |   |           |  
|Payable for investments purchased                                                                                                                      |  | $                         | 38,565    |   |                  | $ | 84,272    |  
|Repurchase agreements payable(1)                                                                                                                       |  |                           | 785,306   |   |                  |   | 625,400   |  
|Credit facilities payable                                                                                                                              |  |                           | 1,138,394 |   |                  |   | 1,015,794 |  
|Stockholder distributions payable                                                                                                                      |  |                           | 19,843    |   |                  |   | 9,085     |  
|Management fees payable                                                                                                                                |  |                           | 23,375    |   |                  |   | 23,069    |  
|Subordinated income incentive fees payable(2)                                                                                                          |  |                           | 15,213    |   |                  |   | 15,334    |  
|Administrative services expense payable                                                                                                                |  |                           | 1,232     |   |                  |   | 1,845     |  
|Interest payable                                                                                                                                       |  |                           | 9,531     |   |                  |   | 6,882     |  
|Directors fees payable                                                                                                                                |  |                           | 219       |   |                  |   | 262       |  
|Unamortized swap premiums received                                                                                                                     |  |                           |          |   |                  |   | 10,622    |  
|Unrealized depreciation on credit default swaps                                                                                                        |  |                           |          |   |                  |   | 19,426    |  
|Other accrued expenses and liabilities                                                                                                                 |  |                           | 2,042     |   |                  |   | 2,790     |  
|                                                                                                                                                       |  |                           |           |   |                  |   |           |  
|Total liabilities                                                                                                                                      |  |                           | 2,033,720 |   |                  |   | 1,814,781 |  
|                                                                                                                                                       |  |                           |           |   |                  |   |           |  
|Commitments and contingencies(3)                                                                                                                       |  |                           |           |   |                  |   |           |  
|                                                                                                                                                       |  |                          
|Stockholders equity                                                                                                                                   |  |                           |           |   |                  |   |           |  
|Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding                                                           |  |                           |          |   |                  |   |          |  
|Common stock, $0.001 par value, 450,000,000 shares authorized, 314,690,600 and 313,037,127 shares issued and outstanding,
respectively                 |  |                           | 315       |   |                  |   | 313       |  
|Capital in excess of par value                                                                                                                         |  |                           | 2,929,769 |   |                  |   | 2,914,177 |  
|Accumulated undistributed (distributions in excess of) net realized gains on investments and credit default swaps and gain/loss
on foreign currency(4) |  |                           | (9,060    | ) |                  |   | 8,168     |  
|Accumulated undistributed net investment income(4)                                                                                                     |  |                           | 23,816    |   |                  |   | 22,143    |  
|Net unrealized appreciation (depreciation) on investments and credit default swaps and unrealized gain/loss on foreign
currency                        |  |                           | (14,867   | ) |                  |   | (33,011   | )
|                                                                                                                                                       |  |                           |           |   |                  |   |           |  
|Total stockholders equity                                                                                                                             |  |                           | 2,929,973 |   |                  |   | 2,911,790 |  
|                                                                                                                                                       |  |                           |           |   |                  |   |           |  
|Total liabilities and stockholders equity                                                                                                             |  | $                         | 4,963,693 |   |                  | $ | 4,726,571 |  
|                                                                                                                                                       |  |                           |           |   |                  |   |           |  
|Net asset value per share of common stock at period end                                                                                                |  | $                         | 9.31      |   |                  | $ | 9.30      |  



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



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



|(3) | See Note 10 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, |            
|                                                                                     |  | 2015                        |             |   | 2014 |  
|Investment income                                                                    |  |                             |             |   |      |   |             | 
|Interest income                                                                      |  | $                           | 107,664     |   |      | $ | 68,584      | 
|Fee income                                                                           |  |                             | 7,706       |   |      |   | 12,481      | 
|Dividend income                                                                      |  |                             | 370         |   |      |   |            | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Total investment income                                                              |  |                             | 115,740     |   |      |   | 81,065      | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Operating expenses                                                                   |  |                             |             |   |      |   |             | 
|Management fees(1)                                                                   |  |                             | 24,226      |   |      |   | 17,641      | 
|Capital gains incentive fees(2)                                                      |  |                             |            |   |      |   | 5,934       | 
|Subordinated income incentive fees(2)                                                |  |                             | 15,213      |   |      |   |            | 
|Administrative services expenses                                                     |  |                             | 1,076       |   |      |   | 1,374       | 
|Stock transfer agent fees                                                            |  |                             | 341         |   |      |   | 850         | 
|Accounting and administrative fees                                                   |  |                             | 427         |   |      |   | 317         | 
|Interest expense                                                                     |  |                             | 13,219      |   |      |   | 5,901       | 
|Directors fees                                                                      |  |                             | 188         |   |      |   | 179         | 
|Other general and administrative expenses                                            |  |                             | 1,051       |   |      |   | 1,169       | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Operating expenses                                                                   |  |                             | 55,741      |   |      |   | 33,365      | 
|Management fee waiver(1)                                                             |  |                             | (851        | ) |      |   |            | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Net expenses                                                                         |  |                             | 54,890      |   |      |   | 33,365      | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Net investment income                                                                |  |                             | 60,850      |   |      |   | 47,700      | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Realized and unrealized gain/loss                                                    |  |                             |             |   |      |   |             | 
|Net realized gain (loss) on investments                                              |  |                             | 2,385       |   |      |   | 2,605       | 
|Net realized gain (loss) on credit default swaps                                     |  |                             | (19,588     | ) |      |   |            | 
|Net realized gain (loss) on foreign currency                                         |  |                             | (25         | ) |      |   | 4           | 
|Net change in unrealized appreciation (depreciation) on investments                  |  |                             | (1,211      | ) |      |   | 27,059      | 
|Net change in unrealized appreciation (depreciation) on credit default swaps         |  |                             | 19,426      |   |      |   |            | 
|Net change in unrealized gain (loss) on foreign currency                             |  |                             | (71         | ) |      |   |            | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Total net realized and unrealized gain (loss) on investments                         |  |                             | 916         |   |      |   | 29,668      | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Net increase (decrease) in net assets resulting from operations                      |  | $                           | 61,766      |   |      | $ | 77,368      | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Per share informationbasic and diluted(3)                                           |  |                             |             |   |      |   |             | 
|Net increase (decrease) in net assets resulting from operations (Earnings per Share) |  | $                           | 0.20        |   |      | $ | 0.27        | 
|                                                                                     |  |                             |             |   |      |   |             | 
|Weighted average shares outstanding                                                  |  |                             | 313,630,422 |   |      |   | 282,039,917 | 
|                                                                                     |  |                             |             |   |      |   |             | 



|(1) | See Note 4 for a discussion of the waiver by FSIC II Advisor, LLC, the Companys investment adviser, of certain management fees to which it was otherwise entitled
during the applicable period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(3) | The weighted average shares used in the per share computation of the net increase (decrease) in net assets resulting from operations is based on the weighted average
shares outstanding during the applicable period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, |          
|                                                                                   |  | 2015                        |           |   | 2014 |  
|Operations                                                                         |  |                             |           |   |      |   |           |  
|Net investment income                                                              |  | $                           | 60,850    |   |      | $ | 47,700    |  
|Net realized gain (loss) on investments, credit default swaps and foreign currency |  |                             | (17,228   | ) |      |   | 2,609     |  
|Net change in unrealized appreciation (depreciation) on investments                |  |                             | (1,211    | ) |      |   | 27,059    |  
|Net change in unrealized appreciation (depreciation) on credit default swaps       |  |                             | 19,426    |   |      |   |          |  
|Net change in unrealized gain (loss) on foreign currency                           |  |                             | (71       | ) |      |   |          |  
|                                                                                   |  |                             |           |   |      |   |           |  
|Net increase (decrease) in net assets resulting from operations                    |  |                             | 61,766    |   |      |   | 77,368    |  
|                                                                                   |  |                             |           |   |      |   |           |  
|Stockholder distributions(1)                                                       |  |                             |           |   |      |   |           |  
|Distributions from net investment income                                           |  |                             | (59,177   | ) |      |   | (49,274   | )
|                                                                                   |  |                             |           |   |      |   |           |  
|Net decrease in net assets resulting from stockholder distributions                |  |                             | (59,177   | ) |      |   | (49,274   | )
|                                                                                   |  |                             |           |   |      |   |           |  
|Capital share transactions(2)                                                      |  |                             |           |   |      |   |           |  
|Issuance of common stock                                                           |  |                             |          |   |      |   | 442,395   |  
|Reinvestment of stockholder distributions                                          |  |                             | 21,090    |   |      |   | 35,865    |  
|Repurchases of common stock                                                        |  |                             | (5,496    | ) |      |   | (1,277    | )
|Offering costs                                                                     |  |                             |          |   |      |   | (1,686    | )
|                                                                                   |  |                             |           |   |      |   |           |  
|Net increase in net assets resulting from capital share transactions               |  |                             | 15,594    |   |      |   | 475,297   |  
|                                                                                   |  |                             |           |   |      |   |           |  
|Total increase in net assets                                                       |  |                             | 18,183    |   |      |   | 503,391   |  
|Net assets at beginning of period                                                  |  |                             | 2,911,790 |   |      |   | 2,390,985 |  
|                                                                                   |  |                             |           |   |      |   |           |  
|Net assets at end of period                                                        |  | $                           | 2,929,973 |   |      | $ | 2,894,376 |  
|                                                                                   |  |                             |           |   |      |   |           |  
|Accumulated undistributed (distributions in excess of) net investment income(1)    |  | $                           | 23,816    |   |      | $ | (11,557   | )
|                                                                                   |  |                             |           |   |      |   |           |  



|(1) | See Note 5 for a discussion of the sources of distributions paid by the Company.
|--- | --------------------------------------------------------------------------------



|(2) | 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, 2015 and 2014.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

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 Months EndedMarch
31, |         
|                                                                                                                                   |  | 2015                        |          |   | 2014 |  
|Cash flows from operating activities                                                                                               |  |                             |          |   |      |   |          |  
|Net increase (decrease) in net assets resulting from operations                                                                    |  | $                           | 61,766   |   |      | $ | 77,368   |  
|Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating
activities: |  |                             |          |   |      |   |          |  
|Purchases of investments                                                                                                           |  |                             | (421,531 | ) |      |   | (927,056 | )
|Paid-in-kind interest                                                                                                              |  |                             | (3,662   | ) |      |   | (1,442   | )
|Proceeds from sales and repayments of investments                                                                                  |  |                             | 244,798  |   |      |   | 310,598  |  
|Net realized (gain) loss on investments                                                                                            |  |                             | (2,385   | ) |      |   | (2,605   | )
|Net change in unrealized (appreciation) depreciation on investments                                                                |  |                             | 1,211    |   |      |   | (27,059  | )
|Net change in unrealized (appreciation) depreciation on credit default swap                                                        |  |                             | (19,426  | ) |      |   |         |  
|Accretion of discount                                                                                                              |  |                             | (3,695   | ) |      |   | (3,994   | )
|Amortization of deferred financing costs                                                                                           |  |                             | 801      |   |      |   | 263      |  
|(Increase) decrease in collateral held at broker for open credit default swap contracts                                            |  |                             | 37,951   |   |      |   |         |  
|(Increase) decrease in receivable for investments sold and repaid                                                                  |  |                             | (68,729  | ) |      |   | 41,750   |  
|(Increase) decrease in interest receivable                                                                                         |  |                             | (12,654  | ) |      |   | (11,460  | )
|(Increase) decrease in receivable for credit default swaps                                                                         |  |                             | 62       |   |      |   |         |  
|(Increase) decrease in prepaid expenses and other assets                                                                           |  |                             | (250     | ) |      |   | (149     | )
|Increase (decrease) in payable for investments purchased                                                                           |  |                             | (45,707  | ) |      |   | (84,279  | )
|Increase (decrease) in management fees payable                                                                                     |  |                             | 306      |   |      |   | 2,628    |  
|Increase (decrease) in accrued capital gains incentive fees                                                                        |  |                             |         |   |      |   | 5,934    |  
|Increase (decrease) in subordinated income incentive fees payable                                                                  |  |                             | (121     | ) |      |   |         |  
|Increase (decrease) in administrative services expense payable                                                                     |  |                             | (613     | ) |      |   | 1,160    |  
|Increase (decrease) in interest payable                                                                                            |  |                             | 2,649    |   |      |   | 163      |  
|Increase (decrease) in directors fees payable                                                                                     |  |                             | (43      | ) |      |   | (15      | )
|Increase (decrease) in unamortized swap premiums received                                                                          |  |                             | (10,622  | ) |      |   |         |  
|Increase (decrease) in other accrued expenses and liabilities                                                                      |  |                             | (748     | ) |      |   | 1,305    |  
|                                                                                                                                   |  |                             |          |   |      |   |          |  
|Net cash used in operating activities                                                                                              |  |                             | (240,642 | ) |      |   | (616,890 | )
|                                                                                                                                   |  |                             |          |   |      |   |          |  
|Cash flows from financing activities                                                                                               |  |                             |          |   |      |   |          |  
|Issuance of common stock                                                                                                           |  |                             |         |   |      |   | 442,927  |  
|Reinvestment of stockholder distributions                                                                                          |  |                             | 21,090   |   |      |   | 35,865   |  
|Repurchases of common stock                                                                                                        |  |                             | (5,496   | ) |      |   | (1,277   | )
|Offering costs                                                                                                                     |  |                             |         |   |      |   | (1,686   | )
|Stockholder distributions                                                                                                          |  |                             | (48,419  | ) |      |   | (67,100  | )
|Borrowings under credit facilities(1)                                                                                              |  |                             | 122,600  |   |      |   |         |  
|Borrowings under repurchase
agreements(2)                                                                                          |  |                             | 159,906  |   |      |   |         |  
|Deferred financing costs paid                                                                                                      |  |                             | (872     | ) |      |   | (5,194   | )
|                                                                                                                                   |  |                             |          |   |      |   |          |  
|Net cash provided by financing activities                                                                                          |  |                             | 248,809  |   |      |   | 403,535  |  
|                                                                                                                                   |  |                             |          |   |      |   |          |  
|Total increase (decrease) in cash                                                                                                  |  |                             | 8,167    |   |      |   | (213,355 | )
|Cash at beginning of period                                                                                                        |  |                             | 224,583  |   |      |   | 581,632  |  
|                                                                                                                                   |  |                             |          |   |      |   |          |  
|Cash at end of period                                                                                                              |  | $                           | 232,750  |   |      | $ | 368,277  |  
|                                                                                                                                   |  |                             |          |   |      |   |          |  
|Supplemental disclosure                                                                                                            |  |                             |          |   |      |   |          |  
|Local and excise taxes paid                                                                                                        |  | $                           | 986      |   |      | $ | 352      |  
|                                                                                                                                   |  |                             |          |   |      |   |          |  



|(1) | See Note 8 for a discussion of the Companys revolving credit facilities. During the three months ended March 31, 2015 and 2014, the Company paid $5,201 and
$907, respectively, in interest expense on the credit facilities.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | See Note 8 for a discussion of the Companys repurchase transactions. During the three months ended March 31, 2015 and 2014, the Company paid $4,568 and
$4,568, respectively, in interest expense pursuant to its repurchase agreements.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2015

(in thousands, except share amounts)







|                                             |  |                    |  |                                                |  |         |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|-------------------------------------------- |  | ------------------ |  | ---------------------------------------------- |  | ------- |  | ----- |  | -------- |  | ------------------ | ------- |  | ------------- | - | ------- | ------------ |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes          |  | Industry                                       |  | Rate(b) |  | Floor |  | Maturity |  | PrincipalAmount(c) |         |  | AmortizedCost |   |         | FairValue(d) | 
|Senior Secured LoansFirst Lien86.6%        |  |                    |  |                                                |  |         |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|A.T. Cross Co.                               |  | (e)(g)             |  | Retailing                                      |  | L+850   |  |       |  | 9/6/19   |  | $                  | 41,420  |  |               | $ | 41,420  |              |  | $ | 41,420  | 
|A.T. Cross Co.                               |  | (s)                |  | Retailing                                      |  | L+850   |  |       |  | 9/6/19   |  |                    | 20,000  |  |               |   | 20,000  |              |  |   | 20,000  | 
|Abaco Energy Technologies LLC                |  | (g)(k)             |  | Energy                                         |  | L+700   |  | 1.0%  |  | 11/20/20 |  |                    | 27,328  |  |               |   | 25,729  |              |  |   | 25,825  | 
|Acision Finance LLC                          |  | (k)(l)(o)          |  | Software & Services                            |  | L+975   |  | 1.0%  |  | 12/15/18 |  |                    | 32,864  |  |               |   | 31,606  |              |  |   | 32,535  | 
|Allen Systems Group, Inc.                    |  | (e)(f)(p)          |  | Software & Services                            |  | L+1625  |  | 1.0%  |  | 12/14/17 |  |                    | 68,615  |  |               |   | 76,847  |              |  |   | 77,864  | 
|Allen Systems Group, Inc.                    |  | (e)(f)(p)          |  | Software & Services                            |  | L+1425  |  | 1.0%  |  | 12/14/17 |  |                    | 2,867   |  |               |   | 3,210   |              |  |   | 3,253   | 
|Altus Power America, Inc.                    |  |                    |  | Energy                                         |  | L+750   |  | 1.5%  |  | 10/10/21 |  |                    | 899     |  |               |   | 899     |              |  |   | 907     | 
|Altus Power America, Inc.                    |  | (s)                |  | Energy                                         |  | L+750   |  | 1.5%  |  | 10/10/21 |  |                    | 2,226   |  |               |   | 2,226   |              |  |   | 2,247   | 
|Alvogen Pharma US, Inc.                      |  | (g)(i)             |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+575   |  | 1.3%  |  | 5/23/18  |  |                    | 9,120   |  |               |   | 9,082   |              |  |   | 9,181   | 
|AP Exhaust Acquisition, LLC                  |  | (e)(h)(i)(k)       |  | Automobiles & Components                       |  | L+775   |  | 1.5%  |  | 1/16/21  |  |                    | 150,811 |  |               |   | 150,811 |              |  |   | 147,794 | 
|Apex Tool Group, LLC                         |  | (i)                |  | Capital Goods                                  |  | L+325   |  | 1.3%  |  | 1/31/20  |  |                    | 2,248   |  |               |   | 2,240   |              |  |   | 2,220   | 
|Ascension Insurance, Inc.                    |  | (e)(f)(g)(i)       |  | Insurance                                      |  | L+825   |  | 1.3%  |  | 3/5/19   |  |                    | 78,460  |  |               |   | 77,441  |              |  |   | 77,675  | 
|Aspect Software, Inc.                        |  | (h)(i)             |  | Software & Services                            |  | L+550   |  | 1.8%  |  | 5/7/16   |  |                    | 7,444   |  |               |   | 7,459   |              |  |   | 7,433   | 
|Avaya Inc.                                   |  | (i)                |  | Technology Hardware & Equipment                |  | L+450   |  |       |  | 10/26/17 |  |                    | 3,930   |  |               |   | 3,752   |              |  |   | 3,873   | 
|Azure Midstream Energy LLC                   |  | (g)                |  | Energy                                         |  | L+650   |  | 1.0%  |  | 11/15/18 |  |                    | 3,441   |  |               |   | 3,402   |              |  |   | 3,281   | 
|BenefitMall Holdings, Inc.                   |  | (e)(h)(i)(k)(l)    |  | Commercial & Professional Services             |  | L+725   |  | 1.0%  |  | 11/24/20 |  |                    | 114,713 |  |               |   | 114,713 |              |  |   | 115,860 | 
|BenefitMall Holdings, Inc.                   |  | (s)                |  | Commercial & Professional Services             |  | L+725   |  | 1.0%  |  | 11/24/20 |  |                    | 41,818  |  |               |   | 41,818  |              |  |   | 42,236  | 
|Boomerang Tube, LLC                          |  | (e)(p)(t)          |  | Energy                                         |  | L+950   |  | 1.5%  |  | 10/11/17 |  |                    | 4,438   |  |               |   | 4,353   |              |  |   | 2,552   | 
|BPA Laboratories Inc.                        |  | (e)                |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 2.5%    |  |       |  | 7/3/17   |  |                    | 3,763   |  |               |   | 3,502   |              |  |   | 3,377   | 
|BRG Sports, Inc.                             |  | (h)                |  | Consumer Durables & Apparel                    |  | L+550   |  | 1.0%  |  | 4/15/21  |  |                    | 1,370   |  |               |   | 1,346   |              |  |   | 1,392   | 
|Cactus Wellhead, LLC                         |  | (g)(h)             |  | Energy                                         |  | L+600   |  | 1.0%  |  | 7/31/20  |  |                    | 16,697  |  |               |   | 15,612  |              |  |   | 10,895  | 
|Cadillac Jack, Inc.                          |  | (e)(g)(h)(i)(k)(o) |  | Consumer Services                              |  | L+850   |  | 1.0%  |  | 5/15/19  |  |                    | 163,138 |  |               |   | 161,505 |              |  |   | 169,663 | 
|Caesars Entertainment Operating Co., Inc.    |  | (k)(o)(p)          |  | Consumer Services                              |  | L+575   |  |       |  | 3/1/17   |  |                    | 15,620  |  |               |   | 14,928  |              |  |   | 14,315  | 
|Caesars Entertainment Operating Co., Inc.    |  | (k)(o)(p)          |  | Consumer Services                              |  | L+675   |  |       |  | 3/1/17   |  |                    | 15,707  |  |               |   | 15,082  |              |  |   | 14,479  | 
|Caesars Entertainment Operating Co., Inc.    |  | (o)(p)             |  | Consumer Services                              |  | L+850   |  | 2.0%  |  | 10/31/16 |  |                    | 2,671   |  |               |   | 2,695   |              |  |   | 2,492   | 
|Caesars Entertainment Operating Co., Inc.    |  | (e)(g)(i)(j)(o)(p) |  | Consumer Services                              |  | L+875   |  | 1.0%  |  | 1/28/18  |  |                    | 68,576  |  |               |   | 68,161  |              |  |   | 62,782  | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(f)(g)(k)       |  | Consumer Services                              |  | L+600   |  | 1.0%  |  | 10/11/20 |  |                    | 58,354  |  |               |   | 55,424  |              |  |   | 55,364  | 
|Cengage Learning Acquisitions, Inc.          |  | (g)(j)             |  | Media                                          |  | L+600   |  | 1.0%  |  | 3/31/20  |  |                    | 5,351   |  |               |   | 5,329   |              |  |   | 5,381   | 
|CEVA Group Plc                               |  | (o)(s)             |  | Transportation                                 |  | L+500   |  |       |  | 3/19/19  |  |                    | 20,000  |  |               |   | 20,000  |              |  |   | 17,500  | 



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, 2015

(in thousands, except share amounts)







|                                            |  |              |  |                                    |  |                              |  |       |  |          |  |                    |        |  |               |   |        |              |  |   |        | 
|------------------------------------------- |  | ------------ |  | ---------------------------------- |  | ---------------------------- |  | ----- |  | -------- |  | ------------------ | ------ |  | ------------- | - | ------ | ------------ |  | - | ------ | 
|Portfolio
Company(a)                        |  | Footnotes    |  | Industry                           |  | Rate(b)                      |  | Floor |  | Maturity |  | PrincipalAmount(c) |        |  | AmortizedCost |   |        | FairValue(d) | 
|Cimarron Energy Inc.                        |  | (k)(l)       |  | Energy                             |  | L+775                        |  | 1.0%  |  | 12/15/19 |  | $                  | 25,000 |  |               | $ | 25,000 |              |  | $ | 24,750 | 
|CITGO Holding, Inc.                         |  | (h)(n)       |  | Energy                             |  | L+850                        |  | 1.0%  |  | 5/12/18  |  |                    | 3,751  |  |               |   | 3,526  |              |  |   | 3,735  | 
|Corner Investment PropCo, LLC               |  | (e)(g)(k)    |  | Consumer Services                  |  | L+975                        |  | 1.3%  |  | 11/2/19  |  |                    | 40,873 |  |               |   | 41,363 |              |  |   | 40,822 | 
|CoSentry.Net, LLC                           |  | (e)(i)(k)    |  | Software & Services                |  | L+800                        |  | 1.3%  |  | 12/31/19 |  |                    | 57,799 |  |               |   | 57,799 |              |  |   | 58,955 | 
|Crestwood Holdings LLC                      |  | (g)          |  | Energy                             |  | L+600                        |  | 1.0%  |  | 6/19/19  |  |                    | 5,382  |  |               |   | 5,362  |              |  |   | 5,097  | 
|Del Monte Foods, Inc.                       |  | (i)(o)       |  | Food, Beverage & Tobacco           |  | L+325                        |  | 1.0%  |  | 2/18/21  |  |                    | 2,781  |  |               |   | 2,769  |              |  |   | 2,655  | 
|Dent Wizard International Corp.             |  | (h)(k)(l)    |  | Commercial & Professional Services |  | L+869                        |  | 1.0%  |  | 2/5/20   |  |                    | 74,834 |  |               |   | 74,834 |              |  |   | 74,834 | 
|Dent Wizard International Corp.             |  | (s)          |  | Commercial & Professional Services |  | L+425                        |  | 1.0%  |  | 2/5/20   |  |                    | 1,951  |  |               |   | 1,951  |              |  |   | 1,951  | 
|Digital River, Inc.                         |  | (g)(h)       |  | Software & Services                |  | L+650                        |  | 1.0%  |  | 2/12/21  |  |                    | 15,000 |  |               |   | 14,260 |              |  |   | 14,963 | 
|Eastman Kodak Co.                           |  | (g)          |  | Consumer Durables & Apparel        |  | L+625                        |  | 1.0%  |  | 9/3/19   |  |                    | 7,145  |  |               |   | 7,034  |              |  |   | 7,154  | 
|EnergySolutions, LLC                        |  | (g)          |  | Energy                             |  | L+575                        |  | 1.0%  |  | 5/29/20  |  |                    | 4,092  |  |               |   | 4,018  |              |  |   | 4,115  | 
|FairPoint Communications, Inc.              |  | (e)(h)(o)    |  | Telecommunication Services         |  | L+625                        |  | 1.3%  |  | 2/14/19  |  |                    | 14,468 |  |               |   | 14,660 |              |  |   | 14,751 | 
|Fairway Group Acquisition Co.               |  | (g)(o)       |  | Food & Staples Retailing           |  | L+400                        |  | 1.0%  |  | 8/17/18  |  |                    | 9,452  |  |               |   | 8,205  |              |  |   | 9,144  | 
|Fox Head, Inc.                              |  | (h)(k)(l)    |  | Consumer Durables & Apparel        |  | L+850                        |  | 1.0%  |  | 12/19/20 |  |                    | 13,286 |  |               |   | 13,286 |              |  |   | 13,146 | 
|FR Dixie Acquisition Corp.                  |  | (g)          |  | Energy                             |  | L+475                        |  | 1.0%  |  | 12/18/20 |  |                    | 4,158  |  |               |   | 4,140  |              |  |   | 3,456  | 
|FR Utility Services LLC                     |  | (g)          |  | Energy                             |  | L+575                        |  | 1.0%  |  | 10/18/19 |  |                    | 570    |  |               |   | 570    |              |  |   | 570    | 
|H.M. Dunn Company, Inc.                     |  | (k)(l)       |  | Capital Goods                      |  | Prime+711                    |  |       |  | 3/26/21  |  |                    | 60,000 |  |               |   | 60,000 |              |  |   | 60,000 | 
|H.M. Dunn Company, Inc.                     |  | (s)          |  | Capital Goods                      |  | Prime+711                    |  |       |  | 3/26/21  |  |                    | 21,429 |  |               |   | 21,429 |              |  |   | 21,429 | 
|Hybrid Promotions, LLC                      |  | (h)(k)(l)    |  | Consumer Durables & Apparel        |  | L+850                        |  | 1.0%  |  | 12/19/20 |  |                    | 48,714 |  |               |   | 48,714 |              |  |   | 48,202 | 
|Industrial Group Intermediate Holdings, LLC |  | (h)(i)(k)(l) |  | Materials                          |  | L+800                        |  | 1.3%  |  | 5/31/20  |  |                    | 84,139 |  |               |   | 84,139 |              |  |   | 84,139 | 
|Industry City TI Lessor, L.P.               |  | (k)          |  | Consumer Services                  |  | 5.0%, 5.3% PIK(5.3% Max PIK) |  |       |  | 6/30/26  |  |                    | 10,086 |  |               |   | 10,086 |              |  |   | 10,086 | 
|Intralinks, Inc.                            |  | (g)(h)(k)(o) |  | Software & Services                |  | L+525                        |  | 2.0%  |  | 2/24/19  |  |                    | 24,750 |  |               |   | 24,552 |              |  |   | 24,564 | 
|Lantiq Deutschland GmbH                     |  | (e)(o)       |  | Software & Services                |  | L+900                        |  | 2.0%  |  | 11/16/15 |  |                    | 975    |  |               |   | 955    |              |  |   | 970    | 
|Larchmont Resources, LLC                    |  | (g)          |  | Energy                             |  | L+725                        |  | 1.0%  |  | 8/7/19   |  |                    | 3,848  |  |               |   | 3,818  |              |  |   | 3,514  | 
|MB Precision Holdings LLC                   |  | (e)(h)(i)(k) |  | Capital Goods                      |  | L+725                        |  | 1.3%  |  | 1/23/20  |  |                    | 62,213 |  |               |   | 62,213 |              |  |   | 60,968 | 
|MMM Holdings, Inc.                          |  | (g)          |  | Health Care Equipment & Services   |  | L+825                        |  | 1.5%  |  | 12/12/17 |  |                    | 2,606  |  |               |   | 2,617  |              |  |   | 2,110  | 
|MModal LLC                                  |  | (e)(g)       |  | Health Care Equipment & Services   |  | L+775                        |  | 1.3%  |  | 1/31/20  |  |                    | 10,111 |  |               |   | 10,066 |              |  |   | 9,361  | 
|Mood Media Corp.                            |  | (g)(o)       |  | Media                              |  | L+600                        |  | 1.0%  |  | 5/1/19   |  |                    | 1,803  |  |               |   | 1,788  |              |  |   | 1,792  | 
|Moxie Liberty LLC                           |  | (g)(i)       |  | Energy                             |  | L+650                        |  | 1.0%  |  | 8/21/20  |  |                    | 11,853 |  |               |   | 11,894 |              |  |   | 11,942 | 
|Moxie Patriot LLC                           |  | (i)          |  | Energy                             |  | L+575                        |  | 1.0%  |  | 12/19/20 |  |                    | 5,556  |  |               |   | 5,509  |              |  |   | 5,597  | 



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, 2015

(in thousands, except share amounts)







|                                            |  |                 |  |                                  |  |                          |  |       |      |  |          |          |                    |   |         |               |  |   |              |  |  |   |         | 
|------------------------------------------- |  | --------------- |  | -------------------------------- |  | ------------------------ |  | ----- | ---- |  | -------- | -------- | ------------------ | - | ------- | ------------- |  | - | ------------ |  |  | - | ------- | 
|Portfolio
Company(a)                        |  | Footnotes       |  | Industry                         |  | Rate(b)                  |  | Floor |      |  | Maturity |          | PrincipalAmount(c) |   |         | AmortizedCost |  |   | FairValue(d) | 
|MSO of Puerto Rico, Inc.                    |  | (g)             |  | Health Care Equipment & Services |  | L+825                    |  |       | 1.5% |  |          | 12/12/17 |                    | $ | 1,894   |               |  | $ | 1,902        |  |  | $ | 1,534   | 
|New HB Acquisition, LLC                     |  | (h)(i)          |  | Food, Beverage & Tobacco         |  | L+550                    |  |       | 1.3% |  |          | 4/9/20   |                    |   | 3,857   |               |  |   | 3,827        |  |  |   | 3,937   | 
|New Star Metals Inc.                        |  | (e)(g)(h)(i)(k) |  | Capital Goods                    |  | L+800                    |  |       | 1.3% |  |          | 3/20/20  |                    |   | 109,425 |               |  |   | 109,425      |  |  |   | 109,425 | 
|Nine West Holdings, Inc.                    |  | (l)             |  | Consumer Durables & Apparel      |  | L+375                    |  |       | 1.0% |  |          | 10/8/19  |                    |   | 471     |               |  |   | 458          |  |  |   | 447     | 
|Nova Wildcat Amerock, LLC                   |  | (e)(g)(h)       |  | Consumer Durables & Apparel      |  | L+941                    |  |       | 1.3% |  |          | 9/10/19  |                    |   | 67,105  |               |  |   | 67,105       |  |  |   | 67,105  | 
|Panda Sherman Power, LLC                    |  | (e)             |  | Energy                           |  | L+750                    |  |       | 1.5% |  |          | 9/14/18  |                    |   | 2,304   |               |  |   | 2,317        |  |  |   | 2,298   | 
|PeroxyChem LLC                              |  | (h)(i)          |  | Capital Goods                    |  | L+650                    |  |       | 1.0% |  |          | 2/28/20  |                    |   | 7,632   |               |  |   | 7,503        |  |  |   | 7,680   | 
|PharMEDium Healthcare Corp.                 |  | (g)             |  | Health Care Equipment & Services |  | L+325                    |  |       | 1.0% |  |          | 1/28/21  |                    |   | 703     |               |  |   | 700          |  |  |   | 698     | 
|PHRC License, LLC                           |  | (f)(h)(i)       |  | Consumer Services                |  | L+900                    |  |       | 1.5% |  |          | 8/14/20  |                    |   | 60,000  |               |  |   | 60,000       |  |  |   | 60,000  | 
|Polymer Additives, Inc.                     |  | (h)(i)(l)       |  | Materials                        |  | L+838                    |  |       | 1.0% |  |          | 12/20/21 |                    |   | 63,068  |               |  |   | 63,068       |  |  |   | 63,384  | 
|Production Resource Group, LLC              |  | (g)(h)(i)(l)    |  | Media                            |  | L+750                    |  |       | 1.0% |  |          | 7/23/19  |                    |   | 47,500  |               |  |   | 47,500       |  |  |   | 47,263  | 
|Professional Plumbing Group, Inc.           |  | (e)(g)          |  | Capital Goods                    |  | L+875                    |  |       | 0.8% |  |          | 7/31/19  |                    |   | 29,158  |               |  |   | 29,158       |  |  |   | 29,304  | 
|PRV Aerospace, LLC                          |  | (g)             |  | Capital Goods                    |  | L+525                    |  |       | 1.3% |  |          | 5/9/18   |                    |   | 2,918   |               |  |   | 2,935        |  |  |   | 2,883   | 
|Reddy Ice Corp.                             |  | (g)(j)          |  | Food & Staples Retailing         |  | L+550                    |  |       | 1.3% |  |          | 5/1/19   |                    |   | 3,080   |               |  |   | 2,849        |  |  |   | 2,725   | 
|RGL Reservoir Operations Inc.               |  | (g)(h)(o)       |  | Energy                           |  | L+500                    |  |       | 1.0% |  |          | 8/13/21  |                    |   | 6,823   |               |  |   | 6,633        |  |  |   | 5,173   | 
|Serena Software, Inc.                       |  | (g)(h)          |  | Software & Services              |  | L+650                    |  |       | 1.0% |  |          | 4/14/20  |                    |   | 17,550  |               |  |   | 17,241       |  |  |   | 17,619  | 
|Smile Brands Group Inc.                     |  | (e)(f)(g)(h)(i) |  | Health Care Equipment & Services |  | L+625                    |  |       | 1.3% |  |          | 8/16/19  |                    |   | 43,525  |               |  |   | 43,017       |  |  |   | 39,607  | 
|Sorenson Communications, Inc.               |  | (e)(g)(h)(i)(k) |  | Telecommunication Services       |  | L+575                    |  |       | 2.3% |  |          | 4/30/20  |                    |   | 101,245 |               |  |   | 100,808      |  |  |   | 100,739 | 
|Southcross Holdings Borrower LP             |  | (l)             |  | Energy                           |  | L+500                    |  |       | 1.0% |  |          | 8/4/21   |                    |   | 315     |               |  |   | 314          |  |  |   | 300     | 
|The Sports Authority, Inc.                  |  | (g)             |  | Consumer Durables & Apparel      |  | L+600                    |  |       | 1.5% |  |          | 11/16/17 |                    |   | 7,818   |               |  |   | 7,867        |  |  |   | 6,841   | 
|Sprint Industrial Holdings LLC              |  | (g)             |  | Energy                           |  | L+575                    |  |       | 1.3% |  |          | 11/14/19 |                    |   | 7,210   |               |  |   | 7,164        |  |  |   | 6,814   | 
|Stallion Oilfield Holdings, Inc.            |  | (e)(g)(h)       |  | Energy                           |  | L+675                    |  |       | 1.3% |  |          | 6/19/18  |                    |   | 16,560  |               |  |   | 16,194       |  |  |   | 12,088  | 
|Stonewall Gas Gathering LLC                 |  | (g)(i)          |  | Energy                           |  | L+775                    |  |       | 1.0% |  |          | 1/28/22  |                    |   | 10,000  |               |  |   | 9,516        |  |  |   | 10,063  | 
|SunGard Availability Services Capital, Inc. |  | (g)(j)          |  | Software & Services              |  | L+500                    |  |       | 1.0% |  |          | 3/29/19  |                    |   | 12,175  |               |  |   | 11,135       |  |  |   | 10,673  | 
|Sunnova Asset Portfolio 5 Holdings, LLC     |  |                 |  | Energy                           |  | 12.0% PIK(12.0% Max PIK) |  |       |      |  |          | 11/14/21 |                    |   | 5,326   |               |  |   | 5,326        |  |  |   | 5,380   | 
|Sunnova Asset Portfolio 5 Holdings, LLC     |  | (s)             |  | Energy                           |  | 12.0% PIK(12.0% Max PIK) |  |       |      |  |          | 11/14/21 |                    |   | 4,800   |               |  |   | 4,800        |  |  |   | 4,848   | 
|Swift Worldwide Resources US Holdings Corp. |  | (g)(i)          |  | Energy                           |  | L+800                    |  |       | 1.3% |  |          | 4/30/19  |                    |   | 19,836  |               |  |   | 19,836       |  |  |   | 19,539  | 
|ThermaSys Corp.                             |  | (g)             |  | Capital Goods                    |  | L+400                    |  |       | 1.3% |  |          | 5/3/19   |                    |   | 4,873   |               |  |   | 4,875        |  |  |   | 4,876   | 



