##### 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 SEPTEMBER 30, 2016

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 ofincorporation or organization) |  | (I.R.S. EmployerIdentification 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 324,543,542 shares of common stock outstanding as of November 2, 2016.



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TABLE OF CONTENTS



|                             |  |                                                                                                                   |  |      |     | 
|---------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                             |  |                                                                                                                   |  | Page |    
|PART IFINANCIAL INFORMATION | 
|ITEM 1.                      |  | FINANCIAL STATEMENTS                                                                                              |  |      |     | 
|                             |  | Consolidated Balance Sheets as of September 30, 2016 (Unaudited) and December 31,
2015                            |  |      | 1   | 
|                             |  | Unaudited Consolidated Statements of Operations for the three and nine months ended September 
30, 2016 and 2015  |  |      | 2   | 
|                             |  | Unaudited Consolidated Statements of Changes in Net Assets for the nine months ended September 
30, 2016 and 2015 |  |      | 3   | 
|                             |  | Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and
2015             |  |      | 4   | 
|                             |  | Consolidated Schedules of Investments as of September 30, 2016 (Unaudited) and December 31,
2015                  |  |      | 5   | 
|                             |  | Notes to Unaudited Consolidated Financial Statements                                                              |  |      | 27  | 
|ITEM 2.                      |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                             |  |      | 66  | 
|ITEM 3.                      |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                        |  |      | 92  | 
|ITEM 4.                      |  | CONTROLS AND PROCEDURES                                                                                           |  |      | 93  | 
|                            
|PART IIOTHER INFORMATION    | 
|ITEM 1.                      |  | LEGAL PROCEEDINGS                                                                                                 |  |      | 94  | 
|ITEM 1A.                     |  | RISK FACTORS                                                                                                      |  |      | 94  | 
|ITEM 2.                      |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                       |  |      | 94  | 
|ITEM 3.                      |  | DEFAULTS UPON SENIOR SECURITIES                                                                                   |  |      | 94  | 
|ITEM 4.                      |  | MINE SAFETY DISCLOSURES                                                                                           |  |      | 94  | 
|ITEM 5.                      |  | OTHER INFORMATION                                                                                                 |  |      | 94  | 
|ITEM 6.                      |  | EXHIBITS                                                                                                          |  |      | 95  | 
|                             |  | SIGNATURES                                                                                                        |  |      | 100 | 



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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)







|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                                                                      |  | September 30, 2016(Unaudited) |           |   | December 31, 2015 |  
|Assets                                                                                                                                |  |                               |           |   |                   |   |           |  
|Investments, at fair value                                                                                                            |  |                               |           |   |                   |   |           |  
|Non-controlled/unaffiliated investments (amortized cost$4,363,655 and $4,752,111, respectively)                                      |  | $                             | 4,221,805 |   |                   | $ | 4,391,357 |  
|Non-controlled/affiliated investments (amortized cost$159,987 and $125,274, respectively)                                            |  |                               | 179,763   |   |                   |   | 141,518   |  
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Total investments, at fair value (amortized cost$4,523,642 and $4,877,385, respectively)                                             |  |                               | 4,401,568 |   |                   |   | 4,532,875 |  
|Cash                                                                                                                                  |  |                               | 428,036   |   |                   |   | 228,781   |  
|Receivable for investments sold and repaid                                                                                            |  |                               | 20,288    |   |                   |   | 1,925     |  
|Interest receivable                                                                                                                   |  |                               | 53,684    |   |                   |   | 37,879    |  
|Deferred financing costs                                                                                                              |  |                               | 7,097     |   |                   |   | 6,267     |  
|Prepaid expenses and other assets                                                                                                     |  |                               | 54        |   |                   |   | 224       |  
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Total assets                                                                                                                          |  | $                             | 4,910,727 |   |                   | $ | 4,807,951 |  
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Liabilities                                                                                                                           |  |                               |           |   |                   |   |           |  
|Payable for investments purchased                                                                                                     |  | $                             | 30,976    |   |                   | $ |          |  
|Repurchase agreements payable (net of deferred financing costs of $1,208 and $1,647, respectively)(1)                                 |  |                               | 948,792   |   |                   |   | 948,353   |  
|Credit facilities payable (net of deferred financing costs of $222 and $274, respectively)                                            |  |                               | 987,657   |   |                   |   | 1,095,566 |  
|Secured borrowing, at fair value (proceeds of $8,135 and $0, respectively)(2)                                                         |  |                               | 8,229     |   |                   |   |          |  
|Stockholder distributions payable                                                                                                     |  |                               | 10,076    |   |                   |   | 20,273    |  
|Management fees payable                                                                                                               |  |                               | 21,555    |   |                   |   | 21,529    |  
|Subordinated income incentive fees
payable(3)                                                                                         |  |                               | 14,252    |   |                   |   | 16,254    |  
|Administrative services expense payable                                                                                               |  |                               | 1,161     |   |                   |   | 1,392     |  
|Interest payable                                                                                                                      |  |                               | 10,837    |   |                   |   | 9,980     |  
|Directors fees payable                                                                                                               |  |                               | 272       |   |                   |   | 278       |  
|Other accrued expenses and liabilities                                                                                                |  |                               | 1,711     |   |                   |   | 3,914     |  
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Total liabilities                                                                                                                     |  |                               | 2,035,518 |   |                   |   | 2,117,539 |  
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Commitments and contingencies(4)                                                                                                      |  |                               |          |   |                   |   |          |  
|                                                                                                                                      |  |                              
|Stockholders equity                                                                                                                  |  |                               |           |   |                   |   |           |  
|Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding                                          |  |                               |          |   |                   |   |          |  
|Common stock, $0.001 par value, 450,000,000 shares authorized, 326,680,550 and321,507,876 shares issued and outstanding,
respectively |  |                               | 327       |   |                   |   | 322       |  
|Capital in excess of par value                                                                                                        |  |                               | 3,031,862 |   |                   |   | 2,987,791 |  
|Accumulated undistributed net realized gains (losses) on investments and credit default swaps and gain/loss on foreign currency(5)    |  |                               | (81,405   | ) |                   |   | 11,785    |  
|Accumulated undistributed net investment
income(5)                                                                                    |  |                               | 46,593    |   |                   |   | 35,024    |  
|Net unrealized appreciation (depreciation) on investments, secured borrowing and unrealized gain/loss on foreign
currency             |  |                               | (122,168  | ) |                   |   | (344,510  | )
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Total stockholders equity                                                                                                            |  |                               | 2,875,209 |   |                   |   | 2,690,412 |  
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Total liabilities and stockholders equity                                                                                            |  | $                             | 4,910,727 |   |                   | $ | 4,807,951 |  
|                                                                                                                                      |  |                               |           |   |                   |   |           |  
|Net asset value per share of common stock at period end                                                                               |  | $                             | 8.80      |   |                   | $ | 8.37      |  



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



|(2) | See Note 8 for a discussion of the Companys secured borrowing.
|--- | ---------------------------------------------------------------



|(3) | See Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------



|(4) | See Note 10 for a discussion of the Companys commitments and contingencies.
|--- | ----------------------------------------------------------------------------



|(5) | 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 EndedSeptember 30, |             |   | Nine Months EndedSeptember 30, |  
|                                                                                     |  | 2016                            |             |   | 2015                           |   |             | 2016 |  |   | 2015        |  
|Investment income                                                                    |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|From non-controlled/unaffiliated investments:                                        |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Interest income                                                                      |  | $                               | 106,643     |   |                                | $ | 115,929     |      |  | $ | 331,138     |   |  | $ | 351,780     |  
|Fee income                                                                           |  |                                 | 8,525       |   |                                |   | 4,463       |      |  |   | 19,388      |   |  |   | 43,701      |  
|Dividend income                                                                      |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   | 5,804       |  
|From non-controlled/affiliated investments:                                          |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Interest income                                                                      |  |                                 | 3,898       |   |                                |   | 1,835       |      |  |   | 9,041       |   |  |   | 3,030       |  
|Fee income                                                                           |  |                                 |            |   |                                |   |            |      |  |   | 700         |   |  |   | 1,482       |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Total investment income                                                              |  |                                 | 119,066     |   |                                |   | 122,227     |      |  |   | 360,267     |   |  |   | 405,797     |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Operating expenses                                                                   |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Management fees(1)                                                                   |  |                                 | 24,635      |   |                                |   | 25,387      |      |  |   | 72,989      |   |  |   | 74,827      |  
|Subordinated income incentive fees(2)                                                |  |                                 | 14,252      |   |                                |   | 16,102      |      |  |   | 45,836      |   |  |   | 56,410      |  
|Administrative services expenses                                                     |  |                                 | 1,039       |   |                                |   | 992         |      |  |   | 3,096       |   |  |   | 3,208       |  
|Stock transfer agent fees                                                            |  |                                 | 506         |   |                                |   | 464         |      |  |   | 1,549       |   |  |   | 1,482       |  
|Accounting and administrative fees                                                   |  |                                 | 368         |   |                                |   | 402         |      |  |   | 1,069       |   |  |   | 1,258       |  
|Interest expense                                                                     |  |                                 | 17,668      |   |                                |   | 16,035      |      |  |   | 51,827      |   |  |   | 45,740      |  
|Directors fees                                                                      |  |                                 | 290         |   |                                |   | 324         |      |  |   | 835         |   |  |   | 736         |  
|Other general and administrative expenses                                            |  |                                 | 1,166       |   |                                |   | 1,290       |      |  |   | 3,634       |   |  |   | 3,683       |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Operating expenses                                                                   |  |                                 | 59,924      |   |                                |   | 60,996      |      |  |   | 180,835     |   |  |   | 187,344     |  
|Management fee waiver(1)                                                             |  |                                 | (3,080      | ) |                                |   | (3,174      | )    |  |   | (9,124      | ) |  |   | (7,176      | )
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Net expenses                                                                         |  |                                 | 56,844      |   |                                |   | 57,822      |      |  |   | 171,711     |   |  |   | 180,168     |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Net investment income                                                                |  |                                 | 62,222      |   |                                |   | 64,405      |      |  |   | 188,556     |   |  |   | 225,629     |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Realized and unrealized gain/loss                                                    |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Net realized gain (loss) on investments:                                             |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Non-controlled/unaffiliated investments                                              |  |                                 | (40,465     | ) |                                |   | (4,565      | )    |  |   | (87,286     | ) |  |   | (16,261     | )
|Non-controlled/affiliated investments                                                |  |                                 | (14         | ) |                                |   |            |      |  |   | (14         | ) |  |   |            |  
|Net realized gain (loss) on credit default swaps                                     |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   | (19,588     | )
|Net realized gain (loss) on foreign currency                                         |  |                                 | (5          | ) |                                |   | (7          | )    |  |   | (2          | ) |  |   | (301        | )
|Net change in unrealized appreciation (depreciation) on investments:                 |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Non-controlled/unaffiliated investments                                              |  |                                 | 137,129     |   |                                |   | (133,240    | )    |  |   | 218,904     |   |  |   | (166,077    | )
|Non-controlled/affiliated investments                                                |  |                                 | (902        | ) |                                |   | 10,801      |      |  |   | 3,532       |   |  |   | 12,674      |  
|Net change in unrealized appreciation (depreciation) on secured borrowing            |  |                                 | (94         | ) |                                |   |            |      |  |   | (94         | ) |  |   |            |  
|Net change in unrealized appreciation (depreciation) on credit default swaps         |  |                                 |            |   |                                |   |            |      |  |   |            |   |  |   | 19,426      |  
|Net change in unrealized gain (loss) on foreign currency                             |  |                                 |            |   |                                |   | (113        | )    |  |   |            |   |  |   | 7           |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Total net realized and unrealized gain (loss)                                        |  |                                 | 95,649      |   |                                |   | (127,124    | )    |  |   | 135,040     |   |  |   | (170,120    | )
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Net increase (decrease) in net assets resulting from operations                      |  | $                               | 157,871     |   |                                | $ | (62,719     | )    |  | $ | 323,596     |   |  | $ | 55,509      |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Per share informationbasic and
diluted(3)                                           |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Net increase (decrease) in net assets resulting from operations (Earnings per Share) |  | $                               | 0.49        |   |                                | $ | (0.20       | )    |  | $ | 1.00        |   |  | $ | 0.18        |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  
|Weighted average shares outstanding                                                  |  |                                 | 324,468,282 |   |                                |   | 318,458,821 |      |  |   | 323,463,183 |   |  |   | 316,089,601 |  
|                                                                                     |  |                                 |             |   |                                |   |             |      |  |   |             |   |  |   |             |  



|(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 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)







|                                                                                   |  |                                |           |   |      |   |           |  
|---------------------------------------------------------------------------------- |  | ------------------------------ | --------- | - | ---- | - | --------- | -
|                                                                                   |  | Nine Months EndedSeptember 30, |          
|                                                                                   |  | 2016                           |           |   | 2015 |  
|Operations                                                                         |  |                                |           |   |      |   |           |  
|Net investment income                                                              |  | $                              | 188,556   |   |      | $ | 225,629   |  
|Net realized gain (loss) on investments, credit default swaps and foreign currency |  |                                | (87,302   | ) |      |   | (36,150   | )
|Net change in unrealized appreciation (depreciation) on investments                |  |                                | 222,436   |   |      |   | (153,403  | )
|Net change in unrealized appreciation (depreciation) on secured borrowing          |  |                                | (94       | ) |      |   |          |  
|Net change in unrealized appreciation (depreciation) on credit default swaps       |  |                                |          |   |      |   | 19,426    |  
|Net change in unrealized gain (loss) on foreign currency                           |  |                                |          |   |      |   | 7         |  
|                                                                                   |  |                                |           |   |      |   |           |  
|Net increase in net assets resulting from operations                               |  |                                | 323,596   |   |      |   | 55,509    |  
|                                                                                   |  |                                |           |   |      |   |           |  
|Stockholder distributions(1)                                                       |  |                                |           |   |      |   |           |  
|Distributions from net investment income                                           |  |                                | (176,987  | ) |      |   | (178,767  | )
|Distributions from net realized gain on investments                                |  |                                | (5,888    | ) |      |   |          |  
|                                                                                   |  |                                |           |   |      |   |           |  
|Net decrease in net assets resulting from stockholder distributions                |  |                                | (182,875  | ) |      |   | (178,767  | )
|                                                                                   |  |                                |           |   |      |   |           |  
|Capital share transactions(2)                                                      |  |                                |           |   |      |   |           |  
|Reinvestment of stockholder distributions                                          |  |                                | 106,401   |   |      |   | 95,418    |  
|Repurchases of common stock                                                        |  |                                | (62,325   | ) |      |   | (23,294   | )
|                                                                                   |  |                                |           |   |      |   |           |  
|Net increase in net assets resulting from capital share transactions               |  |                                | 44,076    |   |      |   | 72,124    |  
|                                                                                   |  |                                |           |   |      |   |           |  
|Total increase (decrease) in net assets                                            |  |                                | 184,797   |   |      |   | (51,134   | )
|Net assets at beginning of period                                                  |  |                                | 2,690,412 |   |      |   | 2,911,790 |  
|                                                                                   |  |                                |           |   |      |   |           |  
|Net assets at end of period                                                        |  | $                              | 2,875,209 |   |      | $ | 2,860,656 |  
|                                                                                   |  |                                |           |   |      |   |           |  
|Accumulated undistributed net investment income(1)                                 |  | $                              | 46,593    |   |      | $ | 69,005    |  
|                                                                                   |  |                                |           |   |      |   |           |  



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



|(2) | See Note 3 for a discussion of the Companys capital share transactions.
|--- | ------------------------------------------------------------------------

See notes to unaudited consolidated financial statements.



3



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FS Investment Corporation II

Unaudited Consolidated Statements of Cash Flows

(in thousands)







|                                                                                                                                                 |  |                                |           |   |      |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------ | --------- | - | ---- | - | ---------- | -
|                                                                                                                                                 |  | Nine Months EndedSeptember 30, |          
|                                                                                                                                                 |  | 2016                           |           |   | 2015 |  
|Cash flows from operating activities                                                                                                             |  |                                |           |   |      |   |            |  
|Net increase (decrease) in net assets resulting from operations                                                                                  |  | $                              | 323,596   |   |      | $ | 55,509     |  
|Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in)
operating activities: |  |                                |           |   |      |   |            |  
|Purchases of investments                                                                                                                         |  |                                | (806,968  | ) |      |   | (1,495,649 | )
|Paid-in-kind interest                                                                                                                            |  |                                | (17,882   | ) |      |   | (8,416     | )
|Proceeds from sales and repayments of investments                                                                                                |  |                                | 1,104,157 |   |      |   | 1,094,101  |  
|Net realized (gain) loss on investments                                                                                                          |  |                                | 87,300    |   |      |   | 16,261     |  
|Net change in unrealized (appreciation) depreciation on investments                                                                              |  |                                | (222,436  | ) |      |   | 153,403    |  
|Net change in unrealized (appreciation) depreciation on credit default swap                                                                      |  |                                |          |   |      |   | (19,426    | )
|Net change in unrealized (appreciation) depreciation on secured borrowing                                                                        |  |                                | 94        |   |      |   |           |  
|Accretion of discount                                                                                                                            |  |                                | (12,864   | ) |      |   | (28,433    | )
|Amortization of deferred financing costs and discount                                                                                            |  |                                | 2,565     |   |      |   | 2,910      |  
|(Increase) decrease in collateral held at broker for open swap contracts                                                                         |  |                                |          |   |      |   | 37,951     |  
|(Increase) decrease in receivable for investments sold and repaid                                                                                |  |                                | (18,363   | ) |      |   | (18,407    | )
|(Increase) decrease in interest receivable                                                                                                       |  |                                | (15,805   | ) |      |   | 3,977      |  
|(Increase) decrease in receivable for credit default swaps                                                                                       |  |                                |          |   |      |   | 62         |  
|(Increase) decrease in prepaid expenses and other assets                                                                                         |  |                                | 170       |   |      |   | (82        | )
|Increase (decrease) in payable for investments purchased                                                                                         |  |                                | 30,976    |   |      |   | (84,272    | )
|Increase (decrease) in management fees payable                                                                                                   |  |                                | 26        |   |      |   | (856       | )
|Increase (decrease) in subordinated income incentive fees payable                                                                                |  |                                | (2,002    | ) |      |   | 768        |  
|Increase (decrease) in administrative services expense payable                                                                                   |  |                                | (231      | ) |      |   | (280       | )
|Increase (decrease) in interest payable                                                                                                          |  |                                | 857       |   |      |   | 3,112      |  
|Increase (decrease) in directors fees payable                                                                                                   |  |                                | (6        | ) |      |   | 10         |  
|Increase (decrease) in unamortized swap premiums received                                                                                        |  |                                |          |   |      |   | (10,622    | )
|Increase (decrease) in other accrued expenses and liabilities                                                                                    |  |                                | (2,203    | ) |      |   | (737       | )
|                                                                                                                                                 |  |                                |           |   |      |   |            |  
|Net cash provided by (used in) operating activities                                                                                              |  |                                | 450,981   |   |      |   | (299,116   | )
|                                                                                                                                                 |  |                                |           |   |      |   |            |  
|Cash flows from financing activities                                                                                                             |  |                                |           |   |      |   |            |  
|Reinvestment of stockholder distributions                                                                                                        |  |                                | 106,401   |   |      |   | 95,418     |  
|Repurchases of common stock                                                                                                                      |  |                                | (62,325   | ) |      |   | (23,294    | )
|Stockholder distributions                                                                                                                        |  |                                | (193,072  | ) |      |   | (178,361   | )
|Borrowings under credit facilities(1)                                                                                                            |  |                                | 95,000    |   |      |   | 169,700    |  
|Borrowings under repurchase
agreements(2)                                                                                                        |  |                                |          |   |      |   | 299,106    |  
|Proceeds from secured borrowing(3)                                                                                                               |  |                                | 8,132     |   |      |   |           |  
|Repayments of credit facilities(1)                                                                                                               |  |                                | (202,961  | ) |      |   |           |  
|Deferred financing costs paid                                                                                                                    |  |                                | (2,901    | ) |      |   | (4,153     | )
|                                                                                                                                                 |  |                                |           |   |      |   |            |  
|Net cash provided by (used in) financing activities                                                                                              |  |                                | (251,726  | ) |      |   | 358,416    |  
|                                                                                                                                                 |  |                                |           |   |      |   |            |  
|Total increase in cash                                                                                                                           |  |                                | 199,255   |   |      |   | 59,300     |  
|Cash at beginning of period                                                                                                                      |  |                                | 228,781   |   |      |   | 224,583    |  
|                                                                                                                                                 |  |                                |           |   |      |   |            |  
|Cash at end of period                                                                                                                            |  | $                              | 428,036   |   |      | $ | 283,883    |  
|                                                                                                                                                 |  |                                |           |   |      |   |            |  
|Supplemental disclosure                                                                                                                          |  |                                |           |   |      |   |            |  
|Local and excise taxes paid                                                                                                                      |  | $                              | 2,069     |   |      | $ | 1,095      |  
|                                                                                                                                                 |  |                                |           |   |      |   |            |  



|(1) | See Note 8 for a discussion of the Companys credit facilities. During the nine months ended September 30, 2016 and 2015, the Company paid $25,496 and $20,496,
respectively, in interest expense on the credit facilities.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | See Note 8 for a discussion of the Companys repurchase transactions. During the nine months ended September 30, 2016 and 2015, the Company paid $22,909 and
$19,222, respectively, in interest expense pursuant to its repurchase agreements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | See Note 8 for a discussion of the Companys secured borrowing. During the nine months ended September 30, 2016, the Company did not pay any interest expense on
the secured borrowing.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See notes to unaudited consolidated financial statements.



4



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments

As of September 30, 2016

(in thousands, except share amounts)







|                                          |  |                 |  |                                    |  |                               |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|----------------------------------------- |  | --------------- |  | ---------------------------------- |  | ----------------------------- |  | ----- |  | -------- |  | ------------------ | ------- |  | ------------- | - | ------- | ------------ |  | - | ------- | 
|Portfolio
Company(a)                      |  | Footnotes       |  | Industry                           |  | Rate(b)                       |  | Floor |  | Maturity |  | PrincipalAmount(c) |         |  | AmortizedCost |   |         | FairValue(d) | 
|Senior Secured LoansFirst Lien95.5%     |  |                 |  |                                    |  |                               |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|5 Arch Income Fund 2, LLC                 |  | (p)(t)          |  | Diversified Financials             |  | 10.5%                         |  |       |  | 11/18/21 |  | $                  | 8,268   |  |               | $ | 8,293   |              |  | $ | 8,268   | 
|5 Arch Income Fund 2, LLC                 |  | (p)(q)(t)       |  | Diversified Financials             |  | 10.5%                         |  |       |  | 11/18/21 |  |                    | 10,732  |  |               |   | 10,732  |              |  |   | 10,732  | 
|A.T. Cross Co.                            |  | (e)(g)          |  | Retailing                          |  | L+875                         |  |       |  | 9/6/19   |  |                    | 39,208  |  |               |   | 39,208  |              |  |   | 25,484  | 
|Abaco Energy Technologies LLC             |  | (g)(k)          |  | Energy                             |  | L+700, 2.5% PIK(2.5% Max PIK) |  | 1.0%  |  | 11/20/20 |  |                    | 26,607  |  |               |   | 25,465  |              |  |   | 17,295  | 
|Aeneas Buyer Corp.                        |  | (g)(h)          |  | Health Care Equipment & Services   |  | L+500                         |  | 1.0%  |  | 12/18/21 |  |                    | 16,538  |  |               |   | 16,538  |              |  |   | 16,538  | 
|Aeneas Buyer Corp.                        |  | (q)             |  | Health Care Equipment & Services   |  | L+500                         |  | 1.0%  |  | 12/18/21 |  |                    | 1,350   |  |               |   | 1,350   |              |  |   | 1,350   | 
|Aeneas Buyer Corp.                        |  |                 |  | Health Care Equipment & Services   |  | L+812                         |  | 1.0%  |  | 12/18/21 |  |                    | 585     |  |               |   | 585     |              |  |   | 594     | 
|Aeneas Buyer Corp.                        |  | (q)             |  | Health Care Equipment & Services   |  | L+750                         |  | 1.0%  |  | 12/18/21 |  |                    | 15      |  |               |   | 15      |              |  |   | 15      | 
|Altus Power America, Inc.                 |  | (l)             |  | Energy                             |  | L+750                         |  | 1.5%  |  | 10/10/21 |  |                    | 3,125   |  |               |   | 3,125   |              |  |   | 3,188   | 
|American Bath Group, LLC                  |  | (g)(h)(m)       |  | Capital Goods                      |  | L+575                         |  | 1.0%  |  | 9/30/23  |  |                    | 25,000  |  |               |   | 24,000  |              |  |   | 25,000  | 
|AP Exhaust Acquisition, LLC               |  | (e)(h)(i)(k)    |  | Automobiles & Components           |  | L+775                         |  | 1.5%  |  | 1/16/21  |  |                    | 163,378 |  |               |   | 163,378 |              |  |   | 142,139 | 
|Ascension Insurance, Inc.                 |  | (e)(g)(h)(i)    |  | Insurance                          |  | L+825                         |  | 1.3%  |  | 3/5/19   |  |                    | 77,009  |  |               |   | 76,381  |              |  |   | 77,394  | 
|ASG Technologies Group, Inc.              |  | (e)(g)(h)(i)(x) |  | Software & Services                |  | L+787, 1.2% PIK(1.2% Max PIK) |  | 1.0%  |  | 4/30/20  |  |                    | 79,079  |  |               |   | 78,897  |              |  |   | 80,660  | 
|Aspect Software, Inc.                     |  |                 |  | Software & Services                |  | L+950                         |  | 1.0%  |  | 5/25/18  |  |                    | 875     |  |               |   | 875     |              |  |   | 884     | 
|Aspect Software, Inc.                     |  | (q)             |  | Software & Services                |  | L+950                         |  | 1.0%  |  | 5/25/18  |  |                    | 318     |  |               |   | 318     |              |  |   | 321     | 
|Aspect Software, Inc.                     |  |                 |  | Software & Services                |  | L+950                         |  | 1.0%  |  | 5/25/20  |  |                    | 3,738   |  |               |   | 3,738   |              |  |   | 3,775   | 
|Atlas Aerospace LLC                       |  | (g)(l)          |  | Capital Goods                      |  | L+806                         |  | 1.0%  |  | 5/8/19   |  |                    | 57,000  |  |               |   | 57,000  |              |  |   | 57,855  | 
|Atlas Aerospace LLC                       |  | (q)             |  | Capital Goods                      |  | L+750                         |  | 1.0%  |  | 5/8/19   |  |                    | 21,714  |  |               |   | 21,714  |              |  |   | 22,040  | 
|ATX Networks Corp.                        |  | (g)(h)(p)       |  | Technology Hardware & Equipment    |  | L+600                         |  | 1.0%  |  | 6/11/21  |  |                    | 1,955   |  |               |   | 1,932   |              |  |   | 1,916   | 
|BenefitMall Holdings, Inc.                |  | (e)(h)(i)(k)(l) |  | Commercial & Professional Services |  | L+725                         |  | 1.0%  |  | 11/24/20 |  |                    | 112,988 |  |               |   | 112,988 |              |  |   | 115,247 | 
|BenefitMall Holdings, Inc.                |  | (q)             |  | Commercial & Professional Services |  | L+725                         |  | 1.0%  |  | 11/24/20 |  |                    | 41,818  |  |               |   | 41,818  |              |  |   | 42,655  | 
|Blueprint Sub, Inc.                       |  | (e)             |  | Software & Services                |  | L+450                         |  | 1.0%  |  | 5/7/21   |  |                    | 2,456   |  |               |   | 2,456   |              |  |   | 2,456   | 
|Blueprint Sub, Inc.                       |  | (q)             |  | Software & Services                |  | L+450                         |  | 1.0%  |  | 5/7/21   |  |                    | 2,456   |  |               |   | 2,456   |              |  |   | 2,456   | 
|Blueprint Sub, Inc.                       |  | (g)(h)(i)(k)(l) |  | Software & Services                |  | L+750                         |  | 1.0%  |  | 5/7/21   |  |                    | 93,441  |  |               |   | 93,441  |              |  |   | 93,735  | 
|Blueprint Sub, Inc.                       |  | (q)             |  | Software & Services                |  | L+750                         |  | 1.0%  |  | 5/7/21   |  |                    | 12,281  |  |               |   | 12,281  |              |  |   | 12,319  | 
|Cactus Wellhead, LLC                      |  | (g)(h)          |  | Energy                             |  | L+600                         |  | 1.0%  |  | 7/31/20  |  |                    | 16,421  |  |               |   | 15,578  |              |  |   | 12,839  | 
|Cadence Aerospace Finance, Inc.           |  | (g)             |  | Capital Goods                      |  | L+525                         |  | 1.3%  |  | 5/9/18   |  |                    | 2,723   |  |               |   | 2,732   |              |  |   | 2,546   | 
|Caesars Entertainment Operating Co., Inc. |  | (k)(o)(p)       |  | Consumer Services                  |  | 5.8%                          |  |       |  | 3/1/17   |  |                    | 14,771  |  |               |   | 14,586  |              |  |   | 14,990  | 



See
notes to unaudited consolidated financial statements.



5



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                             |  |                 |  |                                    |  |                               |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|-------------------------------------------- |  | --------------- |  | ---------------------------------- |  | ----------------------------- |  | ----- |  | -------- |  | ------------------ | ------- |  | ------------- | - | ------- | ------------ |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes       |  | Industry                           |  | Rate(b)                       |  | Floor |  | Maturity |  | PrincipalAmount(c) |         |  | AmortizedCost |   |         | FairValue(d) | 
|Caesars Entertainment Operating Co., Inc.    |  | (k)(o)(p)       |  | Consumer Services                  |  | 6.7%                          |  |       |  | 3/1/17   |  | $                  | 10,416  |  |               | $ | 10,297  |              |  | $ | 10,476  | 
|Caesars Entertainment Operating Co., Inc.    |  | (e)(g)(j)(o)(p) |  | Consumer Services                  |  | 9.0%                          |  |       |  | 3/1/17   |  |                    | 50,570  |  |               |   | 50,490  |              |  |   | 50,714  | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(k)          |  | Consumer Services                  |  | L+600                         |  | 1.0%  |  | 10/11/20 |  |                    | 33,871  |  |               |   | 32,534  |              |  |   | 33,871  | 
|CEVA Group Plc                               |  | (p)(q)          |  | Transportation                     |  | L+500                         |  |       |  | 3/19/19  |  |                    | 20,000  |  |               |   | 20,000  |              |  |   | 15,981  | 
|Cimarron Energy Inc.                         |  | (l)             |  | Energy                             |  | L+775, 3.8% PIK(3.8% Max PIK) |  | 1.0%  |  | 12/15/19 |  |                    | 24,724  |  |               |   | 24,724  |              |  |   | 24,847  | 
|Corner Investment PropCo, LLC                |  | (e)(g)(k)       |  | Consumer Services                  |  | L+975                         |  | 1.3%  |  | 11/2/19  |  |                    | 38,758  |  |               |   | 39,118  |              |  |   | 38,370  | 
|Crestwood Holdings LLC                       |  | (g)             |  | Energy                             |  | L+800                         |  | 1.0%  |  | 6/19/19  |  |                    | 5,035   |  |               |   | 5,024   |              |  |   | 4,679   | 
|Diamond Resorts International, Inc.          |  | (h)(p)          |  | Consumer Services                  |  | L+600                         |  | 1.0%  |  | 9/2/23   |  |                    | 15,000  |  |               |   | 14,628  |              |  |   | 14,953  | 
|Eastman Kodak Co.                            |  | (g)             |  | Consumer Durables & Apparel        |  | L+625                         |  | 1.0%  |  | 9/3/19   |  |                    | 6,958   |  |               |   | 6,889   |              |  |   | 6,944   | 
|Emerging Markets Communications, LLC         |  | (g)(h)          |  | Telecommunication Services         |  | L+575                         |  | 1.0%  |  | 7/1/21   |  |                    | 12,838  |  |               |   | 11,979  |              |  |   | 12,412  | 
|Fairway Group Acquisition Co.                |  |                 |  | Food & Staples Retailing           |  | L+800                         |  | 1.0%  |  | 1/3/20   |  |                    | 2,492   |  |               |   | 2,492   |              |  |   | 2,517   | 
|Fairway Group Acquisition Co.                |  |                 |  | Food & Staples Retailing           |  | 10.0% PIK(10.0% Max PIK)      |  |       |  | 1/3/20   |  |                    | 1,568   |  |               |   | 1,568   |              |  |   | 1,435   | 
|Fox Head, Inc.                               |  | (h)(k)(l)       |  | Consumer Durables & Apparel        |  | L+850                         |  | 1.0%  |  | 12/19/20 |  |                    | 13,186  |  |               |   | 13,186  |              |  |   | 12,901  | 
|FR Dixie Acquisition Corp.                   |  | (g)             |  | Energy                             |  | L+475                         |  | 1.0%  |  | 12/18/20 |  |                    | 4,095   |  |               |   | 4,081   |              |  |   | 1,658   | 
|Greystone Equity Member Corp.                |  | (f)(p)          |  | Diversified Financials             |  | L+1050                        |  |       |  | 3/31/21  |  |                    | 34,344  |  |               |   | 34,486  |              |  |   | 34,301  | 
|Greystone Equity Member Corp.                |  | (f)(p)(q)       |  | Diversified Financials             |  | L+1100                        |  |       |  | 3/31/21  |  |                    | 5,656   |  |               |   | 5,656   |              |  |   | 5,649   | 
|Gulf Finance, LLC                            |  | (h)             |  | Energy                             |  | L+525                         |  | 1.0%  |  | 8/25/23  |  |                    | 5,000   |  |               |   | 4,851   |              |  |   | 4,877   | 
|H.M. Dunn Co., Inc.                          |  | (k)(l)          |  | Capital Goods                      |  | L+906                         |  | 1.0%  |  | 3/26/21  |  |                    | 60,000  |  |               |   | 60,000  |              |  |   | 60,675  | 
|H.M. Dunn Co., Inc.                          |  | (q)             |  | Capital Goods                      |  | L+725                         |  | 1.0%  |  | 3/26/21  |  |                    | 21,429  |  |               |   | 21,429  |              |  |   | 21,670  | 
|Harvey Industries, Inc.                      |  | (h)             |  | Capital Goods                      |  | L+800                         |  | 1.0%  |  | 10/1/21  |  |                    | 9,333   |  |               |   | 9,333   |              |  |   | 9,520   | 
|Hybrid Promotions, LLC                       |  | (h)(k)(l)       |  | Consumer Durables & Apparel        |  | L+850                         |  | 1.0%  |  | 12/19/20 |  |                    | 48,349  |  |               |   | 48,349  |              |  |   | 47,305  | 
|Industrial Group Intermediate Holdings, LLC  |  | (g)(h)(i)(k)(l) |  | Materials                          |  | L+800                         |  | 1.3%  |  | 5/31/20  |  |                    | 126,151 |  |               |   | 126,151 |              |  |   | 128,044 | 
|Industry City TI Lessor, L.P.                |  | (k)             |  | Consumer Services                  |  | 10.8%, 1.0% PIK(1.0% Max PIK) |  |       |  | 6/30/26  |  |                    | 13,214  |  |               |   | 13,214  |              |  |   | 13,676  | 
|Intralinks, Inc.                             |  | (g)(h)(k)(p)    |  | Software & Services                |  | L+525                         |  | 2.0%  |  | 2/24/19  |  |                    | 24,375  |  |               |   | 24,247  |              |  |   | 24,161  | 
|JMC Acquisition Merger Corp.                 |  | (g)(h)(i)       |  | Capital Goods                      |  | L+857                         |  | 1.0%  |  | 11/6/21  |  |                    | 17,038  |  |               |   | 17,038  |              |  |   | 17,208  | 
|JSS Holdings, Inc.                           |  | (g)             |  | Capital Goods                      |  | L+650                         |  | 1.0%  |  | 8/31/21  |  |                    | 7,600   |  |               |   | 7,158   |              |  |   | 7,562   | 
|Latham Pool Products, Inc.                   |  | (g)(h)(k)       |  | Commercial & Professional Services |  | L+775                         |  | 1.0%  |  | 6/29/21  |  |                    | 35,000  |  |               |   | 35,000  |              |  |   | 35,000  | 
|Logans Roadhouse, Inc.                      |  |                 |  | Consumer Services                  |  | L+850 PIK(L+850 Max PIK)      |  | 1.0%  |  | 11/14/16 |  |                    | 1,401   |  |               |   | 1,401   |              |  |   | 1,401   | 
|Logans Roadhouse, Inc.                      |  | (q)             |  | Consumer Services                  |  | L+850 PIK(L+850 Max PIK)      |  | 1.0%  |  | 11/14/16 |  |                    | 1,990   |  |               |   | 1,990   |              |  |   | 1,990   | 



See
notes to unaudited consolidated financial statements.