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, 2015

(in thousands, except share amounts)







|                                       |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   |              |   |  |   |           |  
|-------------------------------------- |  | --------------- |  | ---------------------------------------------- |  | ----------------------------- |  | ----- | ---- |  | -------- | -------- | ------------------ | - | ------- | ------------- |  | - | ------------ | - |  | - | --------- | -
|Portfolio
Company(a)                   |  | Footnotes       |  | Industry                                       |  | Rate(b)                       |  | Floor |      |  | Maturity |          | PrincipalAmount(c) |   |         | AmortizedCost |  |   | FairValue(d) |  
|U.S. Xpress Enterprises, Inc.          |  | (e)(h)(i)(k)    |  | Transportation                                 |  | L+875, 1.8% PIK(1.8% Max PIK) |  |       | 1.5% |  |          | 5/30/19  |                    | $ | 94,525  |               |  | $ | 94,525       |   |  | $ | 95,943    |  
|UTEX Industries, Inc.                  |  | (l)             |  | Energy                                         |  | L+400                         |  |       | 1.0% |  |          | 5/21/21  |                    |   | 1,145   |               |  |   | 1,140        |   |  |   | 1,039     |  
|Vertellus Performance Chemicals LLC    |  | (k)(l)          |  | Materials                                      |  | Prime+850                     |  |       |      |  |          | 1/30/20  |                    |   | 65,000  |               |  |   | 65,000       |   |  |   | 65,009    |  
|Waste Pro USA, Inc.                    |  | (e)(h)(i)(k)(l) |  | Commercial & Professional Services             |  | L+750                         |  |       | 1.0% |  |          | 10/15/20 |                    |   | 112,163 |               |  |   | 112,163      |   |  |   | 113,285   |  
|Waste Pro USA, Inc.                    |  | (s)             |  | Commercial & Professional Services             |  | L+750                         |  |       | 1.0% |  |          | 10/15/20 |                    |   | 12,222  |               |  |   | 12,222       |   |  |   | 12,344    |  
|Weight Watchers International, Inc.    |  | (o)(n)          |  | Food & Staples Retailing                       |  | L+325                         |  |       | 0.8% |  |          | 4/2/20   |                    |   | 26,557  |               |  |   | 15,274       |   |  |   | 14,278    |  
|Weight Watchers International, Inc.    |  | (o)             |  | Food & Staples Retailing                       |  | L+300                         |  |       |      |  |          | 4/2/16   |                    |   | 6,109   |               |  |   | 5,329        |   |  |   | 5,414     |  
|Winchester Electronics Corp.           |  | (e)(k)(l)       |  | Technology Hardware & Equipment                |  | L+850                         |  |       | 1.0% |  |          | 11/17/20 |                    |   | 98,182  |               |  |   | 98,182       |   |  |   | 98,182    |  
|Winchester Electronics Corp.           |  |                 |  | Technology Hardware & Equipment                |  | L+800                         |  |       | 1.0% |  |          | 11/17/20 |                    |   | 12,929  |               |  |   | 12,929       |   |  |   | 12,929    |  
|Winchester Electronics Corp.           |  | (s)             |  | Technology Hardware & Equipment                |  | L+800                         |  |       | 1.0% |  |          | 11/17/20 |                    |   | 19,803  |               |  |   | 19,803       |   |  |   | 19,803    |  
|                                       |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   |              |   |  |   |           |  
|Total Senior Secured LoansFirst Lien  |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   | 2,697,189    |   |  |   | 2,680,037 |  
|Unfunded Loan Commitments              |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   | (144,249     | ) |  |   | (144,249  | )
|                                       |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   |              |   |  |   |           |  
|Net Senior Secured LoansFirst Lien    |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   | 2,552,940    |   |  |   | 2,535,788 |  
|                                       |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   |              |   |  |   |           |  
|Senior Secured LoansSecond Lien34.7% |  |                 |  |                                                |  |                               |  |       |      |  |          |          |                    |   |         |               |  |   |              |   |  |   |           |  
|Accellent Inc.                         |  | (j)             |  | Health Care Equipment & Services               |  | L+650                         |  |       | 1.0% |  |          | 3/11/22  |                    |   | 8,814   |               |  |   | 8,794        |   |  |   | 8,423     |  
|Advantage Sales & Marketing Inc.       |  | (j)             |  | Commercial & Professional Services             |  | L+650                         |  |       | 1.0% |  |          | 7/25/22  |                    |   | 2,824   |               |  |   | 2,805        |   |  |   | 2,834     |  
|Alison US LLC                          |  | (g)(o)          |  | Capital Goods                                  |  | L+850                         |  |       | 1.0% |  |          | 8/29/22  |                    |   | 4,444   |               |  |   | 4,274        |   |  |   | 4,030     |  
|American EnergyMarcellus, LLC         |  | (g)             |  | Energy                                         |  | L+750                         |  |       | 1.0% |  |          | 8/4/21   |                    |   | 3,333   |               |  |   | 3,288        |   |  |   | 2,489     |  
|American EnergyUtica, LLC             |  | (e)(f)(i)(l)    |  | Energy                                         |  | L+950                         |  |       | 1.5% |  |          | 9/30/18  |                    |   | 137,003 |               |  |   | 137,003      |   |  |   | 136,660   |  
|American EnergyUtica, LLC             |  | (f)             |  | Energy                                         |  | L+950                         |  |       | 1.5% |  |          | 9/30/18  |                    |   | 44,524  |               |  |   | 44,524       |   |  |   | 44,413    |  
|AssuredPartners Capital, Inc.          |  | (l)             |  | Insurance                                      |  | L+675                         |  |       | 1.0% |  |          | 4/2/22   |                    |   | 6,983   |               |  |   | 6,919        |   |  |   | 6,738     |  
|Atlas Resource Partners, L.P.          |  | (e)(h)(k)(o)    |  | Energy                                         |  | L+900                         |  |       | 1.0% |  |          | 2/23/20  |                    |   | 67,000  |               |  |   | 65,029       |   |  |   | 66,022    |  
|BlackBrush Oil & Gas, L.P.             |  | (f)(l)          |  | Energy                                         |  | L+650                         |  |       | 1.0% |  |          | 7/30/21  |                    |   | 11,182  |               |  |   | 10,337       |   |  |   | 9,086     |  
|BPA Laboratories Inc.                  |  | (e)             |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 2.5%                          |  |       |      |  |          | 7/3/17   |                    |   | 3,272   |               |  |   | 2,694        |   |  |   | 2,888     |  
|Brasa (Holdings) Inc.                  |  | (e)             |  | Consumer Services                              |  | L+950                         |  |       | 1.5% |  |          | 1/20/20  |                    |   | 621     |               |  |   | 603          |   |  |   | 623       |  
|BRG Sports, Inc.                       |  | (l)             |  | Consumer Durables & Apparel                    |  | L+925                         |  |       | 1.0% |  |          | 4/15/22  |                    |   | 12,500  |               |  |   | 12,215       |   |  |   | 12,625    |  
|Byrider Finance, LLC                   |  | (f)             |  | Automobiles & Components                       |  | L+1000                        |  |       | 1.3% |  |          | 8/22/20  |                    |   | 16,667  |               |  |   | 16,667       |   |  |   | 16,667    |  



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, 2015

(in thousands, except share amounts)







|                                      |  |           |  |                                    |  |             |  |       |      |  |          |          |                    |   |        |               |  |   |              |  |  |   |        | 
|------------------------------------- |  | --------- |  | ---------------------------------- |  | ----------- |  | ----- | ---- |  | -------- | -------- | ------------------ | - | ------ | ------------- |  | - | ------------ |  |  | - | ------ | 
|Portfolio
Company(a)                  |  | Footnotes |  | Industry                           |  | Rate(b)     |  | Floor |      |  | Maturity |          | PrincipalAmount(c) |   |        | AmortizedCost |  |   | FairValue(d) | 
|Cervalis LLC                          |  | (e)(h)    |  | Commercial & Professional Services |  | L+875       |  |       | 1.3% |  |          | 2/8/19   |                    | $ | 30,000 |               |  | $ | 29,709       |  |  | $ | 30,000 | 
|Checkout Holding Corp                 |  | (l)       |  | Media                              |  | L+675       |  |       | 1.0% |  |          | 4/11/22  |                    |   | 10,000 |               |  |   | 9,932        |  |  |   | 7,825  | 
|Chief Exploration & Development LLC   |  | (g)       |  | Energy                             |  | L+650       |  |       | 1.0% |  |          | 5/16/21  |                    |   | 2,259  |               |  |   | 2,239        |  |  |   | 2,105  | 
|ColourOz Investment 2 LLC             |  | (i)(o)    |  | Materials                          |  | L+725       |  |       | 1.0% |  |          | 9/5/22   |                    |   | 5,714  |               |  |   | 5,672        |  |  |   | 5,533  | 
|Compuware Corp.                       |  | (e)       |  | Software & Services                |  | L+825       |  |       | 1.0% |  |          | 12/15/22 |                    |   | 10,000 |               |  |   | 8,701        |  |  |   | 9,317  | 
|Consolidated Precision Products Corp. |  | (e)       |  | Capital Goods                      |  | L+775       |  |       | 1.0% |  |          | 4/30/21  |                    |   | 14,075 |               |  |   | 14,015       |  |  |   | 14,004 | 
|Crossmark Holdings, Inc.              |  | (l)       |  | Commercial & Professional Services |  | L+750       |  |       | 1.3% |  |          | 12/21/20 |                    |   | 7,778  |               |  |   | 7,794        |  |  |   | 7,117  | 
|Del Monte Foods, Inc.                 |  | (l)(o)    |  | Food, Beverage & Tobacco           |  | L+725       |  |       | 1.0% |  |          | 8/18/21  |                    |   | 3,333  |               |  |   | 3,304        |  |  |   | 3,025  | 
|Drew Marine Group Inc.                |  | (l)(o)    |  | Energy                             |  | L+700       |  |       | 1.0% |  |          | 5/19/21  |                    |   | 2,500  |               |  |   | 2,495        |  |  |   | 2,463  | 
|Eastman Kodak Co.                     |  | (j)       |  | Consumer Durables & Apparel        |  | L+950       |  |       | 1.3% |  |          | 9/3/20   |                    |   | 25,000 |               |  |   | 24,476       |  |  |   | 24,990 | 
|Extreme Reach, Inc.                   |  | (l)       |  | Media                              |  | L+950       |  |       | 1.0% |  |          | 1/22/21  |                    |   | 8,000  |               |  |   | 7,864        |  |  |   | 7,993  | 
|Fieldwood Energy LLC                  |  | (f)(j)    |  | Energy                             |  | L+713       |  |       | 1.3% |  |          | 9/30/20  |                    |   | 3,500  |               |  |   | 2,358        |  |  |   | 2,579  | 
|Filtration Group Corp.                |  | (j)       |  | Capital Goods                      |  | L+725       |  |       | 1.0% |  |          | 11/21/21 |                    |   | 5,158  |               |  |   | 5,172        |  |  |   | 5,190  | 
|Flexera Software LLC                  |  | (l)       |  | Software & Services                |  | L+700       |  |       | 1.0% |  |          | 4/2/21   |                    |   | 10,000 |               |  |   | 9,956        |  |  |   | 9,850  | 
|Inmar, Inc.                           |  | (l)       |  | Software & Services                |  | L+700       |  |       | 1.0% |  |          | 1/27/22  |                    |   | 2,830  |               |  |   | 2,805        |  |  |   | 2,787  | 
|Jazz Acquisition, Inc.                |  | (g)       |  | Capital Goods                      |  | L+675       |  |       | 1.0% |  |          | 6/19/22  |                    |   | 3,700  |               |  |   | 3,752        |  |  |   | 3,621  | 
|Jonah Energy LLC                      |  | (f)       |  | Energy                             |  | L+650       |  |       | 1.0% |  |          | 5/12/21  |                    |   | 3,250  |               |  |   | 2,762        |  |  |   | 2,911  | 
|Leedsworld Inc.                       |  | (e)(f)(g) |  | Retailing                          |  | L+875       |  |       | 1.3% |  |          | 6/28/20  |                    |   | 62,500 |               |  |   | 62,500       |  |  |   | 61,875 | 
|LM U.S. Member LLC                    |  | (e)(l)    |  | Transportation                     |  | L+725       |  |       | 1.0% |  |          | 1/25/21  |                    |   | 5,137  |               |  |   | 5,152        |  |  |   | 5,112  | 
|MD America Energy, LLC                |  | (l)       |  | Energy                             |  | L+850       |  |       | 1.0% |  |          | 8/4/19   |                    |   | 12,500 |               |  |   | 11,950       |  |  |   | 12,128 | 
|Mitchell International, Inc.          |  | (k)       |  | Software & Services                |  | L+750       |  |       | 1.0% |  |          | 10/11/21 |                    |   | 9,750  |               |  |   | 9,961        |  |  |   | 9,695  | 
|Neff Rental LLC                       |  | (l)       |  | Capital Goods                      |  | L+625       |  |       | 1.0% |  |          | 6/9/21   |                    |   | 12,073 |               |  |   | 12,018       |  |  |   | 11,877 | 
|Nielsen & Bainbridge, LLC             |  | (f)       |  | Consumer Services                  |  | L+925       |  |       | 1.0% |  |          | 8/15/21  |                    |   | 15,000 |               |  |   | 14,789       |  |  |   | 14,775 | 
|P2 Upstream Acquisition Co.           |  | (l)       |  | Energy                             |  | L+800       |  |       | 1.0% |  |          | 4/30/21  |                    |   | 14,500 |               |  |   | 14,740       |  |  |   | 13,413 | 
|Paw Luxco II Sarl                     |  | (o)       |  | Consumer Durables & Apparel        |  | EURIBOR+950 |  |       |      |  |          | 1/29/19  |                    |  | 5,727  |               |  |   | 7,094        |  |  |   | 5,283  | 
|Payless Inc.                          |  | (l)       |  | Consumer Durables & Apparel        |  | L+750       |  |       | 1.0% |  |          | 3/11/22  |                    | $ | 14,092 |               |  |   | 13,966       |  |  |   | 13,106 | 
|Peak 10, Inc.                         |  | (j)       |  | Software & Services                |  | L+725       |  |       | 1.0% |  |          | 6/17/22  |                    |   | 5,500  |               |  |   | 5,449        |  |  |   | 5,335  | 
|Pelican Products, Inc.                |  | (l)       |  | Capital Goods                      |  | L+825       |  |       | 1.0% |  |          | 4/9/21   |                    |   | 5,438  |               |  |   | 5,402        |  |  |   | 5,410  | 
|Penton Media, Inc.                    |  | (j)       |  | Media                              |  | L+775       |  |       | 1.3% |  |          | 10/2/20  |                    |   | 9,000  |               |  |   | 8,889        |  |  |   | 9,068  | 
|Printpack Holdings, Inc.              |  | (e)(i)(l) |  | Materials                          |  | L+875       |  |       | 1.0% |  |          | 5/28/21  |                    |   | 60,000 |               |  |   | 58,906       |  |  |   | 59,700 | 
|PSAV Acquisition Corp.                |  | (e)(k)    |  | Technology Hardware & Equipment    |  | L+825       |  |       | 1.0% |  |          | 1/24/22  |                    |   | 80,000 |               |  |   | 78,925       |  |  |   | 80,500 | 
|Renaissance Learning, Inc.            |  | (k)       |  | Software & Services                |  | L+700       |  |       | 1.0% |  |          | 4/11/22  |                    |   | 4,857  |               |  |   | 4,814        |  |  |   | 4,736  | 
|Road Infrastructure Investment, LLC   |  | (l)       |  | Consumer Services                  |  | L+675       |  |       | 1.0% |  |          | 9/30/21  |                    |   | 7,759  |               |  |   | 7,725        |  |  |   | 7,060  | 
|Samson Investment Co.                 |  | (g)       |  | Energy                             |  | L+400       |  |       | 1.0% |  |          | 9/25/18  |                    |   | 2,000  |               |  |   | 1,828        |  |  |   | 1,058  | 



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, 2015

(in thousands, except share amounts)







|                                             |  |              |  |                                                |  |                               |  |       |      |  |          |          |                    |   |        |               |  |   |              |  |  |   |           | 
|-------------------------------------------- |  | ------------ |  | ---------------------------------------------- |  | ----------------------------- |  | ----- | ---- |  | -------- | -------- | ------------------ | - | ------ | ------------- |  | - | ------------ |  |  | - | --------- | 
|Portfolio
Company(a)                         |  | Footnotes    |  | Industry                                       |  | Rate(b)                       |  | Floor |      |  | Maturity |          | PrincipalAmount(c) |   |        | AmortizedCost |  |   | FairValue(d) | 
|Sequential Brands Group, Inc.                |  | (e)(i)(k)(o) |  | Consumer Durables & Apparel                    |  | L+800                         |  |       | 1.0% |  |          | 8/15/20  |                    | $ | 50,000 |               |  | $ | 50,000       |  |  | $ | 50,000    | 
|The Telx Group, Inc.                         |  | (j)          |  | Software & Services                            |  | L+650                         |  |       | 1.0% |  |          | 4/9/21   |                    |   | 7,000  |               |  |   | 6,938        |  |  |   | 6,939     | 
|Templar Energy LLC                           |  | (h)(j)       |  | Energy                                         |  | L+750                         |  |       | 1.0% |  |          | 11/25/20 |                    |   | 29,231 |               |  |   | 28,630       |  |  |   | 20,017    | 
|Therakos, Inc.                               |  | (e)          |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+950                         |  |       | 1.3% |  |          | 6/27/18  |                    |   | 28,000 |               |  |   | 27,495       |  |  |   | 28,385    | 
|TNS, Inc.                                    |  | (f)(h)(l)    |  | Telecommunication Services                     |  | L+800                         |  |       | 1.0% |  |          | 8/14/20  |                    |   | 45,296 |               |  |   | 44,925       |  |  |   | 45,225    | 
|Ultima US Holdings LLC                       |  | (l)(o)       |  | Capital Goods                                  |  | L+850                         |  |       | 1.0% |  |          | 12/31/20 |                    |   | 57,000 |               |  |   | 56,075       |  |  |   | 56,715    | 
|Vantage Energy II, LLC                       |  | (i)          |  | Energy                                         |  | L+750                         |  |       | 1.0% |  |          | 5/8/17   |                    |   | 13,000 |               |  |   | 13,000       |  |  |   | 12,935    | 
|Vantage Energy, LLC                          |  | (i)          |  | Energy                                         |  | L+750                         |  |       | 1.0% |  |          | 12/20/18 |                    |   | 18,231 |               |  |   | 18,090       |  |  |   | 16,225    | 
|Winebow Holdings, Inc.                       |  | (g)          |  | Retailing                                      |  | L+750                         |  |       | 1.0% |  |          | 1/2/22   |                    |   | 2,775  |               |  |   | 2,756        |  |  |   | 2,594     | 
|WNA Holdings, Inc.                           |  | (l)          |  | Materials                                      |  | L+725                         |  |       | 1.3% |  |          | 12/7/20  |                    |   | 4,000  |               |  |   | 3,967        |  |  |   | 3,960     | 
|                                             |  |              |  |                                                |  |                               |  |       |      |  |          |          |                    |   |        |               |  |   |              |  |  |   |           | 
|Total Senior Secured LoansSecond Lien       |  |              |  |                                                |  |                               |  |       |      |  |          |          |                    |   |        |               |  |   | 1,034,142    |  |  |   | 1,017,934 | 
|                                             |  |              |  |                                                |  |                               |  |       |      |  |          |          |                    |   |        |               |  |   |              |  |  |   |           | 
|Senior Secured Bonds9.0%                    |  |              |  |                                                |  |                               |  |       |      |  |          |          |                    |   |        |               |  |   |              |  |  |   |           | 
|Advanced Lighting Technologies, Inc.         |  | (e)(f)       |  | Materials                                      |  | 10.5%                         |  |       |      |  |          | 6/1/19   |                    |   | 35,500 |               |  |   | 31,941       |  |  |   | 24,850    | 
|Algeco Scotsman Global Finance Plc           |  | (j)(o)       |  | Commercial & Professional Services             |  | 8.5%                          |  |       |      |  |          | 10/15/18 |                    |   | 15,469 |               |  |   | 15,244       |  |  |   | 15,469    | 
|Allen Systems Group, Inc.                    |  | (f)(p)(t)    |  | Software & Services                            |  | 10.5%                         |  |       |      |  |          | 11/15/16 |                    |   | 14,225 |               |  |   | 10,243       |  |  |   | 4,196     | 
|Aspect Software, Inc.                        |  | (f)(j)       |  | Software & Services                            |  | 10.6%                         |  |       |      |  |          | 5/15/17  |                    |   | 8,005  |               |  |   | 8,237        |  |  |   | 7,004     | 
|Avaya Inc.                                   |  | (j)          |  | Technology Hardware & Equipment                |  | 7.0%                          |  |       |      |  |          | 4/1/19   |                    |   | 5,500  |               |  |   | 5,475        |  |  |   | 5,488     | 
|Avaya Inc.                                   |  | (f)(j)       |  | Technology Hardware & Equipment                |  | 10.5%                         |  |       |      |  |          | 3/1/21   |                    |   | 17,550 |               |  |   | 15,411       |  |  |   | 15,005    | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(f)(j)    |  | Consumer Services                              |  | 11.0%                         |  |       |      |  |          | 10/1/21  |                    |   | 70,460 |               |  |   | 71,129       |  |  |   | 61,653    | 
|CEVA Group Plc                               |  | (j)(o)       |  | Transportation                                 |  | 9.0%                          |  |       |      |  |          | 9/1/21   |                    |   | 2,000  |               |  |   | 2,000        |  |  |   | 1,935     | 
|FourPoint Energy, LLC                        |  | (e)(f)       |  | Energy                                         |  | 8.0%                          |  |       |      |  |          | 12/31/20 |                    |   | 43,875 |               |  |   | 42,043       |  |  |   | 39,268    | 
|FourPoint Energy, LLC                        |  | (f)(s)       |  | Energy                                         |  | 8.0%                          |  |       |      |  |          | 12/31/20 |                    |   | 17,063 |               |  |   | 16,977       |  |  |   | 15,271    | 
|Global A&T Electronics Ltd.                  |  | (f)(o)       |  | Technology Hardware & Equipment                |  | 10.0%                         |  |       |      |  |          | 2/1/19   |                    |   | 9,000  |               |  |   | 9,000        |  |  |   | 8,854     | 
|iHeartCommunications, Inc.                   |  | (j)          |  | Media                                          |  | 10.6%                         |  |       |      |  |          | 3/15/23  |                    |   | 3,500  |               |  |   | 3,500        |  |  |   | 3,520     | 
|JW Aluminum Co.                              |  | (e)(f)       |  | Materials                                      |  | 11.5%, 1.0% PIK(1.0% Max PIK) |  |       |      |  |          | 11/15/17 |                    |   | 17,550 |               |  |   | 17,529       |  |  |   | 17,550    | 
|Light Tower Rentals, Inc.                    |  | (j)          |  | Capital Goods                                  |  | 8.1%                          |  |       |      |  |          | 8/1/19   |                    |   | 2,100  |               |  |   | 2,100        |  |  |   | 1,565     | 
|Logans Roadhouse, Inc.                      |  | (f)(j)       |  | Consumer Services                              |  | 10.8%                         |  |       |      |  |          | 10/15/17 |                    |   | 36,814 |               |  |   | 32,635       |  |  |   | 27,841    | 
|Modular Space Corp.                          |  | (j)          |  | Capital Goods                                  |  | 10.3%                         |  |       |      |  |          | 1/31/19  |                    |   | 9,950  |               |  |   | 10,220       |  |  |   | 7,960     | 
|Prince Mineral Holding Corp.                 |  | (e)          |  | Materials                                      |  | 11.5%                         |  |       |      |  |          | 12/15/19 |                    |   | 2,320  |               |  |   | 2,300        |  |  |   | 2,256     | 
|Sorenson Communications, Inc.                |  | (e)(f)(j)    |  | Telecommunication Services                     |  | 9.0%                          |  |       |      |  |          | 10/31/20 |                    |   | 18,877 |               |  |   | 18,190       |  |  |   | 18,263    | 



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, 2015

(in thousands, except share amounts)







|                                          |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         |  
|----------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ------------------------------ |  | ----- |  | -------- |  | ------------------ | ------ |  | ------------- | - | ------- | ------------ |  | - | ------- | -
|Portfolio
Company(a)                      |  | Footnotes |  | Industry                                       |  | Rate(b)                        |  | Floor |  | Maturity |  | PrincipalAmount(c) |        |  | AmortizedCost |   |         | FairValue(d) | 
|Speedy Cash Intermediate Holdings Corp.   |  | (j)       |  | Diversified Financials                         |  | 10.8%                          |  |       |  | 5/15/18  |  | $                  | 2,000  |  |               | $ | 2,015   |              |  | $ | 1,911   |  
|                                          |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         |  
|Total Senior Secured Bonds                |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   | 316,189 |              |  |   | 279,859 |  
|Unfunded Bond Commitments                 |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   | (16,977 | )            |  |   | (16,977 | )
|                                          |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         |  
|Net Senior Secured Bonds                  |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   | 299,212 |              |  |   | 262,882 |  
|                                          |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         |  
|Subordinated Debt15.3%                   |  |           |  |                                                |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         |  
|Acosta HoldCo, Inc.                       |  | (j)       |  | Consumer Services                              |  | 7.8%                           |  |       |  | 10/1/22  |  |                    | 4,800  |  |               |   | 4,800   |              |  |   | 4,980   |  
|Algeco Scotsman Global Finance Plc        |  | (j)(o)    |  | Commercial & Professional Services             |  | 10.8%                          |  |       |  | 10/15/19 |  |                    | 3,000  |  |               |   | 2,553   |              |  |   | 2,483   |  
|Alta Mesa Holdings, LP                    |  | (f)       |  | Energy                                         |  | 9.6%                           |  |       |  | 10/15/18 |  |                    | 1,350  |  |               |   | 939     |              |  |   | 1,033   |  
|American EnergyWoodford, LLC             |  | (j)       |  | Energy                                         |  | 9.0%                           |  |       |  | 9/15/22  |  |                    | 3,750  |  |               |   | 3,603   |              |  |   | 2,170   |  
|Armored AutoGroup Inc.                    |  | (j)       |  | Household & Personal Products                  |  | 9.3%                           |  |       |  | 11/1/18  |  |                    | 4,119  |  |               |   | 4,240   |              |  |   | 4,207   |  
|Atlas Energy Holdings Operating Co., LLC  |  | (j)(n)(o) |  | Energy                                         |  | 7.8%                           |  |       |  | 1/15/21  |  |                    | 5,310  |  |               |   | 4,894   |              |  |   | 3,611   |  
|Atlas Energy Holdings Operating Co., LLC  |  | (j)(n)(o) |  | Energy                                         |  | 9.3%                           |  |       |  | 8/15/21  |  |                    | 200    |  |               |   | 141     |              |  |   | 142     |  
|Aurora Diagnostics, LLC                   |  | (e)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 10.8%                          |  |       |  | 1/15/18  |  |                    | 7,000  |  |               |   | 7,026   |              |  |   | 6,287   |  
|Beazer Homes USA, Inc.                    |  | (j)(o)    |  | Capital Goods                                  |  | 7.3%                           |  |       |  | 2/1/23   |  |                    | 2,750  |  |               |   | 2,750   |              |  |   | 2,633   |  
|Brooklyn Basketball Holdings, LLC         |  | (f)(i)    |  | Consumer Services                              |  | L+800                          |  |       |  | 10/25/19 |  |                    | 39,746 |  |               |   | 39,746  |              |  |   | 39,547  |  
|BWAY Holding Co.                          |  | (j)       |  | Materials                                      |  | 9.1%                           |  |       |  | 8/15/21  |  |                    | 6,250  |  |               |   | 6,212   |              |  |   | 6,500   |  
|Cadillac Jack, Inc.                       |  | (f)(o)    |  | Consumer Services                              |  | 6.0%, 7.0% PIK(7.0% Max PIK)   |  |       |  | 5/15/20  |  |                    | 53,183 |  |               |   | 37,953  |              |  |   | 63,022  |  
|Calumet Specialty Products Partners, L.P. |  | (j)(o)    |  | Energy                                         |  | 6.5%                           |  |       |  | 4/15/21  |  |                    | 2,500  |  |               |   | 2,500   |              |  |   | 2,433   |  
|CEC Entertainment, Inc.                   |  | (j)       |  | Consumer Services                              |  | 8.0%                           |  |       |  | 2/15/22  |  |                    | 18,715 |  |               |   | 18,502  |              |  |   | 18,528  |  
|Compressco Partners, LP                   |  | (j)(o)    |  | Energy                                         |  | 7.3%                           |  |       |  | 8/15/22  |  |                    | 4,000  |  |               |   | 3,944   |              |  |   | 3,498   |  
|Elizabeth Arden, Inc.                     |  | (j)(o)    |  | Household & Personal Products                  |  | 7.4%                           |  |       |  | 3/15/21  |  |                    | 615    |  |               |   | 571     |              |  |   | 554     |  
|EV Energy Partners, L.P.                  |  | (f)(j)(o) |  | Energy                                         |  | 8.0%                           |  |       |  | 4/15/19  |  |                    | 1,575  |  |               |   | 1,387   |              |  |   | 1,445   |  
|First Data Corp.                          |  | (j)       |  | Software & Services                            |  | 11.8%                          |  |       |  | 8/15/21  |  |                    | 650    |  |               |   | 670     |              |  |   | 755     |  
|Global Jet Capital Inc.                   |  |           |  | Commercial & Professional Services             |  | 15.0%, 0.0% PIK(15.0% Max PIK) |  |       |  | 1/30/25  |  |                    | 401    |  |               |   | 401     |              |  |   | 401     |  
|Hub International Ltd.                    |  | (j)       |  | Insurance                                      |  | 8.1%, 0.8% PIK(0.8% Max PIK)   |  |       |  | 7/15/19  |  |                    | 6,000  |  |               |   | 5,986   |              |  |   | 5,978   |  
|Jefferies Finance LLC                     |  | (j)(o)    |  | Diversified Financials                         |  | 7.4%                           |  |       |  | 4/1/20   |  |                    | 1,500  |  |               |   | 1,500   |              |  |   | 1,459   |  
|Jefferies Finance LLC                     |  | (j)(o)    |  | Diversified Financials                         |  | 6.9%                           |  |       |  | 4/15/22  |  |                    | 950    |  |               |   | 950     |              |  |   | 888     |  
|Jupiter Resources Inc.                    |  | (i)(j)(o) |  | Energy                                         |  | 8.5%                           |  |       |  | 10/1/22  |  |                    | 25,300 |  |               |   | 23,385  |              |  |   | 20,873  |  
|Legacy Reserves LP                        |  | (e)(o)    |  | Energy                                         |  | 8.0%                           |  |       |  | 12/1/20  |  |                    | 8,250  |  |               |   | 8,111   |              |  |   | 6,844   |  
|Legacy Reserves LP                        |  | (j)(o)    |  | Energy                                         |  | 6.6%                           |  |       |  | 12/1/21  |  |                    | 5,000  |  |               |   | 3,901   |              |  |   | 3,982   |  



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, 2015

(in thousands, except share amounts)







|                                            |  |              |  |                                                |  |                              |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|------------------------------------------- |  | ------------ |  | ---------------------------------------------- |  | ---------------------------- |  | ----- |  | -------- |  | ------------------ | ------- |  | ------------- | - | ------- | ------------ |  | - | ------- | 
|Portfolio
Company(a)                        |  | Footnotes    |  | Industry                                       |  | Rate(b)                      |  | Floor |  | Maturity |  | PrincipalAmount(c) |         |  | AmortizedCost |   |         | FairValue(d) | 
|Lightstream Resources Ltd.                  |  | (j)(o)       |  | Energy                                         |  | 8.6%                         |  |       |  | 2/1/20   |  | $                  | 4,150   |  |               | $ | 3,460   |              |  | $ | 3,008   | 
|Linn Energy, LLC                            |  | (j)(o)       |  | Energy                                         |  | 6.5%                         |  |       |  | 9/15/21  |  |                    | 1,000   |  |               |   | 808     |              |  |   | 771     | 
|Linn Energy, LLC                            |  | (j)(o)       |  | Energy                                         |  | 7.8%                         |  |       |  | 2/1/21   |  |                    | 1,500   |  |               |   | 1,201   |              |  |   | 1,231   | 
|Linn Energy, LLC                            |  | (j)(o)       |  | Energy                                         |  | 6.3%                         |  |       |  | 11/1/19  |  |                    | 1,500   |  |               |   | 1,224   |              |  |   | 1,199   | 
|Linn Energy, LLC                            |  | (j)(o)       |  | Energy                                         |  | 8.6%                         |  |       |  | 4/15/20  |  |                    | 500     |  |               |   | 428     |              |  |   | 430     | 
|Mood Media Corp.                            |  | (e)(f)(j)(o) |  | Media                                          |  | 9.3%                         |  |       |  | 10/15/20 |  |                    | 46,207  |  |               |   | 45,624  |              |  |   | 39,854  | 
|NewStar Financial, Inc.                     |  | (e)(k)(l)(o) |  | Diversified Financials                         |  | 8.3%, 0.0% PIK(8.8% Max PIK) |  |       |  | 12/4/24  |  |                    | 100,000 |  |               |   | 70,353  |              |  |   | 75,500  | 
|Ocean Rig UDW Inc                           |  | (j)(o)       |  | Energy                                         |  | 7.3%                         |  |       |  | 4/1/19   |  |                    | 4,700   |  |               |   | 4,700   |              |  |   | 2,714   | 
|Opal Acquisition, Inc.                      |  | (j)          |  | Consumer Services                              |  | 8.9%                         |  |       |  | 12/15/21 |  |                    | 27,000  |  |               |   | 27,000  |              |  |   | 27,554  | 
|P.F. Changs China Bistro, Inc.             |  | (j)          |  | Consumer Services                              |  | 10.3%                        |  |       |  | 6/30/20  |  |                    | 11,578  |  |               |   | 11,914  |              |  |   | 12,070  | 
|Resolute Energy Corp.                       |  | (j)          |  | Energy                                         |  | 8.5%                         |  |       |  | 5/1/20   |  |                    | 5,800   |  |               |   | 5,854   |              |  |   | 2,473   | 
|Rex Energy Corp.                            |  | (e)          |  | Energy                                         |  | 8.9%                         |  |       |  | 12/1/20  |  |                    | 15,000  |  |               |   | 14,916  |              |  |   | 11,618  | 
|Rex Energy Corp.                            |  | (j)          |  | Energy                                         |  | 6.3%                         |  |       |  | 8/1/22   |  |                    | 3,950   |  |               |   | 3,950   |              |  |   | 2,711   | 
|RKI Exploration & Production, LLC           |  | (j)          |  | Energy                                         |  | 8.5%                         |  |       |  | 8/1/21   |  |                    | 2,710   |  |               |   | 2,438   |              |  |   | 2,581   | 
|Samson Investment Co.                       |  | (f)          |  | Energy                                         |  | 9.8%                         |  |       |  | 2/15/20  |  |                    | 1,400   |  |               |   | 1,135   |              |  |   | 392     | 
|SandRidge Energy, Inc.                      |  | (j)(o)       |  | Energy                                         |  | 8.8%                         |  |       |  | 1/15/20  |  |                    | 10,659  |  |               |   | 9,463   |              |  |   | 7,221   | 
|Sorenson Communications, Inc.               |  | (e)(f)(j)    |  | Telecommunication Services                     |  | 13.0%                        |  |       |  | 10/31/21 |  |                    | 14,346  |  |               |   | 13,401  |              |  |   | 14,346  | 
|SunGard Availability Services Capital, Inc. |  | (j)          |  | Software & Services                            |  | 8.8%                         |  |       |  | 4/1/22   |  |                    | 5,900   |  |               |   | 4,161   |              |  |   | 3,747   | 
|Talos Production LLC                        |  | (j)          |  | Energy                                         |  | 9.8%                         |  |       |  | 2/15/18  |  |                    | 4,500   |  |               |   | 4,025   |              |  |   | 3,713   | 
|Triangle USA Petroleum Corp.                |  | (j)(o)       |  | Energy                                         |  | 6.8%                         |  |       |  | 7/15/22  |  |                    | 2,350   |  |               |   | 2,350   |              |  |   | 1,901   | 
|U.S. Coatings Acquisition Inc.              |  | (j)          |  | Capital Goods                                  |  | 7.4%                         |  |       |  | 5/1/21   |  |                    | 2,000   |  |               |   | 2,000   |              |  |   | 2,165   | 
|VRX Escrow Corp.                            |  | (j)(o)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 5.9%                         |  |       |  | 5/15/23  |  |                    | 3,250   |  |               |   | 3,250   |              |  |   | 3,330   | 
|Warren Resources, Inc.                      |  | (f)(j)       |  | Energy                                         |  | 9.0%                         |  |       |  | 8/1/22   |  |                    | 20,890  |  |               |   | 17,143  |              |  |   | 12,379  | 
|Windstream Corp.                            |  | (j)(o)       |  | Telecommunication Services                     |  | 6.4%                         |  |       |  | 8/1/23   |  |                    | 2,600   |  |               |   | 2,600   |              |  |   | 2,353   | 
|WMG Acquisition Corp.                       |  | (j)          |  | Media                                          |  | 6.8%                         |  |       |  | 4/15/22  |  |                    | 6,000   |  |               |   | 6,000   |              |  |   | 5,715   | 
|York Risk Services Holding Corp.            |  | (j)          |  | Insurance                                      |  | 8.5%                         |  |       |  | 10/1/22  |  |                    | 3,350   |  |               |   | 3,350   |              |  |   | 3,181   | 
|                                            |  |              |  |                                                |  |                              |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|Total Subordinated Debt                     |  |              |  |                                                |  |                              |  |       |  |          |  |                    |         |  |               |   | 449,413 |              |  |   | 448,410 | 
|                                            |  |              |  |                                                |  |                              |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|Collateralized Securities4.4%              |  |              |  |                                                |  |                              |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|CGMS CLO 2013-3A Class Subord.              |  | (o)          |  | Diversified Financials                         |  | 15.0%                        |  |       |  | 7/15/25  |  |                    | 17,000  |  |               |   | 11,613  |              |  |   | 13,501  | 



See
notes to unaudited consolidated financial statements.



12



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2015

(in thousands, except share amounts)







|                                                           |  |           |  |                                                |  |         |  |       |  |          |  |                    |            |  |               |   |         |              |  |   |         | 
|---------------------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ------- |  | ----- |  | -------- |  | ------------------ | ---------- |  | ------------- | - | ------- | ------------ |  | - | ------- | 
|Portfolio
Company(a)                                       |  | Footnotes |  | Industry                                       |  | Rate(b) |  | Floor |  | Maturity |  | PrincipalAmount(c) |            |  | AmortizedCost |   |         | FairValue(d) | 
|JPMorgan Chase Bank, N.A. Credit-Linked Notes              |  | (o)       |  | Diversified Financials                         |  | 14.3%   |  |       |  | 12/20/21 |  | $                  | 76,260     |  |               | $ | 75,911  |              |  | $ | 77,404  | 
|NewStar Clarendon 2014-1A Class D                          |  | (o)       |  | Diversified Financials                         |  | L+435   |  |       |  | 1/25/27  |  |                    | 1,060      |  |               |   | 993     |              |  |   | 991     | 
|NewStar Clarendon 2014-1A Class Subord. B                  |  | (o)       |  | Diversified Financials                         |  | 12.5%   |  |       |  | 1/25/27  |  |                    | 12,140     |  |               |   | 12,013  |              |  |   | 11,958  | 
|Octagon CLO 2012-1A Class Income                           |  | (o)       |  | Diversified Financials                         |  | 15.3%   |  |       |  | 1/15/24  |  |                    | 4,650      |  |               |   | 2,703   |              |  |   | 3,349   | 
|Wind River CLO Ltd. 2013-1A Class Subord. B                |  | (o)       |  | Diversified Financials                         |  | 12.0%   |  |       |  | 4/20/25  |  |                    | 26,720     |  |               |   | 20,707  |              |  |   | 22,781  | 
|                                                           |  |           |  |                                                |  |         |  |       |  |          |  |                    |            |  |               |   |         |              |  |   |         | 
|Total Collateralized Securities                            |  |           |  |                                                |  |         |  |       |  |          |  |                    |            |  |               |   | 123,940 |              |  |   | 129,984 | 
|                                                           |  |           |  |                                                |  |         |  |       |  |          |  |                    |            |  |               |   |         |              |  |   |         | 
|                                                           |  |           |  |                                                |  |         |  |      
|                                                           |  |           |  |                                                |  |         |  |       |  |          |  | Number ofShares    |            |  | Cost          |   |         | FairValue(d) | 
|Equity/Other6.4%                                          |  |           |  |                                                |  |         |  |       |  |          |  |                    |            |  |               |   |         |             
|A.T. Cross Co., Common Equity, Class A Units               |  | (f)(p)    |  | Retailing                                      |  |         |  |       |  |          |  |                    | 1,000,000  |  |               |   | 1,000   |              |  |   | 1,050   | 
|Abaco Energy Technologies LLC, Common Equity               |  | (p)       |  | Energy                                         |  |         |  |       |  |          |  |                    | 3,055,556  |  |               |   | 3,056   |              |  |   | 2,750   | 
|ACP FH Holdings GP, LLC, Common Equity                     |  | (f)(p)    |  | Consumer Durables & Apparel                    |  |         |  |       |  |          |  |                    | 88,571     |  |               |   | 89      |              |  |   | 89      | 
|ACP FH Holdings, LP, Common Equity                         |  | (f)(p)    |  | Consumer Durables & Apparel                    |  |         |  |       |  |          |  |                    | 8,768,572  |  |               |   | 8,769   |              |  |   | 8,830   | 
|Altus Power America Holdings, Inc., Preferred Equity       |  | (p)       |  | Energy                                         |  |         |  |       |  |          |  |                    | 299,758    |  |               |   | 300     |              |  |   | 480     | 
|Amaya Gaming Group Inc., Warrants                          |  | (o)(p)    |  | Consumer Services                              |  |         |  |       |  |          |  |                    | 2,000,000  |  |               |   | 16,832  |              |  |   | 33,340  | 
|American Energy Appalachia Holdings, LLC, Common Equity    |  | (p)(q)    |  | Energy                                         |  |         |  |       |  |          |  |                    | 13,555,557 |  |               |   | 12,900  |              |  |   | 13,556  | 
|AP Exhaust Holdings, LLC, Common Equity                    |  | (p)(r)    |  | Automobiles & Components                       |  |         |  |       |  |          |  |                    | 8,378      |  |               |   | 8,378   |              |  |   | 6,200   | 
|BPA Laboratories, Inc., Series A Warrants                  |  | (e)(p)    |  | Pharmaceuticals, Biotechnology & Life Sciences |  |         |  |       |  |          |  |                    | 10,924     |  |               |   |        |              |  |   |        | 
|BPA Laboratories, Inc., Series B Warrants                  |  | (e)(p)    |  | Pharmaceuticals, Biotechnology & Life Sciences |  |         |  |       |  |          |  |                    | 17,515     |  |               |   |        |              |  |   |        | 
|Burleigh Point, Ltd., Warrants                             |  | (o)(p)    |  | Retailing                                      |  |         |  |       |  |          |  |                    | 17,256,081 |  |               |   | 1,898   |              |  |   | 3,451   | 
|Cimarron Energy Inc., Common Equity                        |  | (p)       |  | Energy                                         |  |         |  |       |  |          |  |                    | 2,500,000  |  |               |   | 2,500   |              |  |   | 2,000   | 
|CoSentry.Net, LLC, Preferred Equity                        |  | (f)(p)    |  | Software & Services                            |  |         |  |       |  |          |  |                    | 2,632      |  |               |   | 2,500   |              |  |   | 5,461   | 
|DHS Technologies LLC, Common Equity                        |  | (f)       |  | Capital Goods                                  |  |         |  |       |  |          |  |                    | 60,872     |  |               |   | 5,000   |              |  |   | 1,077   | 
|Eastman Kodak Co., Common Equity                           |  | (p)       |  | Consumer Durables & Apparel                    |  |         |  |       |  |          |  |                    | 1,846      |  |               |   | 36      |              |  |   | 35      | 
|ERC Ireland Holdings Ltd., Common Equity                   |  | (o)(p)    |  | Telecommunication Services                     |  |         |  |       |  |          |  |                    | 27,344     |  |               |   | 3,164   |              |  |   | 4,626   | 
|FourPoint Energy, LLC, Common Equity, Class C Units        |  | (p)(r)    |  | Energy                                         |  |         |  |       |  |          |  |                    | 13,000     |  |               |   | 13,000  |              |  |   | 16,250  | 
|FourPoint Energy, LLC, Common Equity, Class D Units        |  | (p)(r)    |  | Energy                                         |  |         |  |       |  |          |  |                    | 2,437      |  |               |   | 1,610   |              |  |   | 3,083   | 
|Global Jet Capital Holdings, LP, Preferred Equity          |  | (p)       |  | Commercial & Professional Services             |  |         |  |       |  |          |  |                    | 171,832    |  |               |   | 172     |              |  |   | 172     | 
|Industrial Group Intermediate Holdings, LLC, Common Equity |  | (p)(r)    |  | Materials                                      |  |         |  |       |  |          |  |                    | 2,107,438  |  |               |   | 2,107   |              |  |   | 3,267   | 
|MB Precision Holdings LLC, Common Equity                   |  | (f)(p)    |  | Capital Goods                                  |  |         |  |       |  |          |  |                    | 2,287,659  |  |               |   | 2,288   |              |  |   | 1,945   | 
|MModal LLC, Common Equity                                  |  | (e)(g)(p) |  | Health Care Equipment & Services               |  |         |  |       |  |          |  |                    | 132,235    |  |               |   | 2,182   |              |  |   | 1,785   | 



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, 2015

(in thousands, except share amounts)







|                                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   |            |  
|------------------------------------------------------- |  | --------- |  | ---------------------------------------------- |  |  |  | --------------- |  |  | ---- |  | --------- | ------------ |  | - | --------- |  |  | - | ---------- | -
|Portfolio
Company(a)                                    |  | Footnotes |  | Industry                                       |  |  |  | Number ofShares |  |  | Cost |  |           | FairValue(d) | 
|New Star Metals Inc., Common Equity                     |  | (f)       |  | Capital Goods                                  |  |  |  |                 |  |  |      |  | 2,223,246 |              |  | $ | 2,250     |  |  | $ | 2,890      |  
|NewStar Financial, Inc., Warrants                       |  | (o)(p)(v) |  | Diversified Financials                         |  |  |  |                 |  |  |      |  | 6,000,000 |              |  |   | 30,115    |  |  |   | 33,600     |  
|Professional Plumbing Group, Inc., Common Equity        |  | (f)(p)    |  | Capital Goods                                  |  |  |  |                 |  |  |      |  | 3,000,000 |              |  |   | 3,000     |  |  |   | 4,200      |  
|PSAV Holdings LLC, Common Equity                        |  | (p)       |  | Technology Hardware & Equipment                |  |  |  |                 |  |  |      |  | 10,000    |              |  |   | 10,000    |  |  |   | 17,500     |  
|Sorenson Communications, Inc., Common Equity            |  | (e)(f)(p) |  | Telecommunication Services                     |  |  |  |                 |  |  |      |  | 43,796    |              |  |   |          |  |  |   | 21,749     |  
|Swift Worldwide Resources Holdco Limited, Common Equity |  | (o)(p)(u) |  | Energy                                         |  |  |  |                 |  |  |      |  | 1,250,000 |              |  |   | 2,010     |  |  |   | 1,763      |  
|Therakos, Inc., Common Equity                           |  |           |  | Pharmaceuticals, Biotechnology & Life Sciences |  |  |  |                 |  |  |      |  | 14,366    |              |  |   | 1,478     |  |  |   | 6,545      |  
|                                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   |            |  
|Total Equity/Other                                      |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   | 136,634   |  |  |   | 197,694    |  
|Unfunded Contigent Warrant Commitment                   |  | (w)       |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |          |  |  |   | (11,200    | )
|                                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   |            |  
|Net Equity/Other                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   | 136,634   |  |  |   | 186,494    |  
|                                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   |            |  
|TOTAL INVESTMENTS156.4%                                |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  | $ | 4,596,281 |  |  |   | 4,581,492  |  
|                                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   |            |  
|LIABILITIES IN EXCESS OF OTHER ASSETS(56.4%)           |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   | (1,651,519 | )
|                                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   |            |  
|NET ASSETS100.0%                                       |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  | $ | 2,929,973  |  
|                                                        |  |           |  |                                                |  |  |  |                 |  |  |      |  |           |              |  |   |           |  |  |   |            |  



|(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, 2015, the three-month London Interbank Offered Rate was 0.27%, the Euro Interbank Offered Rate was 0.02% and the U.S. Prime Lending Rate was 3.25%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(d) | Fair value and market value are 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 Floating Rate 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 amounts outstanding under the revolving credit facility with
Citibank, N.A. (see Note 8).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



See
notes to unaudited consolidated financial statements.



14



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of March 31, 2015

(in thousands, except share amounts)









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



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



|(k) | Security or portion thereof held within Juniata River LLC and is pledge as collateral supporting the amounts outstanding under a revolving credit facility with JPMorgan
Chase Bank, N.A. (see Note 8).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(m) | Security or portion thereof held within Schuylkill River LLC and is pledged as collateral supporting the obligations of Schuylkill River LLC under the repurchase
transaction with Goldman Sachs Bank USA (see Note 8).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(n) | Position or portion thereof unsettled as of March 31, 2015.
|--- | -----------------------------------------------------------



|(o) | 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, 2015, 78.4% of the Companys total assets represented
qualifying assets.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



|(s) | Security is an unfunded commitment.
|--- | -----------------------------------



|(t) | Security was on non-accrual status as of March 31, 2015.
|--- | --------------------------------------------------------



|(u) | Investment denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2015.
|--- | -----------------------------------------------------------------------------------------------------------------------------



|(v) | Includes 2,000,000 NewStar Financial, Inc., or NewStar, warrants, which is the maximum number of warrants that the Company will forfeit in the event that the Company
declines to fund additional subordinated debt investments in NewStar in an amount not to exceed $50,000 upon the request of NewStar.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(w) | Represents the maximum number of NewStar warrants that the Company will forfeit in the event that the Company declines to fund additional subordinated debt investments
in NewStar in an amount not to exceed $50,000 upon the request of NewStar.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See
notes to unaudited consolidated financial statements.



15



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments

As of December 31, 2014

(in thousands, except share amounts)







|                                             |  |                    |  |                                                |  |         |  |       |     |   |          |          |                    |   |         |               |  |   |               |  |  |   |         | 
|-------------------------------------------- |  | ------------------ |  | ---------------------------------------------- |  | ------- |  | ----- | --- | - | -------- | -------- | ------------------ | - | ------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes          |  | Industry                                       |  | Rate(b) |  | Floor |     |   | Maturity |          | PrincipalAmount(c) |   |         | AmortizedCost |  |   | Fair
Value(d) | 
|Senior Secured LoansFirst Lien80.6%        |  |                    |  |                                                |  |         |  |       |     |   |          |          |                    |   |         |               |  |   |               |  |  |   |         | 
|A.T. Cross Co.                               |  | (e)(g)             |  | Retailing                                      |  | L+825   |  |       |     |   |          | 9/6/19   |                    | $ | 41,525  |               |  | $ | 41,525        |  |  | $ | 41,525  | 
|A.T. Cross Co.                               |  | (s)                |  | Retailing                                      |  | L+825   |  |       |     |   |          | 9/6/19   |                    |   | 20,000  |               |  |   | 20,000        |  |  |   | 20,000  | 
|Abaco Energy Technologies LLC                |  | (g)(k)(n)          |  | Energy                                         |  | L+700   |  |       | 1.0 | % |          | 11/20/20 |                    |   | 27,500  |               |  |   | 25,855        |  |  |   | 25,987  | 
|Acision Finance LLC                          |  | (k)(l)(o)(n)       |  | Software & Services                            |  | L+975   |  |       | 1.0 | % |          | 12/15/18 |                    |   | 33,280  |               |  |   | 31,948        |  |  |   | 32,946  | 
|Air Medical Group Holdings, Inc.             |  | (g)                |  | Health Care Equipment & Services               |  | L+400   |  |       | 1.0 | % |          | 6/30/18  |                    |   | 1,437   |               |  |   | 1,439         |  |  |   | 1,440   | 
|Allen Systems Group, Inc.                    |  | (e)(f)             |  | Software & Services                            |  | L+1625  |  |       | 1.0 | % |          | 12/14/17 |                    |   | 68,615  |               |  |   | 76,592        |  |  |   | 84,594  | 
|Allen Systems Group, Inc.                    |  | (e)(f)             |  | Software & Services                            |  | L+1425  |  |       | 1.0 | % |          | 12/14/17 |                    |   | 2,867   |               |  |   | 3,201         |  |  |   | 3,534   | 
|Altus Power America, Inc.                    |  |                    |  | Energy                                         |  | L+750   |  |       | 1.5 | % |          | 10/10/21 |                    |   | 762     |               |  |   | 762           |  |  |   | 762     | 
|Altus Power America, Inc.                    |  | (s)                |  | Energy                                         |  | L+750   |  |       | 1.5 | % |          | 10/10/21 |                    |   | 2,363   |               |  |   | 2,363         |  |  |   | 2,363   | 
|Alvogen Pharma US, Inc.                      |  | (g)(i)             |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+575   |  |       | 1.3 | % |          | 5/23/18  |                    |   | 9,120   |               |  |   | 9,078         |  |  |   | 9,195   | 
|AP Exhaust Acquisition, LLC                  |  | (e)(h)(i)(k)       |  | Automobiles & Components                       |  | L+775   |  |       | 1.5 | % |          | 1/16/21  |                    |   | 150,811 |               |  |   | 150,811       |  |  |   | 146,286 | 
|Apex Tool Group, LLC                         |  | (i)                |  | Capital Goods                                  |  | L+325   |  |       | 1.3 | % |          | 1/31/20  |                    |   | 2,254   |               |  |   | 2,245         |  |  |   | 2,195   | 
|Ascension Insurance, Inc.                    |  | (e)(f)(i)          |  | Insurance                                      |  | L+825   |  |       | 1.3 | % |          | 3/5/19   |                    |   | 78,653  |               |  |   | 77,585        |  |  |   | 78,652  | 
|Aspect Software, Inc.                        |  | (h)(i)             |  | Software & Services                            |  | L+550   |  |       | 1.8 | % |          | 5/7/16   |                    |   | 7,469   |               |  |   | 7,487         |  |  |   | 7,319   | 
|Avaya Inc.                                   |  | (i)                |  | Technology Hardware & Equipment                |  | L+450   |  |       |     |   |          | 10/26/17 |                    |   | 3,942   |               |  |   | 3,748         |  |  |   | 3,790   | 
|Azure Midstream Energy LLC                   |  | (g)                |  | Energy                                         |  | L+550   |  |       | 1.0 | % |          | 11/15/18 |                    |   | 4,275   |               |  |   | 4,223         |  |  |   | 3,847   | 
|BBB Industries US Holdings, Inc.             |  | (g)                |  | Automobiles & Components                       |  | L+500   |  |       | 1.0 | % |          | 11/3/21  |                    |   | 7,000   |               |  |   | 6,863         |  |  |   | 6,964   | 
|BenefitMall Holdings, Inc.                   |  | (e)(h)(i)(k)(l)    |  | Commercial & Professional Services             |  | L+725   |  |       | 1.0 | % |          | 11/24/20 |                    |   | 115,000 |               |  |   | 115,000       |  |  |   | 115,000 | 
|BenefitMall Holdings, Inc.                   |  | (s)                |  | Commercial & Professional Services             |  | L+725   |  |       | 1.0 | % |          | 11/24/20 |                    |   | 41,818  |               |  |   | 41,818        |  |  |   | 41,818  | 
|Boomerang Tube, LLC                          |  | (e)                |  | Energy                                         |  | L+950   |  |       | 1.5 | % |          | 10/11/17 |                    |   | 4,438   |               |  |   | 4,351         |  |  |   | 3,849   | 
|BPA Laboratories, Inc.                       |  | (e)                |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 2.5%    |  |       |     |   |          | 7/3/17   |                    |   | 3,763   |               |  |   | 3,478         |  |  |   | 3,393   | 
|BRG Sports, Inc.                             |  | (h)                |  | Consumer Durables & Apparel                    |  | L+550   |  |       | 1.0 | % |          | 4/15/21  |                    |   | 1,444   |               |  |   | 1,417         |  |  |   | 1,447   | 
|Cactus Wellhead, LLC                         |  | (g)(h)             |  | Energy                                         |  | L+600   |  |       | 1.0 | % |          | 7/31/20  |                    |   | 12,718  |               |  |   | 12,480        |  |  |   | 10,334  | 
|Cadillac Jack, Inc.                          |  | (e)(g)(h)(i)(k)(o) |  | Consumer Services                              |  | L+850   |  |       | 1.0 | % |          | 5/15/19  |                    |   | 163,550 |               |  |   | 161,807       |  |  |   | 168,252 | 
|Caesars Entertainment Operating Co., Inc.    |  | (k)(o)             |  | Consumer Services                              |  | L+575   |  |       |     |   |          | 3/1/17   |                    |   | 15,620  |               |  |   | 14,844        |  |  |   | 13,705  | 
|Caesars Entertainment Operating Co., Inc.    |  | (k)(o)             |  | Consumer Services                              |  | L+675   |  |       |     |   |          | 3/1/17   |                    |   | 15,707  |               |  |   | 15,005        |  |  |   | 13,805  | 
|Caesars Entertainment Operating Co., Inc.    |  | (o)                |  | Consumer Services                              |  | L+850   |  |       | 2.0 | % |          | 10/31/16 |                    |   | 2,671   |               |  |   | 2,698         |  |  |   | 2,375   | 
|Caesars Entertainment Operating Co., Inc.    |  | (e)(g)(i)(j)(o)    |  | Consumer Services                              |  | L+875   |  |       | 1.0 | % |          | 1/28/18  |                    |   | 68,577  |               |  |   | 68,120        |  |  |   | 59,776  | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(f)(g)(k)       |  | Consumer Services                              |  | L+600   |  |       | 1.0 | % |          | 10/11/20 |                    |   | 58,502  |               |  |   | 55,456        |  |  |   | 54,895  | 
|Cengage Learning Acquisitions, Inc.          |  | (g)(j)             |  | Media                                          |  | L+600   |  |       | 1.0 | % |          | 3/31/20  |                    |   | 5,365   |               |  |   | 5,341         |  |  |   | 5,322   | 



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, 2014

(in thousands, except share amounts)







|                                            |  |              |  |                                                |  |                              |  |       |     |   |          |          |                    |   |        |               |  |   |               |  |  |   |        | 
|------------------------------------------- |  | ------------ |  | ---------------------------------------------- |  | ---------------------------- |  | ----- | --- | - | -------- | -------- | ------------------ | - | ------ | ------------- |  | - | ------------- |  |  | - | ------ | 
|Portfolio
Company(a)                        |  | Footnotes    |  | Industry                                       |  | Rate(b)                      |  | Floor |     |   | Maturity |          | PrincipalAmount(c) |   |        | AmortizedCost |  |   | Fair
Value(d) | 
|CEVA Group Plc                              |  | (o)(s)       |  | Transportation                                 |  | L+550                        |  |       | 1.0 | % |          | 3/19/19  |                    | $ | 20,000 |               |  | $ | 20,000        |  |  | $ | 16,675 | 
|Cimarron Energy Inc.                        |  | (k)(l)       |  | Energy                                         |  | L+775                        |  |       | 1.0 | % |          | 12/15/19 |                    |   | 25,000 |               |  |   | 25,000        |  |  |   | 25,000 | 
|Corner Investment PropCo, LLC               |  | (e)(g)(k)    |  | Consumer Services                              |  | L+975                        |  |       | 1.3 | % |          | 11/2/19  |                    |   | 40,975 |               |  |   | 41,503        |  |  |   | 40,771 | 
|CoSentry.Net, LLC                           |  | (e)(f)(i)    |  | Software & Services                            |  | L+800                        |  |       | 1.3 | % |          | 12/31/19 |                    |   | 57,945 |               |  |   | 57,945        |  |  |   | 58,235 | 
|Crestwood Holdings LLC                      |  | (g)          |  | Energy                                         |  | L+600                        |  |       | 1.0 | % |          | 6/19/19  |                    |   | 5,452  |               |  |   | 5,432         |  |  |   | 5,176  | 
|Del Monte Foods Consumer Products, Inc.     |  | (i)(o)       |  | Food, Beverage & Tobacco                       |  | L+325                        |  |       | 1.0 | % |          | 2/18/21  |                    |   | 2,788  |               |  |   | 2,775         |  |  |   | 2,563  | 
|Eastman Kodak Co.                           |  | (g)          |  | Consumer Durables & Apparel                    |  | L+625                        |  |       | 1.0 | % |          | 9/3/19   |                    |   | 7,164  |               |  |   | 7,046         |  |  |   | 7,185  | 
|EnergySolutions, LLC                        |  | (g)          |  | Energy                                         |  | L+575                        |  |       | 1.0 | % |          | 5/29/20  |                    |   | 4,342  |               |  |   | 4,260         |  |  |   | 4,341  | 
|FairPoint Communications, Inc.              |  | (e)(h)(o)    |  | Telecommunication Services                     |  | L+625                        |  |       | 1.3 | % |          | 2/14/19  |                    |   | 16,505 |               |  |   | 16,693        |  |  |   | 16,412 | 
|Fairway Group Acquisition Co.               |  | (g)(n)       |  | Food & Staples Retailing                       |  | L+400                        |  |       | 1.0 | % |          | 8/17/18  |                    |   | 9,482  |               |  |   | 8,162         |  |  |   | 8,155  | 
|Fox Head, Inc.                              |  | (h)(k)(l)    |  | Consumer Durables & Apparel                    |  | L+850                        |  |       | 1.0 | % |          | 12/19/20 |                    |   | 13,286 |               |  |   | 13,286        |  |  |   | 13,286 | 
|FR Dixie Acquisition Corp.                  |  | (g)          |  | Energy                                         |  | L+475                        |  |       | 1.0 | % |          | 12/18/20 |                    |   | 4,168  |               |  |   | 4,150         |  |  |   | 3,460  | 
|FR Utility Services LLC                     |  | (g)          |  | Energy                                         |  | L+575                        |  |       | 1.0 | % |          | 10/18/19 |                    |   | 571    |               |  |   | 571           |  |  |   | 569    | 
|Fram Group Holdings Inc.                    |  | (g)          |  | Automobiles & Components                       |  | L+500                        |  |       | 1.5 | % |          | 7/29/17  |                    |   | 2,002  |               |  |   | 2,022         |  |  |   | 1,993  | 
|Hybrid Promotions, LLC                      |  | (h)(k)(l)    |  | Consumer Durables & Apparel                    |  | L+850                        |  |       | 1.0 | % |          | 12/19/20 |                    |   | 48,714 |               |  |   | 48,714        |  |  |   | 48,714 | 
|Ikaria Acquisition Inc.                     |  | (g)          |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+400                        |  |       | 1.0 | % |          | 2/12/21  |                    |   | 419    |               |  |   | 417           |  |  |   | 418    | 
|Industrial Group Intermediate Holdings, LLC |  | (h)(i)(k)(l) |  | Materials                                      |  | L+800                        |  |       | 1.3 | % |          | 5/31/20  |                    |   | 84,355 |               |  |   | 84,355        |  |  |   | 84,355 | 
|Industry City TI Lessor, L.P.               |  | (k)          |  | Consumer Services                              |  | 5.0%, 5.3% PIK(5.3% Max PIK) |  |       |     |   |          | 6/30/26  |                    |   | 9,904  |               |  |   | 9,904         |  |  |   | 9,755  | 
|Internap Network Services Corp.             |  | (g)(o)       |  | Software & Services                            |  | L+500                        |  |       | 1.0 | % |          | 11/26/19 |                    |   | 5,910  |               |  |   | 5,861         |  |  |   | 5,888  | 
|Intralinks, Inc.                            |  | (g)(h)(k)(o) |  | Software & Services                            |  | L+525                        |  |       | 2.0 | % |          | 2/24/19  |                    |   | 24,813 |               |  |   | 24,603        |  |  |   | 24,502 | 
|Intrawest Operations Group, LLC             |  | (i)          |  | Consumer Services                              |  | L+450                        |  |       | 1.0 | % |          | 12/9/20  |                    |   | 4,417  |               |  |   | 4,386         |  |  |   | 4,421  | 
|Kanders C3 Holdings, LLC                    |  | (e)(f)       |  | Capital Goods                                  |  | L+900                        |  |       | 1.3 | % |          | 12/19/18 |                    |   | 20,400 |               |  |   | 20,265        |  |  |   | 21,232 | 
|Kanders C3 Holdings, LLC                    |  | (e)(f)       |  | Capital Goods                                  |  | L+900                        |  |       | 1.3 | % |          | 12/19/18 |                    |   | 1,765  |               |  |   | 1,754         |  |  |   | 1,783  | 
|Kanders C3 Holdings, LLC                    |  | (s)          |  | Capital Goods                                  |  | L+900                        |  |       | 1.3 | % |          | 12/19/18 |                    |   | 10,204 |               |  |   | 10,204        |  |  |   | 10,307 | 
|Lantiq Deutschland GmbH                     |  | (e)(o)       |  | Software & Services                            |  | L+900                        |  |       | 2.0 | % |          | 11/16/15 |                    |   | 975    |               |  |   | 949           |  |  |   | 970    | 
|Larchmont Resources, LLC                    |  | (g)          |  | Energy                                         |  | L+725                        |  |       | 1.0 | % |          | 8/7/19   |                    |   | 7,317  |               |  |   | 7,258         |  |  |   | 7,116  | 
|MB Precision Holdings LLC                   |  | (e)(h)(i)(k) |  | Capital Goods                                  |  | L+725                        |  |       | 1.3 | % |          | 1/23/20  |                    |   | 62,370 |               |  |   | 62,370        |  |  |   | 61,746 | 
|MMI International Ltd.                      |  | (g)(l)(o)    |  | Technology Hardware & Equipment                |  | L+600                        |  |       | 1.3 | % |          | 11/20/18 |                    |   | 6,180  |               |  |   | 6,049         |  |  |   | 6,107  | 
|MMM Holdings, Inc.                          |  | (g)          |  | Health Care Equipment & Services               |  | L+825                        |  |       | 1.5 | % |          | 12/12/17 |                    |   | 2,687  |               |  |   | 2,700         |  |  |   | 2,606  | 
|MModal Inc.                                 |  | (e)(g)       |  | Health Care Equipment & Services               |  | L+775                        |  |       | 1.3 | % |          | 1/31/20  |                    |   | 10,111 |               |  |   | 10,064        |  |  |   | 9,922  | 



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, 2014

(in thousands, except share amounts)







|                                            |  |                 |  |                                  |  |                          |  |       |     |   |          |          |                    |   |         |               |  |   |               |  |  |   |         | 
|------------------------------------------- |  | --------------- |  | -------------------------------- |  | ------------------------ |  | ----- | --- | - | -------- | -------- | ------------------ | - | ------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|Portfolio
Company(a)                        |  | Footnotes       |  | Industry                         |  | Rate(b)                  |  | Floor |     |   | Maturity |          | PrincipalAmount(c) |   |         | AmortizedCost |  |   | Fair
Value(d) | 
|Mood Media Corp.                            |  | (g)(o)          |  | Media                            |  | L+600                    |  |       | 1.0 | % |          | 5/1/19   |                    | $ | 1,807   |               |  | $ | 1,791         |  |  | $ | 1,774   | 
|Moxie Liberty LLC                           |  | (g)(i)          |  | Energy                           |  | L+650                    |  |       | 1.0 | % |          | 8/21/20  |                    |   | 11,853  |               |  |   | 11,897        |  |  |   | 11,794  | 
|Moxie Patriot LLC                           |  | (i)             |  | Energy                           |  | L+575                    |  |       | 1.0 | % |          | 12/19/20 |                    |   | 5,556   |               |  |   | 5,507         |  |  |   | 5,528   | 
|MSO of Puerto Rico, Inc.                    |  | (g)             |  | Health Care Equipment & Services |  | L+825                    |  |       | 1.5 | % |          | 12/12/17 |                    |   | 1,953   |               |  |   | 1,963         |  |  |   | 1,895   | 
|New HB Acquisition, LLC                     |  | (h)(i)          |  | Food, Beverage & Tobacco         |  | L+550                    |  |       | 1.3 | % |          | 4/9/20   |                    |   | 3,867   |               |  |   | 3,836         |  |  |   | 3,935   | 
|New Star Metals Inc.                        |  | (e)(g)(h)(i)(k) |  | Capital Goods                    |  | L+800                    |  |       | 1.3 | % |          | 3/20/20  |                    |   | 109,725 |               |  |   | 109,725       |  |  |   | 109,725 | 
|Nine West Holdings                          |  | (l)             |  | Consumer Durables & Apparel      |  | L+375                    |  |       | 1.0 | % |          | 10/8/19  |                    |   | 473     |               |  |   | 459           |  |  |   | 443     | 
|Nova Wildcat Amerock, LLC                   |  | (e)(g)(h)       |  | Consumer Durables & Apparel      |  | L+798                    |  |       | 1.3 | % |          | 9/10/19  |                    |   | 75,000  |               |  |   | 75,000        |  |  |   | 73,500  | 
|Opal Acquisition, Inc.                      |  | (i)             |  | Consumer Services                |  | L+400                    |  |       | 1.0 | % |          | 11/27/20 |                    |   | 1,428   |               |  |   | 1,419         |  |  |   | 1,418   | 
|Panda Sherman Power, LLC                    |  | (e)             |  | Energy                           |  | L+750                    |  |       | 1.5 | % |          | 9/14/18  |                    |   | 2,310   |               |  |   | 2,324         |  |  |   | 2,298   | 
|Panda Temple Power, LLC (TLA)               |  | (e)             |  | Energy                           |  | L+700                    |  |       | 1.5 | % |          | 7/17/18  |                    |   | 1,722   |               |  |   | 1,734         |  |  |   | 1,746   | 
|PeroxyChem LLC                              |  | (h)(i)          |  | Capital Goods                    |  | L+650                    |  |       | 1.0 | % |          | 2/28/20  |                    |   | 9,925   |               |  |   | 9,749         |  |  |   | 9,826   | 
|PharMEDium Healthcare Corp.                 |  | (g)             |  | Health Care Equipment & Services |  | L+325                    |  |       | 1.0 | % |          | 1/28/21  |                    |   | 704     |               |  |   | 701           |  |  |   | 686     | 
|PHRC License, LLC                           |  | (f)(h)(i)       |  | Consumer Services                |  | L+900                    |  |       | 1.5 | % |          | 8/14/20  |                    |   | 60,000  |               |  |   | 60,000        |  |  |   | 59,400  | 
|Polymer Additives, Inc.                     |  | (h)(i)(l)       |  | Materials                        |  | L+838                    |  |       | 1.0 | % |          | 12/20/21 |                    |   | 63,068  |               |  |   | 63,068        |  |  |   | 63,068  | 
|Production Resource Group, LLC              |  | (g)(h)(i)(l)    |  | Media                            |  | L+750                    |  |       | 1.0 | % |          | 7/23/19  |                    |   | 47,500  |               |  |   | 47,500        |  |  |   | 47,738  | 
|Professional Plumbing Group, Inc.           |  | (e)(g)          |  | Capital Goods                    |  | L+875                    |  |       | 0.8 | % |          | 7/31/19  |                    |   | 29,158  |               |  |   | 29,158        |  |  |   | 29,304  | 
|PRV Aerospace, LLC                          |  | (g)             |  | Capital Goods                    |  | L+525                    |  |       | 1.3 | % |          | 5/9/18   |                    |   | 2,966   |               |  |   | 2,984         |  |  |   | 2,930   | 
|Reddy Ice Holdings, Inc.                    |  | (g)             |  | Food & Staples Retailing         |  | L+550                    |  |       | 1.3 | % |          | 5/1/19   |                    |   | 1,170   |               |  |   | 1,160         |  |  |   | 1,032   | 
|RGL Reservoir Operations Inc.               |  | (g)(h)(o)       |  | Energy                           |  | L+500                    |  |       | 1.0 | % |          | 8/13/21  |                    |   | 6,840   |               |  |   | 6,645         |  |  |   | 5,518   | 
|Serena Software, Inc.                       |  | (g)(h)          |  | Software & Services              |  | L+650                    |  |       | 1.0 | % |          | 4/14/20  |                    |   | 18,000  |               |  |   | 17,671        |  |  |   | 17,916  | 
|Smile Brands Group Inc.                     |  | (e)(f)(g)(h)(i) |  | Health Care Equipment & Services |  | L+625                    |  |       | 1.3 | % |          | 8/16/19  |                    |   | 43,635  |               |  |   | 43,110        |  |  |   | 41,781  | 
|Sorenson Communications, Inc.               |  | (e)(g)(h)(i)(k) |  | Telecommunication Services       |  | L+575                    |  |       | 2.3 | % |          | 4/30/20  |                    |   | 101,500 |               |  |   | 101,043       |  |  |   | 102,515 | 
|Southcross Holdings Borrower LP             |  | (l)             |  | Energy                           |  | L+500                    |  |       | 1.0 | % |          | 8/4/21   |                    |   | 316     |               |  |   | 314           |  |  |   | 283     | 
|The Sports Authority, Inc.                  |  | (g)             |  | Consumer Durables & Apparel      |  | L+600                    |  |       | 1.5 | % |          | 11/16/17 |                    |   | 7,818   |               |  |   | 7,871         |  |  |   | 6,939   | 
|Sprint Industrial Holdings LLC              |  | (g)             |  | Energy                           |  | L+575                    |  |       | 1.3 | % |          | 11/14/19 |                    |   | 7,229   |               |  |   | 7,180         |  |  |   | 6,904   | 
|Stallion Oilfield Holdings, Inc.            |  | (e)(g)(h)       |  | Energy                           |  | L+675                    |  |       | 1.3 | % |          | 6/19/18  |                    |   | 16,603  |               |  |   | 16,211        |  |  |   | 14,216  | 
|SunGard Availability Services Capital, Inc. |  | (g)(j)(n)       |  | Software & Services              |  | L+500                    |  |       | 1.0 | % |          | 3/29/19  |                    |   | 8,205   |               |  |   | 7,533         |  |  |   | 7,348   | 
|Sunnova Asset Portfolio 5 Holdings, LLC     |  |                 |  | Energy                           |  | 12.0% PIK (12.0%Max PIK) |  |       |     |   |          | 11/14/21 |                    |   | 3,607   |               |  |   | 3,607         |  |  |   | 3,607   | 



See
notes to unaudited consolidated financial statements.



18



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                            |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   |               |   |  |   |           |  
|------------------------------------------- |  | ------------ |  | ---------------------------------------------- |  | ----------------------------- |  | ----- | --- | - | -------- | -------- | ------------------ | - | ------- | ------------- |  | - | ------------- | - |  | - | --------- | -
|Portfolio
Company(a)                        |  | Footnotes    |  | Industry                                       |  | Rate(b)                       |  | Floor |     |   | Maturity |          | PrincipalAmount(c) |   |         | AmortizedCost |  |   | Fair
Value(d) |  
|Sunnova Asset Portfolio 5 Holdings, LLC     |  | (s)          |  | Energy                                         |  | 12.0% PIK (12.0%Max PIK)      |  |       |     |   |          | 11/14/21 |                    | $ | 6,400   |               |  | $ | 6,400         |   |  | $ | 6,400     |  
|Swift Worldwide Resources US Holdings Corp. |  | (g)(i)       |  | Energy                                         |  | L+800                         |  |       | 1.3 | % |          | 4/30/19  |                    |   | 19,887  |               |  |   | 19,887        |   |  |   | 19,489    |  
|Therakos, Inc.                              |  | (e)(g)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+575                         |  |       | 1.3 | % |          | 12/27/17 |                    |   | 6,443   |               |  |   | 6,367         |   |  |   | 6,419     |  
|ThermaSys Corp.                             |  | (g)          |  | Capital Goods                                  |  | L+400                         |  |       | 1.3 | % |          | 5/3/19   |                    |   | 4,905   |               |  |   | 4,907         |   |  |   | 4,831     |  
|U.S. Xpress Enterprises, Inc.               |  | (e)(h)(i)(k) |  | Transportation                                 |  | L+850, 1.5% PIK(1.5% Max PIK) |  |       | 1.5 | % |          | 5/30/19  |                    |   | 94,763  |               |  |   | 94,763        |   |  |   | 94,763    |  
|UTEX Industries, Inc.                       |  | (l)          |  | Energy                                         |  | L+400                         |  |       | 1.0 | % |          | 5/21/21  |                    |   | 1,148   |               |  |   | 1,143         |   |  |   | 1,062     |  
|Waste Pro USA, Inc.                         |  | (e)(h)(i)(l) |  | Commercial & Professional Services             |  | L+750                         |  |       | 1.0 | % |          | 10/15/20 |                    |   | 112,444 |               |  |   | 112,444       |   |  |   | 112,444   |  
|Waste Pro USA, Inc.                         |  | (s)          |  | Commercial & Professional Services             |  | L+750                         |  |       | 1.0 | % |          | 10/15/20 |                    |   | 12,222  |               |  |   | 12,222        |   |  |   | 12,222    |  
|Winchester Electronics Corp.                |  | (e)(k)(l)    |  | Technology Hardware & Equipment                |  | Prime+750                     |  |       |     |   |          | 11/17/20 |                    |   | 98,182  |               |  |   | 98,182        |   |  |   | 98,182    |  
|Winchester Electronics Corp.                |  | (s)          |  | Technology Hardware & Equipment                |  | Prime+700                     |  |       |     |   |          | 11/17/20 |                    |   | 32,732  |               |  |   | 32,732        |   |  |   | 32,732    |  
|                                            |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   |               |   |  |   |           |  
|Total Senior Secured LoansFirst Lien       |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   | 2,506,445     |   |  |   | 2,492,644 |  
|Unfunded Loan Commitments                   |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   | (145,739      | ) |  |   | (145,739  | )
|                                            |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   |               |   |  |   |           |  
|Net Senior Secured LoansFirst Lien         |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   | 2,360,706     |   |  |   | 2,346,905 |  
|                                            |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   |               |   |  |   |           |  
|Senior Secured LoansSecond Lien34.4%      |  |              |  |                                                |  |                               |  |       |     |   |          |          |                    |   |         |               |  |   |               |  
|Accellent Inc.                              |  | (j)          |  | Health Care Equipment & Services               |  | L+650                         |  |       | 1.0 | % |          | 3/11/22  |                    |   | 8,814   |               |  |   | 8,792         |   |  |   | 8,350     |  
|Advantage Sales & Marketing Inc.            |  | (g)(j)       |  | Commercial & Professional Services             |  | L+650                         |  |       | 1.0 | % |          | 7/25/22  |                    |   | 4,236   |               |  |   | 4,206         |   |  |   | 4,203     |  
|Alison US LLC                               |  | (g)(o)       |  | Capital Goods                                  |  | L+850                         |  |       | 1.0 | % |          | 8/29/22  |                    |   | 4,444   |               |  |   | 4,272         |   |  |   | 4,160     |  
|Alliance Laundry Systems LLC                |  | (e)          |  | Capital Goods                                  |  | L+825                         |  |       | 1.3 | % |          | 12/10/19 |                    |   | 1,450   |               |  |   | 1,439         |   |  |   | 1,451     |  
|American EnergyMarcellus, LLC              |  | (g)          |  | Energy                                         |  | L+750                         |  |       | 1.0 | % |          | 8/4/21   |                    |   | 3,333   |               |  |   | 3,285         |   |  |   | 3,067     |  
|American EnergyUtica, LLC                  |  | (e)(f)(i)(l) |  | Energy                                         |  | L+400, 5.5% PIK(5.5% Max PIK) |  |       | 1.5 | % |          | 9/30/18  |                    |   | 106,649 |               |  |   | 106,649       |   |  |   | 104,516   |  
|American EnergyUtica, LLC                  |  | (f)(l)       |  | Energy                                         |  | L+400, 5.5% PIK(5.5% Max PIK) |  |       | 1.5 | % |          | 9/30/18  |                    |   | 72,432  |               |  |   | 72,431        |   |  |   | 70,983    |  
|AssuredPartners, Inc.                       |  | (l)          |  | Insurance                                      |  | L+675                         |  |       | 1.0 | % |          | 4/2/22   |                    |   | 6,983   |               |  |   | 6,916         |   |  |   | 6,756     |  
|BlackBrush Oil & Gas, L.P.                  |  | (l)          |  | Energy                                         |  | L+650                         |  |       | 1.0 | % |          | 7/30/21  |                    |   | 6,637   |               |  |   | 6,589         |   |  |   | 5,509     |  
|BPA Laboratories, Inc.                      |  | (e)          |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 2.5%                          |  |       |     |   |          | 7/3/17   |                    |   | 3,272   |               |  |   | 2,644         |   |  |   | 2,901     |  
|Brasa (Holdings) Inc.                       |  | (e)          |  | Consumer Services                              |  | L+950                         |  |       | 1.5 | % |          | 1/20/20  |                    |   | 621     |               |  |   | 602           |   |  |   | 615       |  
|BRG Sports, Inc.                            |  | (l)          |  | Consumer Durables & Apparel                    |  | L+925                         |  |       | 1.0 | % |          | 4/15/22  |                    |   | 12,500  |               |  |   | 12,205        |   |  |   | 12,594    |  



See
notes to unaudited consolidated financial statements.