6



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                             |  |                    |  |                                    |  |                               |  |       |  |          |  |                    |         |  |               |   |         |              |  |   |         | 
|-------------------------------------------- |  | ------------------ |  | ---------------------------------- |  | ----------------------------- |  | ----- |  | -------- |  | ------------------ | ------- |  | ------------- | - | ------- | ------------ |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes          |  | Industry                           |  | Rate(b)                       |  | Floor |  | Maturity |  | PrincipalAmount(c) |         |  | AmortizedCost |   |         | FairValue(d) | 
|MB Precision Holdings LLC                    |  | (e)(h)(i)(k)       |  | Capital Goods                      |  | L+725, 1.5% PIK(1.5% Max PIK) |  | 1.3%  |  | 1/23/20  |  | $                  | 59,911  |  |               | $ | 59,911  |              |  | $ | 57,215  | 
|MMM Holdings, Inc.                           |  | (g)                |  | Health Care Equipment & Services   |  | L+825                         |  | 1.5%  |  | 12/12/17 |  |                    | 2,439   |  |               |   | 2,444   |              |  |   | 2,360   | 
|Moxie Liberty LLC                            |  | (g)(i)             |  | Energy                             |  | L+650                         |  | 1.0%  |  | 8/21/20  |  |                    | 11,781  |  |               |   | 11,809  |              |  |   | 11,634  | 
|Moxie Patriot LLC                            |  | (i)                |  | Energy                             |  | L+575                         |  | 1.0%  |  | 12/19/20 |  |                    | 5,452   |  |               |   | 5,418   |              |  |   | 5,356   | 
|MSO of Puerto Rico, Inc.                     |  | (g)                |  | Health Care Equipment & Services   |  | L+825                         |  | 1.5%  |  | 12/12/17 |  |                    | 1,773   |  |               |   | 1,777   |              |  |   | 1,716   | 
|New Star Metals Inc.                         |  | (e)(f)(g)(h)(i)(k) |  | Capital Goods                      |  | L+800                         |  | 1.3%  |  | 3/20/20  |  |                    | 111,231 |  |               |   | 111,231 |              |  |   | 114,568 | 
|Nobel Learning Communities, Inc.             |  |                    |  | Consumer Services                  |  | L+450                         |  | 1.0%  |  | 4/27/20  |  |                    | 4,752   |  |               |   | 4,752   |              |  |   | 4,752   | 
|Nobel Learning Communities, Inc.             |  | (q)                |  | Consumer Services                  |  | L+450                         |  | 1.0%  |  | 4/27/20  |  |                    | 6,429   |  |               |   | 6,429   |              |  |   | 6,429   | 
|Nobel Learning Communities, Inc.             |  | (g)(k)(l)          |  | Consumer Services                  |  | L+842                         |  | 1.0%  |  | 4/27/21  |  |                    | 84,472  |  |               |   | 84,472  |              |  |   | 85,739  | 
|North Haven Cadence Buyer, Inc.              |  | (q)                |  | Consumer Services                  |  | L+500                         |  | 1.0%  |  | 9/2/21   |  |                    | 2,625   |  |               |   | 2,625   |              |  |   | 2,625   | 
|North Haven Cadence Buyer, Inc.              |  | (e)(g)(i)(k)(l)    |  | Consumer Services                  |  | L+813                         |  | 1.0%  |  | 9/2/22   |  |                    | 70,875  |  |               |   | 70,875  |              |  |   | 70,875  | 
|North Haven Cadence Buyer, Inc.              |  | (q)                |  | Consumer Services                  |  | L+750                         |  | 1.0%  |  | 9/2/22   |  |                    | 16,625  |  |               |   | 16,625  |              |  |   | 16,625  | 
|Nova Wildcat Amerock, LLC                    |  | (e)(g)(h)          |  | Consumer Durables & Apparel        |  | L+865                         |  | 1.3%  |  | 9/10/19  |  |                    | 70,077  |  |               |   | 70,077  |              |  |   | 63,945  | 
|PHRC License, LLC                            |  | (f)(h)(i)          |  | Consumer Services                  |  | L+900                         |  | 1.5%  |  | 8/14/20  |  |                    | 58,787  |  |               |   | 58,787  |              |  |   | 58,787  | 
|Polymer Additives, Inc.                      |  | (h)(i)(l)          |  | Materials                          |  | L+888                         |  | 1.0%  |  | 12/20/21 |  |                    | 63,068  |  |               |   | 63,068  |              |  |   | 63,384  | 
|Polymer Additives, Inc.                      |  | (l)                |  | Materials                          |  | L+978                         |  | 1.0%  |  | 12/20/21 |  |                    | 1,941   |  |               |   | 1,941   |              |  |   | 2,019   | 
|Production Resource Group, LLC               |  | (g)(h)(i)(l)       |  | Media                              |  | L+850                         |  | 1.0%  |  | 7/23/19  |  |                    | 47,500  |  |               |   | 47,500  |              |  |   | 47,263  | 
|Production Resource Group, LLC               |  | (g)(k)(l)          |  | Media                              |  | L+850                         |  | 1.0%  |  | 7/23/19  |  |                    | 48,099  |  |               |   | 48,099  |              |  |   | 48,339  | 
|Professional Plumbing Group, Inc.            |  | (e)(g)             |  | Capital Goods                      |  | L+875                         |  | 0.8%  |  | 7/31/19  |  |                    | 25,200  |  |               |   | 25,200  |              |  |   | 25,326  | 
|Propulsion Acquisition, LLC                  |  | (e)(g)(h)          |  | Commercial & Professional Services |  | L+600                         |  | 1.0%  |  | 7/13/21  |  |                    | 37,500  |  |               |   | 34,983  |              |  |   | 36,563  | 
|PSKW, LLC                                    |  | (e)(g)(h)          |  | Health Care Equipment & Services   |  | L+840                         |  | 1.0%  |  | 11/25/21 |  |                    | 26,000  |  |               |   | 26,000  |              |  |   | 25,472  | 
|Roadrunner Intermediate Acquisition Co., LLC |  | (g)                |  | Health Care Equipment & Services   |  | L+800                         |  | 1.0%  |  | 9/22/21  |  |                    | 7,800   |  |               |   | 7,800   |              |  |   | 7,902   | 
|Rogue Wave Software, Inc.                    |  | (e)                |  | Software & Services                |  | L+802                         |  | 1.0%  |  | 9/25/21  |  |                    | 18,788  |  |               |   | 18,788  |              |  |   | 18,506  | 
|Sequential Brands Group, Inc.                |  | (e)(i)(k)(l)(p)    |  | Consumer Durables & Apparel        |  | L+900                         |  |       |  | 7/1/22   |  |                    | 159,288 |  |               |   | 159,288 |              |  |   | 162,474 | 
|Sorenson Communications, Inc.                |  | (e)(g)(h)(i)(k)    |  | Telecommunication Services         |  | L+575                         |  | 2.3%  |  | 4/30/20  |  |                    | 99,715  |  |               |   | 99,394  |              |  |   | 99,715  | 
|Sports Authority, Inc.                       |  | (g)(n)(o)          |  | Retailing                          |  | L+600                         |  | 1.5%  |  | 11/16/17 |  |                    | 7,818   |  |               |   | 6,676   |              |  |   | 1,915   | 
|Stonewall Gas Gathering LLC                  |  | (g)(i)             |  | Capital Goods                      |  | L+775                         |  | 1.0%  |  | 1/28/22  |  |                    | 5,715   |  |               |   | 5,494   |              |  |   | 5,844   | 
|SunGard Availability Services Capital, Inc.  |  | (g)(j)             |  | Software & Services                |  | L+500                         |  | 1.0%  |  | 3/29/19  |  |                    | 10,749  |  |               |   | 10,129  |              |  |   | 10,158  | 
|Sunnova Asset Portfolio 5 Holdings, LLC      |  |                    |  | Energy                             |  | 12.0% PIK(12.0% Max PIK)      |  |       |  | 11/14/21 |  |                    | 9,418   |  |               |   | 9,272   |              |  |   | 9,512   | 
|Swift Worldwide Resources US Holdings Corp.  |  | (g)(i)             |  | Energy                             |  | L+1100                        |  | 1.0%  |  | 7/20/21  |  |                    | 19,587  |  |               |   | 19,587  |              |  |   | 18,902  | 
|ThermaSys Corp.                              |  | (g)                |  | Capital Goods                      |  | L+400                         |  | 1.3%  |  | 5/3/19   |  |                    | 4,682   |  |               |   | 4,683   |              |  |   | 3,856   | 



See
notes to unaudited consolidated financial statements.



7



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                       |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   |           |   |  |   |           |  
|-------------------------------------- |  | --------- | ------------------ |  | -------- | ---------------------------------------------- | ------- |  | ------------------------------ | ----- |  |  | -------- |  |  | ------------------ | -------- |  | ------------- | - | ------- | ------------ |  | - | --------- | - |  | - | --------- | -
|Portfolio
Company(a)                   |  | Footnotes |                    |  | Industry |                                                | Rate(b) |  |                                | Floor |  |  | Maturity |  |  | PrincipalAmount(c) |          |  | AmortizedCost |   |         | FairValue(d) | 
|TierPoint, LLC                         |  |           | (g)                |  |          | Software & Services                            |         |  | L+450                          |       |  |  | 1.0%     |  |  |                    | 12/2/21  |  |               | $ | 4,537   |              |  | $ | 4,453     |   |  | $ | 4,480     |  
|Transplace Texas, LP                   |  |           | (e)(k)             |  |          | Transportation                                 |         |  | L+745                          |       |  |  | 1.0%     |  |  |                    | 9/16/21  |  |               |   | 20,676  |              |  |   | 20,676    |   |  |   | 20,779    |  
|Transplace Texas, LP                   |  |           | (q)                |  |          | Transportation                                 |         |  | L+700                          |       |  |  | 1.0%     |  |  |                    | 9/16/21  |  |               |   | 486     |              |  |   | 487       |   |  |   | 489       |  
|U.S. Xpress Enterprises, Inc.          |  |           | (e)(h)(i)(k)       |  |          | Transportation                                 |         |  | L+950, 0.0% PIK(1.3% Max PIK)  |       |  |  | 1.5%     |  |  |                    | 5/30/19  |  |               |   | 82,538  |              |  |   | 82,538    |   |  |   | 82,538    |  
|UTEX Industries, Inc.                  |  |           | (l)                |  |          | Energy                                         |         |  | L+400                          |       |  |  | 1.0%     |  |  |                    | 5/21/21  |  |               |   | 1,128   |              |  |   | 1,124     |   |  |   | 842       |  
|Vertellus Performance Chemicals LLC    |  |           | (k)(l)             |  |          | Materials                                      |         |  | L+950                          |       |  |  | 1.0%     |  |  |                    | 1/30/20  |  |               |   | 65,000  |              |  |   | 65,000    |   |  |   | 61,776    |  
|Warren Resources, Inc.                 |  |           | (e)(f)(k)(n)       |  |          | Energy                                         |         |  | L+850                          |       |  |  | 1.0%     |  |  |                    | 5/22/20  |  |               |   | 70,443  |              |  |   | 70,443    |   |  |   | 50,170    |  
|Waste Pro USA, Inc.                    |  |           | (e)(f)(h)(i)(k)(l) |  |          | Commercial & Professional Services             |         |  | L+750                          |       |  |  | 1.0%     |  |  |                    | 10/15/20 |  |               |   | 122,674 |              |  |   | 122,674   |   |  |   | 124,975   |  
|Zeta Interactive Holdings Corp.        |  |           | (e)(g)(h)          |  |          | Software & Services                            |         |  | L+750                          |       |  |  | 1.0%     |  |  |                    | 7/29/22  |  |               |   | 28,076  |              |  |   | 28,156    |   |  |   | 28,183    |  
|Zeta Interactive Holdings Corp.        |  |           | (g)(h)(w)          |  |          | Software & Services                            |         |  | L+750                          |       |  |  | 1.0%     |  |  |                    | 7/29/22  |  |               |   | 8,214   |              |  |   | 8,135     |   |  |   | 8,224     |  
|Zeta Interactive Holdings Corp.        |  |           | (q)                |  |          | Software & Services                            |         |  | L+750                          |       |  |  | 1.0%     |  |  |                    | 7/29/22  |  |               |   | 5,109   |              |  |   | 5,109     |   |  |   | 5,129     |  
|Zeta Interactive Holdings Corp.        |  |           | (q)(w)             |  |          | Software & Services                            |         |  | L+750                          |       |  |  | 1.0%     |  |  |                    | 7/29/22  |  |               |   | 1,314   |              |  |   | 1,314     |   |  |   | 1,319     |  
|                                       |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   |           |   |  |   |           |  
|Total Senior Secured LoansFirst Lien  |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   | 2,984,436 |   |  |   | 2,918,168 |  
|Unfunded Loan Commitments              |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   | (172,348  | ) |  |   | (172,348  | )
|                                       |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   |           |   |  |   |           |  
|Net Senior Secured LoansFirst Lien    |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   | 2,812,088 |   |  |   | 2,745,820 |  
|                                       |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   |           |   |  |   |           |  
|Senior Secured LoansSecond Lien26.6% |  |           |                    |  |          |                                                |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |         |              |  |   |           |   |  |   |           |  
|Alison US LLC                          |  |           | (j)(p)             |  |          | Capital Goods                                  |         |  | L+850                          |       |  |  | 1.0%     |  |  |                    | 8/29/22  |  |               |   | 4,444   |              |  |   | 4,299     |   |  |   | 4,115     |  
|American Bath Group, LLC               |  |           | (f)(m)             |  |          | Capital Goods                                  |         |  | L+975                          |       |  |  | 1.0%     |  |  |                    | 9/30/24  |  |               |   | 7,000   |              |  |   | 6,440     |   |  |   | 6,755     |  
|AP Exhaust Acquisition, LLC            |  |           | (e)                |  |          | Automobiles & Components                       |         |  | 12.0% PIK(12.0% Max PIK)       |       |  |  |          |  |  |                    | 9/28/21  |  |               |   | 37,756  |              |  |   | 37,756    |   |  |   | 31,149    |  
|Arena Energy, LP                       |  |           | (e)(g)             |  |          | Energy                                         |         |  | L+900, 4.0% PIK(4.0% Max PIK)  |       |  |  | 1.0%     |  |  |                    | 1/24/21  |  |               |   | 23,625  |              |  |   | 23,625    |   |  |   | 23,521    |  
|Ascent ResourcesMarcellus, LLC        |  |           | (g)                |  |          | Energy                                         |         |  | L+750                          |       |  |  | 1.0%     |  |  |                    | 8/4/21   |  |               |   | 3,333   |              |  |   | 3,291     |   |  |   | 313       |  
|Ascent ResourcesUtica, LLC            |  |           | (e)(f)(i)(l)       |  |          | Energy                                         |         |  | L+950, 2.0% PIK(2.0% Max PIK)  |       |  |  | 1.5%     |  |  |                    | 9/30/18  |  |               |   | 247,858 |              |  |   | 247,118   |   |  |   | 244,140   |  
|ASG Technologies Group, Inc.           |  |           | (e)(f)(x)          |  |          | Software & Services                            |         |  | L+1100, 0.0% PIK(6.0% Max PIK) |       |  |  | 1.0%     |  |  |                    | 6/27/22  |  |               |   | 23,333  |              |  |   | 16,361    |   |  |   | 16,275    |  
|BPA Laboratories Inc.                  |  |           | (e)                |  |          | Pharmaceuticals, Biotechnology & Life Sciences |         |  | L+250                          |       |  |  |          |  |  |                    | 7/3/17   |  |               |   | 3,272   |              |  |   | 3,062     |   |  |   | 2,372     |  
|Byrider Finance, LLC                   |  |           | (f)                |  |          | Automobiles & Components                       |         |  | L+1000, 0.5% PIK(0.5% Max PIK) |       |  |  | 1.3%     |  |  |                    | 8/22/20  |  |               |   | 16,723  |              |  |   | 16,723    |   |  |   | 16,556    |  
|Checkout Holding Corp.                 |  |           | (l)                |  |          | Media                                          |         |  | L+675                          |       |  |  | 1.0%     |  |  |                    | 4/11/22  |  |               |   | 10,000  |              |  |   | 9,943     |   |  |   | 7,237     |  
|Chief Exploration & Development LLC    |  |           | (g)                |  |          | Energy                                         |         |  | L+650                          |       |  |  | 1.3%     |  |  |                    | 5/16/21  |  |               |   | 1,174   |              |  |   | 1,166     |   |  |   | 1,107     |  
|Compuware Corp.                        |  |           | (e)                |  |          | Software & Services                            |         |  | L+825                          |       |  |  | 1.0%     |  |  |                    | 12/15/22 |  |               |   | 10,000  |              |  |   | 8,885     |   |  |   | 9,444     |  



See
notes to unaudited consolidated financial statements.



8



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                       |  |              |  |                                  |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         | 
|-------------------------------------- |  | ------------ |  | -------------------------------- |  | ------------------------------ |  | ----- |  | -------- |  | ------------------ | ------ |  | ------------- | - | ------- | ------------ |  | - | ------- | 
|Portfolio
Company(a)                   |  | Footnotes    |  | Industry                         |  | Rate(b)                        |  | Floor |  | Maturity |  | PrincipalAmount(c) |        |  | AmortizedCost |   |         | FairValue(d) | 
|Consolidated Precision Products Corp.  |  | (e)          |  | Capital Goods                    |  | L+775                          |  | 1.0%  |  | 4/30/21  |  | $                  | 6,932  |  |               | $ | 6,908   |              |  | $ | 6,290   | 
|Crossmark Holdings, Inc.               |  | (l)          |  | Media                            |  | L+750                          |  | 1.3%  |  | 12/21/20 |  |                    | 7,778  |  |               |   | 7,791   |              |  |   | 3,519   | 
|Eastman Kodak Co.                      |  | (l)          |  | Consumer Durables & Apparel      |  | L+950                          |  | 1.3%  |  | 9/3/20   |  |                    | 25,000 |  |               |   | 24,621  |              |  |   | 24,750  | 
|Fairway Group Acquisition Co.          |  |              |  | Food & Staples Retailing         |  | 11.0% PIK(11.0% Max PIK)       |  |       |  | 10/3/21  |  |                    | 1,362  |  |               |   | 1,362   |              |  |   | 1,117   | 
|Fieldwood Energy LLC                   |  | (f)          |  | Energy                           |  | L+713                          |  | 1.3%  |  | 9/30/20  |  |                    | 2,667  |  |               |   | 2,008   |              |  |   | 1,076   | 
|Gruden Acquisition, Inc.               |  | (e)          |  | Transportation                   |  | L+850                          |  | 1.0%  |  | 8/18/23  |  |                    | 15,000 |  |               |   | 14,349  |              |  |   | 11,611  | 
|Inmar, Inc.                            |  | (l)          |  | Software & Services              |  | L+700                          |  | 1.0%  |  | 1/27/22  |  |                    | 2,830  |  |               |   | 2,809   |              |  |   | 2,613   | 
|Jazz Acquisition, Inc.                 |  | (g)          |  | Capital Goods                    |  | L+675                          |  | 1.0%  |  | 6/19/22  |  |                    | 3,700  |  |               |   | 3,744   |              |  |   | 3,108   | 
|Jonah Energy LLC                       |  | (f)          |  | Energy                           |  | L+650                          |  | 1.0%  |  | 5/12/21  |  |                    | 1,250  |  |               |   | 1,089   |              |  |   | 1,119   | 
|JW Aluminum Co.                        |  | (e)(f)(l)(x) |  | Materials                        |  | L+850 PIK(L+850 Max PIK)       |  | 0.8%  |  | 11/17/20 |  |                    | 32,755 |  |               |   | 32,745  |              |  |   | 33,001  | 
|Mitchell International, Inc.           |  | (k)          |  | Software & Services              |  | L+750                          |  | 1.0%  |  | 10/11/21 |  |                    | 8,843  |  |               |   | 9,003   |              |  |   | 8,669   | 
|National Surgical Hospitals, Inc.      |  | (e)          |  | Health Care Equipment & Services |  | L+900                          |  | 1.0%  |  | 6/1/23   |  |                    | 17,500 |  |               |   | 17,500  |              |  |   | 17,360  | 
|Neff Rental LLC                        |  | (l)          |  | Capital Goods                    |  | L+625                          |  | 1.0%  |  | 6/9/21   |  |                    | 7,409  |  |               |   | 7,382   |              |  |   | 7,260   | 
|Nielsen & Bainbridge, LLC              |  | (f)(h)       |  | Consumer Durables & Apparel      |  | L+925                          |  | 1.0%  |  | 8/15/21  |  |                    | 16,675 |  |               |   | 16,480  |              |  |   | 16,175  | 
|P2 Upstream Acquisition Co.            |  | (l)          |  | Energy                           |  | L+800                          |  | 1.0%  |  | 4/30/21  |  |                    | 14,500 |  |               |   | 14,697  |              |  |   | 12,651  | 
|Paw Luxco II Sarl                      |  | (p)          |  | Consumer Durables & Apparel      |  | EURIBOR+950                    |  |       |  | 1/29/19  |  |                   | 5,727  |  |               |   | 7,221   |              |  |   | 4,643   | 
|Payless Inc.                           |  | (l)          |  | Retailing                        |  | L+750                          |  | 1.0%  |  | 3/11/22  |  | $                  | 10,841 |  |               |   | 10,759  |              |  |   | 2,277   | 
|Peak 10, Inc.                          |  | (h)          |  | Software & Services              |  | L+725                          |  | 1.0%  |  | 6/17/22  |  |                    | 5,500  |  |               |   | 5,459   |              |  |   | 5,129   | 
|Penton Media, Inc.                     |  | (j)          |  | Media                            |  | L+775                          |  | 1.3%  |  | 10/2/20  |  |                    | 5,511  |  |               |   | 5,458   |              |  |   | 5,513   | 
|PSAV Acquisition Corp.                 |  | (e)(k)       |  | Technology Hardware & Equipment  |  | L+825                          |  | 1.0%  |  | 1/24/22  |  |                    | 80,000 |  |               |   | 79,119  |              |  |   | 80,000  | 
|Renaissance Learning, Inc.             |  | (k)          |  | Software & Services              |  | L+700                          |  | 1.0%  |  | 4/11/22  |  |                    | 3,736  |  |               |   | 3,708   |              |  |   | 3,683   | 
|Spencer Gifts LLC                      |  | (l)          |  | Retailing                        |  | L+825                          |  | 1.0%  |  | 6/29/22  |  |                    | 20,000 |  |               |   | 20,094  |              |  |   | 16,500  | 
|Stardust Finance Holdings, Inc.        |  | (l)(p)       |  | Materials                        |  | L+950                          |  | 1.0%  |  | 3/13/23  |  |                    | 2,000  |  |               |   | 1,986   |              |  |   | 2,001   | 
|Titan Energy Operating, LLC            |  | (e)(h)(k)    |  | Energy                           |  | 2.0%, L+900 PIK(L+900 Max PIK) |  | 1.0%  |  | 2/23/20  |  |                    | 68,215 |  |               |   | 55,869  |              |  |   | 56,496  | 
|TNS, Inc.                              |  | (h)(j)(l)    |  | Software & Services              |  | L+800                          |  | 1.0%  |  | 8/14/20  |  |                    | 43,475 |  |               |   | 43,206  |              |  |   | 43,149  | 
|Vantage Energy, LLC                    |  | (f)(i)       |  | Energy                           |  | L+750                          |  | 1.0%  |  | 12/20/18 |  |                    | 17,954 |  |               |   | 17,868  |              |  |   | 17,281  | 
|Vantage Energy II, LLC                 |  | (i)          |  | Energy                           |  | L+750                          |  | 1.0%  |  | 5/8/17   |  |                    | 13,000 |  |               |   | 13,000  |              |  |   | 13,000  | 
|Winebow Holdings, Inc.                 |  |              |  | Retailing                        |  | L+750                          |  | 1.0%  |  | 1/2/22   |  |                    | 2,775  |  |               |   | 2,758   |              |  |   | 2,559   | 
|                                       |  |              |  |                                  |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         | 
|Total Senior Secured LoansSecond Lien |  |              |  |                                  |  |                                |  |       |  |          |  |                    |        |  |               |   | 807,662 |              |  |   | 765,534 | 
|                                       |  |              |  |                                  |  |                                |  |       |  |          |  |                    |        |  |               |   |         |              |  |   |         | 



See
notes to unaudited consolidated financial statements.



9



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                             |  |           |              |  |          |                                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |        |              |  |   |         |  |  |   |         | 
|-------------------------------------------- |  | --------- | ------------ |  | -------- | ---------------------------------------- | ------- |  | ------------------------------ | ----- |  |  | -------- |  |  | ------------------ | -------- |  | ------------- | - | ------ | ------------ |  | - | ------- |  |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes |              |  | Industry |                                          | Rate(b) |  |                                | Floor |  |  | Maturity |  |  | PrincipalAmount(c) |          |  | AmortizedCost |   |        | FairValue(d) | 
|Senior Secured Bonds5.4%                    |  |           |              |  |          |                                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |        |              |  |   |         |  |  |   |         | 
|Advanced Lighting Technologies, Inc.         |  |           | (e)(f)       |  |          | Materials                                |         |  | 10.5%                          |       |  |  |          |  |  |                    | 6/1/19   |  |               | $ | 35,500 |              |  | $ | 32,979  |  |  | $ | 8,875   | 
|Caesars Entertainment Resort Properties, LLC |  |           | (e)(j)       |  |          | Consumer Services                        |         |  | 11.0%                          |       |  |  |          |  |  |                    | 10/1/21  |  |               |   | 37,350 |              |  |   | 37,932  |  |  |   | 40,198  | 
|CEVA Group Plc                               |  |           | (j)(p)       |  |          | Transportation                           |         |  | 7.0%                           |       |  |  |          |  |  |                    | 3/1/21   |  |               |   | 5,000  |              |  |   | 4,364   |  |  |   | 4,056   | 
|CEVA Group Plc                               |  |           | (j)(p)       |  |          | Transportation                           |         |  | 9.0%                           |       |  |  |          |  |  |                    | 9/1/21   |  |               |   | 2,000  |              |  |   | 2,000   |  |  |   | 1,299   | 
|Diamond Resorts International, Inc.          |  |           | (l)(p)       |  |          | Consumer Services                        |         |  | 7.8%                           |       |  |  |          |  |  |                    | 9/1/23   |  |               |   | 10,000 |              |  |   | 10,000  |  |  |   | 10,025  | 
|FourPoint Energy, LLC                        |  |           | (e)(f)       |  |          | Energy                                   |         |  | 9.0%                           |       |  |  |          |  |  |                    | 12/31/21 |  |               |   | 46,313 |              |  |   | 44,826  |  |  |   | 45,849  | 
|Global A&T Electronics Ltd.                  |  |           | (f)(l)(p)    |  |          | Semiconductors & Semiconductor Equipment |         |  | 10.0%                          |       |  |  |          |  |  |                    | 2/1/19   |  |               |   | 19,490 |              |  |   | 18,929  |  |  |   | 15,373  | 
|Lightstream Resources Ltd.                   |  |           | (f)(n)(o)(p) |  |          | Energy                                   |         |  | 9.9%                           |       |  |  |          |  |  |                    | 6/15/19  |  |               |   | 5,313  |              |  |   | 5,313   |  |  |   | 4,755   | 
|Logans Roadhouse, Inc.                      |  |           | (n)(o)       |  |          | Consumer Services                        |         |  | 4.0%, 10.5% PIK(10.5% Max PIK) |       |  |  |          |  |  |                    | 10/15/17 |  |               |   | 39,799 |              |  |   | 32,697  |  |  |   | 11,080  | 
|Rex Energy Corp.                             |  |           | (f)          |  |          | Energy                                   |         |  | 1.0%                           |       |  |  |          |  |  |                    | 10/1/20  |  |               |   | 3,980  |              |  |   | 690     |  |  |   | 2,194   | 
|SandRidge Energy, Inc.                       |  |           | (n)(o)       |  |          | Energy                                   |         |  | 8.8%                           |       |  |  |          |  |  |                    | 6/1/20   |  |               |   | 11,700 |              |  |   | 11,675  |  |  |   | 4,241   | 
|Sorenson Communications, Inc.                |  |           | (e)          |  |          | Telecommunication Services               |         |  | 9.0%, 0.0% PIK(9.0% Max PIK)   |       |  |  |          |  |  |                    | 10/31/20 |  |               |   | 7,057  |              |  |   | 6,850   |  |  |   | 6,281   | 
|                                             |  |           |              |  |          |                                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |        |              |  |   |         |  |  |   |         | 
|Total Senior Secured Bonds                   |  |           |              |  |          |                                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |        |              |  |   | 208,255 |  |  |   | 154,226 | 
|                                             |  |           |              |  |          |                                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |        |              |  |   |         |  |  |   |         | 
|Subordinated Debt13.7%                      |  |           |              |  |          |                                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |        |              |  |   |         |  |  |   |         | 
|Alta Mesa Holdings, LP                       |  |           | (f)          |  |          | Energy                                   |         |  | 9.6%                           |       |  |  |          |  |  |                    | 10/15/18 |  |               |   | 1,350  |              |  |   | 1,076   |  |  |   | 1,271   | 
|Aspect Software, Inc.                        |  |           |              |  |          | Software & Services                      |         |  | 3.0% PIK(3.0% Max PIK)         |       |  |  |          |  |  |                    | 5/25/23  |  |               |   | 2,770  |              |  |   | 2,770   |  |  |   | 2,770   | 
|Aurora Diagnostics, LLC                      |  |           | (e)          |  |          | Health Care Equipment & Services         |         |  | 10.8%                          |       |  |  |          |  |  |                    | 1/15/18  |  |               |   | 6,130  |              |  |   | 6,142   |  |  |   | 4,904   | 
|Bellatrix Exploration Ltd.                   |  |           | (p)          |  |          | Energy                                   |         |  | 8.5%                           |       |  |  |          |  |  |                    | 5/15/20  |  |               |   | 5,000  |              |  |   | 4,923   |  |  |   | 4,665   | 
|BMC Software Finance, Inc.                   |  |           | (l)          |  |          | Software & Services                      |         |  | 7.3%                           |       |  |  |          |  |  |                    | 6/1/18   |  |               |   | 3,820  |              |  |   | 3,623   |  |  |   | 3,782   | 
|Brooklyn Basketball Holdings, LLC            |  |           | (f)(i)       |  |          | Consumer Services                        |         |  | L+725                          |       |  |  |          |  |  |                    | 10/25/19 |  |               |   | 39,746 |              |  |   | 39,746  |  |  |   | 39,547  | 
|CEC Entertainment, Inc.                      |  |           | (j)          |  |          | Consumer Services                        |         |  | 8.0%                           |       |  |  |          |  |  |                    | 2/15/22  |  |               |   | 18,715 |              |  |   | 18,538  |  |  |   | 18,725  | 
|Ceridian HCM Holding, Inc.                   |  |           | (j)(l)       |  |          | Commercial & Professional Services       |         |  | 11.0%                          |       |  |  |          |  |  |                    | 3/15/21  |  |               |   | 46,250 |              |  |   | 45,837  |  |  |   | 49,025  | 
|Eclipse Resources Corp.                      |  |           | (j)(p)       |  |          | Energy                                   |         |  | 8.9%                           |       |  |  |          |  |  |                    | 7/15/23  |  |               |   | 9,175  |              |  |   | 9,002   |  |  |   | 8,969   | 
|EV Energy Partners, L.P.                     |  |           | (f)          |  |          | Energy                                   |         |  | 8.0%                           |       |  |  |          |  |  |                    | 4/15/19  |  |               |   | 259    |              |  |   | 237     |  |  |   | 172     | 
|Global Jet Capital Inc.                      |  |           |              |  |          | Commercial & Professional Services       |         |  | 15.0% PIK(15.0% Max PIK)       |       |  |  |          |  |  |                    | 1/30/25  |  |               |   | 705    |              |  |   | 705     |  |  |   | 704     | 
|Global Jet Capital Inc.                      |  |           |              |  |          | Commercial & Professional Services       |         |  | 15.0% PIK(15.0% Max PIK)       |       |  |  |          |  |  |                    | 4/30/25  |  |               |   | 4,478  |              |  |   | 4,478   |  |  |   | 4,478   | 
|Global Jet Capital Inc.                      |  |           |              |  |          | Commercial & Professional Services       |         |  | 15.0% PIK(15.0% Max PIK)       |       |  |  |          |  |  |                    | 9/3/25   |  |               |   | 925    |              |  |   | 925     |  |  |   | 925     | 



See
notes to unaudited consolidated financial statements.