19



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                        |  |           |  |                                    |  |             |  |       |     |   |          |          |                    |   |        |               |  |   |               |  |  |   |        | 
|--------------------------------------- |  | --------- |  | ---------------------------------- |  | ----------- |  | ----- | --- | - | -------- | -------- | ------------------ | - | ------ | ------------- |  | - | ------------- |  |  | - | ------ | 
|Portfolio
Company(a)                    |  | Footnotes |  | Industry                           |  | Rate(b)     |  | Floor |     |   | Maturity |          | PrincipalAmount(c) |   |        | AmortizedCost |  |   | Fair
Value(d) | 
|Byrider Finance, LLC                    |  | (f)       |  | Automobiles & Components           |  | L+1000      |  |       | 1.3 | % |          | 8/22/20  |                    | $ | 16,667 |               |  | $ | 16,667        |  |  | $ | 16,667 | 
|Catalina Marketing Corp.                |  | (l)       |  | Media                              |  | L+675       |  |       | 1.0 | % |          | 4/11/22  |                    |   | 10,000 |               |  |   | 9,930         |  |  |   | 9,325  | 
|Cervalis LLC                            |  | (e)(f)    |  | Commercial & Professional Services |  | L+875       |  |       | 1.3 | % |          | 2/8/19   |                    |   | 30,000 |               |  |   | 29,688        |  |  |   | 30,000 | 
|Chief Exploration & Development LLC     |  | (g)       |  | Energy                             |  | L+650       |  |       | 1.0 | % |          | 5/16/21  |                    |   | 2,259  |               |  |   | 2,238         |  |  |   | 2,044  | 
|ColourOz Investment 2 LLC               |  | (i)(o)(n) |  | Materials                          |  | L+725       |  |       | 1.0 | % |          | 9/5/22   |                    |   | 4,726  |               |  |   | 4,691         |  |  |   | 4,490  | 
|Compuware Corp.                         |  | (e)(o)(n) |  | Software & Services                |  | L+825       |  |       | 1.0 | % |          | 12/9/22  |                    |   | 10,000 |               |  |   | 8,700         |  |  |   | 9,250  | 
|Consolidated Precision Products Corp.   |  | (e)       |  | Capital Goods                      |  | L+775       |  |       | 1.0 | % |          | 4/30/21  |                    |   | 15,575 |               |  |   | 15,506        |  |  |   | 14,874 | 
|Crossmark Holdings, Inc.                |  | (l)       |  | Commercial & Professional Services |  | L+750       |  |       | 1.3 | % |          | 12/21/20 |                    |   | 7,778  |               |  |   | 7,795         |  |  |   | 7,603  | 
|DAE Aviation Holdings, Inc.             |  | (k)(o)    |  | Capital Goods                      |  | L+675       |  |       | 1.0 | % |          | 8/5/19   |                    |   | 15,000 |               |  |   | 14,869        |  |  |   | 14,738 | 
|Del Monte Foods Consumer Products, Inc. |  | (l)(o)    |  | Food, Beverage & Tobacco           |  | L+725       |  |       | 1.0 | % |          | 8/18/21  |                    |   | 3,333  |               |  |   | 3,303         |  |  |   | 2,867  | 
|Drew Marine Group Inc.                  |  | (l)(o)    |  | Energy                             |  | L+700       |  |       | 1.0 | % |          | 5/19/21  |                    |   | 2,500  |               |  |   | 2,495         |  |  |   | 2,488  | 
|Eastman Kodak Co.                       |  | (j)       |  | Consumer Durables & Apparel        |  | L+950       |  |       | 1.3 | % |          | 9/3/20   |                    |   | 25,000 |               |  |   | 24,459        |  |  |   | 25,000 | 
|Extreme Reach, Inc.                     |  | (l)       |  | Media                              |  | L+950       |  |       | 1.0 | % |          | 1/22/21  |                    |   | 8,000  |               |  |   | 7,859         |  |  |   | 7,993  | 
|Filtration Group Corp.                  |  | (j)       |  | Energy                             |  | L+725       |  |       | 1.0 | % |          | 11/21/21 |                    |   | 5,158  |               |  |   | 5,173         |  |  |   | 5,164  | 
|Flexera Software LLC                    |  | (l)       |  | Software & Services                |  | L+700       |  |       | 1.0 | % |          | 4/2/21   |                    |   | 10,000 |               |  |   | 9,954         |  |  |   | 9,600  | 
|Inmar, Inc.                             |  | (l)       |  | Software & Services                |  | L+700       |  |       | 1.0 | % |          | 1/27/22  |                    |   | 2,830  |               |  |   | 2,804         |  |  |   | 2,770  | 
|Jazz Acquisition, Inc.                  |  | (g)       |  | Capital Goods                      |  | L+675       |  |       | 1.0 | % |          | 6/19/22  |                    |   | 3,700  |               |  |   | 3,753         |  |  |   | 3,621  | 
|Kronos Inc.                             |  | (k)       |  | Software & Services                |  | L+850       |  |       | 1.3 | % |          | 4/30/20  |                    |   | 9,906  |               |  |   | 9,913         |  |  |   | 10,104 | 
|Leedsworld Inc.                         |  | (e)(f)(g) |  | Retailing                          |  | L+875       |  |       | 1.3 | % |          | 6/28/20  |                    |   | 62,500 |               |  |   | 62,500        |  |  |   | 61,875 | 
|LM U.S. Member LLC                      |  | (e)(l)    |  | Transportation                     |  | L+725       |  |       | 1.0 | % |          | 1/25/21  |                    |   | 8,138  |               |  |   | 8,199         |  |  |   | 8,015  | 
|MD America Energy, LLC                  |  | (l)       |  | Energy                             |  | L+850       |  |       | 1.0 | % |          | 8/4/19   |                    |   | 12,500 |               |  |   | 11,920        |  |  |   | 12,000 | 
|Mitchell International, Inc.            |  | (k)       |  | Software & Services                |  | L+750       |  |       | 1.0 | % |          | 10/11/21 |                    |   | 10,000 |               |  |   | 10,224        |  |  |   | 9,985  | 
|Neff Rental LLC                         |  | (l)       |  | Capital Goods                      |  | L+625       |  |       | 1.0 | % |          | 6/9/21   |                    |   | 12,073 |               |  |   | 12,016        |  |  |   | 12,126 | 
|Nielsen & Bainbridge, LLC               |  | (f)       |  | Consumer Services                  |  | L+925       |  |       | 1.0 | % |          | 8/15/21  |                    |   | 15,000 |               |  |   | 14,786        |  |  |   | 14,775 | 
|Onex Carestream Finance L.P.            |  | (f)       |  | Health Care Equipment & Services   |  | L+850       |  |       | 1.0 | % |          | 12/7/19  |                    |   | 4,717  |               |  |   | 4,642         |  |  |   | 4,701  | 
|P2 Upstream Acquisition Co.             |  | (l)       |  | Energy                             |  | L+800       |  |       | 1.0 | % |          | 4/30/21  |                    |   | 14,500 |               |  |   | 14,750        |  |  |   | 13,956 | 
|Paw Luxco II Sarl                       |  | (o)       |  | Consumer Durables & Apparel        |  | EURIBOR+950 |  |       |     |   |          | 1/29/19  |                    |  | 5,727  |               |  |   | 7,073         |  |  |   | 6,021  | 
|Payless Inc.                            |  | (l)       |  | Consumer Durables & Apparel        |  | L+750       |  |       | 1.0 | % |          | 3/11/22  |                    | $ | 14,092 |               |  |   | 13,961        |  |  |   | 12,683 | 
|Peak 10, Inc.                           |  | (j)       |  | Software & Services                |  | L+725       |  |       | 1.0 | % |          | 6/17/22  |                    |   | 5,500  |               |  |   | 5,447         |  |  |   | 5,335  | 
|Pelican Products, Inc.                  |  | (l)       |  | Capital Goods                      |  | L+825       |  |       | 1.0 | % |          | 4/9/21   |                    |   | 5,438  |               |  |   | 5,401         |  |  |   | 5,370  | 
|Penton Media, Inc.                      |  | (j)       |  | Media                              |  | L+775       |  |       | 1.3 | % |          | 10/2/20  |                    |   | 9,000  |               |  |   | 8,885         |  |  |   | 8,933  | 



See
notes to unaudited consolidated financial statements.



20



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                             |  |           |  |                                                |  |         |  |       |     |   |          |          |                    |   |        |               |  |   |               |  |  |   |           | 
|-------------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ------- |  | ----- | --- | - | -------- | -------- | ------------------ | - | ------ | ------------- |  | - | ------------- |  |  | - | --------- | 
|Portfolio
Company(a)                         |  | Footnotes |  | Industry                                       |  | Rate(b) |  | Floor |     |   | Maturity |          | PrincipalAmount(c) |   |        | AmortizedCost |  |   | Fair
Value(d) | 
|Printpack Holdings, Inc.                     |  | (e)(i)(l) |  | Materials                                      |  | L+875   |  |       | 1.0 | % |          | 5/28/21  |                    | $ | 60,000 |               |  | $ | 58,871        |  |  | $ | 59,700    | 
|PSAV Acquisition Corp.                       |  | (e)       |  | Technology Hardware & Equipment                |  | L+825   |  |       | 1.0 | % |          | 1/24/22  |                    |   | 80,000 |               |  |   | 78,898        |  |  |   | 80,500    | 
|Redtop Acquisitions Ltd.                     |  | (o)       |  | Consumer Services                              |  | L+725   |  |       | 1.0 | % |          | 6/3/21   |                    |   | 5,449  |               |  |   | 5,389         |  |  |   | 5,442     | 
|Renaissance Learning, Inc.                   |  | (k)       |  | Software & Services                            |  | L+700   |  |       | 1.0 | % |          | 4/11/22  |                    |   | 12,857 |               |  |   | 12,739        |  |  |   | 12,343    | 
|Road Infrastructure Investment, LLC          |  | (l)       |  | Consumer Services                              |  | L+675   |  |       | 1.0 | % |          | 9/30/21  |                    |   | 7,759  |               |  |   | 7,724         |  |  |   | 7,031     | 
|Samson Investment Co.                        |  | (g)       |  | Energy                                         |  | L+400   |  |       | 1.0 | % |          | 9/25/18  |                    |   | 2,000  |               |  |   | 1,818         |  |  |   | 1,579     | 
|Sensus USA Inc.                              |  | (f)       |  | Capital Goods                                  |  | L+725   |  |       | 1.3 | % |          | 5/9/18   |                    |   | 2,050  |               |  |   | 2,055         |  |  |   | 1,963     | 
|Sequential Brands Group, Inc.                |  | (e)(i)(k) |  | Consumer Durables & Apparel                    |  | L+800   |  |       | 1.0 | % |          | 8/15/20  |                    |   | 50,000 |               |  |   | 50,000        |  |  |   | 50,000    | 
|The Telx Group, Inc.                         |  | (j)       |  | Software & Services                            |  | L+650   |  |       | 1.0 | % |          | 4/9/21   |                    |   | 7,000  |               |  |   | 6,936         |  |  |   | 6,851     | 
|Templar Energy LLC                           |  | (h)(j)    |  | Energy                                         |  | L+750   |  |       | 1.0 | % |          | 11/25/20 |                    |   | 29,231 |               |  |   | 28,602        |  |  |   | 21,134    | 
|Therakos, Inc.                               |  | (e)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+950   |  |       | 1.3 | % |          | 6/27/18  |                    |   | 28,000 |               |  |   | 27,481        |  |  |   | 28,385    | 
|TNS, Inc.                                    |  | (f)(h)(l) |  | Telecommunication Services                     |  | L+800   |  |       | 1.0 | % |          | 8/14/20  |                    |   | 51,469 |               |  |   | 51,010        |  |  |   | 50,954    | 
|Ultima US Holdings LLC                       |  | (l)(o)    |  | Capital Goods                                  |  | L+850   |  |       | 1.0 | % |          | 12/31/20 |                    |   | 57,000 |               |  |   | 56,035        |  |  |   | 55,860    | 
|US Renal Care, Inc.                          |  | (i)       |  | Health Care Equipment & Services               |  | L+750   |  |       | 1.0 | % |          | 1/3/20   |                    |   | 2,500  |               |  |   | 2,458         |  |  |   | 2,489     | 
|Vantage Energy II, LLC                       |  | (i)       |  | Energy                                         |  | L+750   |  |       | 1.0 | % |          | 5/8/17   |                    |   | 13,000 |               |  |   | 13,000        |  |  |   | 12,935    | 
|Vantage Energy, LLC                          |  | (i)       |  | Energy                                         |  | L+750   |  |       | 1.0 | % |          | 12/20/18 |                    |   | 18,277 |               |  |   | 18,127        |  |  |   | 16,267    | 
|Vertafore, Inc.                              |  | (f)       |  | Software & Services                            |  | L+825   |  |       | 1.5 | % |          | 10/27/17 |                    |   | 830    |               |  |   | 831           |  |  |   | 836       | 
|Winebow Holdings, Inc.                       |  | (g)       |  | Retailing                                      |  | L+750   |  |       | 1.0 | % |          | 1/2/22   |                    |   | 2,775  |               |  |   | 2,755         |  |  |   | 2,691     | 
|WNA Holdings, Inc.                           |  | (l)       |  | Materials                                      |  | L+725   |  |       | 1.3 | % |          | 12/7/20  |                    |   | 5,000  |               |  |   | 4,958         |  |  |   | 4,875     | 
|                                             |  |           |  |                                                |  |         |  |       |     |   |          |          |                    |   |        |               |  |   |               |  |  |   |           | 
|Total Senior Secured LoansSecond Lien       |  |           |  |                                                |  |         |  |       |     |   |          |          |                    |   |        |               |  |   | 1,019,318     |  |  |   | 1,001,313 | 
|                                             |  |           |  |                                                |  |         |  |       |     |   |          |          |                    |   |        |               |  |   |               |  |  |   |           | 
|Senior Secured Bonds8.6%                    |  |           |  |                                                |  |         |  |       |     |   |          |          |                    |   |        |               |  |   |               |  |  |   |           | 
|Advanced Lighting Technologies, Inc.         |  | (e)(f)    |  | Materials                                      |  | 10.5%   |  |       |     |   |          | 6/1/19   |                    |   | 35,500 |               |  |   | 31,793        |  |  |   | 23,607    | 
|Allen Systems Group, Inc.                    |  | (f)(p)(t) |  | Software & Services                            |  | 10.5%   |  |       |     |   |          | 11/15/16 |                    |   | 14,225 |               |  |   | 10,242        |  |  |   | 4,979     | 
|Altice Financing S.A.                        |  | (j)(o)    |  | Media                                          |  | 7.8%    |  |       |     |   |          | 5/15/22  |                    |   | 7,000  |               |  |   | 7,000         |  |  |   | 6,974     | 
|Aspect Software, Inc.                        |  | (f)(j)    |  | Software & Services                            |  | 10.6%   |  |       |     |   |          | 5/15/17  |                    |   | 8,005  |               |  |   | 8,262         |  |  |   | 7,605     | 
|Avaya Inc.                                   |  | (j)       |  | Technology Hardware & Equipment                |  | 7.0%    |  |       |     |   |          | 4/1/19   |                    |   | 5,500  |               |  |   | 5,473         |  |  |   | 5,444     | 
|Avaya Inc.                                   |  | (f)(j)    |  | Technology Hardware & Equipment                |  | 10.5%   |  |       |     |   |          | 3/1/21   |                    |   | 15,550 |               |  |   | 13,632        |  |  |   | 13,412    | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(f)(j) |  | Consumer Services                              |  | 11.0%   |  |       |     |   |          | 10/1/21  |                    |   | 70,460 |               |  |   | 71,140        |  |  |   | 64,471    | 
|CEVA Group Plc                               |  | (j)(o)    |  | Transportation                                 |  | 9.0%    |  |       |     |   |          | 9/1/21   |                    |   | 2,000  |               |  |   | 2,000         |  |  |   | 1,890     | 
|FourPoint Energy, LLC                        |  | (e)(f)    |  | Energy                                         |  | 8.0%    |  |       |     |   |          | 12/31/20 |                    |   | 43,875 |               |  |   | 41,989        |  |  |   | 38,610    | 



See
notes to unaudited consolidated financial statements.



21



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                          |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   |         |               |  |   |         |  
|----------------------------------------- |  | --------- |  | ---------------------------------------------- |  | ----------------------------- |  | ----- |  | -------- |  | ------------------ | ------ |  | ------------- | - | ------- | ------------- |  | - | ------- | -
|Portfolio
Company(a)                      |  | Footnotes |  | Industry                                       |  | Rate(b)                       |  | Floor |  | Maturity |  | PrincipalAmount(c) |        |  | AmortizedCost |   |         | Fair
Value(d) | 
|FourPoint Energy, LLC                     |  | (s)       |  | Energy                                         |  | 8.0%                          |  |       |  | 12/31/20 |  | $                  | 17,063 |  |               | $ | 16,977  |               |  | $ | 15,015  |  
|Global A&T Electronics Ltd.               |  | (f)(o)    |  | Technology Hardware & Equipment                |  | 10.0%                         |  |       |  | 2/1/19   |  |                    | 9,000  |  |               |   | 9,000   |               |  |   | 8,118   |  
|JW Aluminum Co.                           |  | (e)(f)    |  | Materials                                      |  | 11.5%, 1.0% PIK(1.0% Max PIK) |  |       |  | 11/15/17 |  |                    | 17,550 |  |               |   | 17,527  |               |  |   | 17,550  |  
|Light Tower Rentals, Inc.                 |  | (j)       |  | Capital Goods                                  |  | 8.1%                          |  |       |  | 8/1/19   |  |                    | 2,100  |  |               |   | 2,100   |               |  |   | 1,680   |  
|Logans Roadhouse, Inc.                   |  | (f)(j)    |  | Consumer Services                              |  | 10.8%                         |  |       |  | 10/15/17 |  |                    | 36,814 |  |               |   | 32,309  |               |  |   | 27,288  |  
|Modular Space Corp.                       |  | (j)       |  | Capital Goods                                  |  | 10.3%                         |  |       |  | 1/31/19  |  |                    | 9,950  |  |               |   | 10,234  |               |  |   | 8,657   |  
|Prince Mineral Holding Corp.              |  | (e)       |  | Materials                                      |  | 11.5%                         |  |       |  | 12/15/19 |  |                    | 2,600  |  |               |   | 2,578   |               |  |   | 2,655   |  
|Sorenson Communications, Inc.             |  | (e)(f)(j) |  | Telecommunication Services                     |  | 9.0%                          |  |       |  | 10/31/20 |  |                    | 18,877 |  |               |   | 18,175  |               |  |   | 17,933  |  
|                                          |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   |         |               |  |   |         |  
|Total Senior Secured Bonds                |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   | 300,431 |               |  |   | 265,888 |  
|Unfunded Bond Commitments                 |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   | (16,977 | )             |  |   | (16,977 | )
|                                          |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   |         |               |  |   |         |  
|Net Senior Secured Bonds                  |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   | 283,454 |               |  |   | 248,911 |  
|                                          |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   |         |               |  |   |         |  
|Subordinated Debt14.5%                   |  |           |  |                                                |  |                               |  |       |  |          |  |                    |        |  |               |   |         |              
|Acosta HoldCo, Inc.                       |  | (j)       |  | Consumer Services                              |  | 7.8%                          |  |       |  | 10/1/22  |  |                    | 4,800  |  |               |   | 4,799   |               |  |   | 4,871   |  
|American EnergyWoodford, LLC             |  | (j)       |  | Energy                                         |  | 9.0%                          |  |       |  | 9/15/22  |  |                    | 3,750  |  |               |   | 3,598   |               |  |   | 2,358   |  
|Armored AutoGroup Inc.                    |  | (j)       |  | Household & Personal Products                  |  | 9.3%                          |  |       |  | 11/1/18  |  |                    | 2,544  |  |               |   | 2,651   |               |  |   | 2,557   |  
|Atlas Energy Holdings Operating Co., LLC  |  | (j)(o)    |  | Energy                                         |  | 7.8%                          |  |       |  | 1/15/21  |  |                    | 5,000  |  |               |   | 5,000   |               |  |   | 3,625   |  
|Aurora Diagnostics, LLC                   |  | (e)       |  | Pharmaceuticals, Biotechnology & Life Sciences |  | 10.8%                         |  |       |  | 1/15/18  |  |                    | 7,000  |  |               |   | 7,030   |               |  |   | 6,090   |  
|Beazer Homes USA, Inc.                    |  | (j)(o)    |  | Capital Goods                                  |  | 7.3%                          |  |       |  | 2/1/23   |  |                    | 2,750  |  |               |   | 2,750   |               |  |   | 2,681   |  
|Brooklyn Basketball Holdings, LLC         |  | (f)(i)    |  | Consumer Services                              |  | L+800                         |  |       |  | 10/15/19 |  |                    | 39,746 |  |               |   | 39,746  |               |  |   | 39,348  |  
|BWAY Holding Co.                          |  | (j)       |  | Materials                                      |  | 9.1%                          |  |       |  | 8/15/21  |  |                    | 6,250  |  |               |   | 6,211   |               |  |   | 6,281   |  
|Cadillac Jack, Inc.                       |  | (f)(o)(n) |  | Consumer Services                              |  | 6.0%, 7.0% PIK(7.0% Max PIK)  |  |       |  | 5/15/20  |  |                    | 52,268 |  |               |   | 36,562  |               |  |   | 54,947  |  
|Calumet Specialty Products Partners, L.P. |  | (j)(o)    |  | Energy                                         |  | 6.5%                          |  |       |  | 4/15/21  |  |                    | 2,500  |  |               |   | 2,500   |               |  |   | 2,233   |  
|CEC Entertainment, Inc.                   |  | (j)       |  | Consumer Services                              |  | 8.0%                          |  |       |  | 2/15/22  |  |                    | 11,000 |  |               |   | 11,018  |               |  |   | 10,725  |  
|Compressco Partners, LP                   |  | (j)(o)    |  | Energy                                         |  | 7.3%                          |  |       |  | 8/15/22  |  |                    | 4,000  |  |               |   | 3,942   |               |  |   | 3,468   |  
|Elizabeth Arden, Inc.                     |  | (j)(o)    |  | Household & Personal Products                  |  | 7.4%                          |  |       |  | 3/15/21  |  |                    | 615    |  |               |   | 569     |               |  |   | 569     |  
|Era Group Inc.                            |  | (j)(o)    |  | Energy                                         |  | 7.8%                          |  |       |  | 12/15/22 |  |                    | 7,250  |  |               |   | 7,145   |               |  |   | 7,540   |  
|First Data Corp.                          |  | (j)       |  | Software & Services                            |  | 11.8%                         |  |       |  | 8/15/21  |  |                    | 650    |  |               |   | 671     |               |  |   | 753     |  



See
notes to unaudited consolidated financial statements.



22



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                            |  |              |  |                                    |  |                              |  |       |  |          |  |                    |         |  |               |   |        |               |  |   |        | 
|------------------------------------------- |  | ------------ |  | ---------------------------------- |  | ---------------------------- |  | ----- |  | -------- |  | ------------------ | ------- |  | ------------- | - | ------ | ------------- |  | - | ------ | 
|Portfolio
Company(a)                        |  | Footnotes    |  | Industry                           |  | Rate(b)                      |  | Floor |  | Maturity |  | PrincipalAmount(c) |         |  | AmortizedCost |   |        | Fair
Value(d) | 
|Global Jet Capital, Inc.                    |  |              |  | Commercial & Professional Services |  | 8.0% PIK(8.0% Max PIK)       |  |       |  | 1/30/15  |  | $                  | 313     |  |               | $ | 313    |               |  | $ | 313    | 
|Hub International Ltd.                      |  | (j)          |  | Insurance                          |  | 7.9%                         |  |       |  | 10/1/21  |  |                    | 3,500   |  |               |   | 3,500  |               |  |   | 3,500  | 
|Hub International Ltd.                      |  | (j)          |  | Insurance                          |  | 8.1%, 0.8% PIK(0.8% Max PIK) |  |       |  | 7/15/19  |  |                    | 6,000   |  |               |   | 5,986  |               |  |   | 5,918  | 
|Jefferies Finance LLC                       |  | (j)(o)       |  | Diversified Financials             |  | 7.4%                         |  |       |  | 4/1/20   |  |                    | 1,500   |  |               |   | 1,500  |               |  |   | 1,400  | 
|Jefferies Finance LLC                       |  | (j)(o)       |  | Diversified Financials             |  | 6.9%                         |  |       |  | 4/15/22  |  |                    | 950     |  |               |   | 950    |               |  |   | 860    | 
|Jupiter Resources Inc.                      |  | (i)(j)(o)    |  | Energy                             |  | 8.5%                         |  |       |  | 10/1/22  |  |                    | 22,300  |  |               |   | 20,975 |               |  |   | 16,725 | 
|Kinetic Concepts, Inc.                      |  | (f)          |  | Health Care Equipment & Services   |  | 12.5%                        |  |       |  | 11/1/19  |  |                    | 4,300   |  |               |   | 4,619  |               |  |   | 4,730  | 
|Legacy Reserves L.P.                        |  | (e)(o)       |  | Energy                             |  | 8.0%                         |  |       |  | 12/1/20  |  |                    | 8,250   |  |               |   | 8,107  |               |  |   | 6,895  | 
|Lightstream Resources Ltd.                  |  | (j)(o)       |  | Energy                             |  | 8.6%                         |  |       |  | 2/1/20   |  |                    | 4,150   |  |               |   | 3,436  |               |  |   | 2,925  | 
|Mood Media Corp.                            |  | (e)(f)(j)(o) |  | Media                              |  | 9.3%                         |  |       |  | 10/15/20 |  |                    | 46,207  |  |               |   | 45,596 |               |  |   | 37,774 | 
|NewStar Financial, Inc.                     |  | (e)(k)(l)(o) |  | Diversified Financials             |  | 8.3%, 0.0% PIK(8.8% Max PIK) |  |       |  | 12/4/24  |  |                    | 100,000 |  |               |   | 69,995 |               |  |   | 75,000 | 
|Ocean Rig UDW Inc.                          |  | (j)(o)       |  | Energy                             |  | 7.3%                         |  |       |  | 4/1/19   |  |                    | 4,700   |  |               |   | 4,700  |               |  |   | 3,349  | 
|Opal Acquisition, Inc.                      |  | (j)          |  | Consumer Services                  |  | 8.9%                         |  |       |  | 12/15/21 |  |                    | 27,000  |  |               |   | 27,000 |               |  |   | 27,506 | 
|P.F. Changs China Bistro, Inc.             |  | (f)(j)       |  | Consumer Services                  |  | 10.3%                        |  |       |  | 6/30/20  |  |                    | 12,968  |  |               |   | 13,314 |               |  |   | 13,033 | 
|Resolute Energy Corp.                       |  | (j)          |  | Energy                             |  | 8.5%                         |  |       |  | 5/1/20   |  |                    | 5,800   |  |               |   | 5,856  |               |  |   | 2,748  | 
|Rex Energy Corp.                            |  | (e)(o)       |  | Energy                             |  | 8.9%                         |  |       |  | 12/1/20  |  |                    | 15,000  |  |               |   | 14,914 |               |  |   | 13,500 | 
|Rex Energy Corp.                            |  | (j)(o)       |  | Energy                             |  | 6.3%                         |  |       |  | 8/1/22   |  |                    | 3,950   |  |               |   | 3,950  |               |  |   | 3,022  | 
|RKI Exploration & Production, LLC           |  | (j)          |  | Energy                             |  | 8.5%                         |  |       |  | 8/1/21   |  |                    | 1,650   |  |               |   | 1,462  |               |  |   | 1,345  | 
|Samson Investment Co.                       |  | (f)          |  | Energy                             |  | 9.8%                         |  |       |  | 2/15/20  |  |                    | 1,400   |  |               |   | 1,132  |               |  |   | 588    | 
|SandRidge Energy, Inc.                      |  | (j)(o)       |  | Energy                             |  | 8.8%                         |  |       |  | 1/5/20   |  |                    | 10,659  |  |               |   | 9,421  |               |  |   | 7,275  | 
|Sidewinder Drilling Inc.                    |  | (e)          |  | Energy                             |  | 9.8%                         |  |       |  | 11/15/19 |  |                    | 1,722   |  |               |   | 1,722  |               |  |   | 1,007  | 
|Signode Industrial Group US Inc.            |  | (j)          |  | Commercial & Professional Services |  | 6.4%                         |  |       |  | 5/1/22   |  |                    | 4,900   |  |               |   | 4,900  |               |  |   | 4,753  | 
|Sorenson Communications, Inc.               |  | (e)(f)(j)    |  | Telecommunication Services         |  | 13.0%                        |  |       |  | 10/31/21 |  |                    | 14,346  |  |               |   | 13,388 |               |  |   | 14,633 | 
|SunGard Availability Services Capital, Inc. |  | (j)          |  | Software & Services                |  | 8.8%                         |  |       |  | 4/1/22   |  |                    | 1,000   |  |               |   | 647    |               |  |   | 595    | 
|Talos Production LLC                        |  | (j)          |  | Energy                             |  | 9.8%                         |  |       |  | 2/15/18  |  |                    | 1,500   |  |               |   | 1,364  |               |  |   | 1,358  | 
|Triangle USA Petroleum Corp.                |  | (j)(o)       |  | Energy                             |  | 6.8%                         |  |       |  | 7/15/22  |  |                    | 2,350   |  |               |   | 2,350  |               |  |   | 1,542  | 
|U.S. Coatings Acquisition Inc.              |  | (j)          |  | Capital Goods                      |  | 7.4%                         |  |       |  | 5/1/21   |  |                    | 2,000   |  |               |   | 2,000  |               |  |   | 2,125  | 
|Warren Resources, Inc.                      |  | (j)          |  | Energy                             |  | 9.0%                         |  |       |  | 8/1/22   |  |                    | 12,650  |  |               |   | 12,202 |               |  |   | 7,906  | 
|Windstream Corp.                            |  | (j)(o)       |  | Telecommunication Services         |  | 6.4%                         |  |       |  | 8/1/23   |  |                    | 2,600   |  |               |   | 2,600  |               |  |   | 2,444  | 



See
notes to unaudited consolidated financial statements.



23



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                                     |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   |               |  |  |   |         | 
|---------------------------------------------------- |  | --------- |  | --------------------------- |  | ------- |  | ----- |  | -------- | -------- |  | ------------------ | - | --------- | ------------- |  | - | ------------- |  |  | - | ------- | 
|Portfolio
Company(a)                                 |  | Footnotes |  | Industry                    |  | Rate(b) |  | Floor |  | Maturity |          |  | PrincipalAmount(c) |   |           | AmortizedCost |  |   | Fair
Value(d) | 
|WMG Acquisition Corp.                                |  | (j)       |  | Media                       |  | 6.8%    |  |       |  |          | 4/15/22  |  |                    | $ | 6,000     |               |  | $ | 6,000         |  |  | $ | 5,520   | 
|York Risk Services Holding Corp.                     |  | (j)       |  | Insurance                   |  | 8.5%    |  |       |  |          | 10/1/22  |  |                    |   | 3,350     |               |  |   | 3,350         |  |  |   | 3,348   | 
|                                                     |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   |               |  |  |   |         | 
|Total Subordinated Debt                              |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   | 431,441       |  |  |   | 421,683 | 
|                                                     |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   |               |  |  |   |         | 
|Collateralized Securities6.3%                       |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   |               |  |  |   |         | 
|AMMC 2012 CDO 11A Class Subord.                      |  | (o)       |  | Diversified Financials      |  | 12.4%   |  |       |  |          | 10/30/23 |  |                    |   | 6,000     |               |  |   | 4,022         |  |  |   | 4,076   | 
|Apidos CLO XIV Class E                               |  | (o)       |  | Diversified Financials      |  | L+440   |  |       |  |          | 4/15/25  |  |                    |   | 6,000     |               |  |   | 5,381         |  |  |   | 5,194   | 
|Ares 2012 CLO 2A Class Subord.                       |  | (o)       |  | Diversified Financials      |  | 8.9%    |  |       |  |          | 10/12/23 |  |                    |   | 8,500     |               |  |   | 6,614         |  |  |   | 5,698   | 
|CGMS CLO 2013-3A Class E                             |  | (o)       |  | Diversified Financials      |  | L+525   |  |       |  |          | 7/15/25  |  |                    |   | 5,000     |               |  |   | 4,495         |  |  |   | 4,215   | 
|CGMS CLO 2013-3A Class Subord.                       |  | (o)       |  | Diversified Financials      |  | 14.6%   |  |       |  |          | 7/15/25  |  |                    |   | 22,000    |               |  |   | 15,890        |  |  |   | 18,949  | 
|Halcyon Loan Advisors Funding 2013-2 Class Subord.   |  | (o)       |  | Diversified Financials      |  | 15.2%   |  |       |  |          | 8/1/25   |  |                    |   | 15,000    |               |  |   | 11,363        |  |  |   | 14,628  | 
|JPMorgan Chase Bank, N.A. Credit-Linked Notes        |  | (o)       |  | Diversified Financials      |  | 14.3%   |  |       |  |          | 12/20/21 |  |                    |   | 76,260    |               |  |   | 75,735        |  |  |   | 78,739  | 
|NewStar Clarendon 2014-1A Class D                    |  | (o)(n)    |  | Diversified Financials      |  | L+435   |  |       |  |          | 1/25/27  |  |                    |   | 1,060     |               |  |   | 993           |  |  |   | 993     | 
|NewStar Clarendon 2014-1A Sub B                      |  | (o)(n)    |  | Diversified Financials      |  | 12.4%   |  |       |  |          | 1/25/27  |  |                    |   | 12,140    |               |  |   | 12,013        |  |  |   | 12,013  | 
|Octagon CLO 2012-1A Class Income                     |  | (o)       |  | Diversified Financials      |  | 14.9%   |  |       |  |          | 1/15/24  |  |                    |   | 4,650     |               |  |   | 2,926         |  |  |   | 3,715   | 
|Wind River CLO Ltd. 2013-1A Class Subord. B          |  | (o)       |  | Diversified Financials      |  | 12.6%   |  |       |  |          | 4/20/25  |  |                    |   | 40,720    |               |  |   | 32,636        |  |  |   | 36,370  | 
|                                                     |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   |               |  |  |   |         | 
|Total Collateralized Securities                      |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   | 172,068       |  |  |   | 184,590 | 
|                                                     |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   |               |  |  |   |         | 
|                                                     |  |           |  |                             |  |         |  |      
|                                                     |  |           |  |                             |  |         |  |       |  |          |          |  | Numberof Shares    |   |           | Cost          |  |   | FairValue(d)  | 
|Equity/Other6.6%                                    |  |           |  |                             |  |         |  |       |  |          |          |  |                    |   |           |               |  |   |               |  |  |   |         | 
|A.T. Cross Co., Common Equity, Class A Units         |  | (p)       |  | Retailing                   |  |         |  |       |  |          |          |  |                    |   | 1,000,000 |               |  |   | 1,000         |  |  |   | 1,000   | 
|Abaco Energy Technologies LLC, Common Equity         |  | (p)       |  | Energy                      |  |         |  |       |  |          |          |  |                    |   | 3,055,556 |               |  |   | 3,056         |  |  |   | 3,056   | 
|ACP FH Holdings GP, LLC, Common Equity               |  | (p)       |  | Consumer Durables & Apparel |  |         |  |       |  |          |          |  |                    |   | 88,571    |               |  |   | 89            |  |  |   | 89      | 
|ACP FH Holdings, LP, Common Equity                   |  | (p)       |  | Consumer Durables & Apparel |  |         |  |       |  |          |          |  |                    |   | 8,768,572 |               |  |   | 8,769         |  |  |   | 8,769   | 
|Altus Power America Holdings, Inc., Preferred Equity |  | (p)       |  | Energy                      |  |         |  |       |  |          |          |  |                    |   | 253,925   |               |  |   | 254           |  |  |   | 254     | 



See
notes to unaudited consolidated financial statements.



24



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                                           |  |           |  |                                                |  |  |  |                 |  |  |      |  |            |              |  |   |        |  |  |   |        | 
|---------------------------------------------------------- |  | --------- |  | ---------------------------------------------- |  |  |  | --------------- |  |  | ---- |  | ---------- | ------------ |  | - | ------ |  |  | - | ------ | 
|Portfolio
Company(a)                                       |  | Footnotes |  | Industry                                       |  |  |  | Numberof Shares |  |  | Cost |  |            | FairValue(d) | 
|Amaya Gaming Group Inc., Warrants                          |  | (o)(p)    |  | Consumer Services                              |  |  |  |                 |  |  |      |  | 2,000,000  |              |  | $ | 16,832 |  |  | $ | 35,179 | 
|American Energy Appalachia Holdings, LLC, Common Equity    |  | (p)(q)    |  | Energy                                         |  |  |  |                 |  |  |      |  | 13,555,557 |              |  |   | 12,900 |  |  |   | 13,556 | 
|AP Exhaust Holdings, LLC, Common Equity                    |  | (p)(r)    |  | Automobiles & Components                       |  |  |  |                 |  |  |      |  | 8,378      |              |  |   | 8,378  |  |  |   | 5,990  | 
|BPA Laboratories, Inc., Series A Warrants                  |  | (e)(p)    |  | Pharmaceuticals, Biotechnology & Life Sciences |  |  |  |                 |  |  |      |  | 10,924     |              |  |   |       |  |  |   |       | 
|BPA Laboratories, Inc., Series B Warrants                  |  | (e)(p)    |  | Pharmaceuticals, Biotechnology & Life Sciences |  |  |  |                 |  |  |      |  | 17,515     |              |  |   |       |  |  |   |       | 
|Burleigh Point, Ltd., Warrants                             |  | (o)(p)    |  | Retailing                                      |  |  |  |                 |  |  |      |  | 17,256,081 |              |  |   | 1,898  |  |  |   | 5,003  | 
|Cimarron Energy Inc., Common Equity                        |  | (p)       |  | Energy                                         |  |  |  |                 |  |  |      |  | 2,500,000  |              |  |   | 2,500  |  |  |   | 2,500  | 
|CoSentry.Net, LLC, Preferred Equity                        |  | (p)       |  | Software & Services                            |  |  |  |                 |  |  |      |  | 2,632      |              |  |   | 2,500  |  |  |   | 4,185  | 
|DHS Technologies LLC                                       |  | (f)       |  | Capital Goods                                  |  |  |  |                 |  |  |      |  | 60,872     |              |  |   | 5,000  |  |  |   | 1,468  | 
|Eastman Kodak Co., Common Equity                           |  | (p)       |  | Consumer Durables & Apparel                    |  |  |  |                 |  |  |      |  | 1,846      |              |  |   | 36     |  |  |   | 40     | 
|ERC Ireland Holdings Ltd., Common Equity                   |  | (o)(p)(n) |  | Telecommunication Services                     |  |  |  |                 |  |  |      |  | 22,401     |              |  |   | 2,548  |  |  |   | 3,550  | 
|ERC Ireland Holdings Ltd., Warrants                        |  | (o)(p)    |  | Telecommunication Services                     |  |  |  |                 |  |  |      |  | 4,943      |              |  |   | 598    |  |  |   | 783    | 
|FourPoint Energy, LLC, Common Equity, Class C Units        |  | (p)(r)    |  | Energy                                         |  |  |  |                 |  |  |      |  | 13,000     |              |  |   | 13,000 |  |  |   | 16,575 | 
|FourPoint Energy, LLC, Common Equity, Class D Units        |  | (p)(r)    |  | Energy                                         |  |  |  |                 |  |  |      |  | 2,437      |              |  |   | 1,610  |  |  |   | 3,132  | 
|Industrial Group Intermediate Holdings, LLC, Common Equity |  | (p)(r)    |  | Materials                                      |  |  |  |                 |  |  |      |  | 2,107,438  |              |  |   | 2,107  |  |  |   | 2,950  | 
|MB Precision Holdings LLC, Common Equity                   |  | (p)       |  | Capital Goods                                  |  |  |  |                 |  |  |      |  | 2,287,659  |              |  |   | 2,288  |  |  |   | 2,288  | 
|MModal Inc., Common Equity                                 |  | (e)(g)(p) |  | Health Care Equipment & Services               |  |  |  |                 |  |  |      |  | 132,235    |              |  |   | 2,182  |  |  |   | 1,989  | 
|New Star Metals Inc., Common Equity                        |  |           |  | Capital Goods                                  |  |  |  |                 |  |  |      |  | 2,223,246  |              |  |   | 2,250  |  |  |   | 2,890  | 
|NewStar Financial, Inc., Warrants                          |  | (o)(p)    |  | Diversified Financials                         |  |  |  |                 |  |  |      |  | 4,750,000  |              |  |   | 30,115 |  |  |   | 31,350 | 
|Professional Plumbing Group, Inc., Common Equity           |  | (p)       |  | Capital Goods                                  |  |  |  |                 |  |  |      |  | 3,000,000  |              |  |   | 3,000  |  |  |   | 4,200  | 
|PSAV Holdings LLC, Common Equity                           |  | (p)       |  | Technology Hardware & Equipment                |  |  |  |                 |  |  |      |  | 10,000     |              |  |   | 10,000 |  |  |   | 15,000 | 
|Sorenson Communications, Inc., Common Equity               |  | (e)(f)(p) |  | Telecommunication Services                     |  |  |  |                 |  |  |      |  | 43,796     |              |  |   |       |  |  |   | 20,466 | 
|Swift Worldwide Resources Holdco Limited, Common Equity    |  | (o)(p)(y) |  | Energy                                         |  |  |  |                 |  |  |      |  | 1,250,000  |              |  |   | 2,010  |  |  |   | 1,947  | 



See
notes to unaudited consolidated financial statements.



25



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|                                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   |            |  
|----------------------------------------------- |  | --------- |  | ---------------------------------------------- |  |  |  | ------------------------- |  |  | ---- |  | ------ | ------------ |  | - | --------- |  |  | - | ---------- | -
|Portfolio
Company(a)                            |  | Footnotes |  | Industry                                       |  |  |  | Number ofShares/Contracts |  |  | Cost |  |        | FairValue(d) | 
|Therakos, Inc., Common Equity                   |  |           |  | Pharmaceuticals, Biotechnology & Life Sciences |  |  |  |                           |  |  |      |  | 14,366 |              |  | $ | 1,478     |  |  | $ | 6,169      |  
|Weight Watchers International, Inc., Put Option |  | (o)(p)(u) |  | Food & Staples Retailing                       |  |  |  |                           |  |  |      |  | 4,000  |              |  |   | 2,895     |  |  |   | 1,360      |  
|Weight Watchers International, Inc., Put Option |  | (o)(p)(u) |  | Food & Staples Retailing                       |  |  |  |                           |  |  |      |  | 5,000  |              |  |   | 2,022     |  |  |   | 1,175      |  
|Weight Watchers International, Inc., Put Option |  | (o)(p)(u) |  | Food & Staples Retailing                       |  |  |  |                           |  |  |      |  | 5,000  |              |  |   | 1,504     |  |  |   | 863        |  
|                                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   |            |  
|Total Equity/Other                              |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   | 142,819   |  |  |   | 197,776    |  
|Unfunded Contingent Warrant Commitment          |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |          |  |  |   | (4,950     | )
|                                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   |            |  
|Net Equity/Other                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   | 142,819   |  |  |   | 192,826    |  
|                                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   |            |  
|TOTAL INVESTMENTS151.0%                        |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  | $ | 4,409,806 |  |  |   | 4,396,228  |  
|                                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   |            |  
|LIABILITIES IN EXCESS OF OTHER ASSETS(51.0%)   |  | (v)       |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   | (1,484,438 | )
|                                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   |            |  
|NET ASSETS100.0%                               |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  | $ | 2,911,790  |  
|                                                |  |           |  |                                                |  |  |  |                           |  |  |      |  |        |              |  |   |           |  |  |   |            |  

Credit Default Swaps on Corporate IssuesSell Protection



|                                          |  |              |                           |  |                                              |  |       |          |  |  |                        |  |  |          |     |   |             |  |         |                |  |   |                                    |  |  |                                      |         |   |  |   |        |   |  |   |         |  
|----------------------------------------- |  | ------------ | ------------------------- |  | -------------------------------------------- |  | ----- | -------- |  |  | ---------------------- |  |  | -------- | --- | - | ----------- |  | ------- | -------------- |  | - | ---------------------------------- |  |  | ------------------------------------ | ------- | - |  | - | ------ | - |  | - | ------- | -
|Reference Entity                          |  | Counterparty |                           |  | Implied CreditSpread at December 31, 2014(w) |  |       | Industry |  |  | Fixed DealReceivedRate |  |  | Maturity |     |   | Notional(x) |  |         | MarketValue(d) |  |   | UnamortizedPremiums Paid(Received) |  |  | UnrealizedAppreciation(Depreciation) |        
|Caesars Entertainment Operating Co., Inc. |  |              | JPMorgan Chase Bank, N.A. |  |                                              |  | 888.2 | %        |  |  | Consumer Services      |  |  |          | 5.0 | % |             |  | 6/20/15 |                |  | $ | 15,000                             |  |  | $                                    | (12,026 | ) |  | $ | (3,768 | ) |  | $ | (8,258  | )
|Caesars Entertainment Operating Co., Inc. |  |              | JPMorgan Chase Bank, N.A. |  |                                              |  | 656.5 | %        |  |  | Consumer Services      |  |  |          | 5.0 | % |             |  | 9/20/15 |                |  |   | 22,000                             |  |  |                                      | (18,022 | ) |  |   | (6,854 | ) |  |   | (11,168 | )



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



|(b) | Certain variable rate securities in the Companys portfolio bear interest at a rate determined by a publicly-disclosed base rate plus a basis point spread. As of
December 31, 2014, the three-month London Interbank Offered Rate was 0.26%, the Euro Interbank Offered Rate was 0.08% and the U.S. Prime Lending Rate was 3.25%.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(d) | Fair value and market value are 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 Floating Rate Notes
issued to Cobbs Creek LLC pursuant to an indenture with Citibank, N.A., as trustee (see Note 8).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



See
notes to unaudited consolidated financial statements.



26



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|(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 amounts outstanding under the revolving credit facility with
Citibank, N.A. (see Note 8).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



|(k) | Security or portion thereof held within Juniata River LLC and is pledge as collateral supporting the amounts outstanding under a revolving credit facility with JPMorgan
Chase Bank, N.A. (see Note 8).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



|(m) | Security or portion thereof held within Schuylkill River LLC and is pledged as collateral supporting the obligations of Schuylkill River LLC under the repurchase
transaction with Goldman Sachs Bank USA (see Note 8).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(n) | Position or portion thereof unsettled as of December 31, 2014.
|--- | --------------------------------------------------------------



|(o) | 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, 2014, 78.8% of the Companys total assets represented
qualifying assets.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



|(s) | Security is an unfunded commitment.
|--- | -----------------------------------



|(t) | Security was on non-accrual status as of December 31, 2014.
|--- | -----------------------------------------------------------



|(u) | Put options expire January 15, 2016. The strike prices are $20.00, $17.50 and $15.00, respectively.
|--- | ---------------------------------------------------------------------------------------------------



|(v) | Includes the effect of credit default swap positions.
|--- | -----------------------------------------------------



See
notes to unaudited consolidated financial statements.



27



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2014

(in thousands, except share amounts)







|(w) | Implied credit spread, represented in absolute terms, utilized in determining the market value of the credit default swap agreements as of period end serves as an
indicator of the current status of the payment/performance risk and represents the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection
and may include upfront payments required in connection with the entrance into the agreement. Wider credit spreads generally represent a deterioration of the referenced entitys credit soundness and a greater likelihood or risk of default or
other credit event occurring, as defined under the terms of the applicable agreement.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(x) | The maximum potential amount the Company could be required to pay as a seller of credit protection if a credit event occurs as defined under the terms of the applicable
agreement.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(y) | Investment denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2014.
|--- | --------------------------------------------------------------------------------------------------------------------------------



See
notes to unaudited consolidated financial statements.



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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 investment 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 registered 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 and registration as a non-diversified, closed-end management
investment company.

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 U.S. federal income tax purposes, and intends to qualify annually,
as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of March 31, 2015, the Company had nine wholly-owned financing subsidiaries, two wholly-owned
subsidiaries through which it holds interests in certain non-controlled and non-affiliated portfolio companies and another wholly-owned subsidiary through which it may hold certain investments in portfolio companies from time to time. The unaudited
consolidated financial statements include both the Companys accounts and the accounts of its wholly-owned subsidiaries as of March 31, 2015. 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 or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the over-the-counter market or directly from the
Companys target companies as primary market or directly originated investments. In connection with the Companys debt investments, the Company may on occasion receive equity interests such as warrants or options as additional
consideration. The Company may also purchase minority interests in the form of common or preferred equity or equity-related securities in its target companies, generally in conjunction with one of the Companys 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 the Companys portfolio may be comprised of corporate bonds, collateralized loan obligations, or CLOs, other debt
securities and derivatives, including total return swaps and credit default swaps.

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



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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)



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 fiscal year ended December 31, 2014 included in the Companys annual report on Form 10-K for the year ended December 31,
2014. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. The December 31, 2014 consolidated balance sheet and
consolidated schedule of investments are derived from the Companys audited consolidated financial statements as of and for the fiscal year ended December 31, 2014. The Company is considered an investment company under GAAP and follows the
accounting and reporting guidance applicable to investment companies. 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.

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 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 as if the Companys entire portfolio was 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.

Subordinated Income Incentive Fee: Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor may
also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income, which is calculated and payable quarterly in arrears, equals 20.0% of the Companys pre-incentive fee net investment
income for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital, 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,



30



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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)



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. Thereafter, FSIC II Advisor will be entitled to receive 20.0% of pre-incentive fee net investment
income.

Credit Default Swaps: When the Company is the buyer of a credit default swap contract, the Company is entitled
to receive the par (or other agreed-upon) value of a referenced debt obligation (or basket of debt obligations) from the counterparty to the contract if a specified credit event with respect to the issuer of the debt obligation, such as a U.S. or
foreign corporate issuer or sovereign issuer, occurs. In return, the Company pays the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no specified credit event occurs, the
Company would have paid the stream of payments and received no proceeds from the contract. When the Company is the seller of a credit default swap contract, it receives the stream of payments, but is obligated to pay to the buyer of the protection
an amount up to the notional amount of the swap and, in certain instances, take delivery of securities of the reference entity upon the occurrence of a credit event, as defined under the terms of that particular swap agreement. Credit events are
contract specific but may include bankruptcy, failure to pay principal or interest, restructuring, obligation acceleration and repudiation or moratorium. If the Company is a seller of protection and a credit event occurs, the maximum potential
amount of future payments that the Company could be required to make would be an amount equal to the notional amount of the agreement. This potential amount would be partially offset by any recovery value of the respective referenced obligation, or
net amount received from the settlement of a buy protection credit default swap agreement entered into by the Company for the same referenced obligation. As the seller of a credit default swap contract, the Company may create economic leverage
because, in addition to its total net assets, the Company is subject to investment exposure on the notional amount of the swap. The interest fee paid or received on the swap contract, which is based on a specified interest rate on a fixed notional
amount, is accrued daily and is recorded as realized loss or gain. The Company records an increase or decrease to unrealized appreciation (depreciation) on credit default swaps in an amount equal to the change in daily valuation. Upfront payments or
receipts, if any, are recorded as unamortized swap premiums paid or received, respectively, and are amortized over the life of the swap contract as realized losses or gains. For financial reporting purposes, unamortized upfront payments, if
any, are netted with unrealized appreciation (depreciation) on credit default swaps to determine the market value of swaps as presented in Note 7 and Note 9. The Company will segregate assets in the form of cash and/or liquid securities in an amount
equal to any unrealized depreciation on the credit default swaps of which it is the buyer, marked-to-market on a daily basis. The Company will segregate assets in the form of cash and/or liquid securities in an amount equal to the notional amount of
the credit default swaps of which it is the seller. These transactions involve certain risks, including the risk that the seller may be unable to fulfill the transaction. As of March 31, 2015, the Company had no outstanding credit default swap
contracts.

Reclassifications: Certain amounts in the unaudited consolidated financial statements for the three months
ended March 31, 2014 and the audited consolidated financial statements for the year ended December 31, 2014 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements for
the three months ended March 31, 2015. These reclassifications had no material impact on the Companys consolidated financial position, results of operations or cash flows as previously reported.



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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

Below is a summary of transactions with respect to shares of the Companys common stock during the three months ended March 31,
2015 and 2014:



|                                     |  |                              |           |   |        |   |        |        |  |  |            |   |  |   |         |  
|------------------------------------ |  | ---------------------------- | --------- | - | ------ | - | ------ | ------ |  |  | ---------- | - |  | - | ------- | -
|                                     |  | Three Months Ended March 31, |          
|                                     |  | 2015                         |           |   | 2014   |  
|                                     |  | Shares                       |           |   | Amount |   |        | Shares |  |  | Amount     |  
|Gross Proceeds from Offering         |  |                              |          |   |        | $ |       |        |  |  | 46,680,052 |   |  | $ | 486,879 |  
|Reinvestment of Distributions        |  |                              | 2,232,042 |   |        |   | 21,090 |        |  |  | 3,781,436  |   |  |   | 35,865  |  
|                                     |  |                              |           |   |        |   |        |        |  |  |            |   |  |   |         |  
|Total Gross Proceeds                 |  |                              | 2,232,042 |   |        |   | 21,090 |        |  |  | 50,461,488 |   |  |   | 522,744 |  
|Commissions and Dealer Manager Fees  |  |                              |          |   |        |   |       |        |  |  |           |   |  |   | (44,484 | )
|                                     |  |                              |           |   |        |   |        |        |  |  |            |   |  |   |         |  
|Net Proceeds to Company              |  |                              | 2,232,042 |   |        |   | 21,090 |        |  |  | 50,461,488 |   |  |   | 478,260 |  
|Share Repurchase Program             |  |                              | (578,569  | ) |        |   | (5,496 | )      |  |  | (135,094   | ) |  |   | (1,277  | )
|                                     |  |                              |           |   |        |   |        |        |  |  |            |   |  |   |         |  
|Net Proceeds from Share Transactions |  |                              | 1,653,473 |   |        | $ | 15,594 |        |  |  | 50,326,394 |   |  | $ | 476,983 |  
|                                     |  |                              |           |   |        |   |        |        |  |  |            |   |  |   |         |  

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 4, 2015, the Company had issued a total of 319,523,093 shares of common stock and raised total gross proceeds of $3,276,148, 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, 2015 and 2014, the Company sold 2,232,042 and 50,461,488 shares of common stock for gross proceeds of $21,090 and $522,744 at an average price per share of
$9.45 and $10.36, respectively. All of the shares of common stock the Company issued during the three months ended March 31, 2015 were issued on account of reinvested stockholder distributions pursuant to the Companys dividend
reinvestment plan. The gross proceeds received during the three months ended March 31, 2014 include reinvested stockholder distributions of $35,865 for which the Company issued 3,781,436 shares of common stock. During the period from
April 1, 2015 to May 4, 2015, the Company issued 2,234,224 shares of common stock pursuant to its distribution reinvestment plan for gross proceeds of $21,108 at an average price per share of $9.45.

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 $0 and $44,484 for the three months ended March 31, 2015 and 2014, respectively.



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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)



Share Repurchase Program

The Company intends to continue to conduct quarterly tender offers pursuant to its share repurchase program. 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 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 calendar 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. The Companys board of directors may amend, suspend or terminate the share repurchase program at any time upon 30 days notice.

On February 24, 2014, the Company amended the terms of its share repurchase program, which became effective as of the commencement of the Companys quarterly repurchase offer for the second
quarter of 2014, which was completed in June 2014. Prior to the amendment of the share repurchase program, the Company offered to repurchase shares of common stock 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 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 price at which shares of common stock are issued under the Companys distribution reinvestment plan is 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 faith by the Companys board of directors or a committee thereof, in its sole
discretion, immediately prior to the payment date of the distribution and (ii) not more than 2.5% greater than the net asset value per share as of such date.



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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)



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, 2015 and 2014:



|                           |  |                 |                 |  |                   |  |         |                                                |  |  |                          |   |  |                                             |      |  |  |   |       | 
|-------------------------- |  | --------------- | --------------- |  | ----------------- |  | ------- | ---------------------------------------------- |  |  | ------------------------ | - |  | ------------------------------------------- | ---- |  |  | - | ----- | 
|For the Three Months Ended |  | Repurchase Date |                 |  | SharesRepurchased |  |         | PercentageofSharesTenderedThat WereRepurchased |  |  | RepurchasePrice
PerShare |   |  | AggregateConsideration
forRepurchasedShares |     
|Fiscal 2014                |  |                 |                 |  |                   |  |         |                                                |  |  |                          |  
|December 31, 2013          |  |                 | January 2, 2014 |  |                   |  | 135,094 |                                                |  |  | 100                      | % |  | $                                           | 9.45 |  |  | $ | 1,277 | 
|Fiscal 2015                |  |                 |                 |  |                   |  |         |                                                |  |  |                          |  
|December 31, 2014          |  |                 | January 2, 2015 |  |                   |  | 578,569 |                                                |  |  | 100                      | % |  | $                                           | 9.50 |  |  | $ | 5,496 | 

On April 1, 2015, the Company repurchased 885,509 shares of common stock (representing 100% of the
shares of the common stock tendered for repurchase) at $9.45 per share for aggregate consideration totaling $8,368.

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 investment operations. Base management fees are paid on a quarterly basis in arrears. Effective March 5, 2015, FSIC II Advisor agreed to permanently waive a portion of its base management fee to which it
is entitled under the investment advisory and administrative services agreement, so that the fee received equals 1.75% of the average value of the Companys gross assets.

The incentive fee consists of two parts. The first part of the incentive fee, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears, equals 20.0%
of the Companys pre-incentive fee net investment income for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital, 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 be entitled to receive 20.0% of pre-incentive fee net investment income.

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



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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)



administrative services agreement). This fee equals 20.0% of the Companys incentive fee capital gains, which equals the Companys realized capital gains on a cumulative basis from
inception, calculated as of the end of the applicable period, 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.

The Company reimburses FSIC II Advisor for expenses necessary to perform services related to the Companys administration and
operations, including FSIC II Advisors allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P., or Franklin Square Holdings, the Companys sponsor and an affiliate of FSIC II
Advisor, providing administrative services to the Company on behalf of FSIC II Advisor. 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 reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of the administrative
expenses among the Company and certain affiliates of FSIC II Advisor. The Companys board of directors then assesses the reasonableness of such reimbursements for expenses allocated to the Company based on the breadth, depth and quality of such
services as compared to the estimated cost to the Company of obtaining similar services from third-party service providers known to be available. In addition, the Companys board of directors considers whether any single third-party service
provider would be capable of providing all such services at comparable cost and quality. Finally, the Companys board of directors, among other things, 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. The Company does not reimburse FSIC II Advisor for any services for which it receives a separate fee, or for rent, depreciation, utilities, capital equipment or other
administrative items allocated to a controlling person of FSIC II Advisor.

Under the investment advisory and administrative
services agreement, the Company, either directly or through reimbursement to FSIC II Advisor or its affiliates, was responsible for its organization and offering costs in an amount up to 1.5% of gross proceeds raised in the Companys
continuous public offering. Organization and offering costs primarily included legal, accounting, printing and other expenses relating to the Companys continuous public offering, including costs associated with technology integration between
the Companys systems and those of its selected broker-dealers, marketing expenses, salaries and direct expenses of FSIC II Advisors personnel, employees of its affiliates and others while engaged in registering and marketing the
Companys common stock, which included the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.

Prior to satisfaction of the minimum offering requirement and for a period of time thereafter, Franklin Square Holdings funded certain of
the Companys organization and offering costs. Following this period, the Company paid certain of its organization and offering costs directly and reimbursed FSIC II Advisor for offering costs incurred by FSIC II Advisor on the
Companys behalf, including marketing expenses, salaries and other direct expenses of FSIC II Advisors personnel and employees of its affiliates while engaged in registering and



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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)



marketing the Companys common stock. Organization and offering costs funded directly by Franklin Square Holdings were 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. All other offering costs, including costs incurred directly by the
Company, amounts reimbursed to FSIC II Advisor for ongoing offering costs and any reimbursements paid to Franklin Square Holdings for organization and offering costs previously funded, were recorded as a reduction of capital.

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, or the dealer manager agreement, FS2was entitled to receive selling 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. The dealer manager agreement terminated in connection with the closing of
the Companys continuous public offering in March 2014.

The following table describes the fees and
expenses the Company accrued under the investment advisory and administrative services agreement and the dealer manager fees FS2received under the dealer manager agreement during the three months ended March 31, 2015 and 2014:



|                |  |                                                           |  |                                         |  |                             |        |  |      |   |        | 
|--------------- |  | --------------------------------------------------------- |  | --------------------------------------- |  | --------------------------- | ------ |  | ---- | - | ------ | 
|                |  |                                                           |  |                                         |  | Three Months EndedMarch 31, |       
|Related Party   |  | Source Agreement                                          |  | Description                             |  | 2015                        |        |  | 2014 |  
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Base Management Fee(1)                  |  | $                           | 23,375 |  |      | $ | 17,641 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Capital Gains Incentive Fee(2)          |  | $                           |       |  |      | $ | 5,934  | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Subordinated Incentive Fee on Income(3) |  | $                           | 15,213 |  |      | $ |       | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Administrative Services Expenses(4)     |  | $                           | 1,076  |  |      | $ | 1,374  | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Offering Costs(5)                       |  | $                           |       |  |      | $ | 1,087  | 
|FS2             |  | Dealer Manager Agreement                                  |  | Dealer Manager Fee(6)                   |  | $                           |       |  |      | $ | 8,821  | 



|(1) | FSIC II Advisor agreed, effective March 5, 2015, to permanently waive a portion of its base management fee to which it is entitled under the investment advisory
agreement so that the fee received equals 1.75% of the average value of the Companys gross assets. As a result, the amount shown for the three months ended March 31, 2015 is net of waivers of $851. During the three months ended
March 31, 2015 and 2014, $23,069 and $15,013, respectively, in base management fees were paid to FSIC II Advisor. As of March 31, 2015, $23,375 in base management fees were payable to FSIC II Advisor.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | During the three months ended March 31, 2015 and 2014, the Company accrued capital gains incentive fees of $0 and $5,934, respectively, based on
the performance of its portfolio, all of which was based on
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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)



| | unrealized gains. No such fees are actually payable by the Company with respect to such 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. The Company did not pay any capital gains incentive fees to FSIC II Advisor during the three months ended March 31, 2015. As of March 31, 2015, the Company
did not have any accrued capital gains incentive fees based on the performance of its portfolio.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | During the three months ended March 31, 2015 and 2014, $15,334 and $0, respectively, of subordinated incentive fees on income were paid to FSIC II Advisor. As of
March 31, 2015, a subordinated incentive fee on income of $15,213 was payable to FSIC II Advisor.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | During the three months ended March 31, 2015 and 2014, $1,024 and $1,288, respectively, of 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 $1,689 and $214 in administrative services expenses to FSIC II Advisor during the three
months ended March 31, 2015 and 2014, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | During the three months ended March 31, 2015 and 2014, the Company incurred offering costs of $0 and $1,686, respectively, of which $0 and $1,087, respectively,
related to reimbursements to FSIC II Advisor for offering costs incurred on the Companys behalf, including marketing expenses, salaries and other direct expenses of FSIC II Advisors personnel and employees of its affiliates while engaged
in registering and marketing the Companys common shares.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Represents aggregate sales commissions and dealer manager fees retained by FS2and not re-allowed to selected broker-dealers.
|--- | ----------------------------------------------------------------------------------------------------------------------------

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
represented the initial public offering price of $10.00 per share, excluding selling commissions and dealer manager fees. The principals will not 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, which represented the initial public offering price of $10.00 per share, excluding selling commissions and dealer manager
fees. The principals will not 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 purchased 1,247,267 shares of common stock, and certain individuals and entities affiliated with GDFM purchased 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 sold an aggregate of 2,043,933 shares of common stock for aggregate gross proceeds of $18,395 upon satisfying the minimum offering requirement on June 18, 2012. As of
May 4, 2015, the Company had issued an aggregate of 3,419,924 shares of common stock for aggregate gross proceeds of $31,319 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.



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 4. Related Party
Transactions (continued)



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 certain other BDCs and a closed-end management investment company affiliated with Franklin Square Holdings. 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 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 has and may continue to enhance its ability to further its investment objectives and
strategy. The Company believes this relief 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 such relief had not been obtained. 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 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



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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)



reimburse the Company for the portion of such distributions to stockholders that represent a return of capital as the purpose of the expense reimbursement agreement 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 company taxable income, 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 company taxable income or net capital gains) 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 company taxable income, 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 company taxable income or net capital gains) exceeds the regular cash 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 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.



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 4. Related Party
Transactions (continued)



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 March 31, 2015, there were no unreimbursed expense support payments subject to future reimbursement by the Company.

Note 5. Distributions

The following table reflects the cash distributions
per share that the Company declared and paid on its common stock during the three months ended March 31, 2015 and 2014:



|                           |  |              |        |  |        |   |        | 
|-------------------------- |  | ------------ | ------ |  | ------ | - | ------ | 
|                           |  | Distribution |       
|For the Three Months Ended |  | Per Share    |        |  | Amount |  
|Fiscal 2014                |  |              |        |  |        |   |        | 
|March 31, 2014             |  | $            | 0.1740 |  |        | $ | 49,274 | 
|Fiscal 2015                |  |              |        |  |        |   |        | 
|March 31, 2015             |  | $            | 0.1885 |  |        | $ | 59,177 | 

The Company intends to authorize and declare regular cash distributions on a quarterly basis and pay such
distributions on a monthly basis. On March 12, 2015, the Companys board of directors declared regular monthly cash distributions for April 2015 through June 2015, in the amount of $0.06283 per share. These distributions have been or will
be paid monthly to stockholders of record as of monthly record dates previously determined by the Companys board of directors. 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 the distribution 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.

On February 24, 2014, the Company amended and restated its
distribution reinvestment plan, which first applied to the reinvestment of cash distributions paid on or after, March 26, 2014. Under the original plan, cash distributions to participating stockholders were reinvested in additional shares of
the Companys common stock at a purchase price equal to 90% of the public offering price per share in effect as of the date of issuance. Under the amended plan, cash distributions to participating stockholders will be reinvested in additional
shares of the Companys common stock at a purchase price determined by the Companys board of directors, or a committee thereof, in its sole discretion, that is (i) not less than the net asset value per share of the Companys
common stock as determined in good faith by the Companys board of directors or a committee thereof, in its sole discretion, immediately prior to the payment of the distribution and (ii) not more than 2.5% greater than the net asset value
per share of the Companys common stock as of such date. Although distributions paid in the form of additional shares of common stock will generally be subject to U.S. federal, state and local taxes in the same manner as cash distributions,
Stockholders who elect to participate in the Companys distribution reinvestment plan will not receive any corresponding cash distributions with which to pay any such applicable taxes. Investors receiving distributions in the form of additional
shares of common stock will be treated as receiving a distribution in the amount of the fair market value of the Companys shares of common stock.



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 5. Distributions (continued)



The Company may fund its cash distributions to stockholders from any sources of funds
legally available to it, including proceeds from the sale of the Companys common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, gains from credit default swaps, non-capital gains
proceeds from the sale of assets and 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. During certain periods, the Companys distributions may exceed its earnings. As a result, it is possible that a portion of the distributions the
Company makes may represent a return of capital. A return of capital generally is a return of a stockholders investment rather than a return of earnings or gains derived from the Companys investment activities. Each year a statement on
Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital which is a nontaxable distribution) will be mailed to the Companys
stockholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all. No portion of the distributions paid during the three months ended March 31, 2015 represented a return of capital.

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, 2015 and 2014 was funded through the reimbursement of
operating expenses by Franklin Square Holdings. 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.

The following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common stock during the three months ended March 31, 2015 and 2014:



|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|--------------------------------------------------------- |  | ---------------------------- | ------ |  | ---------- |  | --- | ------------------ |  | - | ---------- |  |  |  | --- | -
|                                                          |  | Three Months Ended March 31, |       
|                                                          |  | 2015                         |        |  | 2014       | 
|Source of Distribution                                    |  | DistributionAmount           |        |  | Percentage |  |     | DistributionAmount |  |   | Percentage | 
|Offering proceeds                                         |  | $                            |       |  |            |  |    |                    |  | $ |           |  |  |  |    |  
|Borrowings                                                |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Net investment income (prior to expense reimbursement)(1) |  |                              | 59,177 |  |            |  | 100 | %                  |  |   | 49,274     |  |  |  | 100 | %
|Short-term capital gains proceeds from the sale of assets |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Long-term capital gains proceeds from the sale of assets  |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Gains from credit default swaps (ordinary income for tax) |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Non-capital gains proceeds from the sale of assets        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Distributions on account of preferred and common equity   |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Expense reimbursement from sponsor                        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|Total                                                     |  | $                            | 59,177 |  |            |  | 100 | %                  |  | $ | 49,274     |  |  |  | 100 | %
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  



41



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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)





|(1) | During the three months ended March 31, 2015 and 2014, 93.6% and 93.3%, respectively, of the Companys gross investment income was attributable to cash income
earned, 3.2% and 4.9%, respectively, was attributable to non-cash accretion of discount and 3.2% and 1.8%, 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, 2015 and 2014 was $60,319 and $52,415,
respectively. As of March 31, 2015 and December 31, 2014, the Company had $23,859 and $19,204, 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 reclassification of unamortized original issue discount recognized upon prepayment of loans from income for GAAP purposes to realized gains for tax purposes and the reclassification of realized gains on credit default swaps to income for tax
purposes.

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, 2015 and 2014:



|                                                                            |  |                             |         |   |      |   |        |  
|--------------------------------------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------ | -
|                                                                            |  | Three Months EndedMarch 31, |        
|                                                                            |  | 2015                        |         |   | 2014 |  
|GAAP-basis net investment income                                            |  | $                           | 60,850  |   |      | $ | 47,700 |  
|Reversal of incentive fee accrual on unrealized gains                       |  |                             |        |   |      |   | 5,934  |  
|Reclassification of unamortized original issue discount and prepayment fees |  |                             | (1,128  | ) |      |   | (1,616 | )
|Reclassification of realized gains on credit default swap                   |  |                             | (19,588 | ) |      |   |       |  
|Mark-to-market on outstanding credit default swaps                          |  |                             | 19,426  |   |      |   |       |  
|Other miscellaneous differences                                             |  |                             | 759     |   |      |   | 397    |  
|                                                                            |  |                             |         |   |      |   |        |  
|Tax-basis net investment income                                             |  | $                           | 60,319  |   |      | $ | 52,415 |  
|                                                                            |  |                             |         |   |      |   |        |  

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, 2015 and December 31, 2014, the components of accumulated earnings on a tax basis were as follows:



|                                                                                               |  |                           |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                               |  | March 31, 2015(Unaudited) |         |   | December 31,2014 |  
|Distributable ordinary income (income and short-term capital gains)                            |  | $                         | 15,220  |   |                  | $ | 9,166   |  
|Distributable realized gains (long-term capital gains)                                         |  |                           | 8,639   |   |                  |   | 10,038  |  
|Incentive fee accrual on unrealized gains                                                      |  |                           |        |   |                  |   |        |  
|Unamortized organization costs                                                                 |  |                           | (186    | ) |                  |   | (189    | )
|Net unrealized appreciation (depreciation) on investments and gain/loss on foreign currency(1) |  |                           | (22,997 | ) |                  |   | (21,715 | )
|                                                                                               |  |                           |         |   |                  |   |         |  
|Total                                                                                          |  | $                         | 676     |   |                  | $ | (2,700  | )
|                                                                                               |  |                           |         |   |                  |   |         |  



42



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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)





|(1) | As of March 31, 2015 and December 31, 2014, the gross unrealized appreciation on the Companys investments and unrealized gain on foreign currency was
$129,540 and $123,852, respectively. As of March 31, 2015 and December 31, 2014, the gross unrealized depreciation on the Companys investments and unrealized loss on foreign currency was $152,537 and $145,567, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The aggregate cost of the Companys investments for U.S. federal income tax purposes totaled $4,604,411
and $4,417,936 as of March 31, 2015 and December 31, 2014, respectively. The aggregate net unrealized appreciation (depreciation) on investments and gain/loss on foreign currency on a tax basis was $(22,997) and $(21,715) as of
March 31, 2015 and December 31, 2014, respectively.

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, 2015
and December 31, 2014:



|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|-------------------------------- |  | ------------------------- | --------- |  | ----------------- | - | --------- | ----------------------- |  |  | ---------------- | - |  | ---------- | --------- |  | ----------------------- | - | --------- |  |  |  | --- | -
|                                 |  | March 31,
2015(Unaudited) |           |  | December 31, 2014 |  
|                                 |  | AmortizedCost(1)          |           |  | Fair Value        |   |           | Percentageof 
Portfolio |  |  | AmortizedCost(1) |   |  | Fair Value |           |  | Percentageof 
Portfolio |  
|Senior Secured LoansFirst Lien  |  | $                         | 2,552,940 |  |                   | $ | 2,535,788 |                         |  |  | 55               | % |  | $          | 2,360,706 |  |                         | $ | 2,346,905 |  |  |  | 53  | %
|Senior Secured LoansSecond Lien |  |                           | 1,034,142 |  |                   |   | 1,017,934 |                         |  |  | 22               | % |  |            | 1,019,318 |  |                         |   | 1,001,313 |  |  |  | 23  | %
|Senior Secured Bonds             |  |                           | 299,212   |  |                   |   | 262,882   |                         |  |  | 6                | % |  |            | 283,454   |  |                         |   | 248,911   |  |  |  | 6   | %
|Subordinated Debt                |  |                           | 449,413   |  |                   |   | 448,410   |                         |  |  | 10               | % |  |            | 431,441   |  |                         |   | 421,683   |  |  |  | 10  | %
|Collateralized Securities        |  |                           | 123,940   |  |                   |   | 129,984   |                         |  |  | 3                | % |  |            | 172,068   |  |                         |   | 184,590   |  |  |  | 4   | %
|Equity/Other                     |  |                           | 136,634   |  |                   |   | 186,494   |                         |  |  | 4                | % |  |            | 142,819   |  |                         |   | 192,826   |  |  |  | 4   | %
|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|Total                            |  | $                         | 4,596,281 |  |                   | $ | 4,581,492 |                         |  |  | 100              | % |  | $          | 4,409,806 |  |                         | $ | 4,396,228 |  |  |  | 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, 2015, the Company did not control and was not an affiliated person
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 or it had the power to
exercise control over the management or policies of such portfolio company, and would be an affiliated person of a portfolio company if it owned 5% or more of its voting securities.

The Companys investment portfolio may contain loans that are in the form of lines of credit, revolving credit facilities, delayed
draw credit facilities or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of March 31, 2015, the Company had
nine senior secured loan investments with aggregate unfunded commitments of $144,249 and one senior secured bond investment with an unfunded commitment of $16,977. As of December 31, 2014, the Company had eight senior secured loan investments
with aggregate unfunded commitments of $145,739 and one senior secured bond investment with an unfunded commitment of $16,977. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments should the need
arise.