10



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                                  |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   |         |  |  |   |         | 
|------------------------------------------------- |  | --------- | --------------- |  | -------- | ---------------------------------- | ------- |  | ------------------------------ | ----- |  |  | -------- |  |  | ------------------ | -------- |  | ------------- | - | --------- | ------------ |  | - | ------- |  |  | - | ------- | 
|Portfolio
Company(a)                              |  | Footnotes |                 |  | Industry |                                    | Rate(b) |  |                                | Floor |  |  | Maturity |  |  | PrincipalAmount(c) |          |  | AmortizedCost |   |           | FairValue(d) | 
|Global Jet Capital Inc.                           |  |           |                 |  |          | Commercial & Professional Services |         |  | 15.0% PIK(15.0% Max PIK)       |       |  |  |          |  |  |                    | 9/29/25  |  |               | $ | 871       |              |  | $ | 871     |  |  | $ | 871     | 
|Global Jet Capital Inc.                           |  |           | (f)(p)          |  |          | Commercial & Professional Services |         |  | 15.0% PIK(15.0% Max PIK)       |       |  |  |          |  |  |                    | 12/4/25  |  |               |   | 6,430     |              |  |   | 6,430   |  |  |   | 6,430   | 
|Global Jet Capital Inc.                           |  |           | (f)(p)          |  |          | Commercial & Professional Services |         |  | 15.0% PIK(15.0% Max PIK)       |       |  |  |          |  |  |                    | 12/9/25  |  |               |   | 1,052     |              |  |   | 1,052   |  |  |   | 1,052   | 
|Global Jet Capital Inc.                           |  |           | (f)(p)          |  |          | Commercial & Professional Services |         |  | 15.0% PIK(15.0% Max PIK)       |       |  |  |          |  |  |                    | 1/29/26  |  |               |   | 551       |              |  |   | 551     |  |  |   | 551     | 
|Jupiter Resources Inc.                            |  |           | (i)(p)          |  |          | Energy                             |         |  | 8.5%                           |       |  |  |          |  |  |                    | 10/1/22  |  |               |   | 28,800    |              |  |   | 26,717  |  |  |   | 24,282  | 
|Mood Media Corp.                                  |  |           | (e)(f)(p)       |  |          | Media                              |         |  | 9.3%                           |       |  |  |          |  |  |                    | 10/15/20 |  |               |   | 46,207    |              |  |   | 45,750  |  |  |   | 36,099  | 
|NewStar Financial, Inc.                           |  |           | (e)(i)(k)(l)(p) |  |          | Diversified Financials             |         |  | 8.3%, 0.0% PIK(8.8% Max PIK)   |       |  |  |          |  |  |                    | 12/4/24  |  |               |   | 150,000   |              |  |   | 122,777 |  |  |   | 126,000 | 
|P.F. Changs China Bistro, Inc.                   |  |           | (e)(j)          |  |          | Consumer Services                  |         |  | 10.3%                          |       |  |  |          |  |  |                    | 6/30/20  |  |               |   | 31,353    |              |  |   | 31,249  |  |  |   | 29,824  | 
|Scientific Games Corp.                            |  |           | (j)(p)          |  |          | Consumer Services                  |         |  | 8.1%                           |       |  |  |          |  |  |                    | 9/15/18  |  |               |   | 3,800     |              |  |   | 3,729   |  |  |   | 3,821   | 
|Sorenson Communications, Inc.                     |  |           | (e)(f)          |  |          | Telecommunication Services         |         |  | 13.0%, 0.0% PIK(13.0% Max PIK) |       |  |  |          |  |  |                    | 10/31/21 |  |               |   | 5,363     |              |  |   | 5,063   |  |  |   | 5,028   | 
|SunGard Availability Services Capital, Inc.       |  |           | (j)             |  |          | Software & Services                |         |  | 8.8%                           |       |  |  |          |  |  |                    | 4/1/22   |  |               |   | 5,900     |              |  |   | 4,394   |  |  |   | 3,861   | 
|Talos Production LLC                              |  |           | (f)             |  |          | Energy                             |         |  | 9.8%                           |       |  |  |          |  |  |                    | 2/15/18  |  |               |   | 4,500     |              |  |   | 4,248   |  |  |   | 2,104   | 
|TI Group Automotive Systems, LLC                  |  |           | (j)(p)          |  |          | Automobiles & Components           |         |  | 8.8%                           |       |  |  |          |  |  |                    | 7/15/23  |  |               |   | 7,302     |              |  |   | 7,302   |  |  |   | 7,950   | 
|York Risk Services Holding Corp.                  |  |           | (e)(j)          |  |          | Insurance                          |         |  | 8.5%                           |       |  |  |          |  |  |                    | 10/1/22  |  |               |   | 8,350     |              |  |   | 7,573   |  |  |   | 6,523   | 
|                                                  |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   |         |  |  |   |         | 
|Total Subordinated Debt                           |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   | 405,708 |  |  |   | 394,333 | 
|                                                  |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   |         |  |  |   |         | 
|Collateralized Securities0.8%                    |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   |         |  |  |   |         | 
|CGMS CLO 2013-3A Class Subord.                    |  |           | (p)             |  |          | Diversified Financials             |         |  | 16.8%                          |       |  |  |          |  |  |                    | 7/15/25  |  |               |   | 17,000    |              |  |   | 8,360   |  |  |   | 9,977   | 
|NewStar Clarendon 2014-1A Class D                 |  |           | (p)             |  |          | Diversified Financials             |         |  | L+435                          |       |  |  |          |  |  |                    | 1/25/27  |  |               |   | 1,060     |              |  |   | 1,002   |  |  |   | 965     | 
|NewStar Clarendon 2014-1A Class Subord. B         |  |           | (p)             |  |          | Diversified Financials             |         |  | 14.8%                          |       |  |  |          |  |  |                    | 1/25/27  |  |               |   | 12,140    |              |  |   | 9,906   |  |  |   | 9,880   | 
|Octagon CLO 2012-1A Class Income                  |  |           | (p)             |  |          | Diversified Financials             |         |  | 2.9%                           |       |  |  |          |  |  |                    | 1/15/24  |  |               |   | 4,650     |              |  |   | 1,789   |  |  |   | 1,776   | 
|                                                  |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   |         |  |  |   |         | 
|Total Collateralized Securities                   |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   | 21,057  |  |  |   | 22,598  | 
|                                                  |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   |         |  |  |   |         | 
|                                                  |  |           |                 |  |          |                                    |         | 
|                                                  |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  | Numberof Shares    |          |  | Cost          |   |           | FairValue(d) | 
|Equity/Other11.1%                                |  |           |                 |  |          |                                    |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   |           |              |  |   |         |  |  |   |         | 
|5 Arches, LLC, Common Equity                      |  |           | (o)(p)(s)       |  |          | Diversified Financials             |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   | 4,738     |              |  |   | 125     |  |  |   | 125     | 
|A.T. Cross Co., Common Equity, Class A Units      |  |           | (f)(o)          |  |          | Retailing                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   | 1,000,000 |              |  |   | 1,000   |  |  |   |        | 
|A.T. Cross Co., Preferred Equity, Class A-1 Units |  |           | (f)(o)          |  |          | Retailing                          |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   | 243,478   |              |  |   | 243     |  |  |   |        | 
|Abaco Energy Technologies LLC, Common Equity      |  |           | (o)             |  |          | Energy                             |         |  |                                |       |  |  |          |  |  |                    |          |  |               |   | 3,055,556 |              |  |   | 3,056   |  |  |   |        | 



See
notes to unaudited consolidated financial statements.



11



---

##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                                           |  |                 |  |                                                |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |             |  |  |   |        |  |  |   |        | 
|---------------------------------------------------------- |  | --------------- |  | ---------------------------------------------- |  |  | --------------- |  |  | ---- |  |  | ------------ |  |  |  |  |  | ----------- |  |  | - | ------ |  |  | - | ------ | 
|Portfolio
Company(a)                                       |  | Footnotes       |  | Industry                                       |  |  | Numberof Shares |  |  | Cost |  |  | FairValue(d) | 
|Abaco Energy Technologies LLC, Preferred Equity            |  | (o)             |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 12,734,481  |  |  | $ | 637    |  |  | $ | 637    | 
|ACP FH Holdings GP, LLC, Common Equity                     |  | (f)(o)          |  | Consumer Durables & Apparel                    |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 88,571      |  |  |   | 89     |  |  |   | 69     | 
|ACP FH Holdings, LP, Common Equity                         |  | (f)(o)          |  | Consumer Durables & Apparel                    |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 8,768,572   |  |  |   | 8,769  |  |  |   | 6,815  | 
|Altus Power America Holdings, LLC, Preferred Equity        |  |                 |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 1,041,667   |  |  |   | 1,002  |  |  |   | 1,719  | 
|Altus Power America Management, LLC, Class B Units         |  | (o)(u)          |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 83          |  |  |   |       |  |  |   |       | 
|Amaya Inc., Warrants, 5/15/2024                            |  | (o)(p)          |  | Consumer Services                              |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 2,000,000   |  |  |   | 16,832 |  |  |   | 18,020 | 
|AP Exhaust Holdings, LLC, Common Equity                    |  | (o)(s)          |  | Automobiles & Components                       |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 8,378       |  |  |   | 8,378  |  |  |   |       | 
|Ascent Resources Utica Holdings, LLC, Common Equity        |  | (o)(r)          |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 128,734,129 |  |  |   | 38,700 |  |  |   | 28,321 | 
|ASG Technologies Group, Inc., Common Equity                |  | (o)(x)          |  | Software & Services                            |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 625,178     |  |  |   | 13,475 |  |  |   | 29,884 | 
|ASG Technologies Group, Inc., Warrants, 6/27/2022          |  | (o)(x)          |  | Software & Services                            |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 253,704     |  |  |   | 7,230  |  |  |   | 6,609  | 
|Aspect Software, Inc., Common Equity                       |  | (o)             |  | Software & Services                            |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 293,761     |  |  |   | 14,512 |  |  |   | 20,681 | 
|BPA Laboratories, Inc., Series A Warrants, 4/29/2024       |  | (e)(o)          |  | Pharmaceuticals, Biotechnology & Life Sciences |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 10,924      |  |  |   |       |  |  |   |       | 
|BPA Laboratories, Inc., Series B Warrants, 4/29/2024       |  | (e)(o)          |  | Pharmaceuticals, Biotechnology & Life Sciences |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 17,515      |  |  |   |       |  |  |   |       | 
|Burleigh Point, Ltd., Warrants, 7/16/2020                  |  | (o)(p)          |  | Retailing                                      |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 3,451,216   |  |  |   | 1,898  |  |  |   | 242    | 
|Cimarron Energy Holdco Inc., Common Equity                 |  | (o)             |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 3,201,631   |  |  |   | 2,991  |  |  |   | 1,761  | 
|DHS Technologies LLC, Common Equity                        |  | (f)(o)          |  | Capital Goods                                  |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 60,872      |  |  |   | 5,000  |  |  |   | 642    | 
|Eastman Kodak Co., Common Equity                           |  | (o)             |  | Consumer Durables & Apparel                    |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 1,846       |  |  |   | 36     |  |  |   | 27     | 
|Fairway Group Acquisition Co., Common Equity               |  | (o)             |  | Food & Staples Retailing                       |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 31,626      |  |  |   | 1,016  |  |  |   | 1,455  | 
|FourPoint Energy, LLC, Common Equity, Class C-II-A Units   |  | (o)(s)          |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 13,000      |  |  |   | 13,000 |  |  |   | 5,688  | 
|FourPoint Energy, LLC, Common Equity, Class D Units        |  | (o)(s)          |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 2,437       |  |  |   | 1,610  |  |  |   | 1,078  | 
|FourPoint Energy, LLC, Common Equity, Class E-II Units     |  | (o)(s)          |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 54,104      |  |  |   | 13,526 |  |  |   | 22,588 | 
|FourPoint Energy, LLC, Common Equity, Class E-III Units    |  | (f)(o)(s)       |  | Energy                                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 43,875      |  |  |   | 10,969 |  |  |   | 19,195 | 
|Global Jet Capital Holdings, LP, Preferred Equity          |  | (f)(o)(p)       |  | Commercial & Professional Services             |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 5,496,503   |  |  |   | 5,497  |  |  |   | 5,497  | 
|Harvey Holdings, LLC, Common Equity                        |  | (o)             |  | Capital Goods                                  |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 666,667     |  |  |   | 667    |  |  |   | 1,133  | 
|Industrial Group Intermediate Holdings, LLC, Common Equity |  | (o)(s)          |  | Materials                                      |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 2,678,947   |  |  |   | 2,679  |  |  |   | 4,956  | 
|JMC Acquisition Holdings, LLC, Common Equity               |  | (o)             |  | Capital Goods                                  |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 1,449       |  |  |   | 1,449  |  |  |   | 1,536  | 
|JW Aluminum Co., Common Equity                             |  | (e)(f)(l)(o)(x) |  | Materials                                      |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 256         |  |  |   |       |  |  |   | 345    | 
|JW Aluminum Co., Preferred Equity                          |  | (e)(f)(l)(o)(x) |  | Materials                                      |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 1,184       |  |  |   | 11,279 |  |  |   | 12,989 | 
|MB Precision Investment Holdings LLC, Class A-2 Units      |  | (o)(s)          |  | Capital Goods                                  |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 2,287,659   |  |  |   | 2,288  |  |  |   | 343    | 
|New Star Metals Inc., Common Equity                        |  | (f)(o)          |  | Capital Goods                                  |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 2,223,246   |  |  |   | 2,250  |  |  |   | 7,337  | 
|NewStar Financial, Inc., Warrants, 11/4/2024               |  | (f)(o)(p)       |  | Diversified Financials                         |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 6,000,000   |  |  |   | 30,115 |  |  |   | 16,980 | 



See
notes to unaudited consolidated financial statements.



12



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##### Table of Contents

FS Investment Corporation II

Unaudited Consolidated Schedule of Investments (continued)

As of September 30, 2016

(in thousands, except share amounts)







|                                                        |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  |   |            |  
|------------------------------------------------------- |  | --------- |  | ------------------------------- |  |  | --------------- |  |  | ---- |  |  | ------------ |  |  |  |  |  | --------- |  |  | - | --------- |  |  | - | ---------- | -
|Portfolio
Company(a)                                    |  | Footnotes |  | Industry                        |  |  | Numberof Shares |  |  | Cost |  |  | FairValue(d) | 
|North Haven Cadence Buyer, Inc., Common Equity          |  | (o)       |  | Consumer Services               |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 2,916,667 |  |  | $ | 2,917     |  |  | $ | 2,917      |  
|Professional Plumbing Group, Inc., Common Equity        |  | (f)(o)    |  | Capital Goods                   |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 3,000,000 |  |  |   | 3,000     |  |  |   | 6,300      |  
|PSAV Holdings LLC, Common Equity                        |  |           |  | Technology Hardware & Equipment |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 10,000    |  |  |   | 10,000    |  |  |   | 28,000     |  
|Sequential Brands Group, Inc., Common Equity            |  | (f)(o)(p) |  | Consumer Durables & Apparel     |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 408,685   |  |  |   | 5,517     |  |  |   | 3,269      |  
|Sorenson Communications, Inc., Common Equity            |  | (e)(f)(o) |  | Telecommunication Services      |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 43,796    |  |  |   |          |  |  |   | 36,359     |  
|Sunnova Energy Corp., Common Equity                     |  | (o)       |  | Energy                          |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 384,746   |  |  |   | 1,444     |  |  |   | 2,066      |  
|Sunnova Energy Corp., Preferred Equity                  |  | (o)       |  | Energy                          |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 36,363    |  |  |   | 194       |  |  |   | 195        |  
|Swift Worldwide Resources Holdco Limited, Common Equity |  | (o)(p)(v) |  | Energy                          |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 1,250,000 |  |  |   | 2,009     |  |  |   | 563        |  
|TE Holdings, LLC, Common Equity                         |  | (f)(o)(s) |  | Energy                          |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 717,718   |  |  |   | 6,100     |  |  |   | 5,203      |  
|TE Holdings, LLC, Preferred Equity                      |  | (f)(o)    |  | Energy                          |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 475,758   |  |  |   | 4,751     |  |  |   | 4,639      |  
|Titan Energy Operating, LLC, Common Equity              |  | (f)(o)    |  | Energy                          |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 200,040   |  |  |   | 6,321     |  |  |   | 5,901      |  
|White Star Petroleum Holdings, LLC, Common Equity       |  | (f)(o)    |  | Energy                          |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 1,613,753 |  |  |   | 1,372     |  |  |   | 1,533      |  
|Zeta Interactive Holdings Corp., Preferred Equity       |  | (o)       |  | Software & Services             |  |  |                 |  |  |      |  |  |              |  |  |  |  |  | 620,025   |  |  |   | 4,929     |  |  |   | 5,440      |  
|                                                        |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  |   |            |  
|Total Equity/Other                                      |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   | 268,872   |  |  |   | 319,057    |  
|                                                        |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  |   |            |  
|TOTAL INVESTMENTS153.1%                                |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  | $ | 4,523,642 |  |  |   | 4,401,568  |  
|                                                        |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  |   |            |  
|LIABILITIES IN EXCESS OF OTHER ASSETS(53.1%)           |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  |   | (1,526,359 | )
|                                                        |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  |   |            |  
|NET ASSETS100.0%                                       |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  | $ | 2,875,209  |  
|                                                        |  |           |  |                                 |  |  |                 |  |  |      |  |  |              |  |  |  |  |  |           |  |  |   |           |  |  |   |            |  



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



|(b) | Certain variable rate securities in the Companys portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of
September 30, 2016, the three-month London Interbank Offered Rate, or LIBOR, was 0.85%, the Euro Interbank Offered Rate, or EURIBOR, was (0.30)% and the U.S. Prime Lending Rate, or Prime, was 3.50%.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|(e) | Security or portion thereof held within Lehigh River LLC and is pledged as collateral supporting the amounts outstanding under the Class A 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).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 September 30, 2016

(in thousands, except share amounts)







|(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 pledged as collateral supporting the amounts outstanding under a term loan 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) | Position or portion thereof unsettled as of September 30, 2016.
|--- | ---------------------------------------------------------------



|(n) | Security was on non-accrual status as of September 30, 2016.
|--- | ------------------------------------------------------------



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



|(p) | The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than
qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the companys total assets. As of September 30, 2016, 86.9% of the Companys total assets represented qualifying assets.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



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



|(v) | Investment denominated in British pounds. Cost and fair value are converted into U.S. dollars as of September 30, 2016.
|--- | -----------------------------------------------------------------------------------------------------------------------



|(w) | The transfer of a portion of this loan does not qualify for sale accounting under Accounting Standards Codification Topic 860, Transfers and Servicing, and
therefore, the entire senior secured loan remains in the unaudited consolidated schedule of investments as of September 30, 2016 (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 September 30, 2016

(in thousands, except share amounts)







|(x) | Under the 1940 Act, the Company generally is deemed to be an affiliated person of a portfolio company if it owns 5% or more of the portfolio companys
voting securities and generally is deemed to control a portfolio company if it owns more than 25% of the portfolio companys voting securities or it has the power to exercise control over the management or policies of such portfolio
company. As of September 30, 2016, the Company held investments in two portfolio companies of which it is deemed to be an affiliated person but is not deemed to control. The following table presents certain financial
information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person of for the nine months ended September 30, 2016:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                     |  |                                |        |  |                                    |   |        |                     |  |   |                      |   |  |                       |     |  |                                                   |   |     |                                 |  |   |                |   |  |           |        |  |                |   |       |  |  |   |     |  |  |  |   | 
|---------------------------------------------------- |  | ------------------------------ | ------ |  | ---------------------------------- | - | ------ | ------------------- |  | - | -------------------- | - |  | --------------------- | --- |  | ------------------------------------------------- | - | --- | ------------------------------- |  | - | -------------- | - |  | --------- | ------ |  | -------------- | - | ----- |  |  | - | --- |  |  |  | - | 
|Portfolio Company                                    |  | Fair Value atDecember 31, 2015 |        |  | Purchases 
andPaid-in-KindInterest |   |        | Sales andRepayments |  |   | Accretion ofDiscount |   |  | NetRealizedGain(Loss) |     |  | NetChange 
inUnrealizedAppreciation(Depreciation) |   |     | Fair Value atSeptember 30, 2016 |  |   | InterestIncome |   |  | FeeIncome |        |  | DividendIncome |  
|Senior Secured LoansFirst Lien                      |  |                                |        |  |                                    |   |        |                     |  |   |                      |   |  |                       |     |  |                                                   |   |     |                                 |  |   |                |   |  |           |        |  |                |   |       |  |  |   |     |  |  |  |   | 
|ASG Technologies Group, Inc.(1)                      |  | $                              | 71,389 |  |                                    | $ | 8,203  |                     |  |   |                     |   |  | $                     | 12  |  |                                                   |   |    |                                 |  | $ | 1,056          |   |  | $         | 80,660 |  |                | $ | 5,694 |  |  |   |    |  |  |  |  | 
|Senior Secured LoansSecond Lien                     |  |                                |        |  |                                    |   |        |                     |  |   |                      |   |  |                       |     |  |                                                   |   |     |                                 |  |   |                |   |  |           |        |  |                |   |       |  |  |   |     |  |  |  |   | 
|ASG Technologies Group, Inc.(1)                      |  |                                |       |  |                                    | $ | 16,103 |                     |  |   |                     |   |  | $                     | 258 |  |                                                   |   |    |                                 |  | $ | (86            | ) |  | $         | 16,275 |  |                | $ | 1,005 |  |  | $ | 700 |  |  |  |  | 
|JW Aluminum Co.                                      |  | $                              | 30,061 |  |                                    | $ | 2,684  |                     |  |   |                     |   |  |                       |    |  |                                                   |   |    |                                 |  | $ | 256            |   |  | $         | 33,001 |  |                | $ | 2,227 |  |  |   |    |  |  |  |  | 
|Senior Secured Bonds                                 |  |                                |        |  |                                    |   |        |                     |  |   |                      |   |  |                       |     |  |                                                   |   |     |                                 |  |   |                |   |  |           |        |  |                |   |       |  |  |   |     |  |  |  |   | 
|JW Aluminum Co.                                      |  |                                |       |  |                                    | $ | 4,421  |                     |  | $ | (4,466               | ) |  | $                     | 59  |  |                                                   | $ | (14 | )                               |  |   |               |   |  |           |       |  |                | $ | 115   |  |  |   |    |  |  |  |  | 
|Equity/Other                                         |  |                                |        |  |                                    |   |        |                     |  |   |                      |   |  |                       |     |  |                                                   |   |     |                                 |  |   |                |   |  |           |        |  |                |   |       |  |  |   |     |  |  |  |   | 
|ASG Technologies Group, Inc. Common
Equity(1)        |  | $                              | 28,821 |  |                                    |   |       |                     |  |   |                     |   |  |                       |    |  |                                                   |   |    |                                 |  | $ | 1,063          |   |  | $         | 29,884 |  |                |   |      |  |  |   |    |  |  |  |  | 
|ASG Technologies Group, Inc., Warrants,
6/27/2022(1) |  |                                |       |  |                                    | $ | 7,230  |                     |  |   |                     |   |  |                       |    |  |                                                   |   |    |                                 |  | $ | (621           | ) |  | $         | 6,609  |  |                |   |      |  |  |   |    |  |  |  |  | 
|JW Aluminum Co., Common Equity                       |  |                                |       |  |                                    |   |       |                     |  |   |                     |   |  |                       |    |  |                                                   |   |    |                                 |  | $ | 345            |   |  | $         | 345    |  |                |   |      |  |  |   |    |  |  |  |  | 
|JW Aluminum Co., Preferred Equity                    |  | $                              | 11,247 |  |                                    | $ | 223    |                     |  |   |                     |   |  |                       |    |  |                                                   |   |    |                                 |  | $ | 1,519          |   |  | $         | 12,989 |  |                |   |      |  |  |   |    |  |  |  |  | 



|(1) | ASG Technologies Group, Inc. was formerly known as Allen Systems Group, Inc.
|--- | ----------------------------------------------------------------------------



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, 2015

(in thousands, except share amounts)







|                                          |  |                 |  |                                    |  |                               |  |       |  |          |  |                      |         |  |               |   |         |                |  |   |         | 
|----------------------------------------- |  | --------------- |  | ---------------------------------- |  | ----------------------------- |  | ----- |  | -------- |  | -------------------- | ------- |  | ------------- | - | ------- | -------------- |  | - | ------- | 
|Portfolio
Company(a)                      |  | Footnotes       |  | Industry                           |  | Rate(b)                       |  | Floor |  | Maturity |  | Principal 
Amount(c) |         |  | AmortizedCost |   |         | Fair 
Value(d) | 
|Senior Secured LoansFirst Lien104.2%    |  |                 |  |                                    |  |                               |  |       |  |          |  |                      |         |  |               |   |         |                |  |   |         | 
|5 Arch Income Fund 2, LLC                 |  | (o)(s)          |  | Diversified Financials             |  | 10.5%                         |  |       |  | 11/18/21 |  | $                    | 1,192   |  |               | $ | 1,219   |                |  | $ | 1,192   | 
|5 Arch Income Fund 2, LLC                 |  | (o)(p)(s)       |  | Diversified Financials             |  | 10.5%                         |  |       |  | 11/18/21 |  |                      | 17,808  |  |               |   | 17,808  |                |  |   | 17,808  | 
|A.T. Cross Co.                            |  | (e)(g)          |  | Retailing                          |  | L+875                         |  |       |  | 9/6/19   |  |                      | 39,208  |  |               |   | 39,207  |                |  |   | 38,816  | 
|A.T. Cross Co.                            |  | (p)             |  | Retailing                          |  | L+875                         |  |       |  | 9/6/19   |  |                      | 20,000  |  |               |   | 20,000  |                |  |   | 19,800  | 
|Abaco Energy Technologies LLC             |  | (g)(k)          |  | Energy                             |  | L+700                         |  | 1.0%  |  | 11/20/20 |  |                      | 26,813  |  |               |   | 25,447  |                |  |   | 13,808  | 
|Acision Finance LLC                       |  | (k)(l)          |  | Software & Services                |  | L+975                         |  | 1.0%  |  | 12/15/18 |  |                      | 31,616  |  |               |   | 30,600  |                |  |   | 31,300  | 
|Aeneas Buyer Corp.                        |  | (h)             |  | Health Care Equipment & Services   |  | L+500                         |  | 1.0%  |  | 12/18/21 |  |                      | 9,000   |  |               |   | 9,000   |                |  |   | 9,000   | 
|Aeneas Buyer Corp.                        |  | (p)             |  | Health Care Equipment & Services   |  | L+500                         |  | 1.0%  |  | 12/18/21 |  |                      | 9,000   |  |               |   | 9,000   |                |  |   | 9,000   | 
|Aeneas Buyer Corp.                        |  |                 |  | Health Care Equipment & Services   |  | L+813                         |  | 1.0%  |  | 12/18/21 |  |                      | 500     |  |               |   | 500     |                |  |   | 500     | 
|Aeneas Buyer Corp.                        |  | (p)             |  | Health Care Equipment & Services   |  | L+750                         |  | 1.0%  |  | 12/18/21 |  |                      | 100     |  |               |   | 100     |                |  |   | 100     | 
|Allen Systems Group, Inc.                 |  | (e)(g)(h)(x)    |  | Software & Services                |  | L+789, 1.2% PIK(1.2% Max PIK) |  | 1.0%  |  | 4/30/20  |  |                      | 70,682  |  |               |   | 70,682  |                |  |   | 71,389  | 
|Altus Power America, Inc.                 |  | (l)             |  | Energy                             |  | L+750                         |  | 1.5%  |  | 10/10/21 |  |                      | 1,724   |  |               |   | 1,724   |                |  |   | 1,707   | 
|Altus Power America, Inc.                 |  | (p)             |  | Energy                             |  | L+750                         |  | 1.5%  |  | 10/10/21 |  |                      | 1,401   |  |               |   | 1,401   |                |  |   | 1,387   | 
|AP Exhaust Acquisition, LLC               |  | (e)(g)(h)(i)(k) |  | Automobiles & Components           |  | L+775                         |  | 1.5%  |  | 1/16/21  |  |                      | 163,378 |  |               |   | 163,378 |                |  |   | 153,371 | 
|Ascension Insurance, Inc.                 |  | (e)(g)(h)(i)    |  | Insurance                          |  | L+825                         |  | 1.3%  |  | 3/5/19   |  |                      | 77,769  |  |               |   | 76,954  |                |  |   | 76,797  | 
|Aspect Software, Inc.                     |  | (h)(i)          |  | Software & Services                |  | L+550, 0.3% PIK(0.3% Max PIK) |  | 1.8%  |  | 5/7/16   |  |                      | 7,375   |  |               |   | 7,381   |                |  |   | 6,828   | 
|Atlas Aerospace LLC                       |  | (g)(l)          |  | Capital Goods                      |  | L+807                         |  | 1.0%  |  | 5/8/19   |  |                      | 57,000  |  |               |   | 57,000  |                |  |   | 56,715  | 
|Atlas Aerospace LLC                       |  | (p)             |  | Capital Goods                      |  | L+750                         |  | 1.0%  |  | 5/8/19   |  |                      | 21,714  |  |               |   | 21,714  |                |  |   | 21,606  | 
|ATX Networks Corp.                        |  | (g)(h)(o)       |  | Technology Hardware & Equipment    |  | L+600                         |  | 1.0%  |  | 6/11/21  |  |                      | 1,970   |  |               |   | 1,943   |                |  |   | 1,940   | 
|Avaya Inc.                                |  | (i)             |  | Technology Hardware & Equipment    |  | L+525                         |  | 1.0%  |  | 5/29/20  |  |                      | 3,895   |  |               |   | 3,895   |                |  |   | 2,733   | 
|BenefitMall Holdings, Inc.                |  | (e)(h)(i)(k)(l) |  | Commercial & Professional Services |  | L+725                         |  | 1.0%  |  | 11/24/20 |  |                      | 113,850 |  |               |   | 113,850 |                |  |   | 112,712 | 
|BenefitMall Holdings, Inc.                |  | (p)             |  | Commercial & Professional Services |  | L+725                         |  | 1.0%  |  | 11/24/20 |  |                      | 41,818  |  |               |   | 41,818  |                |  |   | 41,400  | 
|Blue Coat Holdings, Inc.                  |  | (p)             |  | Technology Hardware & Equipment    |  | L+350                         |  | 1.0%  |  | 5/22/20  |  |                      | 2,045   |  |               |   | 2,045   |                |  |   | 1,918   | 
|Blueprint Sub, Inc.                       |  | (g)(h)(i)(k)(l) |  | Software & Services                |  | L+750                         |  | 1.0%  |  | 5/7/21   |  |                      | 94,119  |  |               |   | 94,119  |                |  |   | 93,819  | 
|Blueprint Sub, Inc.                       |  | (p)             |  | Software & Services                |  | L+750                         |  | 1.0%  |  | 5/7/21   |  |                      | 12,281  |  |               |   | 12,281  |                |  |   | 12,241  | 
|Blueprint Sub, Inc.                       |  | (e)             |  | Software & Services                |  | L+450                         |  | 1.0%  |  | 5/7/21   |  |                      | 2,456   |  |               |   | 2,456   |                |  |   | 2,456   | 
|Blueprint Sub, Inc.                       |  | (p)             |  | Software & Services                |  | L+450                         |  | 1.0%  |  | 5/7/21   |  |                      | 2,456   |  |               |   | 2,456   |                |  |   | 2,456   | 
|Cactus Wellhead, LLC                      |  | (g)(h)          |  | Energy                             |  | L+600                         |  | 1.0%  |  | 7/31/20  |  |                      | 16,572  |  |               |   | 15,603  |                |  |   | 11,973  | 
|Cadence Aerospace Finance, Inc.           |  | (g)             |  | Capital Goods                      |  | L+525                         |  | 1.3%  |  | 5/9/18   |  |                      | 2,737   |  |               |   | 2,750   |                |  |   | 2,689   | 
|Caesars Entertainment Operating Co., Inc. |  | (k)(n)(o)       |  | Consumer Services                  |  | 5.2%                          |  |       |  | 3/1/17   |  |                      | 15,620  |  |               |   | 15,158  |                |  |   | 13,380  | 
|Caesars Entertainment Operating Co., Inc. |  | (k)(n)(o)       |  | Consumer Services                  |  | 6.0%                          |  |       |  | 3/1/17   |  |                      | 15,707  |  |               |   | 15,288  |                |  |   | 13,495  | 