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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, 2015 and December 31, 2014:



|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|---------------------------------------------- |  | ------------------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                                               |  | March 31,
2015(Unaudited) |           |  | December 31, 2014       | 
|Industry Classification                        |  | Fair Value                |           |  | Percentageof 
Portfolio |  |     | Fair Value |  |   | Percentageof 
Portfolio | 
|Automobiles & Components                       |  | $                         | 170,661   |  |                         |  | 4   | %          |  | $ | 177,900                 |  |  |  | 4   | %
|Capital Goods                                  |  |                           | 402,638   |  |                         |  | 9   | %          |  |   | 383,827                 |  |  |  | 9   | %
|Commercial & Professional Services             |  |                           | 362,995   |  |                         |  | 8   | %          |  |   | 274,316                 |  |  |  | 6   | %
|Consumer Durables & Apparel                    |  |                           | 259,245   |  |                         |  | 6   | %          |  |   | 266,710                 |  |  |  | 6   | %
|Consumer Services                              |  |                           | 740,996   |  |                         |  | 16  | %          |  |   | 733,804                 |  |  |  | 17  | %
|Diversified Financials                         |  |                           | 232,142   |  |                         |  | 5   | %          |  |   | 288,250                 |  |  |  | 7   | %
|Energy                                         |  |                           | 691,320   |  |                         |  | 15  | %          |  |   | 601,604                 |  |  |  | 14  | %
|Food & Staples Retailing                       |  |                           | 31,561    |  |                         |  | 1   | %          |  |   | 12,585                  |  |  |  | 0   | %
|Food, Beverage & Tobacco                       |  |                           | 9,617     |  |                         |  | 0   | %          |  |   | 9,365                   |  |  |  | 0   | %
|Health Care Equipment & Services               |  |                           | 63,518    |  |                         |  | 1   | %          |  |   | 80,589                  |  |  |  | 2   | %
|Household & Personal Products                  |  |                           | 4,761     |  |                         |  | 0   | %          |  |   | 3,126                   |  |  |  | 0   | %
|Insurance                                      |  |                           | 93,572    |  |                         |  | 2   | %          |  |   | 98,174                  |  |  |  | 2   | %
|Materials                                      |  |                           | 336,148   |  |                         |  | 7   | %          |  |   | 269,531                 |  |  |  | 6   | %
|Media                                          |  |                           | 128,411   |  |                         |  | 3   | %          |  |   | 131,353                 |  |  |  | 3   | %
|Pharmaceuticals, Biotechnology & Life Sciences |  |                           | 59,993    |  |                         |  | 1   | %          |  |   | 62,970                  |  |  |  | 1   | %
|Retailing                                      |  |                           | 110,390   |  |                         |  | 3   | %          |  |   | 112,094                 |  |  |  | 3   | %
|Software & Services                            |  |                           | 318,651   |  |                         |  | 7   | %          |  |   | 328,443                 |  |  |  | 8   | %
|Technology Hardware & Equipment                |  |                           | 242,331   |  |                         |  | 5   | %          |  |   | 230,554                 |  |  |  | 5   | %
|Telecommunication Services                     |  |                           | 222,052   |  |                         |  | 5   | %          |  |   | 229,690                 |  |  |  | 5   | %
|Transportation                                 |  |                           | 100,490   |  |                         |  | 2   | %          |  |   | 101,343                 |  |  |  | 2   | %
|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total                                          |  | $                         | 4,581,492 |  |                         |  | 100 | %          |  | $ | 4,396,228               |  |  |  | 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. 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.



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 7. Fair Value of Financial
Instruments (continued)



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, 2015 and
December 31, 2014, the Companys investments were categorized as follows in the fair value hierarchy:



|                                            |  |                           |           |  |                   |   |           | 
|------------------------------------------- |  | ------------------------- | --------- |  | ----------------- | - | --------- | 
|Valuation Inputs                            |  | March 31, 2015(Unaudited) |           |  | December 31, 2014 |  
|Level 1Price quotations in active markets  |  | $                         | 35        |  |                   | $ | 3,438     | 
|Level 2Significant other observable inputs |  |                           |          |  |                   |   |          | 
|Level 3Significant unobservable inputs     |  |                           | 4,581,457 |  |                   |   | 4,392,790 | 
|                                            |  |                           |           |  |                   |   |           | 
|Total                                       |  | $                         | 4,581,492 |  |                   | $ | 4,396,228 | 
|                                            |  |                           |           |  |                   |   |           | 

As of March 31, 2015 and December 31, 2014, the Companys credit default swaps were
categorized as follows in the fair value hierarchy:



|                                            |  |                           |   |  |                   |   |   |       |  |   |           |  |  |   |         |  
|------------------------------------------- |  | ------------------------- | - |  | ----------------- | - | - | ----- |  | - | --------- |  |  | - | ------- | -
|                                            |  | March 31, 2015(Unaudited) |   |  | December 31, 2014 |  
|Valuation Inputs                            |  | Asset                     |   |  | Liability         |   |   | Asset |  |   | Liability | 
|Level 1Price quotations in active markets  |  | $                         |  |  |                   | $ |  |       |  | $ |          |  |  | $ |        |  
|Level 2Significant other observable inputs |  |                           |  |  |                   |   |  |       |  |   |          |  |  |   |        |  
|Level 3Significant unobservable inputs     |  |                           |  |  |                   |   |  |       |  |   |          |  |  |   | (30,048 | )
|                                            |  |                           |   |  |                   |   |   |       |  |   |           |  |  |   |         |  
|Total                                       |  | $                         |  |  |                   | $ |  |       |  | $ |          |  |  | $ | (30,048 | )
|                                            |  |                           |   |  |                   |   |   |       |  |   |           |  |  |   |         |  

The Companys investments as of March 31, 2015 consisted primarily of debt securities that were
acquired directly from the issuer. Thirty-eight senior secured loan investments, one senior secured bond investment, four subordinated debt investments and one collateralized security, for which broker quotes were not available, were valued by
independent valuation firms, 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 investments. Except as described below, all of the Companys equity/other investments were also valued by independent valuation firms, 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 equity/other investment, which was traded on an active public market, was valued at its closing price as of March 31, 2015. One senior secured loan investment,
which was newly-issued and purchased near March 31, 2015, was valued at cost, as the Companys board of directors determined that the cost of such investment was the best indication of its fair value. Except as described above, the Company
valued its other investments, including two equity/other 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.



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 7. Fair Value of Financial
Instruments (continued)



The Companys investments as of December 31, 2014 consisted primarily of debt
securities that were acquired directly from the issuer. Twenty-nine senior secured loan investments, one senior secured bond investment, four subordinated debt 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 investments. 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. Four equity/other investments, which were traded on active public markets, were valued at their closing price as of December 31, 2014. Three senior secured loan investments, two collateralized
securities and one equity/other investment which were newly-issued and purchased near December 31, 2014, were valued at cost, as the Companys board of directors determined that the cost of such investments was the best indication of their
fair value. Except as described above, the Company valued its other investments and credit default swaps, including two equity/other 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.

The
Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers, as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the
benchmark analysis and the experience of the Companys management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. 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, including the use of an
independent valuation firm, to determine fair value for securities for which it cannot obtain prevailing bid and ask prices through third-party pricing services or independent dealers, or where the Companys board of directors otherwise
determines that the use of such other methods is appropriate. The Company periodically benchmarks the valuations provided by the independent valuation firms 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.



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 7. Fair Value of Financial
Instruments (continued)



The following is a reconciliation for the three months ended March 31, 2015 and
2014 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:



|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |           |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------- | --------- | - | ------------------------------ | - | --------- | ------------------ |  | - | ---------------- | - |  | ------------------------ | ------- | - | ------------ | - | ------- | ----- |  | - | ------- | - |  | - | --------- | -
|                                                                                                                                                                                                       |  | For the Three Months Ended March 31, 2015 |          
|                                                                                                                                                                                                       |  | Senior 
SecuredLoansFirstLien            |           |   | Senior
SecuredLoansSecondLien |   |           | SeniorSecuredBonds |  |   | SubordinatedDebt |   |  | CollateralizedSecurities |         |   | Equity/Other |   |         | Total | 
|Fair value at beginning of period                                                                                                                                                                      |  | $                                         | 2,346,905 |   |                                | $ | 1,001,313 |                    |  | $ | 248,911          |   |  | $                        | 421,683 |   |              | $ | 184,590 |       |  | $ | 189,388 |   |  | $ | 4,392,790 |  
|Accretion of discount (amortization of premium)                                                                                                                                                        |  |                                           | 1,510     |   |                                |   | 486       |                    |  |   | 561              |   |  |                          | 1,128   |   |              |   | 10      |       |  |   |        |   |  |   | 3,695     |  
|Net realized gain (loss)                                                                                                                                                                               |  |                                           | (152      | ) |                                |   | (242      | )                  |  |   | 231              |   |  |                          | (624    | ) |              |   | (907    | )     |  |   |        |   |  |   | (1,694    | )
|Net change in unrealized appreciation (depreciation)                                                                                                                                                   |  |                                           | (3,351    | ) |                                |   | 1,797     |                    |  |   | (1,787           | ) |  |                          | 8,755   |   |              |   | (6,478  | )     |  |   | (3,165  | ) |  |   | (4,229    | )
|Purchases                                                                                                                                                                                              |  |                                           | 274,848   |   |                                |   | 74,810    |                    |  |   | 22,472           |   |  |                          | 49,053  |   |              |   | 158     |       |  |   | 190     |   |  |   | 421,531   |  
|Paid-in-kind interest                                                                                                                                                                                  |  |                                           | 302       |   |                                |   | 2,445     |                    |  |   |                 |   |  |                          | 915     |   |              |   |        |       |  |   |        |   |  |   | 3,662     |  
|Sales and redemptions                                                                                                                                                                                  |  |                                           | (84,274   | ) |                                |   | (62,675   | )                  |  |   | (7,506           | ) |  |                          | (32,500 | ) |              |   | (47,389 | )     |  |   | 46      |   |  |   | (234,298  | )
|Net transfers in or out of Level 3                                                                                                                                                                     |  |                                           |          |   |                                |   |          |                    |  |   |                 |   |  |                          |        |   |              |   |        |       |  |   |        |   |  |   |          |  
|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |           |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |           |  
|Fair value at end of period                                                                                                                                                                            |  | $                                         | 2,535,788 |   |                                | $ | 1,017,934 |                    |  | $ | 262,882          |   |  | $                        | 448,410 |   |              | $ | 129,984 |       |  | $ | 186,459 |   |  | $ | 4,581,457 |  
|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |           |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |           |  
|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 |  | $                                         | (1,849    | ) |                                | $ | (5,387    | )                  |  | $ | (1,812           | ) |  | $                        | 7,031   |   |              | $ | (4,541  | )     |  | $ | 360     |   |  | $ | (6,198    | )
|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |           |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |           |  



|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |        |  |  |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------- | --------- | - | ------------------------------ | - | ------- | ------------------ |  | - | ---------------- | - |  | ------------------------ | ------- | - | ------------ | - | ------- | ----- |  | - | ------ |  |  | - | --------- | -
|                                                                                                                                                                                                       |  | 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    |  
|                                                                                                                                                                                                       |  |                                           |           |   |                                |   |         |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |        |  |  |   |           |  



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 7. Fair Value of Financial
Instruments (continued)



The following is a reconciliation for the three months ended March 31, 2015, of
credit default swaps for which significant unobservable inputs (Level 3) were used in determining market value:



|                                                                                                                                                                                                                |  |                                  |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | -
|                                                                                                                                                                                                                |  | Three Months EndedMarch 31, 2015 |        
|Market value at beginning of period                                                                                                                                                                             |  | $                                | (30,048 | )
|Net realized gain (loss)                                                                                                                                                                                        |  |                                  | (19,662 | )
|Net change in unrealized appreciation (depreciation)                                                                                                                                                            |  |                                  | 19,426  |  
|Swap premiums received                                                                                                                                                                                          |  |                                  |        |  
|Coupon payments received                                                                                                                                                                                        |  |                                  | 74      |  
|Premiums paid on exit                                                                                                                                                                                           |  |                                  | 30,210  |  
|Net transfers in or out of Level 3                                                                                                                                                                              |  |                                  |        |  
|                                                                                                                                                                                                                |  |                                  |         |  
|Market value at end of period                                                                                                                                                                                   |  | $                                |        |  
|                                                                                                                                                                                                                |  |                                  |         |  
|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 credit default swaps still held at the reporting date |  | $                                |        |  
|                                                                                                                                                                                                                |  |                                  |         |  

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value
measurements as of March 31, 2015 and December 31, 2014 were as follows:



|                                 |  |                                         |           |  |                       |                        |                    |                                  |       |                       |                 |          
|-------------------------------- |  | --------------------------------------- | --------- |  | --------------------- | ---------------------- | ------------------ | -------------------------------- | ----- | --------------------- | --------------- | ---------
|Type of Investment               |  | Fair Value atMarch 
31, 2015(Unaudited) |           |  | ValuationTechnique(1) |                        | Unobservable Input |                                  | Range |                       | WeightedAverage
|Senior Secured LoansFirst Lien  |  | $                                       | 1,599,572 |  |                       | Market Comparables     |                    | Market Yield (%)                 |       | 7.8%  12.2%          |                 | 9.4%     
|                                 |  |                                         | 250,780   |  |                       | Other(2)               |                    | Other(2)                         |       | N/A                   |                 | N/A      
|                                 |  |                                         | 625,436   |  |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 53.2%  102.5%        |                 | 93.8%    
|                                 |  |                                         | 60,000    |  |                       | Cost                   |                    | Cost                             |       | 100.0%  100.0%       |                 | 100.0%   
|Senior Secured LoansSecond Lien |  |                                         | 499,071   |  |                       | Market Comparables     |                    | Market Yield (%)                 |       | 8.5%  13.3%          |                 | 11.1%    
|                                 |  |                                         | 518,863   |  |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 52.2%  101.8%        |                 | 95.8%    
|Senior Secured Bonds             |  |                                         | 37,562    |  |                       | Market Comparables     |                    | Market Yield (%)                 |       | 10.3%  10.8%         |                 | 10.5%    
|                                 |  |                                         | 225,320   |  |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 27.0%  101.0%        |                 | 86.3%    
|Subordinated Debt                |  |                                         | 115,047   |  |                       | Market Comparables     |                    | Market Yield (%)                 |       | 9.0%  13.0%          |                 | 11.5%    
|                                 |  |                                         | 63,423    |  |                       | Other(2)               |                    | Other(2)                         |       | N/A                   |                 | N/A      
|                                 |  |                                         | 269,940   |  |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 27.5%  116.5%        |                 | 88.1%    
|Collateralized Securities        |  |                                         | 77,404    |  |                       | Market Comparables     |                    | Market Yield (%)                 |       | 11.5%  11.5%         |                 | 11.5%    
|                                 |  |                                         | 52,580    |  |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 72.0%  98.5%         |                 | 86.1%    
|Equity/Other                     |  |                                         | 178,798   |  |                       | Market Comparables     |                    | EBITDA Multiples (x)             |       | 5.5x  12.3x          |                 | 8.4x     
|                                 |  |                                         |           |  |                       |                        |                    | Production Multiples(Mboe/d)     |       | $37,500.0  $42,500.0 |                 | $40,000.0
|                                 |  |                                         |           |  |                       |                        |                    | Proved ReservesMultiples (Mmboe) |       | $9.0  $10.0          |                 | $9.6     
|                                 |  |                                         |           |  |                       |                        |                    | PV-10 Multiples (x)              |       | 1.5x  1.9x           |                 | 1.6x     
|                                 |  |                                         |           |  |                       |                        |                    | Capacity Multiple ($/kW)         |       | $1,500.0  $2,000.0   |                 | $1,750.0 
|                                 |  |                                         |           |  |                       | Option Valuation Model |                    | Volatility (%)                   |       | 37.5%  55.5%         |                 | 46.6%    
|                                 |  |                                         | 6,412     |  |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | $13.0  $160.3        |                 | $117.4   
|                                 |  |                                         | 1,249     |  |                       | Other(2)               |                    | Other(2)                         |       | N/A                   |                 | N/A      
|                                 |  |                                         |           |  |                       |                        |                    |                                  |       |                       |                 |          
|Total                            |  | $                                       | 4,581,457 |  |                       |                        |                    |                                  |       |                       |                 |          
|                                 |  |                                         |           |  |                       |                        |                    |                                  |       |                       |                 |          



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 7. Fair Value of Financial
Instruments (continued)





|(1) | Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant
period end, which were provided by independent third-party pricing services and screened for validity by such services. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in
isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For
investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option
valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Fair value based on expected outcome of proposed corporate transactions.
|--- | ------------------------------------------------------------------------



|                                 |  |                                 |           |   |                       |                        |                    |                                  |       |                      |                 |          
|-------------------------------- |  | ------------------------------- | --------- | - | --------------------- | ---------------------- | ------------------ | -------------------------------- | ----- | -------------------- | --------------- | ---------
|Type of Investment               |  | Fair Value atDecember 
31, 2014 |           |   | ValuationTechnique(1) |                        | Unobservable Input |                                  | Range |                      | WeightedAverage
|Senior Secured LoansFirst Lien  |  | $                               | 1,413,100 |   |                       | Market Comparables     |                    | Market Yield (%)                 |       | 4.8%  12.3%         |                 | 8.9%     
|                                 |  |                                 | 88,130    |   |                       | Other(2)               |                    | Other                            |       | N/A                  |                 | N/A      
|                                 |  |                                 | 720,607   |   |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 78.8%  102.3%       |                 | 96.0%    
|                                 |  |                                 | 125,068   |   |                       | Cost                   |                    | Cost                             |       | 100.0%  100.0%      |                 | 100.0%   
|Senior Secured LoansSecond Lien |  |                                 | 427,476   |   |                       | Market Comparables     |                    | Market Yield (%)                 |       | 8.5%  12.0%         |                 | 10.5%    
|                                 |  |                                 | 573,837   |   |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 71.6%  102.5%       |                 | 96.4%    
|Senior Secured Bonds             |  |                                 | 36,648    |   |                       | Market Comparables     |                    | Market Yield (%)                 |       | 10.5%  11.0%        |                 | 10.8%    
|                                 |  |                                 | 212,263   |   |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 34.0%  102.3%       |                 | 86.2%    
|Subordinated Debt                |  |                                 | 169,295   |   |                       | Market Comparables     |                    | Market Yield (%)                 |       | 8.8%  13.0%         |                 | 10.8%    
|                                 |  |                                 | 312       |   |                       | Other                  |                    | Other                            |       | N/A                  |                 | N/A      
|                                 |  |                                 | 252,076   |   |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 41.5%  116.3%       |                 | 89.1%    
|Collateralized Securities        |  |                                 | 91,745    |   |                       | Market Comparables     |                    | Market Yield (%)                 |       | 11.3%  11.3%        |                 | 11.3%    
|                                 |  |                                 | 92,845    |   |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | 67.0%  97.5%        |                 | 86.9%    
|Equity/Other                     |  |                                 | 174,209   |   |                       | Market Comparables     |                    | EBITDA Multiples (x)             |       | 5.0x  12.0x         |                 | 7.7x     
|                                 |  |                                 |           |   |                       |                        |                    | Production Multiples(Mboe/d)     |       | $37,500.0 $70,256.0 |                 | $52,330.5
|                                 |  |                                 |           |   |                       |                        |                    | Proved ReservesMultiples (Mmboe) |       | $10.5  $12.0        |                 | $11.3    
|                                 |  |                                 |           |   |                       |                        |                    | PV-10 Multiples (x)              |       | 1.7x  1.8x          |                 | 1.7x     
|                                 |  |                                 |           |   |                       | Option Valuation Model |                    | Volatility (%)                   |       | 37.5%  55.5%        |                 | 47.1%    
|                                 |  |                                 | 6,322     |   |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | $13.8  $132.7       |                 | $94.5    
|                                 |  |                                 | 8,857     |   |                       | Cost                   |                    | Cost                             |       | $1.00  $1.00        |                 | $1.00    
|                                 |  |                                 |           |   |                       |                        |                    |                                  |       |                      |                 |          
|Total                            |  | $                               | 4,392,790 |   |                       |                        |                    |                                  |       |                      |                 |          
|                                 |  |                                 |           |   |                       |                        |                    |                                  |       |                      |                 |          
|Credit Default Swaps             |  | $                               | (30,048   | ) |                       | Market Quotes          |                    | Indicative Dealer Quotes         |       | (81.9%)  (80.2%)    |                 | (81.2)%  



|(1) | Investments and credit default swaps using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on
the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in
the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value
measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing
an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Fair value based on expected outcome of proposed restructuring of portfolio company.
|--- | ------------------------------------------------------------------------------------



49



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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

The following table presents summary information with respect to the Companys outstanding financing arrangements as of
March 31, 2015. For additional information regarding these financing arrangements, please see the notes to the Companys audited consolidated financial statements contained in its annual report on Form 10-K for the year ended
December 31, 2014 and the additional disclosure set forth in this Note 8.



|                                  |  |                  |  |                   |  |                   |         |  |                 |   |         |              |  |                  
|--------------------------------- |  | ---------------- |  | ----------------- |  | ----------------- | ------- |  | --------------- | - | ------- | ------------ |  | -----------------
|Facility                          |  | Type of Facility |  | Rate              |  | AmountOutstanding |         |  | AmountAvailable |   |         | MaturityDate
|JPM Facility                      |  | Repurchase       |  | 3.25%             |  | $                 | 550,000 |  |                 | $ |        |              |  | May 20, 2017     
|Goldman Facility                  |  | Repurchase       |  | L+2.50%           |  | $                 | 235,306 |  |                 | $ | 164,694 |              |  | December 15, 2018
|Cooper River Credit Facility      |  | Revolving        |  | L+2.00%           |  | $                 | 170,494 |  |                 | $ | 29,506  |              |  | March 27, 2016   
|Wissahickon Creek Credit Facility |  | Revolving        |  | L+1.50% toL+2.50% |  | $                 | 187,600 |  |                 | $ | 62,400  |              |  | February 19, 2019
|Darby Creek Credit Facility       |  | Revolving        |  | L+2.75%           |  | $                 | 249,500 |  |                 | $ | 500     |              |  | February 20, 2018
|Dunning Creek Credit Facility(1)  |  | Revolving        |  | L+1.55%           |  | $                 | 230,800 |  |                 | $ | 19,200  |              |  | May 14, 2015     
|Juniata River Credit Facility     |  | Revolving        |  | L+2.50%           |  | $                 | 300,000 |  |                 | $ |        |              |  | November 14, 2019



|(1) | On May 14, 2015, the Dunning Creek Credit Facility was amended to (a) extend the maturity date to May 14, 2016 and (b) reduce the applicable spread
over LIBOR to 1.45%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys average borrowings and weighted average interest rate, including the
effect of non-usage fees, for the three months ended March 31, 2015 were $1,784,664 and 2.78%, respectively. As of March 31, 2015, the Companys weighted average effective interest rate on borrowings, including the effect of non-usage
fees, was 2.80%.

JPM Facility

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 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 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.



50



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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)



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 related annex and amended and restated confirmation thereto, each dated as of April 23, 2013, or, collectively, 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 will be 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.

Pursuant to the financing arrangement, the assets held by Cobbs Creek secure the obligations of Cobbs Creek under the JPM facility.

As of March 31, 2015 and December 31, 2014, Class A Notes in the aggregate principal amount of $660,000 and
$660,000, respectively, had been purchased by Cobbs Creek from Lehigh River and subsequently sold to JPM under the JPM facility for aggregate proceeds of $550,000 and $550,000, respectively. 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, 2015 and December 31, 2014, Cobbs Creeks liability under the JPM
facility was $550,000 and $550,000, respectively, 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, 2015 and December 31, 2014, the fair value of assets held by Lehigh River was
$1,172,814 and $1,189,438, respectively, which included assets purchased by Lehigh River with proceeds from the issuance of Class A Notes. As of March 31, 2015 and December 31, 2014, the fair value of assets held by Cobbs Creek was
$349,098 and $392,225.

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, 2015, $64 of such deferred financing costs had yet to be amortized to
interest expense.



51



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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, 2015 and 2014, the components of total
interest expense for the JPM facility were as follows:



|                                         |  |                             |       |  |      |   |       | 
|---------------------------------------- |  | --------------------------- | ----- |  | ---- | - | ----- | 
|                                         |  | Three Months EndedMarch 31, |      
|                                         |  | 2015                        |       |  | 2014 |  
|Direct interest expense                  |  | $                           | 4,469 |  |      | $ | 4,469 | 
|Amortization of deferred financing costs |  |                             | 10    |  |      |   | 10    | 
|                                         |  |                             |       |  |      |   |       | 
|Total interest expense                   |  | $                           | 4,479 |  |      | $ | 4,479 | 
|                                         |  |                             |       |  |      |   |       | 

For the three months ended March 31, 2015 and 2014, the 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, |        
|                                      |  | 2015                        |         |   | 2014 |  
|Cash paid for interest expense(1)     |  | $                           | 4,568   |   |      | $ | 4,568   |  
|Average borrowings under the facility |  | $                           | 550,000 |   |      | $ | 550,000 |  
|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 are considered borrowings of the Company for purposes of complying with the asset coverage
requirements under the 1940 Act applicable to BDCs.

Goldman Facility

On December 15, 2014, the Company, through its two wholly-owned, special-purpose financing subsidiaries, Green Creek LLC, or Green
Creek, and Schuylkill River LLC, or Schuylkill River, entered into a debt financing arrangement with Goldman Sachs Bank USA, or Goldman, pursuant to which up to $400,000 is available to the Company. 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 have been available through alternate arrangements.

The Company may sell and/or contribute assets to Green Creek from time to time pursuant to an Amended and Restated Sale and Contribution Agreement, dated as of December 15, 2014, between the Company
and Green Creek, or the Sale and Contribution Agreement. The assets held by Green Creek secure the obligations of Green Creek under Floating Rate Notes, or the Notes, to be issued from time to time by Green Creek to Schuylkill River pursuant to an
Indenture, dated as of December 15, 2014, with Citibank, as trustee, or the Indenture. Pursuant to the Indenture, the aggregate principal amount of Notes that may be issued by Green Creek from time to time is $690,000. Schuylkill River will
purchase the Notes to be issued by Green Creek from time to time at a purchase price equal to their par value.

Interest on
the Notes under the Indenture will accrue at three-month LIBOR plus a spread of 4.00% per annum. Principal and any unpaid interest on the Notes will be due and payable on the stated maturity date of February 15, 2026.



52



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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)



Schuylkill River, in turn, has entered into a repurchase transaction with Goldman,
pursuant to the terms of a master repurchase agreement and the related annex and master confirmation thereto, each dated as of December 15, 2014, or collectively, the Goldman facility. Pursuant to the Goldman facility, on one or more occasions
beginning December 15, 2014, Goldman will purchase Notes held by Schuylkill River for an aggregate purchase price equal to 58.00% of the principal amount of Notes purchased. Subject to certain conditions, the maximum principal amount of Notes
that may be purchased under the Goldman facility is $690,000. Accordingly, the aggregate maximum amount payable to Schuylkill River under the Goldman facility will not exceed $400,000. As of March 31, 2015 and December 31, 2014, Notes in
an aggregate principal amount of $405,700 and $130,000, respectively, had been purchased by Schuylkill River from Green Creek and subsequently sold to Goldman under the Goldman facility for aggregate proceeds of $235,306 and $75,400, respectively.
Schuylkill River intends to enter into additional repurchase transactions under the Goldman facility with respect to the remaining $284,300 in principal amount of Notes (assuming Green Creek issues the maximum amount of Notes).

Schuylkill River will repurchase the Notes sold to Goldman under the Goldman facility no later than December 15, 2018. The
repurchase price paid by Schuylkill River to Goldman will be equal to the purchase price paid by Goldman for the repurchased Notes, plus interest (referred to as financing fees) accrued at the applicable pricing rate under the Goldman facility. Up
until March 15, 2015, financing fees accrued on the aggregate purchase price paid by Goldman for such Notes. Thereafter, financing fees accrue on $400,000 (even if the aggregate purchase price paid for Notes purchased by Goldman is less than
that amount), unless and until the outstanding amount is reduced in accordance with the terms of the Goldman facility. If the Goldman facility is accelerated prior to December 15, 2018 due to an event of default or the failure of Green Creek to
commit to sell any underlying assets that become defaulted obligations within 30 days, then Schuylkill River must pay to Goldman a fee equal to the present value of the aggregate amount of the financing fees that would have been payable to Goldman
from the date of acceleration through December 15, 2018 had the acceleration not occurred. The financing fee under the Goldman facility is equal to three-month LIBOR plus a spread of up to 2.50% per annum for the relevant period.

As of March 31, 2015 and December 31, 2014, Notes in an aggregate principal amount of $405,700 and $130,000,
respectively, had been purchased by Schuylkill River from Green Creek and subsequently sold to Goldman under the Goldman facility for aggregate proceeds of $235,306 and $75,400, respectively. The carrying amount outstanding under the Goldman
facility approximates its fair value. The Company funded each purchase of the Notes by Schuylkill River through a capital contribution to Schuylkill River. As of March 31, 2015 and December 31, 2014, Schuylkill Rivers liability under
the Goldman facility was $235,306 and $75,400, respectively, plus $1,131 and $89, respectively, of accrued interest expense. The Notes issued by Green Creek and purchased by Schuylkill River eliminate in consolidation on the Companys financial
statements.

As of March 31, 2015 and December 31, 2014, the fair value of assets held by Green Creek was $597,135
and $453,678, respectively.

The Company incurred costs of $2,022 in connection with obtaining the Goldman 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 Goldman facility. As of March 31, 2015, $1,873 of such deferred financing costs had yet to be amortized
to interest expense.



53



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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, 2015, the components of total interest expense
for the Goldman facility were as follows:



|                                         |  |                                  |       | 
|---------------------------------------- |  | -------------------------------- | ----- | 
|                                         |  | Three Months EndedMarch 31, 2015 |      
|Direct interest expense                  |  | $                                | 1,042 | 
|Amortization of deferred financing costs |  |                                  | 126   | 
|                                         |  |                                  |       | 
|Total interest expense                   |  | $                                | 1,168 | 
|                                         |  |                                  |       | 

For the three months ended March 31, 2015, the cash paid for interest expense, average borrowings,
effective interest rate and weighted average interest rate for the Goldman facility were as follows:



|                                      |  |                                  |         |  
|------------------------------------- |  | -------------------------------- | ------- | -
|                                      |  | Three Months EndedMarch 31, 2015 |        
|Cash paid for interest expense(1)     |  | $                                |        |  
|Average borrowings under the facility |  | $                                | 150,725 |  
|Effective interest rate on borrowings |  |                                  | 2.77    | %
|Weighted average interest rate        |  |                                  | 2.77    | %



|(1) | Interest under the Goldman facility is paid quarterly in arrears and will commence on May 15, 2015.
|--- | ---------------------------------------------------------------------------------------------------

Amounts outstanding under the Goldman facility will be considered borrowings of 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. Cooper River was able to borrow under the Cooper River facility on a revolving basis through March 27, 2015. Thereafter, Cooper River may not borrow any additional amounts not
already drawn under the Cooper River facility or re-borrow any amounts that have been repaid.

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.



54



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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 accrued interest at a rate equal to
three-month LIBOR plus 1.75% per annum during the first two years of the Cooper River facility and, beginning March 27, 2015, three-month LIBOR plus 2.00% per annum. 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 through March 26, 2015, Cooper River was subject to a non-usage fee of 0.50% per annum to the
extent the aggregate principal amount available under the Cooper River facility had not been borrowed. The non-usage fee does not apply on and after March 27, 2015. Outstanding 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, 2015 and December 31, 2014, $170,494 and $170,494, respectively, 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 Cooper River facility. As of March 31, 2015, $514 of such deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2015 and 2014, the components of total interest expense for the Cooper River facility were as
follows:



|                                         |  |                             |       |  |      |   |       | 
|---------------------------------------- |  | --------------------------- | ----- |  | ---- | - | ----- | 
|                                         |  | Three Months EndedMarch 31, |      
|                                         |  | 2015                        |       |  | 2014 |  
|Direct interest expense                  |  | $                           | 843   |  |      | $ | 846   | 
|Non-usage fees                           |  |                             | 37    |  |      |   | 37    | 
|Amortization of deferred financing costs |  |                             | 128   |  |      |   | 127   | 
|                                         |  |                             |       |  |      |   |       | 
|Total interest expense                   |  | $                           | 1,008 |  |      | $ | 1,010 | 
|                                         |  |                             |       |  |      |   |       | 

For the three months ended March 31, 2015 and 2014, the 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, |        
|                                                                               |  | 2015                        |         |   | 2014 |  
|Cash paid for interest expense(1)                                              |  | $                           | 901     |   |      | $ | 907     |  
|Average borrowings under the facility                                          |  | $                           | 170,494 |   |      | $ | 170,494 |  
|Effective interest rate on borrowings (including the effect of non-usage fees) |  |                             | 2.32    | % |      |   | 1.99    | %
|Weighted average interest rate (including the effect of non-usage fees)        |  |                             | 2.06    | % |      |   | 2.08    | %



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

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



55



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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)



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 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. Interest is payable quarterly in arrears. Beginning June 19, 2014, Wissahickon Creek became subject to a non-usage fee to the extent the aggregate principal amount available under the facility is not
borrowed. The non-usage fee equals 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.

As of March 31, 2015 and
December 31, 2014, $187,600 and $185,000, respectively, was outstanding under the Wissahickon Creek facility. The carrying amount outstanding under the Wissahickon Creek facility approximates its fair value. The Company incurred costs of $3,410
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, 2015, $2,657 of such
deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2015 and
2014, the components of total interest expense for the Wissahickon Creek facility were as follows:



|                                         |  |                             |       |  |      |   |    | 
|---------------------------------------- |  | --------------------------- | ----- |  | ---- | - | -- | 
|                                         |  | Three Months EndedMarch 31, |      
|                                         |  | 2015                        |       |  | 2014 |  
|Direct interest expense                  |  | $                           | 1,223 |  |      | $ |   | 
|Non-usage fees                           |  |                             | 223   |  |      |   |   | 
|Amortization of deferred financing costs |  |                             | 168   |  |      |   | 73 | 
|                                         |  |                             |       |  |      |   |    | 
|Total interest expense                   |  | $                           | 1,614 |  |      | $ | 73 | 
|                                         |  |                             |       |  |      |   |    | 



56



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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, 2015 and 2014, the 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, |        
|                                                                               |  | 2015                        |         |   | 2014 |  
|Cash paid for interest expense(1)                                              |  | $                           | 1,384   |   |      | $ |  |  
|Average borrowings under the facility                                          |  | $                           | 186,589 |   |      | $ |  |  
|Effective interest rate on borrowings (including the effect of non-usage fees) |  |                             | 3.06    | % |      |   |  | %
|Weighted average interest rate (including the effect of non-usage fees)        |  |                             | 3.10    | % |      |   |  | %



|(1) | Interest under the Wissahickon Creek facility is payable quarterly in arrears and commenced on May 27, 2014.
|--- | ------------------------------------------------------------------------------------------------------------

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

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 party 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 sell or 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 Darby Creek facility is not
borrowed. In addition, Darby Creek is subject to a make-whole fee on a quarterly basis effectively equal to a portion of the spread that would have been payable if the full amount under the Darby Creek facility had been borrowed, less the non-usage
fee accrued during such quarter. 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.



57



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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)



As of March 31, 2015 and December 31, 2014, $249,500 and $249,500,
respectively, was outstanding under the Darby Creek facility. The carrying amount outstanding under the Darby Creek facility approximates its fair value. The Company incurred costs of $2,967 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, 2015, $2,337 of such deferred financing costs had yet to be amortized to
interest expense.

For the three months ended March 31, 2015 and 2014, the components of total interest expense for the
Darby Creek facility were as follows:



|                                         |  |                             |       |  |      |   |     | 
|---------------------------------------- |  | --------------------------- | ----- |  | ---- | - | --- | 
|                                         |  | Three Months EndedMarch 31, |      
|                                         |  | 2015                        |       |  | 2014 |  
|Direct interest expense                  |  | $                           | 1,861 |  |      | $ |    | 
|Non-usage fees                           |  |                             |      |  |      |   | 286 | 
|Amortization of deferred financing costs |  |                             | 174   |  |      |   | 53  | 
|                                         |  |                             |       |  |      |   |     | 
|Total interest expense                   |  | $                           | 2,035 |  |      | $ | 339 | 
|                                         |  |                             |       |  |      |   |     | 

For the three months ended March 31, 2015 and 2014, the 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, |        
|                                                                               |  | 2015                        |         |   | 2014 |  
|Cash paid for interest expense(1)                                              |  | $                           | 1,862   |   |      | $ |  |  
|Average borrowings under the facility                                          |  | $                           | 249,500 |   |      | $ |  |  
|Effective interest rate on borrowings (including the effect of non-usage fees) |  |                             | 2.98    | % |      |   |  | %
|Weighted average interest rate (including the effect of non-usage fees)        |  |                             | 2.98    | % |      |   |  | %



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

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

Dunning Creek Credit Facility

On May 14, 2014, the Companys wholly-owned, special-purpose financing subsidiary, Dunning Creek LLC, or Dunning Creek, entered
into a revolving credit facility, or the Dunning Creek facility, with Deutsche Bank, as administrative agent and lender, and each of the other lenders from time to time party thereto. The Dunning Creek facility originally provided for borrowings in
an aggregate principal amount up to $150,000 on a committed basis. On June 4, 2014, the Dunning Creek facility was amended to increase the maximum commitments available under the facility to $250,000.



58



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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)



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

As of March 31, 2015, pricing under the Dunning Creek facility was based on LIBOR for an interest period reasonably close to the weighted average LIBOR applicable to the assets held by Dunning Creek,
plus a spread of 1.55% per annum, and any amounts borrowed under the Dunning Creek facility matured, and all accrued and unpaid interest thereunder were due and payable, on May 14, 2015. On May 14, 2015, the Dunning Creek facility was
amended to extend the maturity date to May 14, 2016 and to reduce the applicable spread over LIBOR to 1.45% per annum.