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, 2015

(in thousands, except share amounts)







|                                             |  |                    |  |                                    |  |                               |  |       |  |          |  |                      |        |  |               |   |        |                |  |   |        | 
|-------------------------------------------- |  | ------------------ |  | ---------------------------------- |  | ----------------------------- |  | ----- |  | -------- |  | -------------------- | ------ |  | ------------- | - | ------ | -------------- |  | - | ------ | 
|Portfolio
Company(a)                         |  | Footnotes          |  | Industry                           |  | Rate(b)                       |  | Floor |  | Maturity |  | Principal 
Amount(c) |        |  | AmortizedCost |   |        | Fair 
Value(d) | 
|Caesars Entertainment Operating Co., Inc.    |  | (e)(g)(i)(j)(n)(o) |  | Consumer Services                  |  | 8.1%                          |  |       |  | 3/1/17   |  | $                    | 68,576 |  |               | $ | 68,321 |                |  | $ | 53,635 | 
|Caesars Entertainment Operating Co., Inc.    |  | (n)(o)             |  | Consumer Services                  |  | 8.8%                          |  |       |  | 10/31/16 |  |                      | 2,671  |  |               |   | 2,685  |                |  |   | 2,267  | 
|Caesars Entertainment Resort Properties, LLC |  | (e)(k)             |  | Consumer Services                  |  | L+600                         |  | 1.0%  |  | 10/11/20 |  |                      | 34,132 |  |               |   | 32,591 |                |  |   | 31,167 | 
|CEVA Group Plc                               |  | (o)(p)             |  | Transportation                     |  | L+500                         |  |       |  | 3/19/19  |  |                      | 20,000 |  |               |   | 20,000 |                |  |   | 17,300 | 
|Cimarron Energy Inc.                         |  | (k)(l)             |  | Energy                             |  | L+775, 3.8% PIK(3.8% Max PIK) |  | 1.0%  |  | 12/15/19 |  |                      | 24,250 |  |               |   | 24,250 |                |  |   | 24,129 | 
|CITGO Holding, Inc.                          |  | (j)                |  | Energy                             |  | L+850                         |  | 1.0%  |  | 5/12/18  |  |                      | 2,186  |  |               |   | 2,078  |                |  |   | 2,177  | 
|Corner Investment PropCo, LLC                |  | (e)(g)(k)          |  | Consumer Services                  |  | L+975                         |  | 1.3%  |  | 11/2/19  |  |                      | 38,788 |  |               |   | 39,224 |                |  |   | 37,964 | 
|CoSentry.Net, LLC                            |  | (e)(i)(k)          |  | Software & Services                |  | L+800                         |  | 1.3%  |  | 12/31/19 |  |                      | 62,331 |  |               |   | 62,331 |                |  |   | 63,578 | 
|Crestwood Holdings LLC                       |  | (g)                |  | Energy                             |  | L+600                         |  | 1.0%  |  | 6/19/19  |  |                      | 5,166  |  |               |   | 5,151  |                |  |   | 3,350  | 
|Eastman Kodak Co.                            |  | (g)                |  | Consumer Durables & Apparel        |  | L+625                         |  | 1.0%  |  | 9/3/19   |  |                      | 7,091  |  |               |   | 7,003  |                |  |   | 6,146  | 
|Emerging Markets Communications, LLC         |  | (g)(h)             |  | Telecommunication Services         |  | L+575                         |  | 1.0%  |  | 7/1/21   |  |                      | 12,935 |  |               |   | 11,962 |                |  |   | 12,191 | 
|Fairway Group Acquisition Co.                |  | (g)                |  | Food & Staples Retailing           |  | L+400                         |  | 1.0%  |  | 8/17/18  |  |                      | 9,379  |  |               |   | 8,374  |                |  |   | 7,566  | 
|Fox Head, Inc.                               |  | (h)(k)(l)          |  | Consumer Durables & Apparel        |  | L+850                         |  | 1.0%  |  | 12/19/20 |  |                      | 13,286 |  |               |   | 13,286 |                |  |   | 13,346 | 
|FR Dixie Acquisition Corp.                   |  | (g)                |  | Energy                             |  | L+475                         |  | 1.0%  |  | 12/18/20 |  |                      | 4,126  |  |               |   | 4,111  |                |  |   | 2,744  | 
|Greystone Bridge Manager LLC                 |  | (f)(o)             |  | Diversified Financials             |  | L+1050                        |  |       |  | 5/1/20   |  |                      | 33,672 |  |               |   | 33,842 |                |  |   | 32,998 | 
|Greystone Bridge Manager LLC                 |  | (o)(p)             |  | Diversified Financials             |  | L+1050                        |  |       |  | 5/1/20   |  |                      | 4,033  |  |               |   | 4,033  |                |  |   | 3,953  | 
|H.M. Dunn Co., Inc.                          |  | (k)(l)             |  | Capital Goods                      |  | L+809                         |  | 1.0%  |  | 3/26/21  |  |                      | 60,000 |  |               |   | 60,000 |                |  |   | 59,400 | 
|H.M. Dunn Co., Inc.                          |  | (p)                |  | Capital Goods                      |  | L+725                         |  | 1.0%  |  | 3/26/21  |  |                      | 21,429 |  |               |   | 21,429 |                |  |   | 21,214 | 
|Harvey Industries, Inc.                      |  | (h)                |  | Capital Goods                      |  | L+800                         |  | 1.0%  |  | 10/1/21  |  |                      | 9,333  |  |               |   | 9,333  |                |  |   | 9,333  | 
|Hybrid Promotions, LLC                       |  | (h)(k)(l)          |  | Consumer Durables & Apparel        |  | L+850                         |  | 1.0%  |  | 12/19/20 |  |                      | 48,714 |  |               |   | 48,714 |                |  |   | 48,935 | 
|Industrial Group Intermediate Holdings, LLC  |  | (g)(h)(i)(k)(l)    |  | Materials                          |  | L+800                         |  | 1.3%  |  | 5/31/20  |  |                      | 84,721 |  |               |   | 84,721 |                |  |   | 83,873 | 
|Industry City TI Lessor, L.P.                |  | (k)                |  | Consumer Services                  |  | 10.3%, 0.0% PIK(5.3% Max PIK) |  |       |  | 6/30/26  |  |                      | 10,151 |  |               |   | 10,151 |                |  |   | 10,607 | 
|Intralinks, Inc.                             |  | (g)(h)(k)(o)       |  | Software & Services                |  | L+525                         |  | 2.0%  |  | 2/24/19  |  |                      | 24,563 |  |               |   | 24,399 |                |  |   | 24,378 | 
|JMC Acquisition Merger Corp.                 |  | (g)(h)(i)          |  | Capital Goods                      |  | L+858                         |  | 1.0%  |  | 11/6/21  |  |                      | 15,000 |  |               |   | 15,000 |                |  |   | 15,000 | 
|JMC Acquisition Merger Corp.                 |  | (p)                |  | Capital Goods                      |  | L+750                         |  | 1.0%  |  | 11/6/21  |  |                      | 2,717  |  |               |   | 2,717  |                |  |   | 2,717  | 
|JSS Holdings, Inc.                           |  | (g)                |  | Capital Goods                      |  | L+650                         |  | 1.0%  |  | 8/31/21  |  |                      | 7,900  |  |               |   | 7,374  |                |  |   | 7,466  | 
|Latham Pool Products, Inc.                   |  | (g)(h)(k)          |  | Commercial & Professional Services |  | L+775                         |  | 1.0%  |  | 6/29/21  |  |                      | 35,000 |  |               |   | 35,000 |                |  |   | 34,300 | 
|MB Precision Holdings LLC                    |  | (e)(h)(i)(k)       |  | Capital Goods                      |  | L+725                         |  | 1.3%  |  | 1/23/20  |  |                      | 59,990 |  |               |   | 59,990 |                |  |   | 59,390 | 
|MMM Holdings, Inc.                           |  | (g)                |  | Health Care Equipment & Services   |  | L+825                         |  | 1.5%  |  | 12/12/17 |  |                      | 2,524  |  |               |   | 2,532  |                |  |   | 1,186  | 
|Mood Media Corp.                             |  | (g)(o)             |  | Media                              |  | L+600                         |  | 1.0%  |  | 5/1/19   |  |                      | 1,789  |  |               |   | 1,776  |                |  |   | 1,704  | 
|Moxie Liberty LLC                            |  | (g)(i)             |  | Energy                             |  | L+650                         |  | 1.0%  |  | 8/21/20  |  |                      | 11,853 |  |               |   | 11,887 |                |  |   | 11,023 | 
|Moxie Patriot LLC                            |  | (i)                |  | Energy                             |  | L+575                         |  | 1.0%  |  | 12/19/20 |  |                      | 5,556  |  |               |   | 5,515  |                |  |   | 5,139  | 



See
notes to unaudited consolidated financial statements.



17



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







|                                             |  |                    |  |                                    |  |                               |  |       |  |          |  |                      |         |  |               |   |         |                |  |   |         | 
|-------------------------------------------- |  | ------------------ |  | ---------------------------------- |  | ----------------------------- |  | ----- |  | -------- |  | -------------------- | ------- |  | ------------- | - | ------- | -------------- |  | - | ------- | 
|Portfolio
Company(a)                         |  | Footnotes          |  | Industry                           |  | Rate(b)                       |  | Floor |  | Maturity |  | Principal 
Amount(c) |         |  | AmortizedCost |   |         | Fair 
Value(d) | 
|MSO of Puerto Rico, Inc.                     |  | (g)                |  | Health Care Equipment & Services   |  | L+825                         |  | 1.5%  |  | 12/12/17 |  | $                    | 1,835   |  |               | $ | 1,841   |                |  | $ | 863     | 
|New Star Metals Inc.                         |  | (e)(f)(g)(h)(i)(k) |  | Capital Goods                      |  | L+800                         |  | 1.3%  |  | 3/20/20  |  |                      | 120,750 |  |               |   | 120,750 |                |  |   | 120,750 | 
|Nobel Learning Communities, Inc.             |  | (g)(k)(l)          |  | Consumer Services                  |  | L+845                         |  | 1.0%  |  | 4/27/21  |  |                      | 84,472  |  |               |   | 84,472  |                |  |   | 84,173  | 
|Nobel Learning Communities, Inc.             |  |                    |  | Consumer Services                  |  | L+450                         |  | 1.0%  |  | 4/27/20  |  |                      | 3,634   |  |               |   | 3,634   |                |  |   | 3,634   | 
|Nobel Learning Communities, Inc.             |  | (p)                |  | Consumer Services                  |  | L+450                         |  | 1.0%  |  | 4/27/20  |  |                      | 7,547   |  |               |   | 7,547   |                |  |   | 7,547   | 
|Nova Wildcat Amerock, LLC                    |  | (e)(g)(h)          |  | Consumer Durables & Apparel        |  | L+330, 5.4% PIK(5.4% Max PIK) |  | 1.3%  |  | 9/10/19  |  |                      | 70,563  |  |               |   | 70,563  |                |  |   | 61,037  | 
|Panda Sherman Power, LLC                     |  | (e)                |  | Energy                             |  | L+750                         |  | 1.5%  |  | 9/14/18  |  |                      | 2,287   |  |               |   | 2,298   |                |  |   | 2,069   | 
|PHRC License, LLC                            |  | (f)(h)(i)          |  | Consumer Services                  |  | L+900                         |  | 1.5%  |  | 8/14/20  |  |                      | 59,425  |  |               |   | 59,425  |                |  |   | 58,831  | 
|Pittsburgh Glass Works, LLC                  |  | (e)(g)(l)          |  | Automobiles & Components           |  | L+916                         |  | 1.0%  |  | 11/25/21 |  |                      | 20,983  |  |               |   | 20,983  |                |  |   | 20,983  | 
|Polymer Additives, Inc.                      |  | (h)(i)(l)          |  | Materials                          |  | L+838                         |  | 1.0%  |  | 12/20/21 |  |                      | 63,068  |  |               |   | 63,068  |                |  |   | 64,330  | 
|Production Resource Group, LLC               |  | (g)(h)(i)(l)       |  | Media                              |  | L+750                         |  | 1.0%  |  | 7/23/19  |  |                      | 47,500  |  |               |   | 47,500  |                |  |   | 47,975  | 
|Professional Plumbing Group, Inc.            |  | (e)(g)             |  | Capital Goods                      |  | L+875                         |  | 0.8%  |  | 7/31/19  |  |                      | 25,200  |  |               |   | 25,200  |                |  |   | 25,326  | 
|Propulsion Acquisition, LLC                  |  | (e)(g)(h)          |  | Commercial & Professional Services |  | L+600                         |  | 1.0%  |  | 7/13/21  |  |                      | 37,784  |  |               |   | 34,941  |                |  |   | 36,840  | 
|PSKW, LLC                                    |  | (e)(g)(h)          |  | Health Care Equipment & Services   |  | L+842                         |  | 1.0%  |  | 11/25/21 |  |                      | 26,000  |  |               |   | 26,000  |                |  |   | 26,018  | 
|Reddy Ice Corp.                              |  | (j)                |  | Food, Beverage & Tobacco           |  | L+550                         |  | 1.3%  |  | 5/1/19   |  |                      | 1,898   |  |               |   | 1,710   |                |  |   | 1,566   | 
|Roadrunner Intermediate Acquisition Co., LLC |  | (g)                |  | Health Care Equipment & Services   |  | L+800                         |  | 1.0%  |  | 9/22/21  |  |                      | 7,950   |  |               |   | 7,950   |                |  |   | 7,925   | 
|Rogue Wave Software, Inc.                    |  | (e)(g)             |  | Software & Services                |  | L+804                         |  | 1.0%  |  | 9/25/21  |  |                      | 18,788  |  |               |   | 18,788  |                |  |   | 18,553  | 
|Sequential Brands Group, Inc.                |  | (e)(i)(k)(l)(o)    |  | Consumer Durables & Apparel        |  | L+825                         |  |       |  | 12/4/21  |  |                      | 158,000 |  |               |   | 158,000 |                |  |   | 156,420 | 
|Serena Software, Inc.                        |  | (g)(h)             |  | Software & Services                |  | L+650                         |  | 1.0%  |  | 4/14/20  |  |                      | 13,281  |  |               |   | 13,075  |                |  |   | 12,683  | 
|Smile Brands Group Inc.                      |  | (e)(g)(h)(i)(j)    |  | Health Care Equipment & Services   |  | L+650, 1.3% PIK(1.5% Max PIK) |  | 1.3%  |  | 8/16/19  |  |                      | 43,247  |  |               |   | 42,836  |                |  |   | 31,408  | 
|Sorenson Communications, Inc.                |  | (e)(g)(h)(i)(k)    |  | Telecommunication Services         |  | L+575                         |  | 2.3%  |  | 4/30/20  |  |                      | 100,480 |  |               |   | 100,100 |                |  |   | 100,731 | 
|Sports Authority, Inc.                       |  | (g)                |  | Retailing                          |  | L+600                         |  | 1.5%  |  | 11/16/17 |  |                      | 7,818   |  |               |   | 7,854   |                |  |   | 2,560   | 
|Stallion Oilfield Holdings, Inc.             |  | (e)(g)(h)          |  | Energy                             |  | L+675                         |  | 1.3%  |  | 6/19/18  |  |                      | 16,430  |  |               |   | 16,146  |                |  |   | 8,905   | 
|Stonewall Gas Gathering LLC                  |  | (g)(i)             |  | Capital Goods                      |  | L+775                         |  | 1.0%  |  | 1/28/22  |  |                      | 9,925   |  |               |   | 9,489   |                |  |   | 9,900   | 
|SunGard Availability Services Capital, Inc.  |  | (g)(j)             |  | Software & Services                |  | L+500                         |  | 1.0%  |  | 3/29/19  |  |                      | 10,855  |  |               |   | 10,070  |                |  |   | 9,471   | 
|Sunnova Asset Portfolio 5 Holdings, LLC      |  |                    |  | Energy                             |  | 12.0% PIK(12.0% Max PIK)      |  |       |  | 11/14/21 |  |                      | 14,435  |  |               |   | 14,160  |                |  |   | 14,110  | 
|Sunnova Asset Portfolio 5 Holdings, LLC      |  | (p)                |  | Energy                             |  | 12.0% PIK(12.0% Max PIK)      |  |       |  | 11/14/21 |  |                      | 414     |  |               |   | 414     |                |  |   | 404     | 
|Swift Worldwide Resources US Holdings Corp.  |  | (g)(i)             |  | Energy                             |  | L+800                         |  | 1.3%  |  | 4/30/19  |  |                      | 19,686  |  |               |   | 19,686  |                |  |   | 19,686  | 



See
notes to unaudited consolidated financial statements.



18



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







|                                       |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   |           |                |  |   |           |  
|-------------------------------------- |  | --------------- |  | ---------------------------------------------- |  | ------------------------------ |  | ----- |  | -------- |  | -------------------- | ------- |  | ------------- | - | --------- | -------------- |  | - | --------- | -
|Portfolio
Company(a)                   |  | Footnotes       |  | Industry                                       |  | Rate(b)                        |  | Floor |  | Maturity |  | Principal 
Amount(c) |         |  | AmortizedCost |   |           | Fair 
Value(d) | 
|ThermaSys Corp.                        |  | (g)             |  | Capital Goods                                  |  | L+400                          |  | 1.3%  |  | 5/3/19   |  | $                    | 4,777   |  |               | $ | 4,779     |                |  | $ | 4,216     |  
|Transplace Texas, LP                   |  | (e)(g)          |  | Transportation                                 |  | L+747                          |  | 1.0%  |  | 9/16/21  |  |                      | 18,000  |  |               |   | 18,000    |                |  |   | 17,843    |  
|U.S. Xpress Enterprises, Inc.          |  | (e)(h)(i)(k)    |  | Transportation                                 |  | L+1000, 0.0% PIK(1.5% Max PIK) |  | 1.5%  |  | 5/30/19  |  |                      | 84,292  |  |               |   | 84,292    |                |  |   | 84,292    |  
|UTEX Industries, Inc.                  |  | (l)             |  | Energy                                         |  | L+400                          |  | 1.0%  |  | 5/21/21  |  |                      | 1,137   |  |               |   | 1,132     |                |  |   | 783       |  
|Vertellus Performance Chemicals LLC    |  | (k)(l)          |  | Materials                                      |  | L+950                          |  | 1.0%  |  | 1/30/20  |  |                      | 65,000  |  |               |   | 65,000    |                |  |   | 61,477    |  
|Warren Resources, Inc.                 |  | (e)(f)(k)(l)    |  | Energy                                         |  | L+850                          |  | 1.0%  |  | 5/22/20  |  |                      | 70,443  |  |               |   | 70,443    |                |  |   | 57,411    |  
|Waste Pro USA, Inc.                    |  | (e)(h)(i)(k)(l) |  | Commercial & Professional Services             |  | L+750                          |  | 1.0%  |  | 10/15/20 |  |                      | 111,320 |  |               |   | 111,320   |                |  |   | 112,990   |  
|Waste Pro USA, Inc.                    |  | (p)             |  | Commercial & Professional Services             |  | L+750                          |  | 1.0%  |  | 10/15/20 |  |                      | 12,222  |  |               |   | 12,222    |                |  |   | 12,406    |  
|Winchester Electronics Corp.           |  | (i)(l)          |  | Technology Hardware & Equipment                |  | L+800                          |  | 1.0%  |  | 11/17/20 |  |                      | 12,929  |  |               |   | 12,929    |                |  |   | 12,670    |  
|Winchester Electronics Corp.           |  | (e)(k)(l)       |  | Technology Hardware & Equipment                |  | L+850                          |  | 1.0%  |  | 11/17/20 |  |                      | 98,182  |  |               |   | 98,182    |                |  |   | 96,218    |  
|Zeta Interactive Holdings Corp.        |  | (e)(g)(h)       |  | Software & Services                            |  | L+750                          |  | 1.0%  |  | 7/9/21   |  |                      | 29,719  |  |               |   | 29,719    |                |  |   | 29,684    |  
|Zeta Interactive Holdings Corp.        |  | (p)             |  | Software & Services                            |  | L+750                          |  | 1.0%  |  | 7/9/21   |  |                      | 6,424   |  |               |   | 6,424     |                |  |   | 6,416     |  
|                                       |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   |           |                |  |   |           |  
|Total Senior Secured LoansFirst Lien  |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   | 3,119,499 |                |  |   | 3,005,616 |  
|Unfunded Loan Commitments              |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   | (203,409  | )              |  |   | (203,409  | )
|                                       |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   |           |                |  |   |           |  
|Net Senior Secured LoansFirst Lien    |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   | 2,916,090 |                |  |   | 2,802,207 |  
|                                       |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   |           |                |  |   |           |  
|Senior Secured LoansSecond Lien33.5% |  |                 |  |                                                |  |                                |  |       |  |          |  |                      |         |  |               |   |           |                |  |   |           |  
|Alison US LLC                          |  | (g)(o)          |  | Capital Goods                                  |  | L+850                          |  | 1.0%  |  | 8/29/22  |  |                      | 4,444   |  |               |   | 4,286     |                |  |   | 3,611     |  
|American EnergyMarcellus, LLC         |  | (g)             |  | Energy                                         |  | L+750                          |  | 1.0%  |  | 8/4/21   |  |                      | 3,333   |  |               |   | 3,291     |                |  |   | 78        |  
|AP Exhaust Acquisition, LLC            |  | (e)             |  | Automobiles & Components                       |  | 12.0%, 0.0% PIK(12.0% Max PIK) |  |       |  | 9/28/21  |  |                      | 33,514  |  |               |   | 33,514    |                |  |   | 30,581    |  
|Arena Energy, LP                       |  | (e)             |  | Energy                                         |  | L+1000                         |  | 1.0%  |  | 1/24/21  |  |                      | 15,000  |  |               |   | 15,000    |                |  |   | 13,812    |  
|Ascent ResourcesUtica, LLC            |  | (e)(f)(i)(l)    |  | Energy                                         |  | L+950, 2.0% PIK(2.0% Max PIK)  |  | 1.5%  |  | 9/30/18  |  |                      | 244,118 |  |               |   | 243,105   |                |  |   | 218,485   |  
|Altas Resource Partners, L.P.          |  | (e)(h)(k)       |  | Energy                                         |  | L+900                          |  | 1.0%  |  | 2/23/20  |  |                      | 67,000  |  |               |   | 65,296    |                |  |   | 53,590    |  
|BlackBrush Oil & Gas, L.P.             |  | (j)(l)          |  | Energy                                         |  | L+650                          |  | 1.0%  |  | 7/30/21  |  |                      | 11,182  |  |               |   | 10,419    |                |  |   | 8,964     |  
|BPA Laboratories Inc.                  |  | (e)             |  | Pharmaceuticals, Biotechnology & Life Sciences |  | L+250                          |  |       |  | 7/3/17   |  |                      | 3,272   |  |               |   | 2,870     |                |  |   | 2,659     |  
|BRG Sports, Inc.                       |  | (l)             |  | Consumer Durables & Apparel                    |  | L+925                          |  | 1.0%  |  | 4/15/22  |  |                      | 12,500  |  |               |   | 12,232    |                |  |   | 11,500    |  
|Byrider Finance, LLC                   |  | (f)             |  | Automobiles & Components                       |  | L+1000                         |  | 1.3%  |  | 8/22/20  |  |                      | 16,667  |  |               |   | 16,667    |                |  |   | 16,333    |  
|Checkout Holding Corp.                 |  | (l)             |  | Media                                          |  | L+675                          |  | 1.0%  |  | 4/11/22  |  |                      | 10,000  |  |               |   | 9,937     |                |  |   | 5,725     |  
|Chief Exploration & Development LLC    |  | (g)             |  | Energy                                         |  | L+650                          |  | 1.0%  |  | 5/16/21  |  |                      | 1,174   |  |               |   | 1,165     |                |  |   | 788       |  
|Compuware Corp.                        |  | (e)             |  | Software & Services                            |  | L+825                          |  | 1.0%  |  | 12/15/22 |  |                      | 10,000  |  |               |   | 8,798     |                |  |   | 9,050     |  



See
notes to unaudited consolidated financial statements.



19



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







|                                       |  |              |  |                                  |  |             |  |       |  |          |  |                      |        |  |               |   |           |                |  |   |         | 
|-------------------------------------- |  | ------------ |  | -------------------------------- |  | ----------- |  | ----- |  | -------- |  | -------------------- | ------ |  | ------------- | - | --------- | -------------- |  | - | ------- | 
|Portfolio
Company(a)                   |  | Footnotes    |  | Industry                         |  | Rate(b)     |  | Floor |  | Maturity |  | Principal 
Amount(c) |        |  | AmortizedCost |   |           | Fair 
Value(d) | 
|Consolidated Precision Products Corp.  |  | (e)          |  | Capital Goods                    |  | L+775       |  | 1.0%  |  | 4/30/21  |  | $                    | 6,932  |  |               | $ | 6,905     |                |  | $ | 6,308   | 
|Crossmark Holdings, Inc.               |  | (l)          |  | Media                            |  | L+750       |  | 1.3%  |  | 12/21/20 |  |                      | 7,778  |  |               |   | 7,793     |                |  |   | 4,394   | 
|Del Monte Foods, Inc.                  |  | (l)(o)       |  | Food, Beverage & Tobacco         |  | L+725       |  | 1.0%  |  | 8/18/21  |  |                      | 3,333  |  |               |   | 3,306     |                |  |   | 2,744   | 
|Eastman Kodak Co.                      |  | (j)          |  | Consumer Durables & Apparel      |  | L+950       |  | 1.3%  |  | 9/3/20   |  |                      | 25,000 |  |               |   | 24,563    |                |  |   | 21,625  | 
|Extreme Reach, Inc.                    |  | (l)          |  | Media                            |  | L+950       |  | 1.0%  |  | 1/22/21  |  |                      | 8,000  |  |               |   | 7,875     |                |  |   | 7,640   | 
|Fieldwood Energy LLC                   |  | (f)          |  | Energy                           |  | L+713       |  | 1.3%  |  | 9/30/20  |  |                      | 2,667  |  |               |   | 1,919     |                |  |   | 425     | 
|Flexera Software LLC                   |  | (l)          |  | Software & Services              |  | L+700       |  | 1.0%  |  | 4/2/21   |  |                      | 1,979  |  |               |   | 1,971     |                |  |   | 1,869   | 
|Gruden Acquisition, Inc.               |  | (e)          |  | Transportation                   |  | L+850       |  | 1.0%  |  | 8/18/23  |  |                      | 15,000 |  |               |   | 14,281    |                |  |   | 14,288  | 
|Inmar, Inc.                            |  | (l)          |  | Software & Services              |  | L+700       |  | 1.0%  |  | 1/27/22  |  |                      | 2,830  |  |               |   | 2,807     |                |  |   | 2,675   | 
|Jazz Acquisition, Inc.                 |  | (g)          |  | Capital Goods                    |  | L+675       |  | 1.0%  |  | 6/19/22  |  |                      | 3,700  |  |               |   | 3,748     |                |  |   | 3,330   | 
|Jonah Energy LLC                       |  | (f)          |  | Energy                           |  | L+650       |  | 1.0%  |  | 5/12/21  |  |                      | 1,250  |  |               |   | 1,070     |                |  |   | 794     | 
|JW Aluminum Co.                        |  | (e)(f)(l)(x) |  | Materials                        |  | L+850       |  | 0.8%  |  | 11/17/20 |  |                      | 30,061 |  |               |   | 30,061    |                |  |   | 30,061  | 
|Leedsworld Inc.                        |  | (e)(f)(g)(h) |  | Retailing                        |  | L+875       |  | 1.3%  |  | 6/28/20  |  |                      | 62,500 |  |               |   | 62,500    |                |  |   | 61,875  | 
|MD America Energy, LLC                 |  | (l)          |  | Energy                           |  | L+850       |  | 1.0%  |  | 8/4/19   |  |                      | 8,298  |  |               |   | 7,977     |                |  |   | 6,942   | 
|Mitchell International, Inc.           |  | (k)          |  | Software & Services              |  | L+750       |  | 1.0%  |  | 10/11/21 |  |                      | 8,843  |  |               |   | 9,021     |                |  |   | 8,482   | 
|National Surgical Hospitals, Inc.      |  | (e)          |  | Health Care Equipment & Services |  | L+900       |  | 1.0%  |  | 6/1/23   |  |                      | 17,500 |  |               |   | 17,500    |                |  |   | 16,971  | 
|Neff Rental LLC                        |  | (l)          |  | Capital Goods                    |  | L+625       |  | 1.0%  |  | 6/9/21   |  |                      | 8,961  |  |               |   | 8,925     |                |  |   | 7,438   | 
|Nielsen & Bainbridge, LLC              |  | (f)(h)       |  | Consumer Durables & Apparel      |  | L+925       |  | 1.0%  |  | 8/15/21  |  |                      | 16,675 |  |               |   | 16,452    |                |  |   | 16,425  | 
|P2 Upstream Acquisition Co.            |  | (l)          |  | Energy                           |  | L+800       |  | 1.0%  |  | 4/30/21  |  |                      | 14,500 |  |               |   | 14,721    |                |  |   | 12,144  | 
|Paw Luxco II Sarl                      |  | (o)          |  | Consumer Durables & Apparel      |  | EURIBOR+950 |  |       |  | 1/29/19  |  |                     | 5,727  |  |               |   | 7,157     |                |  |   | 4,361   | 
|Payless Inc.                           |  | (l)          |  | Retailing                        |  | L+750       |  | 1.0%  |  | 3/11/22  |  | $                    | 10,841 |  |               |   | 10,751    |                |  |   | 4,911   | 
|Peak 10, Inc.                          |  | (h)          |  | Software & Services              |  | L+725       |  | 1.0%  |  | 6/17/22  |  |                      | 5,500  |  |               |   | 5,453     |                |  |   | 5,088   | 
|Penton Media, Inc.                     |  | (j)          |  | Media                            |  | L+775       |  | 1.3%  |  | 10/2/20  |  |                      | 5,942  |  |               |   | 5,876     |                |  |   | 5,838   | 
|Printpack Holdings, Inc.               |  | (e)(i)(l)    |  | Materials                        |  | L+875       |  | 1.0%  |  | 5/28/21  |  |                      | 60,000 |  |               |   | 59,001    |                |  |   | 58,500  | 
|PSAV Acquisition Corp.                 |  | (e)(k)       |  | Technology Hardware & Equipment  |  | L+825       |  | 1.0%  |  | 1/24/22  |  |                      | 80,000 |  |               |   | 79,020    |                |  |   | 79,600  | 
|Renaissance Learning, Inc.             |  | (k)          |  | Software & Services              |  | L+700       |  | 1.0%  |  | 4/11/22  |  |                      | 3,736  |  |               |   | 3,705     |                |  |   | 3,531   | 
|Road Infrastructure Investment, LLC    |  | (l)          |  | Materials                        |  | L+675       |  | 1.0%  |  | 9/30/21  |  |                      | 7,759  |  |               |   | 7,728     |                |  |   | 7,216   | 
|Templar Energy LLC                     |  | (f)(h)       |  | Energy                           |  | L+750       |  | 1.0%  |  | 11/25/20 |  |                      | 29,231 |  |               |   | 28,697    |                |  |   | 3,544   | 
|TNS, Inc.                              |  | (h)(j)(l)    |  | Software & Services              |  | L+800       |  | 1.0%  |  | 8/14/20  |  |                      | 45,296 |  |               |   | 44,965    |                |  |   | 44,361  | 
|Ultima US Holdings LLC                 |  | (l)(o)       |  | Capital Goods                    |  | L+850       |  | 1.0%  |  | 12/31/20 |  |                      | 57,000 |  |               |   | 56,160    |                |  |   | 56,715  | 
|Vantage Energy, LLC                    |  | (f)(i)       |  | Energy                           |  | L+750       |  | 1.0%  |  | 12/20/18 |  |                      | 18,092 |  |               |   | 17,979    |                |  |   | 11,624  | 
|Vantage Energy II, LLC                 |  | (i)          |  | Energy                           |  | L+750       |  | 1.0%  |  | 5/8/17   |  |                      | 13,000 |  |               |   | 13,000    |                |  |   | 12,610  | 
|Winebow Holdings, Inc.                 |  | (g)          |  | Retailing                        |  | L+750       |  | 1.0%  |  | 1/2/22   |  |                      | 2,775  |  |               |   | 2,757     |                |  |   | 2,608   | 
|                                       |  |              |  |                                  |  |             |  |       |  |          |  |                      |        |  |               |   |           |                |  |   |         | 
|Total Senior Secured LoansSecond Lien |  |              |  |                                  |  |             |  |       |  |          |  |                      |        |  |               |   | 1,012,224 |                |  |   | 902,113 | 
|                                       |  |              |  |                                  |  |             |  |       |  |          |  |                      |        |  |               |   |           |                |  |   |         | 



See
notes to unaudited consolidated financial statements.



20



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







|                                             |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   |         |                |  |   |         |  
|-------------------------------------------- |  | --------- |  | ---------------------------------------- |  | ------------------------------ |  | ----- |  | -------- |  | -------------------- | ------ |  | ------------- | - | ------- | -------------- |  | - | ------- | -
|Portfolio
Company(a)                         |  | Footnotes |  | Industry                                 |  | Rate(b)                        |  | Floor |  | Maturity |  | Principal 
Amount(c) |        |  | AmortizedCost |   |         | Fair 
Value(d) | 
|Senior Secured Bonds6.7%                    |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   |         |                |  |   |         |  
|Advanced Lighting Technologies, Inc.         |  | (e)(f)    |  | Materials                                |  | 10.5%                          |  |       |  | 6/1/19   |  | $                    | 35,500 |  |               | $ | 32,439  |                |  | $ | 17,484  |  
|American EnergyWoodford, LLC                |  | (f)(m)(n) |  | Energy                                   |  | 12.0% PIK(12.0% Max PIK)       |  |       |  | 12/30/20 |  |                      | 2,588  |  |               |   | 2,006   |                |  |   | 369     |  
|Aspect Software, Inc.                        |  | (f)       |  | Software & Services                      |  | 10.6%                          |  |       |  | 5/15/17  |  |                      | 8,005  |  |               |   | 8,159   |                |  |   | 6,574   |  
|Avaya Inc.                                   |  | (j)       |  | Technology Hardware & Equipment          |  | 7.0%                           |  |       |  | 4/1/19   |  |                      | 5,500  |  |               |   | 5,478   |                |  |   | 4,102   |  
|Avaya Inc.                                   |  | (f)       |  | Technology Hardware & Equipment          |  | 10.5%                          |  |       |  | 3/1/21   |  |                      | 18,550 |  |               |   | 16,416  |                |  |   | 6,353   |  
|Caesars Entertainment Resort Properties, LLC |  | (e)(j)    |  | Consumer Services                        |  | 11.0%                          |  |       |  | 10/1/21  |  |                      | 37,350 |  |               |   | 37,991  |                |  |   | 33,802  |  
|CEVA Group Plc                               |  | (f)(o)    |  | Transportation                           |  | 9.0%                           |  |       |  | 9/1/21   |  |                      | 2,000  |  |               |   | 2,000   |                |  |   | 1,579   |  
|FourPoint Energy, LLC                        |  | (e)(f)    |  | Energy                                   |  | 8.0%                           |  |       |  | 12/31/20 |  |                      | 57,281 |  |               |   | 55,556  |                |  |   | 44,536  |  
|FourPoint Energy, LLC                        |  | (f)(p)    |  | Energy                                   |  | 8.0%                           |  |       |  | 12/31/20 |  |                      | 3,656  |  |               |   | 3,638   |                |  |   | 2,843   |  
|Global A&T Electronics Ltd.                  |  | (f)(l)(o) |  | Semiconductors & Semiconductor Equipment |  | 10.0%                          |  |       |  | 2/1/19   |  |                      | 19,490 |  |               |   | 18,784  |                |  |   | 15,397  |  
|Lightstream Resources Ltd.                   |  | (f)(o)    |  | Energy                                   |  | 9.9%                           |  |       |  | 6/15/19  |  |                      | 5,313  |  |               |   | 5,313   |                |  |   | 4,436   |  
|Logans Roadhouse, Inc.                      |  | (f)       |  | Consumer Services                        |  | 4.0%, 10.5% PIK(10.5% Max PIK) |  |       |  | 10/15/17 |  |                      | 39,799 |  |               |   | 31,751  |                |  |   | 33,205  |  
|Modular Space Corp.                          |  | (f)       |  | Capital Goods                            |  | 10.3%                          |  |       |  | 1/31/19  |  |                      | 9,950  |  |               |   | 10,168  |                |  |   | 3,992   |  
|SandRidge Energy, Inc.                       |  | (j)       |  | Energy                                   |  | 8.8%                           |  |       |  | 6/1/20   |  |                      | 11,700 |  |               |   | 11,675  |                |  |   | 3,572   |  
|Sorenson Communications, Inc.                |  | (e)       |  | Telecommunication Services               |  | 9.0%, 0.0% PIK(9.0% Max PIK)   |  |       |  | 10/31/20 |  |                      | 7,057  |  |               |   | 6,822   |                |  |   | 6,594   |  
|                                             |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   |         |                |  |   |         |  
|Total Senior Secured Bonds                   |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   | 248,196 |                |  |   | 184,838 |  
|Unfunded Bond Commitments                    |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   | (3,638  | )              |  |   | (3,638  | )
|                                             |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   |         |                |  |   |         |  
|Net Senior Secured Bonds                     |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   | 244,558 |                |  |   | 181,200 |  
|                                             |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   |         |                |  |   |         |  
|Subordinated Debt11.9%                      |  |           |  |                                          |  |                                |  |       |  |          |  |                      |        |  |               |   |         |                |  |   |         |  
|Algeco Scotsman Global Finance Plc           |  | (f)(o)    |  | Commercial & Professional Services       |  | 10.8%                          |  |       |  | 10/15/19 |  |                      | 3,400  |  |               |   | 2,745   |                |  |   | 1,331   |  
|Alta Mesa Holdings, LP                       |  | (f)       |  | Energy                                   |  | 9.6%                           |  |       |  | 10/15/18 |  |                      | 1,350  |  |               |   | 1,002   |                |  |   | 474     |  
|Atlas Energy Holdings Operating Co., LLC     |  | (f)       |  | Energy                                   |  | 7.8%                           |  |       |  | 1/15/21  |  |                      | 7,535  |  |               |   | 6,617   |                |  |   | 1,505   |  
|Atlas Energy Holdings Operating Co., LLC     |  | (f)       |  | Energy                                   |  | 9.3%                           |  |       |  | 8/15/21  |  |                      | 2,264  |  |               |   | 1,717   |                |  |   | 465     |  
|Aurora Diagnostics, LLC                      |  | (e)       |  | Health Care Equipment & Services         |  | 10.8%                          |  |       |  | 1/15/18  |  |                      | 7,000  |  |               |   | 7,021   |                |  |   | 4,554   |  
|Bellatrix Exploration Ltd.                   |  | (j)(o)    |  | Energy                                   |  | 8.5%                           |  |       |  | 5/15/20  |  |                      | 5,000  |  |               |   | 4,911   |                |  |   | 3,369   |  
|BMC Software Finance, Inc.                   |  | (l)       |  | Software & Services                      |  | 7.3%                           |  |       |  | 6/1/18   |  |                      | 3,820  |  |               |   | 3,546   |                |  |   | 3,162   |  
|Brooklyn Basketball Holdings, LLC            |  | (f)(i)    |  | Consumer Services                        |  | L+725                          |  |       |  | 10/25/19 |  |                      | 39,746 |  |               |   | 39,746  |                |  |   | 39,547  |  
|CEC Entertainment, Inc.                      |  | (j)       |  | Consumer Services                        |  | 8.0%                           |  |       |  | 2/15/22  |  |                      | 18,715 |  |               |   | 18,520  |                |  |   | 17,803  |  
|Ceridian HCM Holding Inc.                    |  | (j)       |  | Commercial & Professional Services       |  | 11.0%                          |  |       |  | 3/15/21  |  |                      | 6,500  |  |               |   | 6,266   |                |  |   | 5,135   |  



See
notes to unaudited consolidated financial statements.



21



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







|                                            |  |                 |  |                                    |  |                                |  |       |  |          |  |                      |         |  |               |   |         |                |  |   |         | 
|------------------------------------------- |  | --------------- |  | ---------------------------------- |  | ------------------------------ |  | ----- |  | -------- |  | -------------------- | ------- |  | ------------- | - | ------- | -------------- |  | - | ------- | 
|Portfolio
Company(a)                        |  | Footnotes       |  | Industry                           |  | Rate(b)                        |  | Floor |  | Maturity |  | Principal 
Amount(c) |         |  | AmortizedCost |   |         | Fair 
Value(d) | 
|Communications Sales & Leasing, Inc.        |  | (j)(o)          |  | Real Estate                        |  | 8.3%                           |  |       |  | 10/15/23 |  | $                    | 2,000   |  |               | $ | 1,944   |                |  | $ | 1,707   | 
|Eclipse Resources Corp.                     |  | (j)(o)          |  | Energy                             |  | 8.9%                           |  |       |  | 7/15/23  |  |                      | 9,175   |  |               |   | 8,990   |                |  |   | 4,416   | 
|EV Energy Partners, L.P.                    |  | (f)             |  | Energy                             |  | 8.0%                           |  |       |  | 4/15/19  |  |                      | 259     |  |               |   | 232     |                |  |   | 129     | 
|Global Jet Capital Inc.                     |  |                 |  | Commercial & Professional Services |  | 15.0% PIK(15.0% Max PIK)       |  |       |  | 1/30/25  |  |                      | 635     |  |               |   | 635     |                |  |   | 636     | 
|Global Jet Capital Inc.                     |  |                 |  | Commercial & Professional Services |  | 15.0% PIK(15.0% Max PIK)       |  |       |  | 4/30/25  |  |                      | 4,030   |  |               |   | 4,030   |                |  |   | 4,030   | 
|Global Jet Capital Inc.                     |  |                 |  | Commercial & Professional Services |  | 15.0% PIK(15.0% Max PIK)       |  |       |  | 9/3/25   |  |                      | 828     |  |               |   | 828     |                |  |   | 828     | 
|Global Jet Capital Inc.                     |  |                 |  | Commercial & Professional Services |  | 15.0% PIK(15.0% Max PIK)       |  |       |  | 9/29/25  |  |                      | 779     |  |               |   | 779     |                |  |   | 779     | 
|Global Jet Capital Inc.                     |  | (f)(o)          |  | Commercial & Professional Services |  | 15.0% PIK(15.0% Max PIK)       |  |       |  | 12/4/25  |  |                      | 5,746   |  |               |   | 5,746   |                |  |   | 5,746   | 
|Global Jet Capital Inc.                     |  | (f)(o)          |  | Commercial & Professional Services |  | 15.0% PIK(15.0% Max PIK)       |  |       |  | 12/9/25  |  |                      | 940     |  |               |   | 940     |                |  |   | 940     | 
|Jupiter Resources Inc.                      |  | (i)(j)(o)       |  | Energy                             |  | 8.5%                           |  |       |  | 10/1/22  |  |                      | 28,800  |  |               |   | 26,535  |                |  |   | 11,556  | 
|Legacy Reserves LP                          |  | (j)             |  | Energy                             |  | 6.6%                           |  |       |  | 12/1/21  |  |                      | 5,000   |  |               |   | 3,988   |                |  |   | 1,081   | 
|Legacy Reserves LP                          |  | (e)             |  | Energy                             |  | 8.0%                           |  |       |  | 12/1/20  |  |                      | 8,250   |  |               |   | 8,126   |                |  |   | 1,660   | 
|Mood Media Corp.                            |  | (e)(f)(o)       |  | Media                              |  | 9.3%                           |  |       |  | 10/15/20 |  |                      | 46,207  |  |               |   | 45,676  |                |  |   | 29,630  | 
|Navistar International Corp.                |  | (j)(l)(o)       |  | Capital Goods                      |  | 8.3%                           |  |       |  | 11/1/21  |  |                      | 15,240  |  |               |   | 14,155  |                |  |   | 10,311  | 
|NewStar Financial, Inc.                     |  | (e)(i)(k)(l)(o) |  | Diversified Financials             |  | 8.3%, 0.0% PIK(8.8% Max PIK)   |  |       |  | 12/4/24  |  |                      | 137,500 |  |               |   | 109,003 |                |  |   | 100,375 | 
|Ocean Rig UDW Inc.                          |  | (f)(o)          |  | Energy                             |  | 7.3%                           |  |       |  | 4/1/19   |  |                      | 4,700   |  |               |   | 4,700   |                |  |   | 2,003   | 
|Opal Acquisition, Inc.                      |  | (j)             |  | Commercial & Professional Services |  | 8.9%                           |  |       |  | 12/15/21 |  |                      | 17,157  |  |               |   | 17,157  |                |  |   | 13,940  | 
|P.F. Changs China Bistro, Inc.             |  | (e)(j)          |  | Consumer Services                  |  | 10.3%                          |  |       |  | 6/30/20  |  |                      | 25,853  |  |               |   | 26,150  |                |  |   | 21,539  | 
|Rex Energy Corp.                            |  | (f)             |  | Energy                             |  | 6.3%                           |  |       |  | 8/1/22   |  |                      | 3,950   |  |               |   | 3,950   |                |  |   | 558     | 
|Sorenson Communications, Inc.               |  | (e)(f)          |  | Telecommunication Services         |  | 13.0%, 0.0% PIK(13.0% Max PIK) |  |       |  | 10/31/21 |  |                      | 5,363   |  |               |   | 5,036   |                |  |   | 5,579   | 
|SunGard Availability Services Capital, Inc. |  | (j)             |  | Software & Services                |  | 8.8%                           |  |       |  | 4/1/22   |  |                      | 5,900   |  |               |   | 4,268   |                |  |   | 3,592   | 
|Talos Production LLC                        |  | (f)             |  | Energy                             |  | 9.8%                           |  |       |  | 2/15/18  |  |                      | 4,500   |  |               |   | 4,131   |                |  |   | 1,856   | 
|TI Group Automotive Systems, LLC            |  | (j)(o)          |  | Automobiles & Components           |  | 8.8%                           |  |       |  | 7/15/23  |  |                      | 10,275  |  |               |   | 10,275  |                |  |   | 9,466   | 
|Triangle USA Petroleum Corp.                |  | (f)             |  | Energy                             |  | 6.8%                           |  |       |  | 7/15/22  |  |                      | 2,350   |  |               |   | 2,350   |                |  |   | 731     | 
|Windstream Corp.                            |  | (j)(o)          |  | Telecommunication Services         |  | 6.4%                           |  |       |  | 8/1/23   |  |                      | 2,600   |  |               |   | 2,600   |                |  |   | 1,895   | 



See
notes to unaudited consolidated financial statements.



22



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







|                                                    |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   |         |                |  |   |         | 
|--------------------------------------------------- |  | --------- |  | --------------------------- |  | ------- |  | ----- |  | -------- |  | -------------------- | ---------- |  | ------------- | - | ------- | -------------- |  | - | ------- | 
|Portfolio
Company(a)                                |  | Footnotes |  | Industry                    |  | Rate(b) |  | Floor |  | Maturity |  | Principal 
Amount(c) |            |  | AmortizedCost |   |         | Fair 
Value(d) | 
|York Risk Services Holding Corp.                    |  | (e)(j)    |  | Insurance                   |  | 8.5%    |  |       |  | 10/1/22  |  | $                    | 8,350      |  |               | $ | 7,509   |                |  | $ | 6,691   | 
|                                                    |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   |         |                |  |   |         | 
|Total Subordinated Debt                             |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   | 411,824 |                |  |   | 319,019 | 
|                                                    |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   |         |                |  |   |         | 
|Collateralized Securities4.2%                      |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   |         |                |  |   |         | 
|CGMS CLO 2013-3A Class Subord.                      |  | (o)       |  | Diversified Financials      |  | 17.0%   |  |       |  | 7/15/25  |  |                      | 17,000     |  |               |   | 9,833   |                |  |   | 10,798  | 
|JPMorgan Chase Bank, N.A. CreditLinked Notes       |  | (o)       |  | Diversified Financials      |  | 14.2%   |  |       |  | 12/20/21 |  |                      | 76,260     |  |               |   | 76,187  |                |  |   | 72,828  | 
|NewStar Clarendon 20141A Class D                   |  | (o)       |  | Diversified Financials      |  | L+435   |  |       |  | 1/25/27  |  |                      | 1,060      |  |               |   | 993     |                |  |   | 965     | 
|NewStar Clarendon 20141A Class Subord. B           |  | (o)       |  | Diversified Financials      |  | 13.6%   |  |       |  | 1/25/27  |  |                      | 12,140     |  |               |   | 10,953  |                |  |   | 10,142  | 
|Octagon CLO 20121A Class Income                    |  | (o)       |  | Diversified Financials      |  | 7.9%    |  |       |  | 1/15/24  |  |                      | 4,650      |  |               |   | 2,279   |                |  |   | 1,761   | 
|Wind River CLO Ltd. 20131A Class Subord. B         |  | (o)       |  | Diversified Financials      |  | 11.2%   |  |       |  | 4/20/25  |  |                      | 26,720     |  |               |   | 18,345  |                |  |   | 16,889  | 
|                                                    |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   |         |                |  |   |         | 
|Total Collateralized Securities                     |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   | 118,590 |                |  |   | 113,383 | 
|                                                    |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   |         |                |  |   |         | 
|                                                    |  |           |  |                             |  |         |  |      
|                                                    |  |           |  |                             |  |         |  |       |  |          |  | Numberof Shares      |            |  | Cost          |   |         | FairValue(d)   | 
|Equity/Other8.0%                                   |  |           |  |                             |  |         |  |       |  |          |  |                      |            |  |               |   |         |                |  |   |         | 
|5 Arches, LLC, Common Equity                        |  | (n)(o)(r) |  | Diversified Financials      |  |         |  |       |  |          |  |                      | 4,738      |  |               |   | 125     |                |  |   | 125     | 
|A.T. Cross Co., Common Equity, Class A Units        |  | (f)(n)    |  | Retailing                   |  |         |  |       |  |          |  |                      | 1,000,000  |  |               |   | 1,000   |                |  |   | 550     | 
|A.T. Cross Co., Preferred Equity, Class A-1 Units   |  | (f)(n)    |  | Retailing                   |  |         |  |       |  |          |  |                      | 243,478    |  |               |   | 243     |                |  |   | 256     | 
|Abaco Energy Technologies LLC, Common Equity        |  | (n)       |  | Energy                      |  |         |  |       |  |          |  |                      | 3,055,556  |  |               |   | 3,056   |                |  |   | 459     | 
|ACP FH Holdings GP, LLC, Common Equity              |  | (f)(n)    |  | Consumer Durables & Apparel |  |         |  |       |  |          |  |                      | 88,571     |  |               |   | 89      |                |  |   | 88      | 
|ACP FH Holdings, LP, Common Equity                  |  | (f)(n)    |  | Consumer Durables & Apparel |  |         |  |       |  |          |  |                      | 8,768,572  |  |               |   | 8,769   |                |  |   | 8,734   | 
|Allen Systems Group, Inc., Common Equity            |  | (n)(x)    |  | Software & Services         |  |         |  |       |  |          |  |                      | 625,178    |  |               |   | 13,475  |                |  |   | 28,821  | 
|Altus Power America Holdings, LLC, Preferred Equity |  |           |  | Energy                      |  |         |  |       |  |          |  |                      | 574,758    |  |               |   | 573     |                |  |   | 1,063   | 
|Altus Power America Management, LLC, Class B Units  |  | (n)(t)    |  | Energy                      |  |         |  |       |  |          |  |                      | 83         |  |               |   |        |                |  |   |        | 
|Amaya Inc., Warrants, 5/15/2024                     |  | (n)(o)    |  | Consumer Services           |  |         |  |       |  |          |  |                      | 2,000,000  |  |               |   | 16,832  |                |  |   | 15,260  | 
|AP Exhaust Holdings, LLC, Common Equity             |  | (n)(r)    |  | Automobiles & Components    |  |         |  |       |  |          |  |                      | 8,378      |  |               |   | 8,378   |                |  |   | 4,189   | 
|Ascent Resources Utica Holdings, LLC, Common Equity |  | (n)(q)    |  | Energy                      |  |         |  |       |  |          |  |                      | 13,555,557 |  |               |   | 12,900  |                |  |   | 2,711   | 



See
notes to unaudited consolidated financial statements.



23



---

##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  
|---------------------------------------------------------- |  | --------------- |  | ---------------------------------------------- |  | --------------- | --------- |  | ---- | - | --------- | ------------ |  | - | ---------- | -
|Portfolio
Company(a)                                       |  | Footnotes       |  | Industry                                       |  | Numberof Shares |           |  | Cost |   |           | FairValue(d) | 
|BPA Laboratories, Inc., Series A Warrants, 4/29/2024       |  | (e)(n)          |  | Pharmaceuticals, Biotechnology & Life Sciences |  |                 | 10,924    |  |      |   |          |              |  |   |           |  
|BPA Laboratories, Inc., Series B Warrants, 4/29/2024       |  | (e)(n)          |  | Pharmaceuticals, Biotechnology & Life Sciences |  |                 | 17,515    |  |      |   |          |              |  |   |           |  
|Burleigh Point, Ltd., Warrants, 7/16/2020                  |  | (n)(o)          |  | Retailing                                      |  |                 | 3,451,216 |  |      |   | 1,898     |              |  |   | 2,278      |  
|Cimarron Energy Holdco Inc., Common Equity                 |  | (n)             |  | Energy                                         |  |                 | 2,500,000 |  |      |   | 2,500     |              |  |   | 1,750      |  
|CoSentry.Net, LLC, Preferred Equity                        |  | (f)(n)          |  | Software & Services                            |  |                 | 2,632     |  |      |   | 2,500     |              |  |   | 4,385      |  
|DHS Technologies LLC, Common Equity                        |  | (f)             |  | Capital Goods                                  |  |                 | 60,872    |  |      |   | 5,000     |              |  |   | 1,218      |  
|Eastman Kodak Co., Common Equity                           |  | (n)             |  | Consumer Durables & Apparel                    |  |                 | 1,846     |  |      |   | 36        |              |  |   | 23         |  
|FourPoint Energy, LLC, Common Equity, Class C Units        |  | (n)(r)          |  | Energy                                         |  |                 | 13,000    |  |      |   | 13,000    |              |  |   | 9,100      |  
|FourPoint Energy, LLC, Common Equity, Class D Units        |  | (n)(r)          |  | Energy                                         |  |                 | 2,437     |  |      |   | 1,610     |              |  |   | 1,718      |  
|Global Jet Capital Holdings, LP, Preferred Equity          |  | (f)(n)(o)       |  | Commercial & Professional Services             |  |                 | 5,283,114 |  |      |   | 5,283     |              |  |   | 5,283      |  
|Harvey Holdings, LLC, Common Equity                        |  | (n)             |  | Capital Goods                                  |  |                 | 666,667   |  |      |   | 667       |              |  |   | 633        |  
|Industrial Group Intermediate Holdings, LLC, Common Equity |  | (n)(r)          |  | Materials                                      |  |                 | 2,107,438 |  |      |   | 2,107     |              |  |   | 3,477      |  
|JMC Acquisition Holdings, LLC, Common Equity               |  | (n)             |  | Capital Goods                                  |  |                 | 1,449     |  |      |   | 1,449     |              |  |   | 1,449      |  
|JW Aluminum Co., Common Equity                             |  | (e)(f)(l)(n)(x) |  | Materials                                      |  |                 | 244       |  |      |   |          |              |  |   |           |  
|JW Aluminum Co., Preferred Equity                          |  | (e)(f)(l)(n)(x) |  | Materials                                      |  |                 | 1,128     |  |      |   | 11,056    |              |  |   | 11,247     |  
|MB Precision Investment Holdings LLC, Class A-2 Units      |  | (n)(r)          |  | Capital Goods                                  |  |                 | 2,287,659 |  |      |   | 2,288     |              |  |   | 2,173      |  
|New Star Metals Inc., Common Equity                        |  | (f)             |  | Capital Goods                                  |  |                 | 2,223,246 |  |      |   | 2,250     |              |  |   | 2,001      |  
|NewStar Financial, Inc., Warrants, 11/4/2024               |  | (f)(n)(o)(v)    |  | Diversified Financials                         |  |                 | 6,000,000 |  |      |   | 30,115    |              |  |   | 29,520     |  
|Professional Plumbing Group, Inc., Common Equity           |  | (f)(n)          |  | Capital Goods                                  |  |                 | 3,000,000 |  |      |   | 3,000     |              |  |   | 5,100      |  
|PSAV Holdings LLC, Common Equity                           |  |                 |  | Technology Hardware & Equipment                |  |                 | 10,000    |  |      |   | 10,000    |              |  |   | 31,500     |  
|Sequential Brands Group, Inc., Common Equity               |  | (f)(n)(o)       |  | Consumer Durables & Apparel                    |  |                 | 408,685   |  |      |   | 5,517     |              |  |   | 2,791      |  
|Sorenson Communications, Inc., Common Equity               |  | (e)(f)(n)       |  | Telecommunication Services                     |  |                 | 43,796    |  |      |   |          |              |  |   | 31,393     |  
|Sunnova Holdings, LLC, Common Equity                       |  | (n)             |  | Energy                                         |  |                 | 62,031    |  |      |   | 1,444     |              |  |   | 1,706      |  
|Swift Worldwide Resources Holdco Limited, Common Equity    |  | (n)(o)(u)       |  | Energy                                         |  |                 | 1,250,000 |  |      |   | 2,010     |              |  |   | 1,290      |  
|Zeta Interactive Holdings Corp., Preferred Equity          |  | (n)             |  | Software & Services                            |  |                 | 620,025   |  |      |   | 4,929     |              |  |   | 5,122      |  
|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  
|Total Equity/Other                                         |  |                 |  |                                                |  |                 |           |  |      |   | 174,099   |              |  |   | 217,413    |  
|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  
|Unfunded Contingent Warrant Commitment                     |  | (w)             |  |                                                |  |                 |           |  |      |   |           |              |  |   | (2,460     | )
|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  
|Net Equity/Other                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   | 214,953    |  
|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  
|TOTAL INVESTMENTS168.5%                                   |  |                 |  |                                                |  |                 |           |  |      | $ | 4,877,385 |              |  |   | 4,532,875  |  
|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  
|LIABILITIES IN EXCESS OF OTHER ASSETS(68.5%)              |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   | (1,842,463 | )
|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  
|NET ASSETS100.0%                                          |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  | $ | 2,690,412  |  
|                                                           |  |                 |  |                                                |  |                 |           |  |      |   |           |              |  |   |            |  



See
notes to unaudited consolidated financial statements.



24



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)









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



|(b) | Certain variable rate securities in the Companys portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of
December 31, 2015, the three-month London Interbank Offered Rate, or LIBOR, was 0.61%, the Euro Interbank Offered Rate, or EURIBOR, was (0.13)% and the U.S. Prime Lending Rate, or Prime, was 3.50%.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



|(e) | Security or portion thereof held within Lehigh River LLC and is pledged as collateral supporting the amounts outstanding under the Class A 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).
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(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 pledged as collateral supporting the amounts outstanding under a term loan 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 was on non-accrual status as of December 31, 2015.
|--- | -----------------------------------------------------------



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



|(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
qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the companys total assets. As of December 31, 2015, 84.7% of the Companys total assets represented qualifying assets.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



See
notes to unaudited consolidated financial statements.



25



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##### Table of Contents

FS Investment Corporation II

Consolidated Schedule of Investments (continued)

As of December 31, 2015

(in thousands, except share amounts)







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



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



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



|(v) | Includes 500,000 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 $12,500 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 $12,500 upon the request of NewStar.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(x) | Under the 1940 Act, the Company generally is deemed to be an affiliated person of a portfolio company if it owns 5% or more of the portfolio companys
voting securities and generally is deemed to control a portfolio company if it owns more than 25% of the portfolio companys voting securities or it has the power to exercise control over the management or policies of such portfolio
company. As of December 31, 2015, the Company held investments in two portfolio companies of which it is deemed to be an affiliated person but is not be deemed to control. The following table presents certain financial
information with respect to such portfolio companies for the year ended December 31, 2015:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                        |  |           |        |  |                      |   |     |                    |  |  |                |  |  |           |       |  |                |   |       |                       |  |  |                                                  |  |  |  |   |  |  |   |        | 
|--------------------------------------- |  | --------- | ------ |  | -------------------- | - | --- | ------------------ |  |  | -------------- |  |  | --------- | ----- |  | -------------- | - | ----- | --------------------- |  |  | ------------------------------------------------ |  |  |  | - |  |  | - | ------ | 
|Portfolio Company                       |  | Purchases |        |  | Paid-in-KindInterest |   |     | SalesandRepayments |  |  | InterestIncome |  |  | FeeIncome |       |  | DividendIncome |   |       | NetRealizedGain(Loss) |  |  | NetChange
inUnrealizedAppreciation(Depreciation) | 
|Senior Secured LoansFirst Lien         |  |           |        |  |                      |   |     |                    |  |  |                |  |  |           |       |  |                |   |       |                       |  |  |                                                  |  |  |  |   |  |  |   |        | 
|Allen Systems Group, Inc.               |  | $         | 70,109 |  |                      | $ | 573 |                    |  |  |               |  |  | $         | 4,849 |  |                | $ | 1,482 |                       |  |  |                                                 |  |  |  |  |  |  | $ | 707    | 
|Senior Secured LoansSecond Lien        |  |           |        |  |                      |   |     |                    |  |  |                |  |  |           |       |  |                |   |       |                       |  |  |                                                  |  |  |  |   |  |  |   |        | 
|JW Aluminum Co.                         |  | $         | 30,061 |  |                      |   |    |                    |  |  |               |  |  | $         | 348   |  |                |   |      |                       |  |  |                                                 |  |  |  |  |  |  |   |       | 
|Equity/Other                            |  |           |        |  |                      |   |     |                    |  |  |                |  |  |           |       |  |                |   |       |                       |  |  |                                                  |  |  |  |   |  |  |   |        | 
|Allen Systems Group, Inc. Common Equity |  | $         | 13,475 |  |                      |   |    |                    |  |  |               |  |  |           |      |  |                |   |      |                       |  |  |                                                 |  |  |  |  |  |  | $ | 15,346 | 
|JW Aluminum Co., Common Equity          |  |           |       |  |                      |   |    |                    |  |  |               |  |  |           |      |  |                |   |      |                       |  |  |                                                 |  |  |  |  |  |  |   |       | 
|JW Aluminum Co., Preferred Equity       |  | $         | 11,056 |  |                      |   |    |                    |  |  |               |  |  |           |      |  |                |   |      |                       |  |  |                                                 |  |  |  |  |  |  | $ | 191    | 



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. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a
business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated
investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of September 30, 2016, the Company had nine wholly-owned financing subsidiaries and four wholly-owned subsidiaries
through which it holds interests in certain non-controlled and non-affiliated portfolio companies. The unaudited consolidated financial statements include both the Companys accounts and the accounts of its wholly-owned subsidiaries as of
September 30, 2016. 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 or otherwise acquire minority interests in target companies, in the form of common or
preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity. Any such minority interests are generally acquired
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 presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Companys interim unaudited consolidated financial statements should
be read in conjunction with its audited consolidated financial statements as of and for the year ended December 31, 2015 included in the Companys annual report on Form 10-K for the year ended December 31, 2015. Operating results for
the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2016. The December 31, 2015 consolidated balance sheet and consolidated schedule
of investments are derived from the Companys audited consolidated financial statements



27



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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)



as of and for the fiscal year ended December 31, 2015. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment
companies under Accounting Standards Update No. 2013-08, Financial ServicesInvestment Companies. The Company has evaluated the impact of subsequent events through the date the consolidated financial statements were issued and filed with
the U.S. Securities and Exchange Commission, or the SEC.

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

While the investment advisory and administrative services agreement neither includes nor contemplates the inclusion of
unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of an American Institute of Certified Public Accountants, or AICPA, Technical Practice Aid for investment companies, the Company includes
unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to FSIC II Advisor if the Companys entire portfolio
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 equal to 1.875% per quarter, or an annualized hurdle rate of 7.5%. For purposes of this fee,
adjusted capital means cumulative gross proceeds generated from sales of the Companys common stock (including proceeds from its distribution reinvestment plan) reduced for distributions paid to stockholders from proceeds of
non-liquidating dispositions of the Companys investments and amounts paid for share repurchases pursuant to the Companys share repurchase program. As a result, FSIC II Advisor will not earn this part of the 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



28



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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)



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 the Companys 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 September 30, 2016, the Company had no outstanding credit default swap contracts.

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



29



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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)



Reclassifications: Certain amounts in the unaudited consolidated financial
statements for the three and nine months ended September 30, 2015 and the audited consolidated financial statements for the year ended December 31, 2015 may have been reclassified to conform to the classifications used to prepare the unaudited
consolidated financial statements for the three and nine months ended September 30, 2016. These reclassifications had no material impact on the Companys consolidated financial position, results of operations or cash flows as previously
reported.

In April 2015, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update No.
2015-03, InterestImputation of Interest, or ASU 2015-03, to simplify the presentation of debt issuance costs in financial statements. Under pre-existing guidance, debt issuance costs were recognized as a deferred charge
and presented as an asset on the balance sheet. ASU 2015-03 requires that debt issuance costs related to a recognized liability for indebtedness be presented in the balance sheet as a direct deduction from the carrying amount of that liability,
consistent with debt discounts. In August 2015, the FASB issued Accounting Standards Update No. 2015-15, InterestImputation of Interest, or ASU 2015-15, to update the guidance to include SEC staff views regarding the
presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC indicated
that it would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any
outstanding borrowings on the line-of-credit arrangement.

Commencing January 1, 2016, the Company adopted ASU 2015-03 and
changed its method of disclosing debt issuance costs for its repurchase agreements and term loan credit facility. ASU 2015-03 affects the presentation and disclosure of such costs in the Companys financial statements. There is no change to the
Companys recognition and measurement of debt issuance costs. In accordance with ASU 2015-15, the Company elected to continue to present debt issuance costs associated with line-of-credit arrangements as an asset, unchanged from its prior
method of disclosure.