As of March 31, 2015 and December 31, 2014, $230,800 and $230,800, respectively, was outstanding under the Dunning Creek facility. The carrying amount outstanding under the Dunning Creek
facility approximates its fair value. The Company incurred costs of $710 in connection with obtaining and amending 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, 2015, $87 of such deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2015, the components of total interest expense for the Dunning Creek facility were as follows:



|                                         |  |                                  |       | 
|---------------------------------------- |  | -------------------------------- | ----- | 
|                                         |  | Three Months EndedMarch 31, 2015 |      
|Direct interest expense                  |  | $                                | 1,031 | 
|Amortization of deferred financing costs |  |                                  | 181   | 
|                                         |  |                                  |       | 
|Total interest expense                   |  | $                                | 1,212 | 
|                                         |  |                                  |       | 



59



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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, 2015, the cash paid for interest expense,
average borrowings, effective interest rate and weighted average interest rate for the Dunning Creek facility were as follows:



|                                      |  |                                  |         |  
|------------------------------------- |  | -------------------------------- | ------- | -
|                                      |  | Three Months EndedMarch 31, 2015 |        
|Cash paid for interest expense(1)     |  | $                                | 1,054   |  
|Average borrowings under the facility |  | $                                | 230,800 |  
|Effective interest rate on borrowings |  |                                  | 1.77    | %
|Weighted average interest rate        |  |                                  | 1.79    | %



|(1) | Interest under the Dunning Creek facility is payable quarterly in arrears and commenced on May 14, 2014.
|--- | --------------------------------------------------------------------------------------------------------

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

Juniata River Credit Facility

On November 14, 2014, the Companys wholly-owned, special-purpose financing subsidiary, Juniata River LLC, or Juniata River,
entered into a senior secured term loan facility, or the Juniata River facility, with JPM, as administrative agent, and the financial institutions and other lenders from time to time party thereto, Citibank, as collateral agent, and Virtus Group,
LP, as collateral administrator. The Juniata River facility provides for delayed-draw borrowings in an aggregate principal amount up to $300,000 on a committed basis before February 14, 2015.

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

Pricing under the Juniata River facility is based on LIBOR for a six month interest period for the first interest payment due and thereafter a three-month interest period, in each case, plus a spread of
2.50% per annum. Interest is payable in arrears beginning on April 25, 2015 and each quarter thereafter. Any amounts borrowed under the Juniata River facility will mature, and all accrued and unpaid interest thereunder will be due and
payable, on November 14, 2019.

As of March 31, 2015 and December 31, 2014, $300,000 and $180,000,
respectively, was outstanding under the Juniata River facility. The carrying amount outstanding under the Juniata River facility approximates its fair value. The Company incurred costs of $289 in connection with obtaining the Juniata River facility,
which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortize to interest expense over the life of the Juniata River facility. As of March 31, 2015, $267 of such deferred financing costs had yet to
be amortized to interest expense.



60



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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, 2015, the components of total interest expense
for the Juniata River facility were as follows:



|                                         |  |                                  |       | 
|---------------------------------------- |  | -------------------------------- | ----- | 
|                                         |  | Three Months EndedMarch 31, 2015 |      
|Direct interest expense                  |  | $                                | 1,689 | 
|Amortization of deferred financing costs |  |                                  | 14    | 
|                                         |  |                                  |       | 
|Total interest expense                   |  | $                                | 1,703 | 
|                                         |  |                                  |       | 

For the three months ended March 31, 2015, the cash paid for interest expense, average borrowings,
effective interest rate and weighted average interest rate for the Juniata River facility were as follows:



|                                      |  |                                  |         |  
|------------------------------------- |  | -------------------------------- | ------- | -
|                                      |  | Three Months EndedMarch 31, 2015 |        
|Cash paid for interest expense(1)     |  | $                                |        |  
|Average borrowings under the facility |  | $                                | 246,556 |  
|Effective interest rate on borrowings |  |                                  | 2.74    | %
|Weighted average interest rate        |  |                                  | 2.74    | %



|(1) | Interest under the Juniata River facility is payable quarterly in arrears and commenced on April 25, 2015.
|--- | ----------------------------------------------------------------------------------------------------------

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

Note 9. Financial Instruments

The Company is subject to credit risk in the normal course of pursuing its investment objectives. The Company has in the past, and may in
the future, enter into credit default swap contracts to manage its credit risk, to gain exposure to a credit in which it may otherwise invest or to enhance its returns, which may involve elements of risk in excess of the amounts recognized for
financial statement purposes. The notional or contractual amounts of these instruments represent the investment the Company has in particular classes of financial instruments and do not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful only when all related and offsetting transactions are considered.

The Company may enter into swap contracts containing provisions allowing the counterparty to terminate the contract under certain conditions, including, but not limited to, a decline in the Companys
net asset value below a certain level over a certain period of time, which would trigger a payment by the Company for those swaps in a liability position.



61



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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 9. Financial
Instruments (continued)



The Company had certain credit default swap contracts outstanding during the three
months ended March 31, 2015 and the year ended December 31, 2014. As of March 31, 2015, the Company had no outstanding credit default swap contracts. The effect of derivative instruments (which are not considered to be hedging
instruments for accounting disclosure purposes) on the Companys consolidated statements of operations whose primary underlying risk exposure is credit risk for the three months ended March 31, 2015 was as follows:



|                              |  |                                                         |         |   |                                                                                   |   |        | 
|----------------------------- |  | ------------------------------------------------------- | ------- | - | --------------------------------------------------------------------------------- | - | ------ | 
|Derivative                    |  | Realized Gain(Loss) onDerivativesRecognized inIncome(1) |         |   | Change inUnrealizedAppreciation(Depreciation) onDerivativesRecognized
inIncome(2) |  
|Credit Default Swap Contracts |  | $                                                       | (19,588 | ) |                                                                                   | $ | 19,426 | 



|(1) | Reflected on the consolidated statement of operations as: Net realized gain (loss) on credit default swaps.
|--- | -----------------------------------------------------------------------------------------------------------



|(2) | Reflected on the consolidated statement of operations as: Net change in unrealized appreciation (depreciation) on credit default swaps.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

See Note 7 for a summary of credit default swap activity for the three months ended March 31, 2015.

The fair value of open derivative instruments (which are not considered to be hedging instruments for accounting disclosure purposes)
whose primary underlying risk exposure is credit risk as of December 31, 2014 was as follows:



|                              |  |                 |   |  |                        |   |        | 
|----------------------------- |  | --------------- | - |  | ---------------------- | - | ------ | 
|                              |  | Fair Value      |  
|Derivative                    |  | AssetDerivative |   |  | LiabilityDerivative(1) |  
|                              |  |                
|Credit Default Swap Contracts |  | $               |  |  |                        | $ | 30,048 | 



|(1) | Reflected on the consolidated balance sheet as: Unamortized swap premiums received and unrealized depreciation on credit default swaps.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

The Companys derivative assets and liabilities at fair value by risk, which are reported on a gross basis on its unaudited
consolidated balance sheet, are presented in the table above. The following tables present the Companys derivative assets and liabilities by counterparty, net of amounts available for offset under a master netting agreement and net of the
related collateral received by the Company for assets or pledged by the Company for liabilities as of December 31, 2014:



|                          |  |                                                   |   |  |                                |   |   |                               |  |   |                           |  |  |                                  |   |  |  |   |   | 
|------------------------- |  | ------------------------------------------------- | - |  | ------------------------------ | - | - | ----------------------------- |  | - | ------------------------- |  |  | -------------------------------- | - |  |  | - | - | 
|Counterparty              |  | DerivativeAssets Subjectto MasterNettingAgreement |   |  | DerivativesAvailable forOffset |   |   | Non-cashCollateralReceived(1) |  |   | CashCollateralReceived(1) |  |  | Net Amount ofDerivativeAssets(2) |  
|                          |  |                                                   |   |  |                               
|JPMorgan Chase Bank, N.A. |  | $                                                 |  |  |                                | $ |  |                               |  | $ |                          |  |  | $                                |  |  |  | $ |  | 



62



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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 9. Financial
Instruments (continued)



|                          |  |                                                        |        |  |                                |   |   |                              |  |   |                          |  |  |                                       |        |  |  |   |   | 
|------------------------- |  | ------------------------------------------------------ | ------ |  | ------------------------------ | - | - | ---------------------------- |  | - | ------------------------ |  |  | ------------------------------------- | ------ |  |  | - | - | 
|Counterparty              |  | DerivativeLiabilitiesSubject toMaster NettingAgreement |        |  | DerivativesAvailable forOffset |   |   | Non-cashCollateralPledged(1) |  |   | CashCollateralPledged(1) |  |  | Net Amount ofDerivativeLiabilities(3) |       
|JPMorgan Chase Bank, N.A. |  | $                                                      | 30,048 |  |                                | $ |  |                              |  | $ |                         |  |  | $                                     | 30,048 |  |  | $ |  | 



|(1) | In some instances, the actual amount of the collateral received and/or pledged may be more than the amount shown due to overcollateralization.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Net amount of derivative assets represents the net amount due from the counterparty to the Company in the event of default.
|--- | ---------------------------------------------------------------------------------------------------------------------------



|(3) | Net amount of derivative liabilities represents the net amount due from the Company to the counterparty in the event of default.
|--- | --------------------------------------------------------------------------------------------------------------------------------

The effect of derivative instruments (which are not considered to be hedging instruments for accounting disclosure purposes) on the
Companys consolidated statements of operations whose primary underlying risk exposure is credit risk for the year ended December 31, 2014 was as follows:



|                              |  |                                                         |       |  |                                                                                   |   |         |  
|----------------------------- |  | ------------------------------------------------------- | ----- |  | --------------------------------------------------------------------------------- | - | ------- | -
|Derivative                    |  | Realized Gain(Loss) onDerivativesRecognized inIncome(1) |       |  | Change inUnrealizedAppreciation(Depreciation) onDerivativesRecognized
inIncome(2) |  
|Credit Default Swap Contracts |  | $                                                       | 7,535 |  |                                                                                   | $ | (19,426 | )



|(1) | Reflected on the consolidated statement of operations as: Net realized gain (loss) on credit default swaps.
|--- | -----------------------------------------------------------------------------------------------------------



|(2) | Reflected on the consolidated statement of operations as: Net change in unrealized appreciation (depreciation) on credit default swaps.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

The average notional amount of credit default swap contracts outstanding during the year ended December 31, 2014, which is
indicative of the volume of this derivative type, was approximately $37,200.

Note 10. 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 these legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of
operations.

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



63



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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 11. Financial Highlights

The following is a schedule of financial highlights of the Company for the three months ended March 31, 2015 and the year ended
December 31, 2014:



|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------- | ----------- | -- | --------------------------- | - | ----------- | -
|                                                                                                                               |  | Three Months EndedMarch 31, 2015 (Unaudited) |             |    | Year EndedDecember 31, 2014 |  
|Per Share Data(1):                                                                                                             |  |                                              |             |    |                             |   |             |  
|Net asset value, beginning of period                                                                                           |  | $                                            | 9.30        |    |                             | $ | 9.39        |  
|Results of operations(2)                                                                                                       |  |                                              |             |    |                             |   |             |  
|Net investment income (loss)                                                                                                   |  |                                              | 0.19        |    |                             |   | 0.80        |  
|Net realized and unrealized appreciation (depreciation) on investments, credit default swaps and gain/loss on foreign
currency |  |                                              | 0.01        |    |                             |   | (0.17       | )
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Net increase (decrease) in net assets resulting from operations                                                                |  |                                              | 0.20        |    |                             |   | 0.63        |  
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Stockholder distributions(3)                                                                                                   |  |                                              |             |    |                             |   |             |  
|Distributions from net investment income                                                                                       |  |                                              | (0.19       | )  |                             |   | (0.69       | )
|Distributions from net realized gain on investments                                                                            |  |                                              |            |    |                             |   | (0.05       | )
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Net decrease in net assets resulting from stockholder distributions                                                            |  |                                              | (0.19       | )  |                             |   | (0.74       | )
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Capital share transactions                                                                                                     |  |                                              |             |    |                             |   |             |  
|Issuance of common stock(4)                                                                                                    |  |                                              | 0.00        |    |                             |   | 0.03        |  
|Repurchases of common stock(5)                                                                                                 |  |                                              |            |    |                             |   |            |  
|Offering costs(2)                                                                                                              |  |                                              |            |    |                             |   | (0.01       | )
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Net increase (decrease) in net assets resulting from capital share transactions                                                |  |                                              |            |    |                             |   | 0.02        |  
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Net asset value, end of period                                                                                                 |  | $                                            | 9.31        |    |                             | $ | 9.30        |  
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Shares outstanding, end of period                                                                                              |  |                                              | 314,690,600 |    |                             |   | 313,037,127 |  
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Total return(6)                                                                                                                |  |                                              | 2.15        | %  |                             |   | 6.92        | %
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Ratio/Supplemental Data:                                                                                                       |  |                                              |             |    |                             |   |             |  
|Net assets, end of period                                                                                                      |  | $                                            | 2,929,973   |    |                             | $ | 2,911,790   |  
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Ratio of net investment income to average net assets(7)                                                                        |  |                                              | 2.09        | %  |                             |   | 8.43        | %
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Ratio of total operating expenses to average net assets(7)                                                                     |  |                                              | 1.91        | %  |                             |   | 5.43        | %
|Ratio of waived expenses to average net assets(7)                                                                              |  |                                              | (0.03       | )% |                             |   |            |  
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Ratio of net operating expenses and excise taxes to average net assets(7)                                                      |  |                                              | 1.88        | %  |                             |   | 5.43        | %
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Portfolio turnover(8)                                                                                                          |  |                                              | 5.42        | %  |                             |   | 43.79       | %
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Total amount of senior securities outstanding, exclusive of treasury securities                                                |  | $                                            | 1,923,700   |    |                             | $ | 1,641,194   |  
|                                                                                                                               |  |                                              |             |    |                             |   |             |  
|Asset coverage per unit(9)                                                                                                     |  |                                              | 2.52        |    |                             |   | 2.75        |  



|(1) | Per share data may be rounded in order to recompute the ending net asset value per share.
|--- | -----------------------------------------------------------------------------------------



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 11. Financial Highlights (continued)



|(2) | The per share data was derived by using the weighted average shares outstanding during the applicable period.
|--- | -------------------------------------------------------------------------------------------------------------



|(3) | The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.
|--- | -----------------------------------------------------------------------------------------------------------------------------



|(4) | 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, as applicable, and pursuant to the Companys distribution reinvestment plan. The issuance of common stock at an offering price, net of selling 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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | 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 rate 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 as calculated above represents the total return on the Companys investment portfolio during the applicable period and is calculated in accordance with GAAP. These return figures do
not represent an actual return to stockholders.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Weighted average net assets during the applicable period are used for this calculation. The following is a schedule of supplemental ratios for the three months ended
March 31, 2015 and the year ended December 31, 2014:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                    |  |                                              |      |   |                             |  |       |   
|------------------------------------------------------------------- |  | -------------------------------------------- | ---- | - | --------------------------- |  | ----- | --
|                                                                    |  | Three Months EndedMarch 31, 2015 (Unaudited) |      |   | Year EndedDecember 31, 2014 | 
|Ratio of accrued capital gains incentive fees to average net assets |  |                                              |     |   |                             |  | (0.32 | )%
|Ratio of subordinated income incentive fees to average net assets   |  |                                              | 0.52 | % |                             |  | 1.16  | % 
|Ratio of interest expense to average net assets                     |  |                                              | 0.45 | % |                             |  | 1.16  | % 
|Ratio of excise taxes to average net assets                         |  |                                              |     |   |                             |  | 0.04  | % 



|(8) | Portfolio turnover for the three months ended March 31, 2015 is not annualized.
|--- | -------------------------------------------------------------------------------



|(9) | Asset coverage per unit is the ratio of the carrying value of the Companys total consolidated assets, less liabilities and indebtedness not represented by senior
securities, to the aggregate amount of senior securities representing indebtedness.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 12. Recently Issued Accounting Standards

In April 2015, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update No. 2015-03,
Interest-Imputation of Interest to simplify the presentation of debt issuance costs. Under existing guidance, debt issuance costs are recognized as a deferred charge and presented as an asset on the balance sheet. The amendments to the
guidance require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement
guidance for debt issuance costs is not affected by the amendments to the guidance. The amendments to the FASB codification guidance are to be applied retrospectively with applicable disclosures for a change in accounting principle upon transition.
For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2015. Early application by public entities is permitted. Management is currently assessing the impact of this guidance on the
Companys consolidated financial statements.



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|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (in thousands, except share and per share amounts)
|------- | -----------------------------------------------------------------------------------------------------------------------------------------

The information contained in this section should be read in conjunction with our unaudited consolidated
financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, we, us 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;
| | - |  | ----------------------------------------------------



| |  |  | changes in the general interest rate environment;
| | - |  | -------------------------------------------------



| |  |  | the adequacy of our cash resources, financing sources and working capital;
| | - |  | --------------------------------------------------------------------------



| |  |  | the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;
| | - |  | -------------------------------------------------------------------------------------------------------



| |  |  | our contractual arrangements and relationships with third parties;
| | - |  | ------------------------------------------------------------------



| |  |  | actual and potential conflicts of interest with 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 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 may 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, including those factors set forth in Item 1A. Risk Factors in our annual report on Form 10-K. 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 investment
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 U.S. 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 the average value of 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 CLOs.



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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 L.P., 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 or make other debt investments, including investments in senior secured bonds, through secondary market
transactions in the over-the-counter market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants
or options as additional consideration. We may also purchase minority interests in the form of common or preferred equity or the equity-related securities in our target companies, generally 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, CLOs, other debt securities and derivatives, including total return
swaps and credit default swaps. FSIC II Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structure or
otherwise make opportunistic investments.

The senior secured loans, second lien secured loans, and senior secured bonds, in
which we invest generally have stated terms of three to seven years and subordinated debt investments that we make generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and seven



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years. However, there is no limit on the maturity or duration of any security in our portfolio. Our debt investments 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 lower than BBB- by Standard & Poors Ratings Services).We also invest in
non-rated debt securities.

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

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

Expenses

Our primary operating expenses include the payment of management and incentive fees and other expenses under the investment advisory and
administrative services agreement, interest expense from financing facilities and other expenses necessary for our operations. The management and incentive fees compensate 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, including FSIC II Advisors allocable portion of the compensation and related
expenses of certain personnel of Franklin Square Holdings providing administrative services to us on behalf of FSIC II Advisor. 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, oversees the preparation and filing of tax returns and the printing and dissemination of reports
to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. See Note 4 to our unaudited consolidated financial statements included herein for
additional information regarding the reimbursements payable to FSIC II Advisor for administrative services and the methodology for



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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, 2014.

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.

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 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 as the purpose of the expense reimbursement agreement 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 company taxable income, 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 company taxable income or net capital gains) 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 company taxable income, 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 company taxable income or net capital gains) exceeds the regular cash 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.



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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.

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 March 31, 2015 and December 31, 2014, no amounts remained subject to repayment by us to Franklin
Square Holdings in the future.

Portfolio Investment Activity for the Three Months Ended March 31, 2015 and for the Year Ended
December 31, 2014

During the three months ended March 31, 2015, we made investments in portfolio companies
totaling $421,531. During the same period, we sold investments for proceeds of $204,407 and received principal repayments of $40,391. As of March 31, 2015, our investment portfolio, with a total fair value of $4,581,492 (55% in first lien
senior secured loans, 22% in second lien senior secured loans, 6% in senior secured bonds, 10% in subordinated debt, 3% in collateralized securities and 4% in equity/other), consisted of interests in 190 portfolio companies. The portfolio companies
that comprised our portfolio as of such date had an average annual EBITDA of approximately $254.6 million. As of March 31, 2015, the investments in our portfolio were purchased at a weighted average price of 97.5% of par or stated value, as
applicable, and our estimated gross portfolio yield (which represents the expected annualized yield to be generated by us on our investment portfolio based on the composition of our portfolio as of such date), prior to leverage, was 9.8% based upon
the amortized costs of our investments.

During the year ended December 31, 2014, we made investments in portfolio
companies totaling $3,382,134. During the same period, we sold investments for proceeds of $951,935 and received principal repayments of $673,165. As of December 31, 2014, our investment portfolio, with a total fair value of $4,396,228 (53% in
first lien senior secured loans, 23% in second lien senior secured loans, 6% in senior secured bonds, 10% in subordinated debt, 4% in collateralized securities and 4% in equity/other), consisted of interests in 200 portfolio companies. The portfolio
companies that comprised our portfolio as of such date had an average annual EBITDA of approximately $181.7 million. As of December 31, 2014, the investments in our portfolio were purchased at a weighted average price of 97.8% of par or stated
value, as applicable, and our estimated gross portfolio yield, prior to leverage, was 9.6% based upon the amortized cost of our investments.

Based on our regular monthly cash distribution rate of $0.06283 per share as of March 31, 2015 and December 31, 2014 and our final public offering price of $10.60 per share, the annualized
distribution rate to stockholders as of March 31, 2015 and December 31, 2014 was 7.11%. The annualized distribution rate to stockholders is expressed as a percentage equal to the projected annualized distribution amount per share divided
by our final public offering price per share.

Our estimated gross portfolio yield and our annualized distribution rate to
stockholders do not represent an actual investment return to stockholders, are subject to change and in the future may be greater or less than the rates set forth above. See the section entitled Item 1A. Risk Factors in our annual report
on Form 10-K for the fiscal year ended December 31, 2014 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements.



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Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three months ended March 31, 2015 and the year ended December 31, 2014:



|                        |  |                                          |          |   |                                     |   |            |  
|----------------------- |  | ---------------------------------------- | -------- | - | ----------------------------------- | - | ---------- | -
|Net Investment Activity |  | For the Three Months EndedMarch 31, 2015 |          |   | For the Year EndedDecember 31, 2014 |  
|Purchases               |  | $                                        | 421,531  |   |                                     | $ | 3,382,134  |  
|Sales and Redemptions   |  |                                          | (244,798 | ) |                                     |   | (1,625,100 | )
|                        |  |                                          |          |   |                                     |   |            |  
|Net Portfolio Activity  |  | $                                        | 176,733  |   |                                     | $ | 1,757,034  |  
|                        |  |                                          |          |   |                                     |   |            |  



|                                       |  |                                          |         |  |                                     |  |     |           |  |   |            |  |  |  |     |  
|-------------------------------------- |  | ---------------------------------------- | ------- |  | ----------------------------------- |  | --- | --------- |  | - | ---------- |  |  |  | --- | -
|                                       |  | For the Three Months EndedMarch 31, 2015 |         |  | For the Year EndedDecember 31, 2014 | 
|New Investment Activity by Asset Class |  | Purchases                                |         |  | Percentage                          |  |     | Purchases |  |   | Percentage | 
|Senior Secured LoansFirst Lien        |  | $                                        | 274,848 |  |                                     |  | 65  | %         |  | $ | 1,937,477  |  |  |  | 57  | %
|Senior Secured LoansSecond Lien       |  |                                          | 74,810  |  |                                     |  | 18  | %         |  |   | 769,796    |  |  |  | 23  | %
|Senior Secured Bonds                   |  |                                          | 22,472  |  |                                     |  | 5   | %         |  |   | 189,249    |  |  |  | 6   | %
|Subordinated Debt                      |  |                                          | 49,053  |  |                                     |  | 12  | %         |  |   | 353,232    |  |  |  | 10  | %
|Collateralized Securities              |  |                                          | 158     |  |                                     |  | 0   | %         |  |   | 13,226     |  |  |  | 0   | %
|Equity/Other                           |  |                                          | 190     |  |                                     |  | 0   | %         |  |   | 119,154    |  |  |  | 4   | %
|                                       |  |                                          |         |  |                                     |  |     |           |  |   |            |  |  |  |     |  
|Total                                  |  | $                                        | 421,531 |  |                                     |  | 100 | %         |  | $ | 3,382,134  |  |  |  | 100 | %
|                                       |  |                                          |         |  |                                     |  |     |           |  |   |            |  |  |  |     |  

The following table summarizes the composition of our investment portfolio at cost and fair value as of
March 31, 2015 and December 31, 2014:



|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|-------------------------------- |  | ------------------------- | --------- |  | ----------------- | - | --------- | ----------------------- |  |  | ---------------- | - |  | ---------- | --------- |  | ----------------------- | - | --------- |  |  |  | --- | -
|                                 |  | March 31, 2015(Unaudited) |           |  | December 31, 2014 |  
|                                 |  | AmortizedCost(1)          |           |  | Fair Value        |   |           | Percentageof 
Portfolio |  |  | AmortizedCost(1) |   |  | Fair Value |           |  | Percentageof 
Portfolio |  
|Senior Secured LoansFirst Lien  |  | $                         | 2,552,940 |  |                   | $ | 2,535,788 |                         |  |  | 55               | % |  | $          | 2,360,706 |  |                         | $ | 2,346,905 |  |  |  | 53  | %
|Senior Secured LoansSecond Lien |  |                           | 1,034,142 |  |                   |   | 1,017,934 |                         |  |  | 22               | % |  |            | 1,019,318 |  |                         |   | 1,001,313 |  |  |  | 23  | %
|Senior Secured Bonds             |  |                           | 299,212   |  |                   |   | 262,882   |                         |  |  | 6                | % |  |            | 283,454   |  |                         |   | 248,911   |  |  |  | 6   | %
|Subordinated Debt                |  |                           | 449,413   |  |                   |   | 448,410   |                         |  |  | 10               | % |  |            | 431,441   |  |                         |   | 421,683   |  |  |  | 10  | %
|Collateralized Securities        |  |                           | 123,940   |  |                   |   | 129,984   |                         |  |  | 3                | % |  |            | 172,068   |  |                         |   | 184,590   |  |  |  | 4   | %
|Equity/Other                     |  |                           | 136,634   |  |                   |   | 186,494   |                         |  |  | 4                | % |  |            | 142,819   |  |                         |   | 192,826   |  |  |  | 4   | %
|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|Total                            |  | $                         | 4,596,281 |  |                   | $ | 4,581,492 |                         |  |  | 100              | % |  | $          | 4,409,806 |  |                         | $ | 4,396,228 |  |  |  | 100 | %
|                                 |  |                           |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  



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



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The following table presents certain selected information regarding the composition of our
investment portfolio as of March 31, 2015 and December 31, 2014:



|                                                                                                        |  |                |  |                  
|------------------------------------------------------------------------------------------------------- |  | -------------- |  | -----------------
|                                                                                                        |  | March 31, 2015 |  | December 31, 2014
|Number of Portfolio Companies                                                                           |  | 190            |  | 200              
|% Variable Rate (based on fair value)                                                                   |  | 78.0%          |  | 76.8%            
|% Fixed Rate (based on fair value)                                                                      |  | 18.0%          |  | 18.8%            
|% Income Producing Equity/Other Investments (based on fair value)                                       |  | 0.2%           |  | 0.3%             
|% Non-Income Producing Equity/Other Investments (based on fair value)                                   |  | 3.8%           |  | 4.1%             
|Average Annual EBITDA of Portfolio Companies                                                            |  | $254,600       |  | $181,700         
|Weighted Average Purchase Price of Investments (as a % of par or stated value)                          |  | 97.5%          |  | 97.8%            
|% of Investments on Non-Accrual (based on fair value)                                                   |  | 0.1%           |  | 0.1%             
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)                                       |  | 9.8%           |  | 9.6%             
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)Excluding Non-Income Producing Assets |  | 10.0%          |  | 9.9%             

Direct Originations

The following tables present certain selected information regarding our direct originations for the three months ended March 31, 2015 and the year ended December 31, 2014:



|                                                   |  |                                          |         |   |                                     |   |           |  
|-------------------------------------------------- |  | ---------------------------------------- | ------- | - | ----------------------------------- | - | --------- | -
|New Direct Originations                            |  | For the Three Months EndedMarch 31, 2015 |         |   | For the Year EndedDecember 31, 2014 |  
|Total Commitments (including unfunded commitments) |  | $                                        | 290,464 |   |                                     | $ | 2,078,636 |  
|Exited Investments (including partial paydowns)    |  |                                          | (32,763 | ) |                                     |   | (278,220  | )
|                                                   |  |                                          |         |   |                                     |   |           |  
|Net Direct Originations                            |  | $                                        | 257,701 |   |                                     | $ | 1,800,416 |  
|                                                   |  |                                          |         |   |                                     |   |           |  



|                                                                       |                   |                                          |         |            |                                     |  |                   |   |  |            |           |  |  |  |     |  
|---------------------------------------------------------------------- | ----------------- | ---------------------------------------- | ------- | ---------- | ----------------------------------- |  | ----------------- | - |  | ---------- | --------- |  |  |  | --- | -
|New Direct Originations by Asset Class (includingunfunded
commitments) |                   | For the Three Months EndedMarch 31, 2015 |         |            | For the Year
EndedDecember 31, 2014 | 
|                                                                       | Commitment Amount |                                          |         | Percentage |                                     |  | Commitment Amount |   |  | Percentage |          
|Senior Secured LoansFirst Lien                                        |                   | $                                        | 223,214 |            |                                     |  | 77                | % |  | $          | 1,393,927 |  |  |  | 67  | %
|Senior Secured LoansSecond Lien                                       |                   |                                          | 67,000  |            |                                     |  | 23                | % |  |            | 315,110   |  |  |  | 15  | %
|Senior Secured Bonds                                                   |                   |                                          |        |            |                                     |  |                  |   |  |            | 79,815    |  |  |  | 4   | %
|Subordinated Debt                                                      |                   |                                          | 78      |            |                                     |  | 0                 | % |  |            | 204,852   |  |  |  | 10  | %
|Collateralized Securities                                              |                   |                                          |        |            |                                     |  |                  |   |  |            | 13,200    |  |  |  | 1   | %
|Equity/Other                                                           |                   |                                          | 172     |            |                                     |  | 0                 | % |  |            | 71,732    |  |  |  | 3   | %
|                                                                       |                   |                                          |         |            |                                     |  |                   |   |  |            |           |  |  |  |     |  
|Total                                                                  |                   | $                                        | 290,464 |            |                                     |  | 100               | % |  | $          | 2,078,636 |  |  |  | 100 | %
|                                                                       |                   |                                          |         |            |                                     |  |                   |   |  |            |           |  |  |  |     |  



|                                                                                                                                                        |  |                                          |         |  |                                     |  |          | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------- |  | ----------------------------------- |  | -------- | 
|                                                                                                                                                        |  | For the Three Months EndedMarch 31, 2015 |         |  | For the Year EndedDecember 31, 2014 | 
|Average New Direct Origination Commitment Amount                                                                                                        |  |                                          | $58,093 |  |                                     |  | $56,179  | 
|Weighted Average Maturity for New Direct Originations                                                                                                   |  |                                          | 6/3/20  |  |                                     |  | 11/06/20 | 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations funded during Period                                       |  |                                          | 10.7%   |  |                                     |  | 9.4%     | 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations funded during PeriodExcluding
Non-Income Producing Assets |  |                                          | 10.7%   |  |                                     |  | 10.0%    | 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period                                           |  |                                          | 10.4%   |  |                                     |  | 9.6%     | 



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The following table presents certain selected information regarding our direct originations
as of March 31, 2015 and December 31, 2014:



|                                                                                                                                      |  |                |  |                  
|------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | -----------------
|Characteristics of All Direct Originations Held in Portfolio                                                                          |  | March 31, 2015 |  | December 31, 2014
|Number of Portfolio Companies                                                                                                         |  | 47             |  | 44               
|Average Annual EBITDA of Portfolio Companies                                                                                          |  | $60,000        |  | $52,300          
|Average Leverage Through Tranche of Portfolio CompaniesExcluding Equity/Other and Collateralized Securities                          |  | 5.0x           |  | 4.7x             
|% of Investments on Non-Accrual (based on fair value)                                                                                 |  |               |  |                 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations                                       |  | 9.7%           |  | 9.6%             
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct OriginationsExcluding Non-Income
Producing Assets |  | 10.2%          |  | 10.1%            

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, 2015 and December 31, 2014:



|                                  |  |                |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|--------------------------------- |  | -------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                                  |  | March 31, 2015 |           |  | December 31, 2014       | 
|Portfolio Composition by Strategy |  | Fair Value     |           |  | Percentage 
ofPortfolio |  |     | Fair Value |  |   | Percentage 
ofPortfolio | 
|Direct Originations               |  | $              | 2,987,105 |  |                         |  | 65  | %          |  | $ | 2,722,339               |  |  |  | 62  | %
|Opportunistic                     |  |                | 912,582   |  |                         |  | 20  | %          |  |   | 903,455                 |  |  |  | 21  | %
|Broadly Syndicated/Other          |  |                | 681,805   |  |                         |  | 15  | %          |  |   | 770,434                 |  |  |  | 17  | %
|                                  |  |                |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total                             |  | $              | 4,581,492 |  |                         |  | 100 | %          |  | $ | 4,396,228               |  |  |  | 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, 2015 and December 31, 2014:



|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|---------------------------------------------- |  | ------------------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                                               |  | March 31, 2015(Unaudited) |           |  | December 31, 2014       | 
|Industry Classification                        |  | Fair Value                |           |  | Percentageof 
Portfolio |  |     | Fair Value |  |   | Percentageof 
Portfolio | 
|Automobiles & Components                       |  | $                         | 170,661   |  |                         |  | 4   | %          |  | $ | 177,900                 |  |  |  | 4   | %
|Capital Goods                                  |  |                           | 402,638   |  |                         |  | 9   | %          |  |   | 383,827                 |  |  |  | 9   | %
|Commercial & Professional Services             |  |                           | 362,995   |  |                         |  | 8   | %          |  |   | 274,316                 |  |  |  | 6   | %
|Consumer Durables & Apparel                    |  |                           | 259,245   |  |                         |  | 6   | %          |  |   | 266,710                 |  |  |  | 6   | %
|Consumer Services                              |  |                           | 740,996   |  |                         |  | 16  | %          |  |   | 733,804                 |  |  |  | 17  | %
|Diversified Financials                         |  |                           | 232,142   |  |                         |  | 5   | %          |  |   | 288,250                 |  |  |  | 7   | %
|Energy                                         |  |                           | 691,320   |  |                         |  | 15  | %          |  |   | 601,604                 |  |  |  | 14  | %
|Food & Staples Retailing                       |  |                           | 31,561    |  |                         |  | 1   | %          |  |   | 12,585                  |  |  |  | 0   | %
|Food, Beverage & Tobacco                       |  |                           | 9,617     |  |                         |  | 0   | %          |  |   | 9,365                   |  |  |  | 0   | %
|Health Care Equipment & Services               |  |                           | 63,518    |  |                         |  | 1   | %          |  |   | 80,589                  |  |  |  | 2   | %
|Household & Personal Products                  |  |                           | 4,761     |  |                         |  | 0   | %          |  |   | 3,126                   |  |  |  | 0   | %
|Insurance                                      |  |                           | 93,572    |  |                         |  | 2   | %          |  |   | 98,174                  |  |  |  | 2   | %
|Materials                                      |  |                           | 336,148   |  |                         |  | 7   | %          |  |   | 269,531                 |  |  |  | 6   | %
|Media                                          |  |                           | 128,411   |  |                         |  | 3   | %          |  |   | 131,353                 |  |  |  | 3   | %
|Pharmaceuticals, Biotechnology & Life Sciences |  |                           | 59,993    |  |                         |  | 1   | %          |  |   | 62,970                  |  |  |  | 1   | %
|Retailing                                      |  |                           | 110,390   |  |                         |  | 3   | %          |  |   | 112,094                 |  |  |  | 3   | %
|Software & Services                            |  |                           | 318,651   |  |                         |  | 7   | %          |  |   | 328,443                 |  |  |  | 8   | %
|Technology Hardware & Equipment                |  |                           | 242,331   |  |                         |  | 5   | %          |  |   | 230,554                 |  |  |  | 5   | %
|Telecommunication Services                     |  |                           | 222,052   |  |                         |  | 5   | %          |  |   | 229,690                 |  |  |  | 5   | %
|Transportation                                 |  |                           | 100,490   |  |                         |  | 2   | %          |  |   | 101,343                 |  |  |  | 2   | %
|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total                                          |  | $                         | 4,581,492 |  |                         |  | 100 | %          |  | $ | 4,396,228               |  |  |  | 100 | %
|                                               |  |                           |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  

As of March 31, 2015, we did not control and were not an affiliated person
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 or we had the power to exercise
control over the management or policies of such portfolio company, and would be an affiliated person of a portfolio company if we owned 5% or more of its voting securities.

Our investment portfolio may contain loans that are in the form of lines of credit, revolving credit facilities, delayed draw credit
facilities or other investments, pursuant to which we may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of March 31, 2015, we had nine senior secured loan
investments with aggregate unfunded commitments of $144,249 and one senior secured bond investment with an unfunded commitment of $16,977. As of December 31, 2014, we had eight senior secured loan investments with aggregate unfunded commitments
of $145,739 and one senior secured bond investment with an unfunded commitment of $16,977. We maintain sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.



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



|                 |  |                                                                                                                                                   
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|InvestmentRating |  | 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, 2015 and December 31, 2014:



|                  |  |                |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|----------------- |  | -------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                  |  | March 31, 2015 |           |  | December 31, 2014       | 
|Investment Rating |  | Fair Value     |           |  | Percentage 
ofPortfolio |  |     | Fair Value |  |   | Percentage 
ofPortfolio | 
|1                 |  | $              | 292,400   |  |                         |  | 7   | %          |  | $ | 284,924                 |  |  |  | 7   | %
|2                 |  |                | 3,709,669 |  |                         |  | 81  | %          |  |   | 3,608,887               |  |  |  | 82  | %
|3                 |  |                | 563,861   |  |                         |  | 12  | %          |  |   | 485,443                 |  |  |  | 11  | %
|4                 |  |                | 7,345     |  |                         |  | 0   | %          |  |   | 10,528                  |  |  |  | 0   | %
|5                 |  |                | 8,217     |  |                         |  | 0   | %          |  |   | 6,446                   |  |  |  | 0   | %
|                  |  |                |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total             |  | $              | 4,581,492 |  |                         |  | 100 | %          |  | $ | 4,396,228               |  |  |  | 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, 2015 and 2014

Revenues

We generated investment income of $115,740 and $81,065 for the three months ended March 31, 2015 and 2014,
respectively, in the form of interest and fees earned on senior secured loans (first and second lien), senior secured bonds, subordinated debt and collateralized securities in our portfolio and dividends and other distributions earned on
equity/other investments in our portfolio. Such revenues represent $108,383 and $75,629 of cash income earned as well as $7,357 and $5,436 in non-cash portions relating to accretion of discount and PIK interest for the three months ended
March 31, 2015 and 2014, 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 and the increase in the number of directly originated loans. The level of investment 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 and any dividend income that we earn to increase as the proportion of directly originated investments in our portfolio continues to increase.



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During the three months ended March 31, 2015 and 2014, we generated $7,706 and $12,481,
respectively, of fee income, which represented 6.7% and 15.4%, respectively, of total investment income. Such fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and other
non-recurring fees. As such, future fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.

Expenses

Our net
operating expenses were $54,890 and $33,365 for the three months ended March 31, 2015 and 2014, respectively. Our operating expenses include base management fees attributed to FSIC II Advisor of $23,375 and $17,641, net of waivers by FSIC II
Advisor of base management fees to which it was otherwise entitled of $851 and $0, for the three months ended March 31, 2015 and 2014, respectively. Our operating expenses also include administrative services expenses attributed to FSIC II
Advisor of $1,076 and $1,374 for the three months ended March 31, 2015 and 2014, respectively.