Comparative financial statements of prior interim and annual periods have been adjusted to apply the
new method retrospectively. The adoption and retrospective adjustment of ASU 2015-03 had no material impact on the Companys consolidated financial position, results of operations or cash flows as previously reported.

Note 3. Share Transactions

Below is a summary of transactions with respect to shares of the Companys common stock during the nine months ended September 30, 2016 and 2015:



|                                     |  |                                 |            |   |        |   |         |        |  |  |            |   |  |   |         |  
|------------------------------------ |  | ------------------------------- | ---------- | - | ------ | - | ------- | ------ |  |  | ---------- | - |  | - | ------- | -
|                                     |  | Nine Months Ended September 30, |           
|                                     |  | 2016                            |            |   | 2015   |  
|                                     |  | Shares                          |            |   | Amount |   |         | Shares |  |  | Amount     |  
|Reinvestment of Distributions        |  |                                 | 12,541,507 |   |        | $ | 106,401 |        |  |  | 10,178,097 |   |  | $ | 95,418  |  
|Share Repurchase Program             |  |                                 | (7,368,833 | ) |        |   | (62,325 | )      |  |  | (2,461,923 | ) |  |   | (23,294 | )
|                                     |  |                                 |            |   |        |   |         |        |  |  |            |   |  |   |         |  
|Net Proceeds from Share Transactions |  |                                 | 5,172,674  |   |        | $ | 44,076  |        |  |  | 7,716,174  |   |  | $ | 72,124  |  
|                                     |  |                                 |            |   |        |   |         |        |  |  |            |   |  |   |         |  



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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)



Distribution Reinvestment Plan

During the nine months ended September 30, 2016 and 2015, the Company issued 12,541,507 and 10,178,097 shares of common stock pursuant to
its distribution reinvestment plan for gross proceeds of $106,401 and $95,418 at an average price per share of $8.48 and $9.37, respectively. During the period from October 1, 2016 to November 2, 2016, the Company issued 1,192,639 shares
of common stock pursuant to its distribution reinvestment plan for gross proceeds of $10,555 at an average price per share of $8.85.

Share
Repurchase Program

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



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



| |  |  | the liquidity of the Companys assets (including fees and costs associated with disposing of assets);
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | 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.

Under the Companys 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.



31



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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)



The following table provides information concerning the Companys repurchases of
shares of common stock pursuant to its share repurchase program during the nine months ended September 30, 2016 and 2015:



|                           |  |                 |                 |  |                   |  |           |                                                    |  |  |                                                                    |   |  |                           |      |   |                                             |   |       |  |  |   |        | 
|-------------------------- |  | --------------- | --------------- |  | ----------------- |  | --------- | -------------------------------------------------- |  |  | ------------------------------------------------------------------ | - |  | ------------------------- | ---- | - | ------------------------------------------- | - | ----- |  |  | - | ------ | 
|For the Three Months Ended |  | Repurchase Date |                 |  | SharesRepurchased |  |           | Percentageof Shares Tendered That Were Repurchased |  |  | Percentage ofOutstanding SharesRepurchased as
ofthe RepurchaseDate |   |  | RepurchasePrice Per Share |      |   | AggregateConsiderationfor RepurchasedShares |  
|Fiscal 2015                |  |                 |                 |  |                   |  |           |                                                    |  |  |                                                                    |   |  |                           |      |   |                                             |   |       |  |  |   |        | 
|December 31, 2014          |  |                 | January 2, 2015 |  |                   |  | 578,569   |                                                    |  |  | 100                                                                | % |  |                           | 0.18 | % |                                             | $ | 9.500 |  |  | $ | 5,496  | 
|March 31, 2015             |  |                 | April 1, 2015   |  |                   |  | 885,509   |                                                    |  |  | 100                                                                | % |  |                           | 0.28 | % |                                             | $ | 9.450 |  |  | $ | 8,368  | 
|June 30, 2015              |  |                 | July 1, 2015    |  |                   |  | 997,845   |                                                    |  |  | 100                                                                | % |  |                           | 0.31 | % |                                             | $ | 9.450 |  |  | $ | 9,430  | 
|Fiscal 2016                |  |                 |                 |  |                   |  |           |                                                    |  |  |                                                                    |   |  |                           |      |   |                                             |   |       |  |  |   |        | 
|December 31, 2015          |  |                 | January 4, 2016 |  |                   |  | 1,779,357 |                                                    |  |  | 100                                                                | % |  |                           | 0.55 | % |                                             | $ | 8.550 |  |  | $ | 15,214 | 
|March 31, 2016             |  |                 | April 1, 2016   |  |                   |  | 2,715,325 |                                                    |  |  | 100                                                                | % |  |                           | 0.84 | % |                                             | $ | 8.300 |  |  | $ | 22,537 | 
|June 30, 2016              |  |                 | July 1, 2016    |  |                   |  | 2,874,151 |                                                    |  |  | 100                                                                | % |  |                           | 0.88 | % |                                             | $ | 8.550 |  |  | $ | 24,574 | 

On October 1, 2016 the Company repurchased 3,329,647 shares of common stock (representing 100% of the
shares of common stock tendered for repurchase and 1.02% of the shares outstanding as of such date) at $8.85 per share for aggregate consideration totaling $29,467.

Note 4. Related Party Transactions

Compensation of the Investment Adviser

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 equal to 1.875% per quarter, or an annualized hurdle rate of 7.5%. For purposes of this fee, adjusted capital means cumulative gross proceeds generated from sales of the Companys common stock (including
proceeds from its distribution reinvestment plan) reduced for distributions from non-liquidating dispositions of the Companys investments paid to stockholders and amounts paid for share repurchases pursuant to the Companys share
repurchase program. As a result, FSIC II Advisor will not earn this part of the 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.



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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)



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 the Companys 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 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.

Pursuant to an investment sub-advisory
agreement, or the investment sub-advisory agreement, between FSIC II Advisor and GSO / Blackstone Debt Funds Management LLC, or GDFM, GDFM will receive 50% of all management and incentive fees payable to FSIC II Advisor under the investment advisory
and administrative services agreement with respect to each year.

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 FS
Investments, 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 total assets, revenues, time allocations and/or other reasonable metrics. The Companys board of directors reviews the methodology employed in determining how the
expenses are allocated to the Company and the proposed allocation of 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 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.



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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)



The following table describes the fees and expenses the Company accrued under the
investment advisory and administrative services agreement during the three and nine months ended September 30, 2016 and 2015:



|                |  |                                                           |  |                                         |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|--------------- |  | --------------------------------------------------------- |  | --------------------------------------- |  | ------------------------------- | ------ |  | ------------------------------ | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                |  |                                                           |  |                                         |  | Three Months EndedSeptember 30, |        |  | Nine Months EndedSeptember 30, |  
|Related Party   |  | Source Agreement                                          |  | Description                             |  | 2016                            |        |  | 2015                           |   |        | 2016 |  |   | 2015   | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Base ManagementFee(1)                   |  | $                               | 21,555 |  |                                | $ | 22,213 |      |  | $ | 63,865 |  |  | $ | 67,651 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Subordinated Incentive Fee on
Income(2) |  | $                               | 14,252 |  |                                | $ | 16,102 |      |  | $ | 45,836 |  |  | $ | 56,410 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Administrative Services Expenses(3)     |  | $                               | 1,039  |  |                                | $ | 992    |      |  | $ | 3,096  |  |  | $ | 3,208  | 



|(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
and administrative services agreement so that the fee received equals 1.75% of the average value of the Companys gross assets. As a result, the amounts shown for the three and nine months ended September 30, 2016 are net of waivers of $3,080
and $9,124, respectively, and the amounts shown for the three and nine months ended September 30, 2015 are net of waivers of $3,174 and $7,176, respectively. During the nine months ended September 30, 2016 and 2015, $63,839 and $68,507,
respectively, in base management fees were paid to FSIC II Advisor. As of September 30, 2016, $21,555 in base management fees were payable to FSIC II Advisor.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | During the nine months ended September 30, 2016 and 2015, $47,838 and $55,642, respectively, of subordinated incentive fees on income were paid to FSIC II Advisor. As
of September 30, 2016, a subordinated incentive fee on income of $14,252 was payable to FSIC II Advisor.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | During the nine months ended September 30, 2016 and 2015, $2,955 and $3,030, 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 $3,327 and $3,488 in administrative services expenses to FSIC II Advisor during the nine
months ended September 30, 2016 and 2015, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, FSIC IV Advisor, LLC and FS Global Advisor, LLC, the investment advisers to certain other BDCs and a closed-end management investment company affiliated with FS Investments. 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, FS Investment Corporation IV and FS Global Credit Opportunities Fund. While
none of FSIC II Advisor, FB Income Advisor, LLC, FS Investment Advisor, LLC, FSIC III Advisor, LLC, FSIC IV 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, FS Investment Corporation IV 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



34



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 4. Related Party
Transactions (continued)



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,
FS Investment Corporation IV and/or FS Global Credit Opportunities Fund rather than to the Company.

Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not
permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions
where price is the only negotiated term. 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, FS Investment Corporation IV 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 strategies. The Company believes this relief may
also increase favorable investment opportunities for it, in part, by allowing the Company to participate in larger investments, together with its co-investment affiliates, than would be available to the Company 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, the Company is permitted to co-invest with GDFM and its affiliates only in accordance with existing regulatory guidance (e.g.,
where price is the only negotiated term).

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, FS Investments 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, FS Investments will not 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, FS Investments
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 FS
Investments for any amounts funded by FS Investments under such agreement if (and only to the extent that),



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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)



during any fiscal quarter occurring within three years of the date on which FS Investments 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 its stockholders; provided, however, that (i) the Company will only reimburse FS Investments for expense support payments made by FS Investments 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 its 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 shares of its common stock represented by other operating expenses during the fiscal year in which such
expense support payment from FS Investments was made (provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from FS Investments made during the same fiscal year) and (ii) the
Company will not reimburse FS Investments for expense support payments made by FS Investments 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 FS Investments 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 FS Investments
may terminate the expense reimbursement agreement at any time. The specific amount of expenses reimbursed by FS Investments, if any, will be determined at the end of each quarter. Upon termination of the expense reimbursement agreement by FS
Investments, FS Investments will be required to fund any amounts accrued thereunder as of the date of termination. Similarly, the Companys conditional obligation to reimburse FS Investments pursuant to the terms of the expense reimbursement
agreement shall survive the termination of such agreement by either party.

FS Investments 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 FS Investments will reimburse any portion
of the Companys expenses in future quarters. As of September 30, 2016, there were no unreimbursed expense support payments subject to future reimbursement by the Company.



36



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 5. Distributions



The following table reflects the cash distributions per share that the Company declared
and paid on its common stock during the nine months ended September 30, 2016 and 2015:



|                           |  |              |        |  |        |   |        | 
|-------------------------- |  | ------------ | ------ |  | ------ | - | ------ | 
|                           |  | Distribution |       
|For the Three Months Ended |  | Per Share    |        |  | Amount |  
|Fiscal 2015                |  |              |        |  |        |   |        | 
|March 31, 2015             |  | $            | 0.1885 |  |        | $ | 59,177 | 
|June 30, 2015              |  | $            | 0.1885 |  |        | $ | 59,567 | 
|September 30, 2015         |  | $            | 0.1885 |  |        | $ | 60,023 | 
|Fiscal 2016                |  |              |        |  |        |   |        | 
|March 31, 2016             |  | $            | 0.1885 |  |        | $ | 60,744 | 
|June 30, 2016              |  | $            | 0.1885 |  |        | $ | 60,976 | 
|September 30, 2016         |  | $            | 0.1885 |  |        | $ | 61,155 | 

The Company intends to declare regular cash distributions on a quarterly basis and pay such distributions
on a monthly basis. On August 3, 2016 and November 3, 2016, the Companys board of directors declared regular monthly cash distributions for October 2016 through December 2016 and January 2017 through March 2017, respectively, each 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.

Under the Companys distribution reinvestment 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. 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 the Companys shares of common stock.

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



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 5. Distributions (continued)



preferred and common equity investments in portfolio companies and expense reimbursements from FS Investments. 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.

The following table reflects the sources of the cash
distributions on a tax basis that the Company paid on its common stock during the nine months ended September 30, 2016 and 2015:



|                                                          |  |                                 |         |  |            |  |     |                    |  |   |            |  |  |  |     |  
|--------------------------------------------------------- |  | ------------------------------- | ------- |  | ---------- |  | --- | ------------------ |  | - | ---------- |  |  |  | --- | -
|                                                          |  | Nine Months Ended September 30, |        
|                                                          |  | 2016                            |         |  | 2015       | 
|Source of Distribution                                    |  | DistributionAmount              |         |  | Percentage |  |     | DistributionAmount |  |   | Percentage | 
|Offering proceeds                                         |  | $                               |        |  |            |  |    |                    |  | $ |           |  |  |  |    |  
|Borrowings                                                |  |                                 |        |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Net investment income(1)                                  |  |                                 | 176,987 |  |            |  | 97  | %                  |  |   | 178,767    |  |  |  | 100 | %
|Short-term capital gains proceeds from the sale of assets |  |                                 |        |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Long-term capital gains proceeds from the sale of assets  |  |                                 | 5,888   |  |            |  | 3   | %                  |  |   |           |  |  |  |    |  
|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                                                     |  | $                               | 182,875 |  |            |  | 100 | %                  |  | $ | 178,767    |  |  |  | 100 | %
|                                                          |  |                                 |         |  |            |  |     |                    |  |   |            |  |  |  |     |  



|(1) | During the nine months ended September 30, 2016 and 2015, 92.6% and 95.3%, respectively, of the Companys gross investment income was attributable to cash income
earned, 2.5% and 2.6%, respectively, was attributable to non-cash accretion of discount and 4.9% and 2.1%, respectively, was attributable to paid-in-kind, or PIK, interest.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys net investment income on a tax basis for the nine months ended September 30, 2016 and 2015 was $186,883 and $192,192,
respectively. As of September 30, 2016, the Company had $55,989 of undistributed net investment income, $0 of distributable realized gains and $78,819 of capital loss carryover on a tax basis. As of December 31, 2015, the Company had $51,981 of
undistributed net investment income and realized capital gains on a tax basis.

The difference between the Companys
GAAP-basis net investment income and its tax-basis net investment income during the nine months ended September 30, 2016 is primarily due to the reclassification of unamortized original issue discount and prepayment fees recognized upon prepayment
of loans from income for GAAP purposes to realized gains for tax purposes.



38



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 5. Distributions (continued)



The following table sets forth a reconciliation between GAAP-basis net investment income
and tax-basis net investment income during the nine months ended September 30, 2016 and 2015:



|                                                                            |  |                                |         |   |      |   |         |  
|--------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                            |  | Nine Months EndedSeptember 30, |        
|                                                                            |  | 2016                           |         |   | 2015 |  
|GAAP-basis net investment income                                            |  | $                              | 188,556 |   |      | $ | 225,629 |  
|Reclassification of unamortized original issue discount and prepayment fees |  |                                | (12,729 | ) |      |   | (35,385 | )
|Reclassification of realized gains on credit default swap                   |  |                                |        |   |      |   | (19,588 | )
|Reversal of mark-to-market on outstanding credit default swaps              |  |                                |        |   |      |   | 19,426  |  
|Other miscellaneous differences                                             |  |                                | 11,056  |   |      |   | 2,110   |  
|                                                                            |  |                                |         |   |      |   |         |  
|Tax-basis net investment income                                             |  | $                              | 186,883 |   |      | $ | 192,192 |  
|                                                                            |  |                                |         |   |      |   |         |  

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

As of September 30, 2016 and December 31, 2015, the components of accumulated earnings on a tax basis were as follows:



|                                                                                                                  |  |                               |          |   |                   |   |          |  
|----------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | -------- | - | ----------------- | - | -------- | -
|                                                                                                                  |  | September 30, 2016(Unaudited) |          |   | December 31, 2015 |  
|Distributable ordinary income                                                                                     |  | $                             | 55,989   |   |                   | $ | 46,093   |  
|Distributable realized gains                                                                                      |  |                               |         |   |                   |   | 5,888    |  
|Capital loss carryover(1)                                                                                         |  |                               | (78,819  | ) |                   |   |         |  
|Unamortized organization costs                                                                                    |  |                               | (165     | ) |                   |   | (175     | )
|Net unrealized appreciation (depreciation) on investments, secured borrowing and gain/loss on foreign currency(2) |  |                               | (127,165 | ) |                   |   | (349,507 | )
|                                                                                                                  |  |                               |          |   |                   |   |          |  
|Total                                                                                                             |  | $                             | (150,160 | ) |                   | $ | (297,701 | )
|                                                                                                                  |  |                               |          |   |                   |   |          |  



|(1) | Under the Regulated Investment Company Modernization Act of 2010, net capital losses recognized for tax years beginning after December 22, 2010, may be carried
forward indefinitely, and their character is retained as short-term or long-term losses. As of September 30, 2016, the Company had short-term and long-term capital loss carryforwards available to offset future realized capital gains of $4,179
and $74,640, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | As of September 30, 2016 and December 31, 2015, the gross unrealized appreciation on the Companys investments, secured borrowing and unrealized gain on
foreign currency was $153,093 and $85,717, respectively. As of September 30, 2016 and December 31, 2015, the gross unrealized depreciation on the Companys investments, secured borrowing and unrealized loss on foreign currency was
$280,258 and $435,224, respectively.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The aggregate cost of the Companys investments for U.S. federal
income tax purposes totaled $4,528,639 and $4,882,382 as of September 30, 2016 and December 31, 2015, respectively. The aggregate net unrealized appreciation (depreciation) on investments, secured borrowing and gain/loss on foreign
currency on a tax basis was $(127,165) and $(349,507) as of September 30, 2016 and December 31, 2015, respectively.



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 6. Investment Portfolio



The following table summarizes the composition of the Companys
investment portfolio at cost and fair value as of September 30, 2016 and December 31, 2015:



|                                 |  |                               |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|-------------------------------- |  | ----------------------------- | --------- |  | ----------------- | - | --------- | ----------------------- |  |  | ---------------- | - |  | ---------- | --------- |  | ----------------------- | - | --------- |  |  |  | --- | -
|                                 |  | September 30, 2016(Unaudited) |           |  | December 31, 2015 |  
|                                 |  | AmortizedCost(1)              |           |  | Fair Value        |   |           | Percentageof 
Portfolio |  |  | AmortizedCost(1) |   |  | Fair Value |           |  | Percentageof 
Portfolio |  
|Senior Secured LoansFirst Lien  |  | $                             | 2,812,088 |  |                   | $ | 2,745,820 |                         |  |  | 62               | % |  | $          | 2,916,090 |  |                         | $ | 2,802,207 |  |  |  | 62  | %
|Senior Secured LoansSecond Lien |  |                               | 807,662   |  |                   |   | 765,534   |                         |  |  | 17               | % |  |            | 1,012,224 |  |                         |   | 902,113   |  |  |  | 20  | %
|Senior Secured Bonds             |  |                               | 208,255   |  |                   |   | 154,226   |                         |  |  | 4                | % |  |            | 244,558   |  |                         |   | 181,200   |  |  |  | 4   | %
|Subordinated Debt                |  |                               | 405,708   |  |                   |   | 394,333   |                         |  |  | 9                | % |  |            | 411,824   |  |                         |   | 319,019   |  |  |  | 7   | %
|Collateralized Securities        |  |                               | 21,057    |  |                   |   | 22,598    |                         |  |  | 1                | % |  |            | 118,590   |  |                         |   | 113,383   |  |  |  | 2   | %
|Equity/Other                     |  |                               | 268,872   |  |                   |   | 319,057   |                         |  |  | 7                | % |  |            | 174,099   |  |                         |   | 214,953   |  |  |  | 5   | %
|                                 |  |                               |           |  |                   |   |           |                         |  |  |                  |   |  |            |           |  |                         |   |           |  |  |  |     |  
|Total                            |  | $                             | 4,523,642 |  |                   | $ | 4,401,568 |                         |  |  | 100              | % |  | $          | 4,877,385 |  |                         | $ | 4,532,875 |  |  |  | 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 September 30, 2016, except for ASG Technologies Group, Inc. (formerly Allen Systems Group, Inc.), in
which the Company held two senior secured loans and two equity/other investments, and JW Aluminum Co., in which the Company held a senior secured loan and two equity/other investments, the Company was not an affiliated person of any of
its portfolio companies, as defined in the 1940 Act. As of September 30, 2016, the Company did not control any of its portfolio companies, as defined in the 1940 Act.

As of December 31, 2015, except for Allen Systems Group, Inc., in which the Company held a senior secured loan and an equity/other
investment, and JW Aluminum Co., in which the Company held a senior secured loan and two equity/other investments, the Company was not an affiliated person of any of its portfolio companies, as defined in the 1940 Act. As of December 31,
2015, the Company did not control any of its portfolio companies, 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 more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be
an affiliated person of a portfolio company if it owned 5% or more of its voting securities.

The Companys
investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, pursuant to which the Company may be required to
provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of September 30, 2016, the Company had eighteen senior secured loan investments with aggregate unfunded commitments of $172,348.
As of December 31, 2015, the Company had eighteen senior secured loan investments with aggregate unfunded commitments of $203,409, one senior secured bond investment with an unfunded commitment of $3,638 and two unfunded commitments to purchase
up to $467 and $246 in shares of preferred stock of Altus Power America Holdings, LLC and common equity of Sunnova Holdings, LLC, respectively. The Company maintains sufficient cash on hand, available borrowings and liquid securities to fund
such unfunded commitments should the need arise. For additional details



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 6. Investment Portfolio (continued)

regarding the Companys unfunded debt investments, see the Companys unaudited consolidated
schedule of investments as of September 30, 2016 and audited consolidated schedule of investments as of December 31, 2015.

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 September 30, 2016 and
December 31, 2015:



|                                               |  |                               |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|---------------------------------------------- |  | ----------------------------- | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                                               |  | September 30, 2016(Unaudited) |           |  | December 31, 2015       | 
|Industry Classification                        |  | Fair Value                    |           |  | Percentageof 
Portfolio |  |     | Fair Value |  |   | Percentageof 
Portfolio | 
|Automobiles & Components                       |  | $                             | 197,794   |  |                         |  | 4   | %          |  | $ | 234,923                 |  |  |  | 5   | %
|Capital Goods                                  |  |                               | 432,561   |  |                         |  | 10  | %          |  |   | 474,141                 |  |  |  | 11  | %
|Commercial & Professional Services             |  |                               | 382,155   |  |                         |  | 9   | %          |  |   | 335,256                 |  |  |  | 7   | %
|Consumer Durables & Apparel                    |  |                               | 349,317   |  |                         |  | 8   | %          |  |   | 351,431                 |  |  |  | 8   | %
|Consumer Services                              |  |                               | 572,761   |  |                         |  | 13  | %          |  |   | 470,309                 |  |  |  | 10  | %
|Diversified Financials                         |  |                               | 208,265   |  |                         |  | 5   | %          |  |   | 275,053                 |  |  |  | 6   | %
|Energy                                         |  |                               | 736,092   |  |                         |  | 17  | %          |  |   | 624,508                 |  |  |  | 14  | %
|Food & Staples Retailing                       |  |                               | 6,524     |  |                         |  | 0   | %          |  |   | 7,566                   |  |  |  | 0   | %
|Food, Beverage & Tobacco                       |  |                               |          |  |                         |  |    |            |  |   | 4,310                   |  |  |  | 0   | %
|Health Care Equipment & Services               |  |                               | 76,846    |  |                         |  | 2   | %          |  |   | 98,425                  |  |  |  | 2   | %
|Insurance                                      |  |                               | 83,917    |  |                         |  | 2   | %          |  |   | 83,488                  |  |  |  | 2   | %
|Materials                                      |  |                               | 317,390   |  |                         |  | 7   | %          |  |   | 337,665                 |  |  |  | 7   | %
|Media                                          |  |                               | 147,970   |  |                         |  | 3   | %          |  |   | 102,906                 |  |  |  | 2   | %
|Pharmaceuticals, Biotechnology & Life Sciences |  |                               | 2,372     |  |                         |  | 0   | %          |  |   | 2,659                   |  |  |  | 0   | %
|Real Estate                                    |  |                               |          |  |                         |  |    |            |  |   | 1,707                   |  |  |  | 0   | %
|Retailing                                      |  |                               | 48,977    |  |                         |  | 1   | %          |  |   | 113,654                 |  |  |  | 3   | %
|Semiconductors & Semiconductor Equipment       |  |                               | 15,373    |  |                         |  | 0   | %          |  |   | 15,397                  |  |  |  | 0   | %
|Software & Services                            |  |                               | 437,277   |  |                         |  | 10  | %          |  |   | 490,803                 |  |  |  | 11  | %
|Technology Hardware & Equipment                |  |                               | 109,916   |  |                         |  | 2   | %          |  |   | 234,989                 |  |  |  | 5   | %
|Telecommunication Services                     |  |                               | 159,795   |  |                         |  | 4   | %          |  |   | 158,383                 |  |  |  | 4   | %
|Transportation                                 |  |                               | 116,266   |  |                         |  | 3   | %          |  |   | 115,302                 |  |  |  | 3   | %
|                                               |  |                               |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total                                          |  | $                             | 4,401,568 |  |                         |  | 100 | %          |  | $ | 4,532,875               |  |  |  | 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.



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 7. Fair Value of Financial
Instruments (continued)



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

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

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

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

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

As of September 30, 2016 and December 31, 2015, the Companys investments were
categorized as follows in the fair value hierarchy:



|                                            |  |                               |           |  |                   |   |           | 
|------------------------------------------- |  | ----------------------------- | --------- |  | ----------------- | - | --------- | 
|Valuation Inputs                            |  | September 30, 2016(Unaudited) |           |  | December 31, 2015 |  
|Level 1Price quotations in active markets  |  | $                             | 9,197     |  |                   | $ | 23        | 
|Level 2Significant other observable inputs |  |                               |          |  |                   |   |          | 
|Level 3Significant unobservable inputs     |  |                               | 4,392,371 |  |                   |   | 4,532,852 | 
|                                            |  |                               |           |  |                   |   |           | 
|Total                                       |  | $                             | 4,401,568 |  |                   | $ | 4,532,875 | 
|                                            |  |                               |           |  |                   |   |           | 

The Company has elected the fair value option under ASC Topic 825, Financial Instruments,relating
to accounting for debt obligations at their fair value for its secured borrowings which arose due to partial loan sales which did not meet the criteria for sale treatment under ASC Topic 860. The Company reports changes in the fair value of its
secured borrowing as a component of the net change in unrealized appreciation (depreciation) on the secured borrowing in the consolidated statements of operations. The net gain or loss reflects the difference between the fair value and the principal
amount due on maturity.

The secured borrowing as of September 30, 2016 was valued using Level 3 inputs under the fair
value hierarchy. The Companys approach to determining fair value of the Level 3 secured borrowing is consistent with its approach to determining fair value of the Level 3 investments that are associated with the secured borrowing. See Note 2
and Note 8 for additional information.

As of September 30, 2016 and December 31, 2015, the Companys secured
borrowing was categorized as follows in the fair value hierarchy:



|                                            |  |                               |       |  |                   |   |   | 
|------------------------------------------- |  | ----------------------------- | ----- |  | ----------------- | - | - | 
|Valuation Inputs                            |  | September 30, 2016(Unaudited) |       |  | December 31, 2015 |  
|Level 1Price quotations in active markets  |  | $                             |      |  |                   | $ |  | 
|Level 2Significant other observable inputs |  |                               |      |  |                   |   |  | 
|Level 3Significant unobservable inputs     |  |                               | 8,229 |  |                   |   |  | 
|                                            |  |                               |       |  |                   |   |   | 
|Total                                       |  | $                             | 8,229 |  |                   | $ |  | 
|                                            |  |                               |       |  |                   |   |   | 

The Companys investments as of September 30, 2016 consisted primarily of debt investments that
were acquired directly from the issuer. Sixty senior secured loan investments, three senior secured bond



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 7. Fair Value of Financial
Instruments (continued)



investments and ten subordinated debt investments, 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. Three
equity/other investments, which were traded on an active public market, were valued at their respective closing prices as of September 30, 2016. Except as described above, the Company valued its other investments, including five 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s investments as of December 31, 2015 consisted primarily of debt investments that were acquired directly from the
issuer. Fifty-five senior secured loan investments, three senior secured bond investments, eight 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 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 December 31, 2015. Two senior secured loan investments, which were newly-issued and purchased near December 31, 2015, were valued
at cost, as the Companys board of directors determined that the cost of such investments was the best indication of its fair value. Except as described above, the Company valued its 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



43



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 7. Fair Value of Financial
Instruments (continued)



valuation committee of the Companys board of directors, or the valuation committee, and the board of directors reviewed and approved the valuation determinations made with respect to these
investments in a manner consistent with the Companys valuation policy.

The following is a reconciliation for the nine
months ended September 30, 2016 and 2015 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:



|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |          |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------- | --------- | - | ------------------------------ | - | -------- | ------------------ |  | - | ---------------- | - |  | ------------------------ | ------- | - | ------------ | - | ------- | ----- |  | - | ------- | - |  | - | ---------- | -
|                                                                                                                                                                                                       |  | For the Nine Months Ended September 30, 2016 |          
|                                                                                                                                                                                                       |  | Senior 
SecuredLoansFirstLien               |           |   | Senior
SecuredLoansSecondLien |   |          | SeniorSecuredBonds |  |   | SubordinatedDebt |   |  | CollateralizedSecurities |         |   | Equity/Other |   |         | Total | 
|Fair value at beginning of period                                                                                                                                                                      |  | $                                            | 2,802,207 |   |                                | $ | 902,113  |                    |  | $ | 181,200          |   |  | $                        | 319,019 |   |              | $ | 113,383 |       |  | $ | 214,930 |   |  | $ | 4,532,852  |  
|Accretion of discount (amortization of premium)                                                                                                                                                        |  |                                              | 4,272     |   |                                |   | 4,113    |                    |  |   | 2,071            |   |  |                          | 2,311   |   |              |   | 97      |       |  |   |        |   |  |   | 12,864     |  
|Net realized gain (loss)                                                                                                                                                                               |  |                                              | 58        |   |                                |   | (27,866  | )                  |  |   | (27,399          | ) |  |                          | (33,298 | ) |              |   | (341    | )     |  |   | 1,546   |   |  |   | (87,300    | )
|Net change in unrealized appreciation (depreciation)                                                                                                                                                   |  |                                              | 47,615    |   |                                |   | 67,983   |                    |  |   | 9,329            |   |  |                          | 81,430  |   |              |   | 6,748   |       |  |   | 9,269   |   |  |   | 222,374    |  
|Purchases                                                                                                                                                                                              |  |                                              | 502,042   |   |                                |   | 110,169  |                    |  |   | 25,594           |   |  |                          | 69,143  |   |              |   |        |       |  |   | 93,699  |   |  |   | 800,647    |  
|Paid-in-kind interest                                                                                                                                                                                  |  |                                              | 4,612     |   |                                |   | 11,482   |                    |  |   | 155              |   |  |                          | 1,633   |   |              |   |        |       |  |   |        |   |  |   | 17,882     |  
|Sales and redemptions                                                                                                                                                                                  |  |                                              | (614,986  | ) |                                |   | (302,460 | )                  |  |   | (36,724          | ) |  |                          | (45,905 | ) |              |   | (97,289 | )     |  |   | (6,793  | ) |  |   | (1,104,157 | )
|Net transfers in or out of
Level 3(1)                                                                                                                                                                  |  |                                              |          |   |                                |   |         |                    |  |   |                 |   |  |                          |        |   |              |   |        |       |  |   | (2,791  | ) |  |   | (2,791     | )
|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |          |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |            |  
|Fair value at end of period                                                                                                                                                                            |  | $                                            | 2,745,820 |   |                                | $ | 765,534  |                    |  | $ | 154,226          |   |  | $                        | 394,333 |   |              | $ | 22,598  |       |  | $ | 309,860 |   |  | $ | 4,392,371  |  
|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |          |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |            |  
|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 |  | $                                            | 18,177    |   |                                | $ | 25,587   |                    |  | $ | (13,639          | ) |  | $                        | 43,453  |   |              | $ | 1,933   |       |  | $ | 9,013   |   |  | $ | 84,524     |  
|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |          |                    |  |   |                  |   |  |                          |         |   |              |   |         |       |  |   |         |   |  |   |            |  



|(1) | There was one transfer of an investment from Level 3 to Level 1 during the nine months ended September 30, 2016. It is the Companys policy to recognize transfers
between levels, if any, at the beginning of the reporting period.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |           |                    |  |   |                  |   |  |                          |          |   |              |   |         |       |  |   |         |   |  |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------- | --------- | - | ------------------------------ | - | --------- | ------------------ |  | - | ---------------- | - |  | ------------------------ | -------- | - | ------------ | - | ------- | ----- |  | - | ------- | - |  | - | ---------- | -
|                                                                                                                                                                                                       |  | For the Nine Months Ended September 30, 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)                                                                                                                                                        |  |                                              | 6,152     |   |                                |   | 2,454     |                    |  |   | 1,831            |   |  |                          | 17,867   |   |              |   | 129     |       |  |   |        |   |  |   | 28,433     |  
|Net realized gain (loss)                                                                                                                                                                               |  |                                              | (6,074    | ) |                                |   | (1,767    | )                  |  |   | (8,791           | ) |  |                          | (18,154  | ) |              |   | (906    | )     |  |   | 15,349  |   |  |   | (20,343    | )
|Net change in unrealized appreciation (depreciation)                                                                                                                                                   |  |                                              | (45,433   | ) |                                |   | (38,555   | )                  |  |   | (18,601          | ) |  |                          | (39,514  | ) |              |   | (10,787 | )     |  |   | (3,525  | ) |  |   | (156,415   | )
|Purchases                                                                                                                                                                                              |  |                                              | 904,557   |   |                                |   | 291,610   |                    |  |   | 68,715           |   |  |                          | 202,420  |   |              |   | 239     |       |  |   | 28,108  |   |  |   | 1,495,649  |  
|Paid-in-kind interest                                                                                                                                                                                  |  |                                              | 3,777     |   |                                |   | 3,548     |                    |  |   | 176              |   |  |                          | 915      |   |              |   |        |       |  |   |        |   |  |   | 8,416      |  
|Sales and redemptions                                                                                                                                                                                  |  |                                              | (562,401  | ) |                                |   | (187,680  | )                  |  |   | (50,042          | ) |  |                          | (209,419 | ) |              |   | (51,331 | )     |  |   | (22,725 | ) |  |   | (1,083,598 | )
|Net transfers in or out of Level 3                                                                                                                                                                     |  |                                              |          |   |                                |   |          |                    |  |   |                 |   |  |                          |         |   |              |   |        |       |  |   |        |   |  |   |           |  
|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |           |                    |  |   |                  |   |  |                          |          |   |              |   |         |       |  |   |         |   |  |   |            |  
|Fair value at end of period                                                                                                                                                                            |  | $                                            | 2,647,483 |   |                                | $ | 1,070,923 |                    |  | $ | 242,199          |   |  | $                        | 375,798  |   |              | $ | 121,934 |       |  | $ | 206,595 |   |  | $ | 4,664,932  |  
|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |           |                    |  |   |                  |   |  |                          |          |   |              |   |         |       |  |   |         |   |  |   |            |  
|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 |  | $                                            | (32,046   | ) |                                | $ | (48,310   | )                  |  | $ | (33,310          | ) |  | $                        | (39,643  | ) |              | $ | (6,871  | )     |  | $ | 6,269   |   |  | $ | (153,911   | )
|                                                                                                                                                                                                       |  |                                              |           |   |                                |   |           |                    |  |   |                  |   |  |                          |          |   |              |   |         |       |  |   |         |   |  |   |            |  



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)



The following is a reconciliation for the nine months ended September 30, 2016 of a
secured borrowing for which significant unobservable inputs (Level 3) were used in determining market value:



|                                                                                                                                                                                                               |  |                                             |        |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------ | -
|                                                                                                                                                                                                               |  | For the Nine Months EndedSeptember 30, 2016 |       
|Fair value at beginning of period                                                                                                                                                                              |  | $                                           |       |  
|Amortization of premium (accretion of discount)                                                                                                                                                                |  |                                             | (3     | )
|Net realized gain (loss)                                                                                                                                                                                       |  |                                             |       |  
|Net change in unrealized (appreciation) depreciation                                                                                                                                                           |  |                                             | (94    | )
|Proceeds from secured borrowing                                                                                                                                                                                |  |                                             | (8,132 | )
|Paid-in-kind interest                                                                                                                                                                                          |  |                                             |       |  
|Repayments on secured borrowing                                                                                                                                                                                |  |                                             |       |  
|Net transfers in or out of Level 3                                                                                                                                                                             |  |                                             |       |  
|                                                                                                                                                                                                               |  |                                             |        |  
|Fair value at end of period                                                                                                                                                                                    |  | $                                           | (8,229 | )
|                                                                                                                                                                                                               |  |                                             |        |  
|The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized
gains or losses relating to a secured borrowing still held at the reporting date |  | $                                           | (94    | )
|                                                                                                                                                                                                               |  |                                             |        |  

The following is a reconciliation for the nine months ended September 30, 2015 of credit default swaps
for which significant unobservable inputs (Level 3) were used in determining market value:



|                                                                                                                                                                                                                |  |                                             |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------- | ------- | -
|                                                                                                                                                                                                                |  | For the Nine Months EndedSeptember 30, 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 |  | $                                           |        |  
|                                                                                                                                                                                                                |  |                                             |         |  



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 valuation techniques and significant unobservable inputs used in recurring Level 3
fair value measurements as of September 30, 2016 and December 31, 2015 were as follows:



|                                 |  |                                             |           |   |                        |                        |                    |                                   |       |                       |                 |          
|-------------------------------- |  | ------------------------------------------- | --------- | - | ---------------------- | ---------------------- | ------------------ | --------------------------------- | ----- | --------------------- | --------------- | ---------
|Type of Investment               |  | Fair Value atSeptember 
30, 2016(Unaudited) |           |   | Valuation Technique(1) |                        | Unobservable Input |                                   | Range |                       | WeightedAverage
|Senior Secured LoansFirst Lien  |  | $                                           | 2,220,654 |   |                        | Market Comparables     |                    | Market Yield (%)                  |       | 5.1%  15.8%          |                 | 9.8%     
|                                 |  |                                             |           |   |                        |                        |                    | EBITDA Multiples (x)              |       | 4.0x  6.8x           |                 | 5.0x     
|                                 |  |                                             |           |   |                        |                        |                    | Production Multiples (Mboe/d)     |       | $10,500.0  $12,000.0 |                 | $11,250.0
|                                 |  |                                             |           |   |                        |                        |                    | Proved Reserves Multiples (Mmboe) |       | $4.3  $4.8           |                 | $4.5     
|                                 |  |                                             |           |   |                        |                        |                    | PV-10 Multiples (x)               |       | 1.8x  1.9x           |                 | 1.9x     
|                                 |  |                                             | 8,268     |   |                        | Other(2)               |                    | Other                             |       | N/A                   |                 | N/A      
|                                 |  |                                             | 516,898   |   |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 21.5%  102.8%        |                 | 97.2%    
|Senior Secured LoansSecond Lien |  |                                             | 518,498   |   |                        | Market Comparables     |                    | Market Yield (%)                  |       | 8.8%  21.5%          |                 | 13.6%    
|                                 |  |                                             | 13,000    |   |                        | Other(2)               |                    | Other                             |       | N/A                   |                 | N/A      
|                                 |  |                                             | 234,036   |   |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 8.1%  100.8%         |                 | 91.0%    
|Senior Secured Bonds             |  |                                             | 50,604    |   |                        | Market Comparables     |                    | Market Yield (%)                  |       | 9.0%  9.5%           |                 | 9.3%     
|                                 |  |                                             |           |   |                        |                        |                    | EBITDA Multiples (x)              |       | 6.5x  7.0x           |                 | 6.8x     
|                                 |  |                                             |           |   |                        |                        |                    | Production Multiples (Mboe/d)     |       | $42,500.0  $47,500.0 |                 | $45,000.0
|                                 |  |                                             |           |   |                        |                        |                    | Proved Reserves Multiples (Mmboe) |       | $14.3  $14.8         |                 | $14.5    
|                                 |  |                                             |           |   |                        |                        |                    | PV-10 Multiples (x)               |       | 0.8x  0.9x           |                 | 0.9x     
|                                 |  |                                             | 11,080    |   |                        | Other(2)               |                    | Other                             |       | N/A                   |                 | N/A      
|                                 |  |                                             | 92,542    |   |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 24.0%  107.8%        |                 | 86.6%    
|Subordinated Debt                |  |                                             | 183,328   |   |                        | Market Comparables     |                    | Market Yield (%)                  |       | 8.3%  15.3%          |                 | 11.0%    
|                                 |  |                                             |           |   |                        |                        |                    | EBITDA Multiples (x)              |       | 10.0x  10.5x         |                 | 10.3x    
|                                 |  |                                             | 211,005   |   |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 45.8%  109.0%        |                 | 92.7%    
|Collateralized Securities        |  |                                             | 22,598    |   |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 38.2%  91.0%         |                 | 68.4%    
|Equity/Other                     |  |                                             | 286,859   |   |                        | Market Comparables     |                    | EBITDA Multiples (x)              |       | 4.8x  18.0x          |                 | 8.8x     
|                                 |  |                                             |           |   |                        |                        |                    | Production Multiples (Mboe/d)     |       | $37,500.0  $50,000.0 |                 | $40,229.6
|                                 |  |                                             |           |   |                        |                        |                    | Proved Reserves Multiples (Mmboe) |       | $6.5  $10.5          |                 | $8.2     
|                                 |  |                                             |           |   |                        |                        |                    | Undeveloped AcreageMultiples ($)  |       | $8,000.0  $10,000.0  |                 | $9,000.0 
|                                 |  |                                             |           |   |                        |                        |                    | Capacity Multiple ($/kW)          |       | $1,750.0  $2,250.0   |                 | $2,000.0 
|                                 |  |                                             |           |   |                        |                        |                    | PV-10 Multiples (x)               |       | 1.9x  2.0x           |                 | 2.0x     
|                                 |  |                                             |           |   |                        | Discounted Cash Flow   |                    | Discount Rate (%)                 |       | 11.0%  25.0%         |                 | 18.6%    
|                                 |  |                                             |           |   |                        | Option Valuation Model |                    | Volatility (%)                    |       | 33.0%  50.0%         |                 | 44.9%    
|                                 |  |                                             | 11,704    |   |                        | Other(2)               |                    | Other                             |       | N/A                   |                 | N/A      
|                                 |  |                                             | 11,297    |   |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 6.8%  47.0%          |                 | 13.3%    
|                                 |  |                                             |           |   |                        |                        |                    |                                   |       |                       |                 |          
|Total                            |  | $                                           | 4,392,371 |   |                        |                        |                    |                                   |       |                       |                 |          
|                                 |  |                                             |           |   |                        |                        |                    |                                   |       |                       |                 |          
|Secured borrowing                |  | $                                           | (8,229    | ) |                        | Market Comparables     |                    | Market Yield (%)                  |       | (5.2)%  (6.3)%       |                 | (5.8)%   



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



|(2) | Fair value based on expected outcome of proposed corporate transactions and/or other factors.
|--- | ---------------------------------------------------------------------------------------------



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)



|                                   |  |                                |           |  |                        |                        |                    |                                   |       |                       |                 |          
|---------------------------------- |  | ------------------------------ | --------- |  | ---------------------- | ---------------------- | ------------------ | --------------------------------- | ----- | --------------------- | --------------- | ---------
|Type of Investment                 |  | Fair Value atDecember 31, 2015 |           |  | Valuation Technique(1) |                        | Unobservable Input |                                   | Range |                       | WeightedAverage
|Senior Secured LoansFirst Lien    |  | $                              | 2,316,852 |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 5.5%  16.8%          |                 | 10.0%    
|                                   |  |                                | 1,192     |  |                        | Other(2)               |                    | Other                             |       | N/A                   |                 | N/A      
|                                   |  |                                | 474,663   |  |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 30.0%  102.0%        |                 | 88.1%    
|                                   |  |                                | 9,500     |  |                        | Cost                   |                    | Cost                              |       | 100.0%  100.0%       |                 | 100.0%   
|Senior Secured Loans  Second Lien |  |                                | 533,919   |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 9.0%  19.9%          |                 | 14.5%    
|                                   |  |                                | 368,194   |  |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 1.8%  100.0%         |                 | 90.3%    
|Senior Secured Bonds               |  |                                | 81,382    |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 14.0%  31.5%         |                 | 20.6%    
|                                   |  |                                |           |  |                        |                        |                    | EBITDA Multiples (x)              |       | 7.0x  7.5x           |                 | 7.3x     
|                                   |  |                                | 99,818    |  |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 14.0%  94.4%         |                 | 72.3%    
|Subordinated Debt                  |  |                                | 139,922   |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 8.8%  13.8%          |                 | 12.2%    
|                                   |  |                                | 12,959    |  |                        | Other(2)               |                    | Other                             |       | N/A                   |                 | N/A      
|                                   |  |                                | 166,138   |  |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 14.0%  104.1%        |                 | 71.9%    
|Collateralized Securities          |  |                                | 72,828    |  |                        | Market Comparables     |                    | Market Yield (%)                  |       | 13.2%  13.2%         |                 | 13.2%    
|                                   |  |                                | 40,555    |  |                        | Market Quotes          |                    | Indicative Dealer Quotes          |       | 37.9%  91.0%         |                 | 67.9%    
|Equity/Other                       |  |                                | 203,182   |  |                        | Market Comparables     |                    | EBITDA Multiples (x)              |       | 5.3x  14.3x          |                 | 8.9x     
|                                   |  |                                |           |  |                        |                        |                    | Production Multiples (Mboe/d)     |       | $50,000.0  $55,000.0 |                 | $52,500.0
|                                   |  |                                |           |  |                        |                        |                    | Proved Reserves Multiples (Mmboe) |       | $8.8  $11.0          |                 | $9.4     
|                                   |  |                                |           |  |                        |                        |                    | Capacity Multiple ($/kW)          |       | $2,000.0  $2,500.0   |                 | $2,250.0 
|                                   |  |                                |           |  |                        | Option Valuation Model |                    | Volatility (%)                    |       | 40.0%  72.5%         |                 | 46.8%    
|                                   |  |                                | 11,748    |  |                        | Other(2)               |                    | Other                             |       | N/A                   |                 | N/A      
|                                   |  |                                |           |  |                        |                        |                    |                                   |       |                       |                 |          
|Total                              |  | $                              | 4,532,852 |  |                        |                        |                    |                                   |       |                       |                 |          
|                                   |  |                                |           |  |                        |                        |                    |                                   |       |                       |                 |          



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



|(2) | Fair value based on expected outcome of proposed corporate transactions and/or other factors.
|--- | ---------------------------------------------------------------------------------------------



47



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##### Table of Contents

FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 8. Financing Arrangements

The following tables present summary information with respect to the Companys outstanding financing arrangements as of
September 30, 2016 and December 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, 2015 and the additional disclosure set forth in this Note 8.



|                                  |  |                                     |  |                      |  |                   |         |  |                 |   |         |              |  |                  
|--------------------------------- |  | ----------------------------------- |  | -------------------- |  | ----------------- | ------- |  | --------------- | - | ------- | ------------ |  | -----------------
|                                  |  | As of September 30,
2016(Unaudited)
|Arrangement                       |  | Type of Arrangement                 |  | Rate                 |  | AmountOutstanding |         |  | AmountAvailable |   |         | MaturityDate
|JPM Facility(1)                   |  | Repurchase Agreement                |  | 3.25%                |  | $                 | 550,000 |  |                 | $ |        |              |  | May 20, 2017     
|Goldman Facility                  |  | Repurchase Agreement                |  | L+2.50%              |  | $                 | 400,000 |  |                 | $ |        |              |  | December 15, 2018
|Cooper River Credit Facility      |  | Revolving Credit Facility           |  | L+2.25%              |  | $                 | 158,533 |  |                 | $ | 41,467  |              |  | May 29, 2020     
|Wissahickon Creek Credit Facility |  | Revolving Credit Facility           |  | L+1.50% to L+2.50%   |  | $                 | 225,146 |  |                 | $ | 24,854  |              |  | February 19, 2019
|Darby Creek Credit Facility(2)    |  | Revolving Credit Facility           |  | L+2.50%              |  | $                 | 210,000 |  |                 | $ | 40,000  |              |  | August 19, 2020  
|Dunning Creek Credit Facility     |  | Revolving Credit Facility           |  | L+1.70%              |  | $                 | 94,200  |  |                 | $ | 55,800  |              |  | May 14, 2017     
|Juniata River Credit Facility(1)  |  | Term Loan Credit Facility           |  | L+2.50%              |  | $                 | 300,000 |  |                 | $ |        |              |  | November 14, 2019
|FSIC II Revolving Credit Facility |  | Revolving Credit Facility           |  | L+1.75%              |  | $                 |        |  |                 | $ | 120,000 |              |  | February 23, 2021
|Partial Loan Sale                 |  | Secured Borrowing                   |  | L+4.50% (1.0% floor) |  | $                 | 8,214   |  |                 | $ |        |              |  | July 29, 2022    



|(1) | On October 11, 2016, the Companys wholly-owned, special-purpose financing subsidiaries, Lehigh River LLC and Cobbs Creek LLC entered into amendments to the JPM
Facility which, among other things, resulted in (a) the prepayment and termination of the Lehigh River LLC / Cobbs Creek LLC repurchase agreement financing facility with JPM; and (b) the merger of Lehigh River LLC into Juniata River LLC, a
wholly-owned, special purpose financing subsidiary of the Company. In addition, in connection with the foregoing transactions, Juniata River LLC entered into amendments to the Juniata River Credit Facility which, among other things, (i) provided for
an immediate upsize of $550,000, resulting in a total facility amount of $850,000, (ii) extended the maturity date of the facility to October 11, 2020 and (iii) increased the margin payable of borrowing to 2.6833% over the three-month LIBOR.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | On August 19, 2016, the Darby Creek Credit Facility was amended to extend (a) the end of the revolving period from August 20, 2016 to February 19, 2019 and (b) the
maturity date from February 20, 2018 to August 19, 2020.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys average borrowings and weighted
average interest rate, including the effect of non-usage fees, for the nine months ended September 30, 2016 were $2,070,641 and 3.13%, respectively. As of September 30, 2016, the Companys weighted average effective interest rate on
borrowings, including the effect of non-usage fees, was 3.20%.



|                                  |  |                           |  |                    |  |                   |         |  |                 |   |         |              |  |                  
|--------------------------------- |  | ------------------------- |  | ------------------ |  | ----------------- | ------- |  | --------------- | - | ------- | ------------ |  | -----------------
|                                  |  | As of December 31, 2015  
|Arrangement                       |  | Type of Arrangement       |  | Rate               |  | AmountOutstanding |         |  | AmountAvailable |   |         | MaturityDate
|JPM Facility                      |  | Repurchase Agreement      |  | 3.25%              |  | $                 | 550,000 |  |                 | $ |        |              |  | May 20, 2017     
|Goldman Facility                  |  | Repurchase Agreement      |  | L+2.50%            |  | $                 | 400,000 |  |                 | $ |        |              |  | December 15, 2018
|Cooper River Credit Facility      |  | Revolving Credit Facility |  | L+2.25%            |  | $                 | 191,494 |  |                 | $ | 8,506   |              |  | May 29, 2020     
|Wissahickon Creek Credit Facility |  | Revolving Credit Facility |  | L+1.50% to L+2.50% |  | $                 | 240,146 |  |                 | $ | 9,854   |              |  | February 19, 2019
|Darby Creek Credit Facility       |  | Revolving Credit Facility |  | L+2.50%            |  | $                 | 250,000 |  |                 | $ |        |              |  | February 20, 2018
|Dunning Creek Credit Facility     |  | Revolving Credit Facility |  | L+1.45%            |  | $                 | 114,200 |  |                 | $ | 135,800 |              |  | May 14, 2016     
|Juniata River Credit Facility     |  | Term Loan Credit Facility |  | L+2.50%            |  | $                 | 300,000 |  |                 | $ |        |              |  | November 14, 2019

The Companys average borrowings and weighted average interest rate, including the effect of
non-usage fees, for the year ended December 31, 2015 were $1,989,137 and 2.94%, respectively. As of December 31, 2015, the Companys weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 2.90%.



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 8. Financing Arrangements (continued)



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.

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 is permitted to reduce (based on certain thresholds) the aggregate principal amount of Class A Notes subject to the JPM facility. Such reductions, and any other reductions of the principal amount of
Class A Notes, including upon an event of default, will be subject to breakage fees in an amount equal to the present value of 1.25% per annum over the remaining term of the JPM facility applied to the amount of such reduction.

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

As of September 30, 2016 and December 31, 2015, 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



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 (continued)



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
September 30, 2016 and December 31, 2015, 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
September 30, 2016 and December 31, 2015, the fair value of assets held by Lehigh River was $1,159,009 and $1,150,608, respectively, which included assets purchased by Lehigh River with proceeds from the issuance of Class A Notes. As
of September 30, 2016 and December 31, 2015, the fair value of assets held by Cobbs Creek was $343,538 and $345,813, respectively.

The Company incurred costs of $159 in connection with obtaining and amending the JPM facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes
to interest expense over the life of the JPM facility. As of September 30, 2016, $6 of such deferred financing costs had yet to be amortized to interest expense.

For the three and nine months ended September 30, 2016 and 2015, the components of total interest expense for the JPM facility were as follows:



|                                         |  |                                 |       |  |                                |   |       |      |  |   |        |  |  |   |        | 
|---------------------------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - | ----- | ---- |  | - | ------ |  |  | - | ------ | 
|                                         |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                                         |  | 2016                            |       |  | 2015                           |   |       | 2016 |  |   | 2015   | 
|Direct interest expense                  |  | $                               | 4,569 |  |                                | $ | 4,568 |      |  | $ | 13,605 |  |  | $ | 13,555 | 
|Amortization of deferred financing costs |  |                                 | 9     |  |                                |   | 9     |      |  |   | 29     |  |  |   | 29     | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |        |  |  |   |        | 
|Total interest expense                   |  | $                               | 4,578 |  |                                | $ | 4,577 |      |  | $ | 13,634 |  |  | $ | 13,584 | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |        |  |  |   |        | 

For the nine months ended September 30, 2016 and 2015, the cash paid for interest expense, average
borrowings, effective interest rate and weighted average interest rate for the JPM facility were as follows:



|                                      |  |                                |         |   |      |   |         |  
|------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                      |  | Nine Months EndedSeptember 30, |        
|                                      |  | 2016                           |         |   | 2015 |  
|Cash paid for interest expense        |  | $                              | 13,704  |   |      | $ | 13,555  |  
|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    | %

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



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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)



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.

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.

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 commenced accruing on $400,000 (even if the aggregate purchase price paid for Notes purchased by
Goldman was 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 September 30, 2016 and December 31, 2015, Notes in an aggregate principal amount of $689,655 and $689,655,
respectively, had been purchased by Schuylkill River from Green Creek and subsequently sold to Goldman under the Goldman facility for aggregate proceeds of $400,000 and $400,000, 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 September 30, 2016 and December 31, 2015, Schuylkill Rivers liability
under the Goldman facility was $400,000 and



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)



$400,000, respectively, plus $1,733 and $1,443, 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 September 30, 2016 and December 31, 2015, the fair value of assets held
by Green Creek was $775,967 and $717,247, respectively.

The Company incurred costs of $2,167 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 September 30, 2016, $1,202 of such deferred financing
costs had yet to be amortized to interest expense.

For the three and nine months ended September 30, 2016 and 2015, the
components of total interest expense for the Goldman facility were as follows:



|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|---------------------------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                         |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                                         |  | 2016                            |       |  | 2015                           |   |       | 2016 |  |   | 2015  | 
|Direct interest expense                  |  | $                               | 3,295 |  |                                | $ | 2,836 |      |  | $ | 9,495 |  |  | $ | 6,965 | 
|Amortization of deferred financing costs |  |                                 | 138   |  |                                |   | 136   |      |  |   | 410   |  |  |   | 395   | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|Total interest expense                   |  | $                               | 3,433 |  |                                | $ | 2,972 |      |  | $ | 9,905 |  |  | $ | 7,360 | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 

For the nine months ended September 30, 2016 and 2015, the cash paid for interest expense, average
borrowings, effective interest rate and weighted average interest rate for the Goldman facility were as follows:



|                                      |  |                                |         |   |      |   |         |  
|------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                      |  | Nine Months EndedSeptember 30, |        
|                                      |  | 2016                           |         |   | 2015 |  
|Cash paid for interest expense(1)     |  | $                              | 9,205   |   |      | $ | 5,667   |  
|Average borrowings under the facility |  | $                              | 400,000 |   |      | $ | 290,439 |  
|Effective interest rate on borrowings |  |                                | 3.32    | % |      |   | 2.96    | %
|Weighted average interest rate(1)     |  |                                | 3.12    | % |      |   | 3.16    | %



|(1) | Interest under the Goldman facility is paid quarterly in arrears and commenced on May 15, 2015. The weighted average interest rate presented for periods of less than
one year is annualized.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Amounts outstanding under the Goldman facility are 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 May 29, 2015, 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, which amends and restates that certain credit facility dated as of March 27, 2013, with Citibank, as administrative agent, and the financial institutions and other lenders from
time to time party thereto. The Cooper River facility provides for a five-year



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 8. Financing Arrangements (continued)



credit facility with a three-year reinvestment period, during which Cooper River, subject to compliance with the terms of the facility, including maintenance of the required borrowing base, is
permitted to borrow, repay and re-borrow advances up to a maximum commitment of $200,000, followed by a two-year amortization period.

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

Borrowings under the Cooper River
facility, prior to its amendment and restatement, accrued interest at a rate equal to three-month LIBOR, plus a spread of (a) 1.75% per annum from closing through March 26, 2015 and (b) 2.00% per annum thereafter. Borrowings under the
amended and restated Cooper River facility will accrue interest at a rate per annum equal to three-month LIBOR (subject to a 0% floor) plus a spread of (i) 2.25% during the reinvestment period, (ii) 2.75% during the first year of the amortization
period and (iii) 3.75% thereafter.

Under the terms of the original Cooper River facility, from 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. Such non-usage fee did not apply from March 27, 2015 through
the date the Cooper River facility was amended and restated. Under the amended and restated Cooper River facility, Cooper River pays a commitment fee of 0.75% per annum of the aggregate principal amount available under the Cooper River facility that
has not been borrowed. Any amounts borrowed under the Cooper River facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on May 29, 2020.

As of September 30, 2016 and December 31, 2015, $158,533 and $191,494, 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 $3,975 in connection with obtaining the Cooper River facility (including the original facility and amended and
restated 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 September 30, 2016, $1,700 of such deferred
financing costs had yet to be amortized to interest expense.



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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 and nine months ended September 30, 2016 and 2015, the components of total
interest expense for the Cooper River facility were as follows:



|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|---------------------------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                         |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                                         |  | 2016                            |       |  | 2015                           |   |       | 2016 |  |   | 2015  | 
|Direct interest expense                  |  | $                               | 1,309 |  |                                | $ | 1,114 |      |  | $ | 4,124 |  |  | $ | 2,981 | 
|Non-usage fees                           |  |                                 | 43    |  |                                |   | 55    |      |  |   | 78    |  |  |   | 136   | 
|Amortization of deferred financing costs |  |                                 | 118   |  |                                |   | 138   |      |  |   | 386   |  |  |   | 831   | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|Total interest expense                   |  | $                               | 1,470 |  |                                | $ | 1,307 |      |  | $ | 4,588 |  |  | $ | 3,948 | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 

For the nine months ended September 30, 2016 and 2015, the cash paid for interest expense, average
borrowings, effective interest rate and weighted average interest rate for the Cooper River facility were as follows:



|                                                                               |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                               |  | Nine Months EndedSeptember 30, |        
|                                                                               |  | 2016                           |         |   | 2015 |  
|Cash paid for interest expense                                                 |  | $                              | 4,071   |   |      | $ | 2,898   |  
|Average borrowings under the facility                                          |  | $                              | 186,310 |   |      | $ | 170,758 |  
|Effective interest rate on borrowings (including the effect of non-usage fees) |  |                                | 3.07    | % |      |   | 2.60    | %
|Weighted average interest rate (including the effect of non-usage fees)        |  |                                | 2.96    | % |      |   | 2.41    | %

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.

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.



54



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 8. Financing Arrangements (continued)



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 September 30, 2016 and December 31, 2015, $225,146 and $240,146, 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 September 30, 2016, $1,630 of such deferred financing costs had yet to be amortized to interest expense.

For the three and nine months ended September 30, 2016 and 2015, the components of total interest expense for the Wissahickon Creek
facility were as follows:



|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|---------------------------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                         |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                                         |  | 2016                            |       |  | 2015                           |   |       | 2016 |  |   | 2015  | 
|Direct interest expense                  |  | $                               | 1,843 |  |                                | $ | 1,348 |      |  | $ | 5,426 |  |  | $ | 3,838 | 
|Non-usage fees                           |  |                                 | 32    |  |                                |   | 168   |      |  |   | 74    |  |  |   | 608   | 
|Amortization of deferred financing costs |  |                                 | 172   |  |                                |   | 172   |      |  |   | 512   |  |  |   | 510   | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|Total interest expense                   |  | $                               | 2,047 |  |                                | $ | 1,688 |      |  | $ | 6,012 |  |  | $ | 4,956 | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 

For the nine months ended September 30, 2016 and 2015, the cash paid for interest expense, average
borrowings, effective interest rate and weighted average interest rate for the Wissahickon Creek facility were as follows:



|                                                                               |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                               |  | Nine Months EndedSeptember 30, |        
|                                                                               |  | 2016                           |         |   | 2015 |  
|Cash paid for interest expense                                                 |  | $                              | 5,289   |   |      | $ | 4,296   |  
|Average borrowings under the facility                                          |  | $                              | 230,511 |   |      | $ | 191,121 |  
|Effective interest rate on borrowings (including the effect of non-usage fees) |  |                                | 3.31    | % |      |   | 2.77    | %
|Weighted average interest rate (including the effect of non-usage fees)        |  |                                | 3.13    | % |      |   | 3.07    | %

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



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)



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. On August 19, 2016, the Darby Creek Credit Facility
was amended to (a) extend the end of the revolving period from August 20, 2016 to February 19, 2019; and (b) extend the maturity date from February 20, 2018 to August 19, 2020.

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 2.50% per annum. Darby Creek is subject to a non-usage fee of 0.50% 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 (i) 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 and (ii) an administration fee. Any amounts borrowed under the Darby Creek facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on August 19, 2020.

As of September 30, 2016 and December 31, 2015, $210,000 and $250,000, 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 $5,179 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 September 30, 2016, $3,243 of such deferred financing costs had yet to be amortized to interest expense.

For the three and nine months ended September 30, 2016 and 2015, the components of total interest expense for the Darby Creek facility
were as follows:



|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|---------------------------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                         |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                                         |  | 2016                            |       |  | 2015                           |   |       | 2016 |  |   | 2015  | 
|Direct interest expense                  |  | $                               | 2,073 |  |                                | $ | 1,940 |      |  | $ | 6,322 |  |  | $ | 5,709 | 
|Non-usage fees                           |  |                                 | 18    |  |                                |   |      |      |  |   | 18    |  |  |   |      | 
|Amortization of deferred financing costs |  |                                 | 274   |  |                                |   | 206   |      |  |   | 691   |  |  |   | 583   | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|Total interest expense                   |  | $                               | 2,365 |  |                                | $ | 2,146 |      |  | $ | 7,031 |  |  | $ | 6,292 | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 



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 nine months ended September 30, 2016 and 2015, the cash paid for interest
expense, average borrowings, effective interest rate and weighted average interest rate for the Darby Creek facility were as follows:



|                                                                               |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                               |  | Nine Months EndedSeptember 30, |        
|                                                                               |  | 2016                           |         |   | 2015 |  
|Cash paid for interest expense                                                 |  | $                              | 6,477   |   |      | $ | 5,582   |  
|Average borrowings under the facility                                          |  | $                              | 245,182 |   |      | $ | 249,500 |  
|Effective interest rate on borrowings (including the effect of non-usage fees) |  |                                | 3.57    | % |      |   | 3.03    | %
|Weighted average interest rate (including the effect of non-usage fees)        |  |                                | 3.40    | % |      |   | 3.02    | %

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. 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. On May 13, 2016, the Dunning Creek facility was amended to (a) extend the maturity date to May 14, 2017; (b) set the maximum commitments available under
the facility at $150,000; (c) increase the applicable spread over LIBOR to 1.70% per annum; (d) add a commitment fee of 0.75% per annum on unborrowed amounts; (e) add an excess unused fee of 0.95% per annum payable on any unborrowed amounts in
excess of $75,000; and (f) add a commitment reduction fee in an amount equal to the commitment fee and, as applicable, excess unused fee that would have accrued through scheduled maturity on any amount by which the commitments are reduced.

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 September 30, 2016, 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 1.70% per annum. Any amounts borrowed under the Dunning Creek
facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on May 14, 2017.

As of
September 30, 2016 and December 31, 2015, $94,200 and $114,200, respectively, was outstanding under the Dunning Creek facility. The carrying amount outstanding under the Dunning Creek facility



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)



approximates its fair value. The Company incurred costs of $1,755 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 September 30, 2016, $259 of such deferred financing costs had yet to be amortized to interest expense.

For the three and nine months ended September 30, 2016 and 2015, the components of total interest expense for the Dunning Creek facility
were as follows:



|                                         |  |                                 |     |  |                                |   |       |      |  |   |       |  |  |   |       | 
|---------------------------------------- |  | ------------------------------- | --- |  | ------------------------------ | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                         |  | Three Months EndedSeptember 30, |     |  | Nine Months EndedSeptember 30, |  
|                                         |  | 2016                            |     |  | 2015                           |   |       | 2016 |  |   | 2015  | 
|Direct interest expense                  |  | $                               | 643 |  |                                | $ | 1,032 |      |  | $ | 1,869 |  |  | $ | 3,111 | 
|Non-usage fees                           |  |                                 | 85  |  |                                |   |      |      |  |   | 121   |  |  |   |      | 
|Amortization of deferred financing costs |  |                                 | 105 |  |                                |   | 157   |      |  |   | 391   |  |  |   | 507   | 
|                                         |  |                                 |     |  |                                |   |       |      |  |   |       |  |  |   |       | 
|Total interest expense                   |  | $                               | 833 |  |                                | $ | 1,189 |      |  | $ | 2,381 |  |  | $ | 3,618 | 
|                                         |  |                                 |     |  |                                |   |       |      |  |   |       |  |  |   |       | 

For the nine months ended September 30, 2016 and 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:



|                                                                               |  |                                |         |   |      |   |         |  
|------------------------------------------------------------------------------ |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                                                               |  | Nine Months EndedSeptember 30, |        
|                                                                               |  | 2016                           |         |   | 2015 |  
|Cash paid for interest expense                                                 |  | $                              | 1,907   |   |      | $ | 3,129   |  
|Average borrowings under the facility                                          |  | $                              | 111,499 |   |      | $ | 232,057 |  
|Effective interest rate on borrowings (including the effect of non-usage fees) |  |                                | 2.81    | % |      |   | 1.73    | %
|Weighted average interest rate (including the effect of non-usage fees)        |  |                                | 2.34    | % |      |   | 1.77    | %

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 $300,000 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 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



58



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 8. Financing Arrangements (continued)



River 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
September 30, 2016 and December 31, 2015, $300,000 and $300,000, 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 $355 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
September 30, 2016, $222 of such deferred financing costs had yet to be amortized to interest expense.