FSIC II Advisor is
eligible to receive incentive fees based on performance. During the three months ended March 31, 2015 and 2014, we accrued a subordinated incentive fee on income of $15,213 and $0, respectively, based upon the performance of our portfolio.
During the three months ended March 31, 2015 and 2014, we accrued capital gains incentive fees of $0 and $5,934, respectively, based upon the performance of our portfolio, all of which was based on unrealized gains. No such 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 $13,219 and $5,901 for the three months ended March 31, 2015 and 2014, respectively, in connection
with our financing arrangements. For the three months ended March 31, 2015 and 2014, fees and expenses incurred with our fund administrator, which provides various accounting and administrative services to us, totaled $427 and $317,
respectively, and fees and expenses incurred with our stock transfer agent totaled $341 and $850, respectively. Fees for our board of directors were $188 and $179 for the three months ended March 31, 2015 and 2014, respectively.

Our other general and administrative expenses totaled $1,051 and $1,169 for the three months ended March 31, 2015 and 2014,
respectively, and consisted of the following:



|                                                                |  |                             |       |  |      |   |       | 
|--------------------------------------------------------------- |  | --------------------------- | ----- |  | ---- | - | ----- | 
|                                                                |  | Three Months EndedMarch 31, |      
|                                                                |  | 2015                        |       |  | 2014 |  
|Expenses associated with our independent audit and related fees |  | $                           | 109   |  |      | $ | 121   | 
|Compensation of our chief compliance officer(1)                 |  |                             | 30    |  |      |   | 30    | 
|Legal fees                                                      |  |                             | 201   |  |      |   | 197   | 
|Printing fees                                                   |  |                             | 272   |  |      |   | 249   | 
|Other                                                           |  |                             | 439   |  |      |   | 572   | 
|                                                                |  |                             |       |  |      |   |       | 
|Total                                                           |  | $                           | 1,051 |  |      | $ | 1,169 | 
|                                                                |  |                             |       |  |      |   |       | 



|(1) | On April 1, 2015, James F. Volk was appointed as our chief compliance officer. Prior to that date, we had contracted with Vigilant Compliance, LLC to provide the
services of Salvatore Faia as our chief compliance officer. Mr. Volk is employed by Franklin Square Holdings and will not receive any direct compensation from us in this capacity.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the three months ended March 31, 2015 and 2014, the ratio of our operating expenses to our average net assets was 1.91% and
1.24%, respectively. During the three months ended March 31, 2015 and 2014, the ratio of our operating expenses to average net assets included $13,219 and $5,901, respectively, related to interest expense and $15,213 and $5,934, respectively,
related to accruals of incentive fees. Without such expenses, our



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ratio of operating expenses to average net assets would have been 0.94% and 0.80% for the three months ended March 31, 2015 and 2014, 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.

Net Investment Income

Our net investment income totaled $60,850 ($0.19 per share) and $47,700 ($0.17 per share) for the three months ended March 31, 2015
and 2014, respectively. The increase in net investment income was primarily due to the growth of our portfolio, as well as the increase in the number of directly originated transactions during the three months ended March 31, 2015.

Net Realized Gains or Losses

We sold investments and received principal repayments of $204,407 and $40,391, respectively, during the three months ended ended March 31, 2015, from which we realized a net gain of $2,385. During
the three months ended March 31, 2015, we also realized net losses of $19,588 and $25, respectively, on our credit default swaps and from settlements on foreign currency. 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 also realized a net gain of $4 from settlements on foreign currency.

Net Change in Unrealized Appreciation (Depreciation) on Investments and Credit Default Swaps and Unrealized Gain (Loss) on Foreign
Currency

For the three months ended March 31, 2015, the net change in unrealized appreciation (depreciation) on
investments totaled $(1,211), the net change in unrealized gain (loss) on foreign currency was $(71), and the net change in unrealized appreciation (depreciation) on our credit default swaps was $19,426. For the three months ended March 31,
2014, the net change in unrealized appreciation (depreciation) on investments totaled $27,059. The net change in unrealized appreciation (depreciation) on our investments during the three months ended March 31, 2015, was primarily driven by
increased volatility and a general widening of credit spreads on our loan and other debt investments during the first quarter, partially offset by increased valuations of certain of our equity/other positions. The net change in unrealized
appreciation (depreciation) on our credit default swaps was due to the closing of our credit default swap contracts.

Net Increase
(Decrease) in Net Assets Resulting from Operations

For the three months ended March 31, 2015 and 2014, the net
increase in net assets resulting from operations was $61,766 ($0.20 per share) and $77,368 ($0.27 per share), respectively.

Financial
Condition, Liquidity and Capital Resources

Overview

As of March 31, 2015, we had $232,750 in cash, which we held in a custodial account, and $276,300 in borrowings available under our financing arrangements. As of March 31, 2015, we had nine
senior secured loan investments with aggregate unfunded commitments of $144,249 and one senior secured bond investment with an unfunded commitment of $16,977. We maintain sufficient cash on hand and available borrowings to fund such unfunded
commitments should the need arise.

We currently generate cash primarily from cash flows from fees, interest and dividends
earned from our investments and from the issuance of shares under our distribution reinvestment plan, as well as principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage



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as market conditions permit and at the discretion of FSIC II Advisor, but in no event will leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See
Financing Arrangements.

Prior to investing in securities of portfolio companies, we invest the cash flows
from fees, interest and dividends earned from our investments and from the issuance of shares under our distribution reinvestment plan, as well as principal repayments and proceeds from sales of our 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.

Distribution Reinvestment Plan

Following the closing of our continuous public offering, we have continued to issue shares pursuant to our distribution reinvestment plan. The gross proceeds received from the issuance of our common stock
under our distribution reinvestment plan during the three months ended March 31, 2015 was $21,090, for which we issued 2,232,042 shares of common stock. During the period from April 1, 2015 to May 4, 2015, we issued 2,234,224 shares
of common stock pursuant to our distribution reinvestment plan at an average price per share of $9.45 for gross proceeds of $21,108.

Share
Repurchase Program

To provide our stockholders with limited liquidity, we intend to continue to conduct quarterly tender
offers pursuant to our share repurchase program. 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, 2015 and 2014:



|                           |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                             |      |  |  |   |       | 
|-------------------------- |  | --------------- | --------------- |  | ----------------- |  | ------- | ----------------------------------------------- |  |  | ------------------------ | - |  | ------------------------------------------- | ---- |  |  | - | ----- | 
|For the Three Months Ended |  | Repurchase Date |                 |  | SharesRepurchased |  |         | Percentageof SharesTenderedThat WereRepurchased |  |  | RepurchasePrice PerShare |   |  | AggregateConsiderationfor RepurchasedShares |     
|Fiscal 2014                |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                             |      |  |  |   |       | 
|December 31, 2013          |  |                 | January 2, 2014 |  |                   |  | 135,094 |                                                 |  |  | 100                      | % |  | $                                           | 9.45 |  |  | $ | 1,277 | 
|Fiscal 2015                |  |                 |                 |  |                   |  |         |                                                 |  |  |                          |   |  |                                             |      |  |  |   |       | 
|December 31, 2014          |  |                 | January 2, 2015 |  |                   |  | 578,569 |                                                 |  |  | 100                      | % |  | $                                           | 9.50 |  |  | $ | 5,496 | 

On April 1, 2015, we repurchased 885,509 shares of common stock (representing 100% of the shares of
the common stock tendered for repurchase) at $9.45 per share for aggregate consideration totaling $8,368.

For additional
information regarding our share repurchase program, see Note 3 to our unaudited consolidated financial statements included herein.

Financing Arrangements

The following table presents a summary of information with respect to our outstanding financing arrangements as of March 31,
2015:



|                                  |  |                  |  |                   |  |                   |         |  |                 |   |         |              |  |                  
|--------------------------------- |  | ---------------- |  | ----------------- |  | ----------------- | ------- |  | --------------- | - | ------- | ------------ |  | -----------------
|Facility                          |  | Type of Facility |  | Rate              |  | AmountOutstanding |         |  | AmountAvailable |   |         | MaturityDate
|JPM Facility                      |  | Repurchase       |  | 3.25%             |  | $                 | 550,000 |  |                 | $ |        |              |  | May 20, 2017     
|Goldman Facility                  |  | Repurchase       |  | L+2.50%           |  | $                 | 235,306 |  |                 | $ | 164,694 |              |  | December 15, 2018
|Cooper River Credit Facility      |  | Revolving        |  | L+2.00%           |  | $                 | 170,494 |  |                 | $ | 29,506  |              |  | March 27, 2016   
|Wissahickon Creek Credit Facility |  | Revolving        |  | L+1.50% toL+2.50% |  | $                 | 187,600 |  |                 | $ | 62,400  |              |  | February 19, 2019
|Darby Creek Credit Facility       |  | Revolving        |  | L+2.75%           |  | $                 | 249,500 |  |                 | $ | 500     |              |  | February 20, 2018
|Dunning Creek Credit Facility(1)  |  | Revolving        |  | L+1.55%           |  | $                 | 230,800 |  |                 | $ | 19,200  |              |  | May 14, 2015     
|Juniata River Credit Facility     |  | Revolving        |  | L+2.50%           |  | $                 | 300,000 |  |                 | $ |        |              |  | November 14, 2019



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|(1) | On May 14, 2015, the Dunning Creek Credit Facility was amended to (a) extend the maturity date to May 14, 2016 and (b) reduce the applicable spread
over LIBOR to 1.45%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our average borrowings and weighted average interest rate, including the effect of
non-usage fees, for the three months ended March 31, 2015 were $1,784,664 and 2.78%, respectively. As of March 31, 2015, the weighted average effective interest rate on our borrowings, including the effect of non-usage fees, was 2.80%.

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

RIC Status and Distributions

We have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level U.S.
federal income taxes on any ordinary income or capital gains that we distribute as dividends to our stockholders. In order to qualify for and maintain RIC tax treatment, we must, among other things, distribute to our stockholders each tax year
dividends of an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions paid. As long as the distributions are declared by the later of the fifteenth day of the
ninth month following the close of the tax 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 tax year. We are also generally subject to nondeductible U.S. federal excise taxes on certain undistributed income unless
we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary taxable income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the
excess of capital gains over capital losses, for the one-year period ending October 31 of that calendar year (adjusted for certain ordinary losses) and (3) any net ordinary income and capital gain net income for the preceding years that were not
distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, will be treated as if it had been paid by us, as well as received by our U.S.
stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited
from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.

Following formal commencement of our investment operations, 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 regular cash distributions on a weekly basis, and paid such distributions on a monthly basis. Effective January 1, 2015 and subject to applicable legal
restrictions and the sole discretion of our board of directors, we intend to authorize and declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. We will calculate each stockholders specific
distribution amount for the period using record and declaration dates and each stockholders distributions will begin to accrue on the date that shares of our common stock are issued to such stockholder. From time to time, we may also pay
special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole
discretion of our board of directors.



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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, 2015 and 2014:



|                           |  |              |        |  |        |   |        | 
|-------------------------- |  | ------------ | ------ |  | ------ | - | ------ | 
|                           |  | Distribution |       
|For the Three Months Ended |  | Per Share    |        |  | Amount |  
|Fiscal 2014                |  |              |        |  |        |   |        | 
|March 31, 2014             |  | $            | 0.1740 |  |        | $ | 49,274 | 
|Fiscal 2015                |  |              |        |  |        |   |        | 
|March 31, 2015             |  | $            | 0.1885 |  |        | $ | 59,177 | 

On March 12, 2015, our board of directors declared regular monthly cash distributions for April 2015
through June 2015 in the amount of $0.06283. These distributions have been or will be paid monthly to stockholders of record as of monthly record dates previously determined by our board of directors.

We have adopted an opt in distribution reinvestment plan for our stockholders. As a result, if we make a cash distribution,
stockholders will receive the distribution 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.

On February 24, 2014, we amended and restated our distribution reinvestment plan, which first applied to the reinvestment of cash
distributions paid on or after, March 26, 2014. Under the original plan, cash distributions to participating stockholders were reinvested in additional shares of our common stock at a purchase price equal to 90% of the public offering price per
share in effect as of the date of issuance. Under the amended plan, cash distributions to participating stockholders will be reinvested in additional shares of our common stock at a purchase price determined by our board of directors, or a committee
thereof, in its sole discretion, that is (i) not less than the net asset value per share of our common stock as determined in good faith by our board of directors or a committee thereof, in its sole discretion, immediately prior to the payment
of the distribution and (ii) not more than 2.5% greater than the net asset value per share of our common stock as of such date. Although distributions paid in the form of additional shares of common stock will generally be subject to U.S.
federal, state and local taxes in the same manner as cash distributions, stockholders who elect to participate in our distribution reinvestment plan will not receive any corresponding cash distributions with which to pay any such applicable taxes.
Stockholders receiving distributions in the form of additional shares of common stock will be treated as receiving a distribution in the amount of the fair market value of our shares of common stock.

We intend to continue to make our regular distributions in the form of cash, unless stockholders elect to receive their distributions in
additional shares of our common stock under our distribution reinvestment plan. From time to time and not less than quarterly, FSIC II Advisor must review our accounts to determine whether cash distributions are appropriate. We intend to distribute
pro rata to our stockholders funds received by us which FSIC II Advisor deems unnecessary for us to retain. 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, gains from credit default swaps, non-capital gains proceeds from the sale of assets, and dividends or other distributions
paid to us on account of preferred and common equity investments in portfolio companies and reimbursements of certain expenses by Franklin Square Holdings and its affiliates, including through the waiver of certain investment advisory fees. We have
not established limits on the amount of funds we may use from available sources to make distributions.

During certain
periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a stockholders investment rather than a
return of earnings or gains derived from our investment activities and will be made after the deduction of fees and expenses, including any fees payable to FSIC II Advisor. Each year a



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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,
2015 and 2014 represented a return of capital.

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 our offering proceeds or borrowings. 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. 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, 2015 and 2014 was funded through the reimbursement of operating expenses by Franklin Square Holdings. 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.

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, 2015 and 2014:



|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|--------------------------------------------------------- |  | ---------------------------- | ------ |  | ---------- |  | --- | ------------------ |  | - | ---------- |  |  |  | --- | -
|                                                          |  | Three Months Ended March 31, |       
|                                                          |  | 2015                         |        |  | 2014       | 
|Source of Distribution                                    |  | DistributionAmount           |        |  | Percentage |  |     | DistributionAmount |  |   | Percentage | 
|Offering proceeds                                         |  | $                            |       |  |            |  |    |                    |  | $ |           |  |  |  |    |  
|Borrowings                                                |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Net investment income (prior to expense reimbursement)(1) |  |                              | 59,177 |  |            |  | 100 | %                  |  |   | 49,274     |  |  |  | 100 | %
|Short-term capital gains proceeds from the sale of assets |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Long-term capital gains proceeds from the sale of assets  |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Gains from credit default swaps (ordinary income for tax) |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Non-capital gains proceeds from the sale of assets        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Distributions on account of preferred and common equity   |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Expense reimbursement from sponsor                        |  |                              |       |  |            |  |    |                    |  |   |           |  |  |  |    |  
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  
|Total                                                     |  | $                            | 59,177 |  |            |  | 100 | %                  |  | $ | 49,274     |  |  |  | 100 | %
|                                                          |  |                              |        |  |            |  |     |                    |  |   |            |  |  |  |     |  



|(1) | During the three months ended March 31, 2015 and 2014, 93.6% and 93.3%, respectively, of our gross investment income was attributable to cash income earned, 3.2%
and 4.9%, respectively, was attributable to non-cash accretion of discount and 3.2% and 1.8%, respectively, was attributable to PIK interest.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our net investment income on a tax basis for the three months ended March 31, 2015 and 2014 was $60,319 and $52,415, respectively. As of March 31, 2015 and December 31, 2014, we had $23,859
and $19,204, 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, 2015 and 2014.

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



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

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



| |  |  | our quarterly 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 firms, 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 such 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 unaudited consolidated financial
statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of directors may use
independent third-party pricing or valuation services.



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However, our board of directors is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information
obtained from FSIC II Advisor or any independent third-party valuation or pricing service that our board of directors deems to be reliable in determining fair value under the circumstances. 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 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, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower)
financial risk and/or the size of portfolio companies relative to comparable firms, as well as such other factors as our board of directors, in consultation with any third party valuation firm, if applicable, may consider relevant in assessing fair
value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are
typically valued at a discount from the public market value of the security.

When we receive warrants or other equity
securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis of the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of
origination. Our board of directors subsequently values these warrants or other equity securities received at 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, 2015 consisted primarily of debt
investments that were acquired directly from the issuer. Thirty-eight senior secured loan investments, one senior secured bond investment, four subordinated debt investments and one collateralized security were valued by independent valuation firms,
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 investments. Except as described below, all of our



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equity/other investments were valued by the same independent valuation firms, 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/other investment, which was traded on an active public market,
was valued at its closing price as of March 31, 2015. One senior secured loan investment, which was newly-issued and purchased near March 31, 2015, was valued at cost, as our board of directors determined that the cost of such investment
was the best indication of its fair value. Except as described above, we valued our other investments, including two equity/other 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.

Our
investments as of December 31, 2014 consisted primarily of debt investments that were acquired directly from the issuer. Twenty-nine senior secured loan investments, one senior secured bond investment, four subordinated debt 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 investments. 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. Four equity/other investments, which were traded on active public markets, were valued at their closing price as of December 31, 2014. Three senior secured
loan investments, two collateralized securities and one equity/other investment which were newly-issued and purchased near December 31, 2014, were valued at cost, as our board of directors determined that the cost of such investments was the
best indication of their fair value. Except as described above, we valued our other investments and credit default swaps, including two equity/other 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.

We periodically benchmark the bid and ask prices we receive from the third-party pricing services and/or dealers as applicable 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, including the use of an independent valuation firm,
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, or where our board of directors otherwise determines that the use of other methods is
appropriate. We periodically benchmark the valuations provided by the independent valuation firms 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. Structuring and other non-recurring upfront fees are recorded as fee income when earned. We record prepayment premiums on loans and securities as fee income when we receive such amounts.



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

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

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 the investment advisory and administrative services 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 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.

Subordinated Income Incentive Fee

Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income,
which is calculated and payable quarterly in arrears, equals 20.0% of our 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 our
pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.875%. Once our 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 our pre-incentive fee net investment income for such quarter equals 2.34375%, or 9.375% annually, of adjusted capital. Thereafter, FSIC II Advisor will
be entitled to receive 20.0% of pre-incentive fee net investment income.

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



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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, 2015 and
2014, 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 based on 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, GDFM, are reimbursed for administrative and/or organizational and offering costs incurred on our behalf. See Note 4 to our unaudited consolidated financial
statements included herein and Related Party TransactionsCompensation of the Investment Adviser and Dealer Manager for a discussion of this agreement and the amount of fees and expenses accrued under these agreements during
the three months ended March 31, 2015 and 2014.

A summary of our significant contractual payment obligations related to
the repayment of our outstanding indebtedness at March 31, 2015 is as follows:



|                                     |  |                        |         |  |                  |   |         |           |  |   |           |  |  |                   |         |  |  |  |   | 
|------------------------------------ |  | ---------------------- | ------- |  | ---------------- | - | ------- | --------- |  | - | --------- |  |  | ----------------- | ------- |  |  |  | - | 
|                                     |  | Payments Due By Period |        
|                                     |  | Total                  |         |  | Less than 1 year |   |         | 1-3 years |  |   | 3-5 years |  |  | More than 5 years |        
|JPM Facility(1)                      |  | $                      | 550,000 |  |                  | $ | 550,000 |           |  |   |          |  |  |                   |        |  |  |  |  | 
|Goldman Facility(2)                  |  | $                      | 235,306 |  |                  | $ | 235,306 |           |  |   |          |  |  |                   |        |  |  |  |  | 
|Cooper River Credit Facility(3)      |  | $                      | 170,494 |  |                  | $ | 170,494 |           |  |   |          |  |  |                   |        |  |  |  |  | 
|Wissahickon Creek Credit Facility(4) |  | $                      | 187,600 |  |                  |   |        |           |  |   |          |  |  | $                 | 187,600 |  |  |  |  | 
|Darby Creek Credit Facility(5)       |  | $                      | 249,500 |  |                  |   |        |           |  | $ | 249,500   |  |  |                   |        |  |  |  |  | 
|Dunning Creek Credit Facility(6)     |  | $                      | 230,800 |  |                  | $ | 230,800 |           |  |   |          |  |  |                   |        |  |  |  |  | 
|Juniata River Credit Facility(7)     |  | $                      | 300,000 |  |                  |   |        |           |  |   |          |  |  | $                 | 300,000 |  |  |  |  | 



|(1) | At March 31, 2015, 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, 2015, $164,694 remained unused under the Goldman facility. All amounts under the Goldman facility will mature, and all accrued and unpaid interest
thereunder will be due and payable, on December 15, 2018.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | At March 31, 2015, $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. Amounts due on the facility will begin to amortize on June 27, 2015.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | At March 31, 2015, $62,400 remained unused under the Wissahickon Creek facility. All amounts under the Wissahickon Creek facility will mature, and all accrued and
unpaid interest thereunder will be due and payable, on February 19, 2019.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | At March 31, 2015, $500 remained unused under the Darby Creek facility. All amounts under the Darby Creek facility will mature, and all accrued and unpaid interest
thereunder will be due and payable, on February 20, 2018.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | At March 31, 2015, $19,200 remained unused under the Dunning Creek facility. All amounts under the Dunning Creek facility will mature, and all accrued and unpaid
interest thereunder will be due and payable, on May 14, 2015. On May 14, 2015, the Dunning Creek facility was amended to (a) extend the maturity date to May 14, 2016 and (b) reduce the applicable spread over LIBOR to 1.45%.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | At March 31, 2015, no amounts remained unused under the Juniata River facility. All amounts under the Juniata River facility will mature, and all accrued and
unpaid interest thereunder will be due and payable, on November 14, 2019.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest-Imputation of Interest, to simplify the presentation of debt issuance costs. Under existing guidance, debt
issuance costs are recognized as a deferred charge and presented as an asset on the balance sheet. The amendments to the guidance require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by the amendments in this guidance. The amendments to the FASB codification
in this guidance are to be applied retrospectively with applicable disclosures for a change in accounting principle upon transition. For public entities, the amendments are effective during interim and annual periods beginning after
December 15, 2015. Early application by public entities is permitted. We are currently assessing the impact of this guidance on our consolidated financial statements.

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 based on the average value of our gross assets and an incentive fee based on our performance. We also reimburse FSIC II Advisor and GDFM for expenses necessary to perform services related to our administration and operations,
including FSIC II Advisors allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings providing administrative services to us on behalf of FSIC II Advisor.

Pursuant to the investment advisory and administrative services agreement we also reimbursed FSIC II Advisor and its
affiliates for expenses necessary to perform services related to our organization and continuous public offering. In addition, the dealer manager for our continuous public offering was FS2, which is one of our affiliates. Under the dealer manager agreement FS2was entitled to receive selling commissions and dealer manager fees
in connection with the sale of shares of our common stock in our continuous public offering, all or a portion of which were re-allowed to selected broker-dealers. Our continuous public offering closed in March 2014, and in connection therewith, the
dealer manager agreement was terminated. Therefore, in the future we will not make any additional reimbursements to FSIC II Advisor or its affiliates for services related to our organization and continuous public offering, and FS2will no longer receive selling commissions and dealer manager fees
relating to our continuous public offering.



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The following table describes the fees and expenses we accrued under
the investment advisory and administrative services agreement and the dealer manager fees FS2received under the dealer manager agreement during the three months ended March 31, 2015 and 2014:



|                |  |                                                           |  |                                         |  |                             |        |  |      |   |        | 
|--------------- |  | --------------------------------------------------------- |  | --------------------------------------- |  | --------------------------- | ------ |  | ---- | - | ------ | 
|                |  |                                                           |  |                                         |  | Three Months EndedMarch 31, |       
|Related Party   |  | Source Agreement                                          |  | Description                             |  | 2015                        |        |  | 2014 |  
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Base Management Fee(1)                  |  | $                           | 23,375 |  |      | $ | 17,641 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Capital Gains Incentive Fee(2)          |  | $                           |       |  |      | $ | 5,934  | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Subordinated Incentive Fee on
Income(3) |  | $                           | 15,213 |  |      | $ |       | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Administrative Services Expenses(4)     |  | $                           | 1,076  |  |      | $ | 1,374  | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Offering Costs(5)                       |  | $                           |       |  |      | $ | 1,087  | 
|FS2             |  | Dealer Manager Agreement                                  |  | Dealer Manager Fee(6)                   |  | $                           |       |  |      | $ | 8,821  | 



|(1) | FSIC II Advisor agreed, effective March 5, 2015, to permanently waive a portion of the base management fee to which it is entitled under the investment advisory
agreement so that the fee received equals 1.75% of the average value of our gross assets. As a result, the amount shown for the three months ended March 31, 2015 is net of waivers of $851. During the three months ended March 31, 2015 and
2014, $23,069 and $15,013, respectively, in base management fees were paid to FSIC II Advisor. As of March 31, 2015, $23,375 in base management fees were payable to FSIC II Advisor.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | During the three months ended March 31, 2015 and 2014, we accrued capital gains incentive fees of $0 and $5,934, respectively, based on the performance of our
portfolio, all of which was based on unrealized gains. No such fees are actually payable by us with respect to such unrealized gains unless and until those gains are actually realized. See Note 2 to our unaudited consolidated financial statements
included herein for a discussion of the methodology employed by us in calculating the capital gains incentive fee. We did not pay any capital gains incentive fees to FSIC II Advisor during the three months ended March 31, 2015. As of
March 31, 2015, we did not have any accrued capital gains incentive fees based on the performance of our portfolio.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | During the three months ended March 31, 2015 and 2014, $15,334 and $0, respectively, of subordinated incentive fees on income were paid to FSIC II Advisor. As of
March 31, 2015, a subordinated incentive fee on income of $15,213 was payable to FSIC II Advisor.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | During the three months ended March 31, 2015 and 2014, $1,024 and $1,288, respectively, of 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 $1,689 and $214, in administrative services expenses to FSIC II Advisor during the three months ended
March 31, 2015 and 2014, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | During the three months ended March 31, 2015 and 2014, we incurred offering costs of $0 and $1,686, respectively, of which $0 and $1,087, respectively, related to
reimbursements to FSIC II Advisor for offering costs incurred on our behalf, including marketing expenses, salaries and other direct expenses of FSIC II Advisors personnel and employees of its affiliates while engaged in registering and
marketing our common stock.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(6) | Represents aggregate sales commissions and dealer manager fees retained by FS2and not re-allowed to selected broker-dealers.
|--- | ----------------------------------------------------------------------------------------------------------------------------

See Note 4 to our unaudited consolidated financial statements included herein for additional information regarding
our agreements with FSIC II Advisor, FS2, and our other
related party transactions and relationships, including potential conflicts of interests, our exemptive relief order from the SEC and our expense reimbursement agreement 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, 2015, 78.0% of our portfolio investments (based on fair value) paid variable interest rates, 18.0% paid
fixed interest rates, 3.8% were non-income producing equity or other investments and the remaining 0.2% were income producing equity/other investments. A rise in the general level of interest rates can be expected to lead to higher interest
rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income
from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this point would make it easier
for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income under, the investment advisory and administrative services agreement we have entered into with FSIC II Advisor, 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, Wissahickon Creek facility, Darby Creek facility, Dunning Creek facility, Juniata River facility and Goldman facility, borrowings are 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, total return swap agreements or other financing arrangements that we or any of our
subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding or financing
arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our
investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of March 31, 2015 (dollar amounts are presented in thousands):



|                                     |  |                                        |         |   |                                      |   |        |                                          |  |   |                                         |   |  |  |      |   
|------------------------------------ |  | -------------------------------------- | ------- | - | ------------------------------------ | - | ------ | ---------------------------------------- |  | - | --------------------------------------- | - |  |  | ---- | --
|Basis Point Change in Interest Rates |  | Increase(Decrease)in InterestIncome(1) |         |   | Increase(Decrease)in InterestExpense |   |        | Increase(Decrease) 
inNet InterestIncome |  |   | PercentageChange in 
NetInterest Income |  
|Down 25 basis points                 |  | $                                      | (525    | ) |                                      | $ | (3,132 | )                                        |  | $ | 2,607                                   |   |  |  | 0.7  | % 
|No change                            |  |                                        |        |   |                                      |   |       |                                          |  |   |                                        |   |  |  |     |   
|Up 100 basis points                  |  |                                        | 7,030   |   |                                      |   | 12,528 |                                          |  |   | (5,498                                  | ) |  |  | (1.4 | )%
|Up 300 basis points                  |  |                                        | 76,317  |   |                                      |   | 37,583 |                                          |  |   | 38,734                                  |   |  |  | 9.7  | % 
|Up 500 basis points                  |  |                                        | 148,125 |   |                                      |   | 62,638 |                                          |  |   | 85,487                                  |   |  |  | 21.4 | % 



|(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



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material adverse effect on our business, financial condition and results of operations. During the three months ended March 31, 2015 and 2014, 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.
|------- | ------------------------

Evaluation
of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an
evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of
March 31, 2015.

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.

Changes
in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as
defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Exchange Act) that occurred during the three-month period ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.



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PART IIOTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------

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



|Item 1A. | Risk Factors.
|-------- | -------------

There have
been no material changes from the risk factors set forth in our annual report on Form 10-K for the fiscal year ended December 31, 2014.



|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, 2015, 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, 2015   |  |                                | 578,569 |  |                            | $ | 9.50 |                                                                              |  |  | 578,569                                                                    |  |  |  | (1) | 
|February 1 to February 28, 2015 |  |                                |        |  |                            |   |     |                                                                              |  |  |                                                                           |  |  |  |    | 
|March 1 to March 31, 2015       |  |                                |        |  |                            |   |     |                                                                              |  |  |                                                                           |  |  |  |    | 
|                                |  |                                |         |  |                            |   |      |                                                                              |  |  |                                                                            |  |  |  |     | 
|Total                           |  |                                | 578,569 |  |                            | $ | 9.50 |                                                                              |  |  | 578,569                                                                    |  |  |  | (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.
|------- | ---------

The following
exhibits are filed as part of this annual report or hereby incorporated by reference to exhibits previously filed with the SEC:



|     |  |                                                                                                                                                                                                                                                                                                                                                  
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|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) filed with Pre-Effective Amendment No. 3 to the Companys registration statement on Form
N-2 (File No. 333-175654) filed on February 10, 2012.)                                                                                                            
|     | 
|4.1  |  | Amended and Restated Distribution Reinvestment Plan of the Company, effective as of March 26, 2014. (Incorporated by reference to Exhibit 4.1 to the Companys Current Report on
Form 8-K filed on February 24, 2014.)                                                                                                                           
|     | 
|10.1 |  | Investment Advisory and Administrative Services Agreement, dated as of February 8, 2012, by and between the Company and FSIC II Advisor, LLC. (Incorporated by reference to
Exhibit (g)(1) filed with Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)       
|     | 
|10.2 |  | 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) filed with Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)
|     | 
|10.3 |  | Dealer Manager Agreement, dated as of February 8, 2012, by and among the Company, FSIC II Advisor, LLC and FS2 Capital Partners, LLC. (Incorporated by reference to Exhibit (h)(1)
filed with Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)               
|     | 
|10.4 |  | Form of Follow-On Dealer Manager Agreement. (Incorporated by reference to Exhibit (h)(2) filed with 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) filed with Pre-Effective Amendment No. 3 to
the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                                        
|     | 
|10.6 |  | 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) filed with
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) filed with
Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                 
|     | 
|10.8 |  | Escrow Agreement, dated as of January 23, 2012, by and among the Company, UMB Bank, N.A. and FS2 Capital Partners, LLC. (Incorporated by reference to Exhibit (k) filed with
Pre-Effective Amendment No. 3 to the Companys registration statement on Form N-2 (File No. 333-175654) filed on February 10, 2012.)                                
|     | 
|10.9 |  | 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.)



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.10 |  | Confirmation Letter Agreement, dated as of July 2, 2012, by and between Del River 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 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 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 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 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 |  | Investment Management Agreement, dated as of July 2, 2012, by and between the Company and Del River LLC. (Incorporated by reference to Exhibit 10.3 to the Companys Current
Report on Form 8-K filed on July 3, 2012.)                                                                                                                                                               
|      | 
|10.16 |  | Termination Acknowledgement (TRS), dated as of June 13, 2013, by and between Del River 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.)                                                                                                                                                         
|      | 
|10.17 |  | 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 |  | 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.)                                                                                                                                      
|      | 
|10.19 |  | 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.)                                                                                                                                                                                                     
|      | 
|10.20 |  | 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 2024. (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on February 7,
2013.)                                                                                                                                                                                                     
|      | 
|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 April 26,
2013.)                                                                                                                                                                                                       
|      | 
|10.23 |  | 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.)                                                                                                                                                          
|      | 
|10.24 |  | 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.)
|      | 
|10.25 |  | 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.)                                                                                                                                                            



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.26 |  | 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.)                                                                                                                                                                                                                                  
|      | 
|10.27 |  | 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.)                                                                                                                                                                                                              
|      | 
|10.28 |  | 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.)                                                                                                                                                                                                                                   
|      | 
|10.29 |  | 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.)                                                                                                                                             
|      | 
|10.30 |  | 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.)                                                                                                                                                                                                                       
|      | 
|10.31 |  | 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.)                                                                                                                                                                                                                                                 
|      | 
|10.32 |  | 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.)                                                                                                                                                                                                     
|      | 
|10.33 |  | 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.)                                                                                                                                                                                                                                      
|      | 
|10.34 |  | 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.)
|      | 
|10.35 |  | 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.)                                                                                                                                                                                                     
|      | 
|10.36 |  | 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.)                                                                                                                                                                                                    
|      | 
|10.37 |  | 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.)                                                                                       
|      | 
|10.38 |  | 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.)    



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                    
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       | 
|10.39  |  | 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.)                                                                                                                      
|       | 
|10.40  |  | 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.)                                                                                                                         
|       | 
|10.41  |  | Securities Account Control Agreement, dated as of February 20, 2014, by and among Darby Creek LLC, as pledgor, Wells Fargo Bank, National Association, as secured party, and Wells
Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.8 to the Companys Current Report on Form 8-K filed on February 25, 2014.)               
|       | 
|10.42  |  | Credit Agreement, dated as of May 14, 2014, by and among Dunning Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative agent and lender, and the other
lenders 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 May 19, 2014.)                                              
|       | 
|10.43  |  | First Amendment to Credit Agreement, dated as of June 4, 2014, by and between Dunning Creek LLC and Deutsche Bank AG, New York Branch, as administrative agent and lender.
(Incorporated by reference to Exhibit 10 to the Companys Current Report on Form 8-K filed on June 6, 2014.)                                                                                            
|       | 
|10.44* |  | Second Amendment to Credit Agreement, dated as of May 14, 2015, by and between Dunning Creek LLC and Deutsche Bank AG, New York Branch, as administrative agent and
lender.                                                                                                                                                                                                        
|       | 
|10.45  |  | Custodial Agreement, dated as of May 14, 2014, by and among Dunning Creek LLC, as borrower, the Company, as manager, Deutsche Bank AG, New York Branch, as administrative agent, and
Deutsche Bank Trust Company Americas, as custodian. (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on May 19, 2014.)                            
|       | 
|10.46  |  | Security Agreement, dated as of May 14, 2014, by and between Dunning Creek LLC, as borrower, and Deutsche Bank AG, New York Branch, as administrative agent. (Incorporated by
reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on May 19, 2014.)                                                                                                        
|       | 
|10.47  |  | Sale and Contribution Agreement, dated as of May 14, 2014, by and between the Company, as seller, and Dunning Creek LLC, as purchaser. (Incorporated by reference to Exhibit
10.4 to the Companys Current Report on Form 8-K filed on May 19, 2014.)                                                                                                                              
|       | 
|10.48  |  | Investment Management Agreement, dated as of May 14, 2014, by and between Dunning Creek LLC and the Company, as Investment Manager. (Incorporated by reference to Exhibit 10.5
to the Companys Current Report on Form 8-K filed on May 19, 2014.)                                                                                                                                 
|       | 
|10.49  |  | Loan Agreement, dated as of November 14, 2014, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and lender, Citibank,
N.A., as collateral agent and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.51 to the Companys Annual Report on Form 10-K filed on March 18, 2015.)
|       | 
|10.50  |  | Sale and Contribution Agreement, dated as of November 14, 2014, between Juniata River LLC, as purchaser, and the Company, as seller. (Incorporated by reference to Exhibit 10.52 to
the Companys Annual Report on Form 10-K filed on March 18, 2015.)                                                                                                                             
|       | 
|10.51  |  | Investment Management Agreement, dated as of November 14, 2014, between Juniata River LLC and the Company, as investment manager. (Incorporated by reference to Exhibit 10.53 to the
Companys Annual Report on Form 10-K filed on March 18, 2015.)                                                                                                                                
|       | 
|10.52  |  | Collateral Administration Agreement, dated as of November 14, 2014, by and among Juniata River LLC, JPMorgan Chase Bank, National Association, as administrative agent, the Company,
as investment manager and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.54 to the Companys Annual Report on Form 10-K filed on March 18,
2015.)    



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|      |  |                                                                                                                                                                                                                                                                                                                                     
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.53 |  | Amended and Restated Sale and Contribution Agreement, dated as of December 15, 2014, by and between the Company and Green Creek LLC. (Incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K filed on December 19, 2014.)                                                                            
|      | 
|10.54 |  | Indenture, dated as of December 15, 2014, by and between Green Creek 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 December 19, 2014.)                                                                                                        
|      | 
|10.55 |  | Green Creek LLC Floating Rate Notes due 2026. (Incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on December 19,
2014.)                                                                                                                                                                   
|      | 
|10.56 |  | September 1996 Version Master Repurchase Agreement between Goldman Sachs Bank USA and Schuylkill River LLC, together with the related Annex and Master Confirmation thereto, each
dated as of December 15, 2014. (Incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed on December 19, 2014.)
|      | 
|10.57 |  | Revolving Credit Agreement, dated as of December 15, 2014, by and between the Company and Schuylkill River LLC. (Incorporated by reference to Exhibit 10.5 to the Companys
Current Report on Form 8-K filed on December 19, 2014.)                                                                                                 
|      | 
|10.58 |  | Amended and Restated Investment Management Agreement, dated as of December 15, 2014, by and between Green Creek LLC and the Company. (Incorporated by reference to Exhibit 10.6 to
the Companys Current Report on Form 8-K filed on December 19, 2014.)                                                                            
|      | 
|10.59 |  | Collateral Administration Agreement, dated as of December 15, 2014, by and among Green Creek LLC, the Company and Virtus Group, LP. (Incorporated by reference to Exhibit 10.7 to the
Companys Current Report on Form 8-K filed on December 19, 2014.)                                                                             
|      | 
|31.1* |  | Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                
|      | 
|31.2* |  | Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                
|      | 
|32.1* |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                    



|* | Filed herewith.
|- | ---------------



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on May 15, 2015.



FS INVESTMENT CORPORATION IIBy:

/s/ MICHAEL C. FORMANMichael C. FormanChief Executive Officer(Principal Executive Officer)By:

/s/ MICHAEL LAWSONMichael LawsonChief Financial Officer(Principal Financial and Accounting Officer)




99