For the three and
nine months ended September 30, 2016 and 2015, the components of total interest expense for the Juniata River facility were as follows:



|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|---------------------------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                         |  | Three Months EndedSeptember 30, |       |  | Nine Months EndedSeptember 30, |  
|                                         |  | 2016                            |       |  | 2015                           |   |       | 2016 |  |   | 2015  | 
|Direct interest expense                  |  | $                               | 2,432 |  |                                | $ | 2,137 |      |  | $ | 7,136 |  |  | $ | 5,927 | 
|Amortization of deferred financing costs |  |                                 | 18    |  |                                |   | 19    |      |  |   | 52    |  |  |   | 55    | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|Total interest expense                   |  | $                               | 2,450 |  |                                | $ | 2,156 |      |  | $ | 7,188 |  |  | $ | 5,982 | 
|                                         |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 

For the nine months ended September 30, 2016 and 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:



|                                      |  |                                |         |   |      |   |         |  
|------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                      |  | Nine Months EndedSeptember 30, |        
|                                      |  | 2016                           |         |   | 2015 |  
|Cash paid for interest expense(1)     |  | $                              | 6,902   |   |      | $ | 4,591   |  
|Average borrowings under the facility |  | $                              | 300,000 |   |      | $ | 282,381 |  
|Effective interest rate on borrowings |  |                                | 3.18    | % |      |   | 2.79    | %
|Weighted average interest rate(1)     |  |                                | 3.13    | % |      |   | 2.77    | %



|(1) | Interest under the Juniata River facility is payable quarterly in arrears and commenced on April 25, 2015. The weighted average interest rate presented for periods of
less than one year is annualized.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



59



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)





Note 8. Financing Arrangements (continued)



FSIC II Revolving Credit Facility

On February 23, 2016, the Company entered into the FSIC II revolving credit facility with ING Capital LLC, or ING, as administrative
agent, and the lenders party thereto. The FSIC II revolving credit facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an initial aggregate amount of up to $95,000, with an option for the Company to
request, at one or more times after closing, that existing or new lenders, at their election, provide up to $80,000 of additional commitments. On April 26, 2016, the Company entered into an incremental commitment and assumption agreement pursuant to
which an additional lender provided an additional commitment of $25,000. The FSIC II revolving credit facility provides for the issuance of letters of credit in an aggregate face amount not to exceed $25,000 if one of the lenders or another party
assumes the role of letter of credit issuer. The Companys obligations under the FSIC II revolving credit facility are guaranteed by all of the Companys subsidiaries, other than its special-purpose financing subsidiaries, tax blocker
subsidiaries and foreign subsidiaries. The Companys obligations under the FSIC II revolving credit facility are secured by a first priority security interest in substantially all of the assets of the Company and the subsidiary guarantors
thereunder.

As of September 30, 2016, no amounts were outstanding under the FSIC II revolving credit facility. The
carrying amount outstanding under the facility approximates its fair value. The Company incurred costs of $356 in connection with obtaining the FSIC II revolving credit 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 FSIC II revolving credit facility. As of September 30, 2016, $265 of such deferred financing costs had yet to be amortized to interest expense.

For the three and nine months ended September 30, 2016, the components of total interest expense for the FSIC II revolving credit
facility were as follows:



|                                         |  |                                      |     |  |                                     |   |       | 
|---------------------------------------- |  | ------------------------------------ | --- |  | ----------------------------------- | - | ----- | 
|                                         |  | Three Months EndedSeptember 30, 2016 |     |  | Nine Months EndedSeptember 30, 2016 |  
|Direct interest expense                  |  | $                                    | 307 |  |                                     | $ | 787   | 
|Non-usage fees                           |  |                                      | 65  |  |                                     |   | 131   | 
|Amortization of deferred financing costs |  |                                      | 41  |  |                                     |   | 91    | 
|                                         |  |                                      |     |  |                                     |   |       | 
|Total interest expense                   |  | $                                    | 413 |  |                                     | $ | 1,009 | 
|                                         |  |                                      |     |  |                                     |   |       | 

For the nine months ended September 30, 2016, the cash paid for interest expense, average borrowings,
effective interest rate and weighted average interest rate for the FSIC II revolving credit facility were as follows:



|                                                                                  |  |                                     |        |  
|--------------------------------------------------------------------------------- |  | ----------------------------------- | ------ | -
|                                                                                  |  | Nine Months EndedSeptember 30, 2016 |       
|Cash paid for interest expense(1)                                                 |  | $                                   | 850    |  
|Average borrowings under the facility(2)                                          |  | $                                   | 45,310 |  
|Effective interest rate on borrowings (including the effect of non-usage fees)(3) |  |                                     | 0.38   | %
|Weighted average interest rate (including the effect of non-usage fees)(2)        |  |                                     | 2.66   | %



|(1) | Interest under the FSIC II revolving credit facility is payable quarterly and commenced on March 29, 2016.
|--- | ----------------------------------------------------------------------------------------------------------



|(2) | The average borrowings under the FSIC II revolving credit facility are calculated for the period since the Company commenced borrowing thereunder to September 30, 2016.
The weighted average interest rate presented for periods of less than one year is annualized.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







Note 8. Financing Arrangements (continued)



|(3) | The effective interest rate on borrowings for the nine months ended September 30, 2016 represents only non-usage fees as there were no amounts outstanding under the
FSIC II revolving credit facility as of September 30, 2016.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Partial Loan Sale

Certain partial loan sales do not qualify for sale accounting under ASC Topic 860 because these sales do not meet the definition of a
participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a participating interest remain as an investment on the consolidated
balance sheets and the portion sold is recorded as a secured borrowing in the liabilities section of the consolidated balance sheets. For these partial loan sales, the interest earned on the entire loan balance is recorded within interest income and
the interest earned by the buyer in the partial loan sale is recorded within interest expense in the consolidated statements of operations.

As of September 30, 2016, the Company recognized a secured borrowing at a fair value of $8,229 and the fair value of the loan that is associated with the secured borrowing was $42,855. The secured
borrowing was the result of the Companys completion of a partial sale of a senior secured loan associated with one portfolio company that did not meet the definition of a participating interest. As a result, sale treatment was not allowed and
the partial loan sale was treated as a secured borrowing.

During the three and nine months ended September 30, 2016, there
was a partial loan sale of $8,214 and no fundings on revolving and delayed draw secured borrowings or repayments on secured borrowings.

For the three and nine months ended September 30, 2016, the components of total interest expense for the secured borrowing were as follows:



|                        |  |                                      |    |  |                                     |   |    | 
|----------------------- |  | ------------------------------------ | -- |  | ----------------------------------- | - | -- | 
|                        |  | Three Months EndedSeptember 30, 2016 |    |  | Nine Months EndedSeptember 30, 2016 |  
|Direct interest expense |  | $                                    | 76 |  |                                     | $ | 76 | 
|Accretion of discount   |  |                                      | 3  |  |                                     |   | 3  | 
|                        |  |                                      |    |  |                                     |   |    | 
|Total interest expense  |  | $                                    | 79 |  |                                     | $ | 79 | 
|                        |  |                                      |    |  |                                     |   |    | 

For the nine months ended September 30, 2016, the cash paid for interest expense, average borrowings,
effective interest rate and weighted average interest rate for the secured borrowing were as follows:



|                                             |  |                                     |       |  
|-------------------------------------------- |  | ----------------------------------- | ----- | -
|                                             |  | Nine Months EndedSeptember 30, 2016 |      
|Cash paid for interest expense(1)            |  | $                                   |      |  
|Average secured borrowing(2)                 |  | $                                   | 8,214 |  
|Effective interest rate on secured borrowing |  |                                     | 5.50  | %
|Weighted average interest rate(2)            |  |                                     | 5.50  | %



|(1) | Interest under the secured borrowing is paid quarterly in arrears.
|--- | ------------------------------------------------------------------



|(2) | For the nine months ended September 30, 2016, average borrowings are calculated for the period from the date of issuance to September 30, 2016. The weighted
average interest rate presented for periods of less than one year is annualized.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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FS Investment Corporation II

Notes to Unaudited Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)







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.

The Company had certain credit default swap contracts outstanding during the year ended December 31, 2015. As of September 30, 2016, 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 nine
months ended September 30, 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 nine months ended September 30, 2015.

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.



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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

The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2016 and the year ended
December 31, 2015:



|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------- | ----------- | - | --------------------------- | - | ----------- | --
|                                                                                                                                                  |  | Nine Months EndedSeptember 30, 2016(Unaudited) |             |   | Year EndedDecember 31, 2015 |  
|Per Share Data:(1)                                                                                                                                |  |                                                |             |   |                             |   |             |   
|Net asset value, beginning of period                                                                                                              |  | $                                              | 8.37        |   |                             | $ | 9.30        |   
|Results of operations(2)                                                                                                                          |  |                                                |             |   |                             |   |             |   
|Net investment income                                                                                                                             |  |                                                | 0.58        |   |                             |   | 0.92        |   
|Net realized and unrealized appreciation (depreciation) on investments, credit default swaps, gain/loss on foreign currency and
secured borrowing |  |                                                | 0.42        |   |                             |   | (1.11       | ) 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Net increase (decrease) in net assets resulting from operations                                                                                   |  |                                                | 1.00        |   |                             |   | (0.19       | ) 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Stockholder distributions(3)                                                                                                                      |  |                                                |             |   |                             |   |             |   
|Distributions from net investment income                                                                                                          |  |                                                | (0.55       | ) |                             |   | (0.72       | ) 
|Distributions from net realized gain on investments                                                                                               |  |                                                | (0.02       | ) |                             |   | (0.03       | ) 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Net decrease in net assets resulting from stockholder distributions                                                                               |  |                                                | (0.57       | ) |                             |   | (0.75       | ) 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Capital share transactions                                                                                                                        |  |                                                |             |   |                             |   |             |   
|Issuance of common stock(4)                                                                                                                       |  |                                                | 0.00        |   |                             |   | 0.01        |   
|Repurchases of common stock(5)                                                                                                                    |  |                                                | 0.00        |   |                             |   | 0.00        |   
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Net increase (decrease) in net assets resulting from capital share transactions                                                                   |  |                                                | 0.00        |   |                             |   | 0.01        |   
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Net asset value, end of period                                                                                                                    |  | $                                              | 8.80        |   |                             | $ | 8.37        |   
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Shares outstanding, end of period                                                                                                                 |  |                                                | 326,680,550 |   |                             |   | 321,507,876 |   
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Total return(6)                                                                                                                                   |  |                                                | 12.36       | % |                             |   | (2.37       | )%
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Total return (without assuming reinvestment of distributions)(7)                                                                                  |  |                                                | 11.95       | % |                             |   | (1.94       | )%
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Ratio/Supplemental Data:                                                                                                                          |  |                                                |             |   |                             |   |             |   
|Net assets, end of period                                                                                                                         |  | $                                              | 2,875,209   |   |                             | $ | 2,690,412   |   
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Ratio of net investment income to average net assets(8)                                                                                           |  |                                                | 6.96        | % |                             |   | 10.03       | % 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Ratio of operating expenses and excise taxes to average net assets(8)                                                                             |  |                                                | 6.68        | % |                             |   | 8.59        | % 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Ratio of net operating expenses and excise taxes to average net assets(8)                                                                         |  |                                                | 6.34        | % |                             |   | 8.24        | % 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Portfolio turnover(9)                                                                                                                             |  |                                                | 18.17       | % |                             |   | 31.79       | % 
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Total amount of senior securities outstanding, exclusive of treasury securities                                                                   |  | $                                              | 1,946,093   |   |                             | $ | 2,045,840   |   
|                                                                                                                                                  |  |                                                |             |   |                             |   |             |   
|Asset coverage per unit(10)                                                                                                                       |  |                                                | 2.48        |   |                             |   | 2.32        |   



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



|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------------



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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)



|(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, pursuant to
the Companys distribution reinvestment plan. The issuance of common stock at a price 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 based on the change in net asset value during the applicable period, including the impact of distributions
reinvested in accordance with the Companys distribution reinvestment plan. The total return does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Companys
common stock. The total return includes the effect of the issuance of shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. The historical calculation of total return in
the table should not be considered a representation of the Companys future total return, which may be greater or less than the return shown in the table due to a number of factors, including the Companys ability or inability to make
investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Companys expenses, variations in and the timing of the recognition of realized and unrealized
gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in
future periods. The total return calculations set forth above represent the total return on the Companys investment portfolio during the applicable period and do not represent an actual return to stockholders. The total return for the year
ended December 31, 2015 is unaudited.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | The total return (without assuming reinvestment of distributions) 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 (without assuming
reinvestment of distributions) does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Companys common stock. The total return (without assuming reinvestment of
distributions) 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 (without assuming
reinvestment of distributions) in the table should not be considered a representation of the Companys future total return (without assuming reinvestment of distributions) which may be greater or less than the return shown in the table due to a
number of factors, including the Companys ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Companys
expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for
any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total return (without assuming reinvestment of distributions) on the Companys
investment portfolio during the applicable period and do not represent an actual return to stockholders.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Weighted average net assets during the applicable period are used for this calculation. The following is a schedule of supplemental ratios for the nine months ended
September 30, 2016 and the year ended December 31, 2015:
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                                                  |  |                                                |      |   |                             |  |      |  
|----------------------------------------------------------------- |  | ---------------------------------------------- | ---- | - | --------------------------- |  | ---- | -
|                                                                  |  | Nine Months EndedSeptember 30, 2016(Unaudited) |      |   | Year EndedDecember 31, 2015 | 
|Ratio of subordinated income incentive fees to average net assets |  |                                                | 1.69 | % |                             |  | 2.51 | %
|Ratio of interest expense to average net assets                   |  |                                                | 1.91 | % |                             |  | 2.13 | %
|Ratio of excise taxes to average net assets                       |  |                                                |     |   |                             |  | 0.07 | %



|(9) | Portfolio turnover for the nine months ended September 30, 2016 is not annualized.
|--- | ----------------------------------------------------------------------------------



|(10) | 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. Subsequent Events

On October 11, 2016, Lehigh River and Cobbs Creek entered into amendments to the JPM facility which, among other things, resulted in (a)
prepayment and termination of the JPM facility and (b) the merger of Lehigh River into Juniata River. In addition, in connection with the foregoing transactions, Juniata River entered into amendments to the Juniata River facility which, among other
things, (i) provided for an immediate upsize of $550,000, resulting in a total facility amount of $850,000, (ii) extended the maturity date of the facility to October 11, 2020 and (iii) increased the margin payable of borrowing to 2.6833% over
the three-month LIBOR.



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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, our and the Company refer to FS Investment Corporation II.

Forward-Looking Statements

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



| |  |  | our future operating results;
| | - |  | -----------------------------



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



| |  |  | the impact of the investments that we expect to make;
| | - |  | -----------------------------------------------------



| |  |  | the ability of our portfolio companies to achieve their objectives;
| | - |  | -------------------------------------------------------------------



| |  |  | our current and expected financings and investments;
| | - |  | ----------------------------------------------------



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



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



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



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



| |  |  | actual and potential conflicts of interest with 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, FSIC IV Advisor, LLC, FS Investment Corporation IV, FS Global Advisor, LLC, FS Global Credit Opportunities Fund, GDFM or any of their affiliates;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the dependence of our future success on the general economy and its effect on the industries in which we may invest;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | our use of financial leverage;
| | - |  | ------------------------------



| |  |  | the ability of FSIC II Advisor to locate suitable investments for us and to monitor and administer our investments;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | the ability of FSIC II Advisor or its affiliates to attract and retain highly talented professionals;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | our ability to maintain our qualification as a RIC and as a BDC;
| | - |  | ----------------------------------------------------------------



| |  |  | the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, 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. 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. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax
purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. In March 2014, we closed our continuous public offering of shares of common stock to new investors.

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

Opportunistic: We intend to seek to capitalize on market price inefficiencies by investing in loans, bonds and other securities
where the market price of such investment reflects a lower value than deemed warranted by our fundamental analysis. We believe that market price inefficiencies may occur due to, among other things, general dislocations in the markets, a
misunderstanding by the market of a particular 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.

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



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fundamental analysis. Such events may include a looming debt maturity or default, a merger, spin-off or other corporate reorganization, an adverse regulatory or legal ruling, or a material
contract expiration, any of which may significantly improve or impair a companys financial position. Compared to other investment strategies, event driven investing depends more heavily on our ability to successfully predict the outcome of an
individual event rather than on underlying macroeconomic fundamentals. As a result, successful event driven strategies may offer both substantial diversification benefits and the ability to generate performance in uncertain market environments.

We may also invest in certain opportunities that are originated and then syndicated by a commercial or investment bank, but
where we provide a capital commitment significantly above the average syndicate participant, i.e., an anchor order. In these types of investments, we may receive fees, preferential pricing or other benefits not available to other lenders in return
for our significant capital commitment. Our decision to provide an anchor order to a syndicated transaction is predicated on a rigorous credit analysis, our familiarity with a particular company, industry or financial sponsor, and the broader
investment experiences of FSIC II Advisor and GDFM.

In addition, our relationship with GSO Capital Partners LP, the parent of
GDFM and one of the largest CLO managers in the world, allows us to opportunistically invest in CLOs. CLOs are a form of securitization where the cash flow from a pooled basket of syndicated loans is used to support distribution payments made to
different tranches of securities. While collectively CLOs represent nearly fifty percent of the broadly syndicated loan universe, investing in individual CLO tranches requires a high degree of investor sophistication due to their structural
complexity and the illiquid nature of their securities.

Broadly Syndicated/Other: Although our primary focus is to
invest in directly originated transactions and opportunistic investments, in certain circumstances we will also invest in the broadly syndicated loan and high yield markets. Broadly syndicated loans and bonds are generally more liquid than our
directly originated investments and provide a complement to our less liquid strategies. In addition, and because we typically receive more attractive financing terms on these positions than we do on our less liquid assets, we are able to leverage
the broadly syndicated portion of our portfolio in such a way that maximizes the levered return potential of our portfolio.

Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S.
companies and, to a lesser extent, subordinated loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may
invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the over-the-counter market or directly from our target companies as
primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration. We may also purchase or otherwise acquire minority
interests in target companies, in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other
equity. Any such minority interests are generally acquired 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 Services, 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 arrangements and other indebtedness, 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 FS Investments 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, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to
our stockholders, and generally overseeing the payment of our expenses



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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 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 year ended December 31, 2015.

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 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, FS Investments 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, FS Investments 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, FS
Investments 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 FS Investments for any amounts funded by
FS Investments under such agreement if (and only to the extent that), during any fiscal quarter occurring within three years of the date on which FS Investments 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 FS Investments for expense support payments made by FS Investments 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 FS Investments was made (provided, however, that
this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from FS Investments made during the same fiscal year) and (ii) we will not reimburse FS Investments for expense support payments made by FS
Investments 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 FS Investments 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



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offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. Operating expenses means all operating costs and expenses incurred, as
determined in accordance with GAAP, for investment companies.

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

FS Investments 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 FS Investments will reimburse any portion of our expenses in future quarters.

As of September 30, 2016 and December 31, 2015, no amounts remained subject to repayment by us to FS Investments in the future.

Portfolio Investment Activity for the Three and Nine Months Ended September 30, 2016 and for the Year Ended December 31, 2015

During the nine months ended September 30, 2016, we made investments in portfolio companies totaling $806,968. During the
same period, we sold investments for proceeds of $511,389 and received principal repayments of $592,768. As of September 30, 2016, our investment portfolio, with a total fair value of $4,401,568 (62% in first lien senior secured loans, 17% in
second lien senior secured loans, 4% in senior secured bonds, 9% in subordinated debt, 1% in collateralized securities and 7% in equity/other), consisted of interests in 140 portfolio companies. The portfolio companies that comprised our portfolio
as of such date had an average annual EBITDA of approximately $128.4 million. As of September 30, 2016, the debt investments in our portfolio were purchased at a weighted average price of 97.6% of par and our estimated gross portfolio yield,
prior to leverage, was 9.2% based upon the amortized cost of our investments. For the nine months ended September 30, 2016, our total return was 12.36% and our total return without assuming reinvestment of distributions was 11.95%.

During the year ended December 31, 2015, we made investments in portfolio companies totaling $1,904,545. During the same period, we
sold investments for proceeds of $872,333 and received principal repayments of $590,278. As of December 31, 2015, our investment portfolio, with a total fair value of $4,532,875 (62% in first lien senior secured loans, 20% in second lien senior
secured loans, 4% in senior secured bonds, 7% in subordinated debt, 2% in collateralized securities and 5% in equity/other), consisted of interests in 165 portfolio companies. The portfolio companies that comprised our portfolio as of such date had
an average annual EBITDA of approximately $168.7 million. As of December 31, 2015, the debt investments in our portfolio were purchased at a weighted average price of 98.0% of par and our estimated gross portfolio yield, prior to leverage, was
9.6% based upon the amortized cost of our investments. For the year ended December 31, 2015, our total return was (2.37)% and our total return without assuming reinvestment of distributions was (1.94)%.

Based on our regular monthly cash distribution amount of $0.06283 per share as of September 30, 2016 and December 31, 2015 and
our final public offering price of $10.60 per share, the annualized distribution rate to stockholders as of September 30, 2016 and December 31, 2015 was 7.11%. Based on our regular monthly cash distribution amount of $0.06283 per share as
of September 30, 2016 and December 31, 2015 and our distribution reinvestment price of $8.85 as of September 30, 2016 and $8.90 as of December 31, 2015, the annualized distribution rate to stockholders as of September 30,
2016 and December 31, 2015 was 8.52% and 8.47%, respectively. The annualized distribution rate to stockholders, in each case, is expressed as a percentage equal to the projected annualized distribution amount per share (which is calculated by
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cash distribution per share as of the dates indicated above without compounding), divided by our final public offering price per share or our distribution reinvestment price, as applicable, as of
the dates indicated above.

Our estimated gross portfolio yield may be higher than a stockholders yield on an investment
in shares of our common stock. Our estimated gross portfolio yield does not reflect operating expenses that may be incurred by us. In addition, our estimated gross portfolio yield and total return figures disclosed above do not consider the effect
of any selling commissions or charges that may have been incurred in connection with the sale of shares of our common stock. Our estimated gross portfolio yield, total return and annualized distribution rate to stockholders do not represent actual
investment returns to stockholders, are subject to change and in the future may be greater or less than the rates set forth above. See the section entitled Item 1A. Risk Factors in our annual report on Form 10-K for the fiscal year ended
December 31, 2015 and our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements. See footnotes 6 and 7 to the table included in Note 11 to our unaudited consolidated
financial statements included herein for information regarding the calculation of our total return.

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three and
nine months ended September 30, 2016:



|                        |  |                                              |          |   |                                             |   |            |  
|----------------------- |  | -------------------------------------------- | -------- | - | ------------------------------------------- | - | ---------- | -
|Net Investment Activity |  | For the Three Months EndedSeptember 30, 2016 |          |   | For the Nine Months EndedSeptember 30, 2016 |  
|Purchases               |  | $                                            | 429,168  |   |                                             | $ | 806,968    |  
|Sales and Redemptions   |  |                                              | (594,076 | ) |                                             |   | (1,104,157 | )
|                        |  |                                              |          |   |                                             |   |            |  
|Net Portfolio Activity  |  | $                                            | (164,908 | ) |                                             | $ | (297,189   | )
|                        |  |                                              |          |   |                                             |   |            |  



|                                       |  |                                              |         |  |                                             |  |     |           |  |   |            |  |  |  |     |  
|-------------------------------------- |  | -------------------------------------------- | ------- |  | ------------------------------------------- |  | --- | --------- |  | - | ---------- |  |  |  | --- | -
|                                       |  | For the Three Months EndedSeptember 30, 2016 |         |  | For the Nine Months EndedSeptember 30, 2016 | 
|New Investment Activity by Asset Class |  | Purchases                                    |         |  | Percentage                                  |  |     | Purchases |  |   | Percentage | 
|Senior Secured LoansFirst Lien        |  | $                                            | 315,765 |  |                                             |  | 74  | %         |  | $ | 502,042    |  |  |  | 62  | %
|Senior Secured LoansSecond Lien       |  |                                              | 71,467  |  |                                             |  | 17  | %         |  |   | 110,169    |  |  |  | 14  | %
|Senior Secured Bonds                   |  |                                              | 10,680  |  |                                             |  | 2   | %         |  |   | 25,594     |  |  |  | 3   | %
|Subordinated Debt                      |  |                                              | 9,938   |  |                                             |  | 2   | %         |  |   | 69,143     |  |  |  | 9   | %
|Collateralized Securities              |  |                                              |        |  |                                             |  |    |           |  |   |           |  |  |  |    |  
|Equity/Other                           |  |                                              | 21,318  |  |                                             |  | 5   | %         |  |   | 100,020    |  |  |  | 12  | %
|                                       |  |                                              |         |  |                                             |  |     |           |  |   |            |  |  |  |     |  
|Total                                  |  | $                                            | 429,168 |  |                                             |  | 100 | %         |  | $ | 806,968    |  |  |  | 100 | %
|                                       |  |                                              |         |  |                                             |  |     |           |  |   |            |  |  |  |     |  

The following table summarizes the composition of our investment portfolio at cost and fair value as of
September 30, 2016 and December 31, 2015:



|                                 |  |                               |           |  |                   |   |           |                        |  |  |                  |   |  |            |           |  |                        |   |           |  |  |  |     |  
|-------------------------------- |  | ----------------------------- | --------- |  | ----------------- | - | --------- | ---------------------- |  |  | ---------------- | - |  | ---------- | --------- |  | ---------------------- | - | --------- |  |  |  | --- | -
|                                 |  | September 30, 2016(Unaudited) |           |  | December 31, 2015 |  
|                                 |  | AmortizedCost(1)              |           |  | Fair Value        |   |           | Percentageof Portfolio |  |  | AmortizedCost(1) |   |  | Fair Value |           |  | Percentageof Portfolio |  
|Senior Secured LoansFirst Lien  |  | $                             | 2,812,088 |  |                   | $ | 2,745,820 |                        |  |  | 62               | % |  | $          | 2,916,090 |  |                        | $ | 2,802,207 |  |  |  | 62  | %
|Senior Secured LoansSecond Lien |  |                               | 807,662   |  |                   |   | 765,534   |                        |  |  | 17               | % |  |            | 1,012,224 |  |                        |   | 902,113   |  |  |  | 20  | %
|Senior Secured Bonds             |  |                               | 208,255   |  |                   |   | 154,226   |                        |  |  | 4                | % |  |            | 244,558   |  |                        |   | 181,200   |  |  |  | 4   | %
|Subordinated Debt                |  |                               | 405,708   |  |                   |   | 394,333   |                        |  |  | 9                | % |  |            | 411,824   |  |                        |   | 319,019   |  |  |  | 7   | %
|Collateralized Securities        |  |                               | 21,057    |  |                   |   | 22,598    |                        |  |  | 1                | % |  |            | 118,590   |  |                        |   | 113,383   |  |  |  | 2   | %
|Equity/Other                     |  |                               | 268,872   |  |                   |   | 319,057   |                        |  |  | 7                | % |  |            | 174,099   |  |                        |   | 214,953   |  |  |  | 5   | %
|                                 |  |                               |           |  |                   |   |           |                        |  |  |                  |   |  |            |           |  |                        |   |           |  |  |  |     |  
|Total                            |  | $                             | 4,523,642 |  |                   | $ | 4,401,568 |                        |  |  | 100              | % |  | $          | 4,877,385 |  |                        | $ | 4,532,875 |  |  |  | 100 | %
|                                 |  |                               |           |  |                   |   |           |                        |  |  |                  |   |  |            |           |  |                        |   |           |  |  |  |     |  



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



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The following table presents certain selected information regarding the composition of our
investment portfolio as of September 30, 2016 and December 31, 2015:



|                                                                                                        |  |                    |  |                  
|------------------------------------------------------------------------------------------------------- |  | ------------------ |  | -----------------
|                                                                                                        |  | September 30, 2016 |  | December 31, 2015
|Number of Portfolio Companies                                                                           |  | 140                |  | 165              
|% Variable Rate (based on fair value)                                                                   |  | 77.5%              |  | 79.5%            
|% Fixed Rate (based on fair value)                                                                      |  | 15.3%              |  | 15.7%            
|% Income Producing Equity or Other Investments (based on fair value)                                    |  | 0.7%               |  | 0.8%             
|% Non-Income Producing Equity or Other Investments (based on fair value)                                |  | 6.5%               |  | 4.0%             
|Average Annual EBITDA of Portfolio Companies                                                            |  | $128,400           |  | $168,700         
|Weighted Average Purchase Price of Debt Investments (as a % of par)                                     |  | 97.6%              |  | 98.0%            
|% of Investments on Non-Accrual (based on fair value)                                                   |  | 1.6%               |  | 0.0%             
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)                                       |  | 9.2%               |  | 9.6%             
|Gross Portfolio Yield Prior to Leverage (based on amortized cost)Excluding Non-Income Producing Assets |  | 9.9%               |  | 10.0%            

Direct Originations

The following tables present certain selected information regarding our direct originations for the three and nine months ended September 30, 2016:



|                                                   |  |                                              |          |   |                                             |   |          |  
|-------------------------------------------------- |  | -------------------------------------------- | -------- | - | ------------------------------------------- | - | -------- | -
|New Direct Originations                            |  | For the Three Months EndedSeptember 30, 2016 |          |   | For the Nine Months EndedSeptember 30, 2016 |  
|Total Commitments (including unfunded commitments) |  | $                                            | 362,327  |   |                                             | $ | 584,347  |  
|Exited Investments (including partial paydowns)    |  |                                              | (448,872 | ) |                                             |   | (733,485 | )
|                                                   |  |                                              |          |   |                                             |   |          |  
|Net Direct Originations                            |  | $                                            | (86,545  | ) |                                             | $ | (149,138 | )
|                                                   |  |                                              |          |   |                                             |   |          |  



|                                                                       |  |                                              |         |  |                                             |  |     |                  |  |   |            |  |  |  |     |  
|---------------------------------------------------------------------- |  | -------------------------------------------- | ------- |  | ------------------------------------------- |  | --- | ---------------- |  | - | ---------- |  |  |  | --- | -
|                                                                       |  | For the Three Months EndedSeptember 30, 2016 |         |  | For the Nine Months EndedSeptember 30, 2016 | 
|New Direct Originations by Asset Class (includingunfunded
commitments) |  | CommitmentAmount                             |         |  | Percentage                                  |  |     | CommitmentAmount |  |   | Percentage | 
|Senior Secured LoansFirst Lien                                        |  | $                                            | 262,464 |  |                                             |  | 72  | %                |  | $ | 377,802    |  |  |  | 65  | %
|Senior Secured LoansSecond Lien                                       |  |                                              | 90,625  |  |                                             |  | 25  | %                |  |   | 114,461    |  |  |  | 19  | %
|Senior Secured Bonds                                                   |  |                                              |        |  |                                             |  |    |                  |  |   | 4,467      |  |  |  | 1   | %
|Subordinated Debt                                                      |  |                                              |        |  |                                             |  |    |                  |  |   | 12,998     |  |  |  | 2   | %
|Collateralized Securities                                              |  |                                              |        |  |                                             |  |    |                  |  |   |           |  |  |  |    |  
|Equity/Other                                                           |  |                                              | 9,238   |  |                                             |  | 3   | %                |  |   | 74,619     |  |  |  | 13  | %
|                                                                       |  |                                              |         |  |                                             |  |     |                  |  |   |            |  |  |  |     |  
|Total                                                                  |  | $                                            | 362,327 |  |                                             |  | 100 | %                |  | $ | 584,347    |  |  |  | 100 | %
|                                                                       |  |                                              |         |  |                                             |  |     |                  |  |   |            |  |  |  |     |  



|                                                                                                                                                        |  |                                              |  |                                            
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------- |  | -------------------------------------------
|                                                                                                                                                        |  | For the Three Months EndedSeptember 30, 2016 |  | For the Nine Months EndedSeptember 30, 2016
|Average New Direct Origination Commitment Amount                                                                                                        |  | $51,761                                      |  | $26,561                                    
|Weighted Average Maturity for New Direct Originations                                                                                                   |  | 12/7/21                                      |  | 8/28/21                                    
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations funded during Period                                       |  | 11.3%                                        |  | 10.0%                                      
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of New Direct Originations funded during PeriodExcluding
Non-Income Producing Assets |  | 11.6%                                        |  | 11.5%                                      
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period                                           |  | 10.0%                                        |  | 9.7%                                       



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The following table presents certain selected information regarding our direct originations
as of September 30, 2016 and December 31, 2015:



|                                                                                                                                      |  |                    |        |  |                   |   |        | 
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------ |  | ----------------- | - | ------ | 
|Characteristics of All Direct Originations Held in Portfolio                                                                          |  | September 30, 2016 |        |  | December 31, 2015 |  
|Number of Portfolio Companies                                                                                                         |  |                    | 65     |  |                   |   | 69     | 
|Average Annual EBITDA of Portfolio Companies                                                                                          |  | $                  | 69,200 |  |                   | $ | 70,300 | 
|Average Leverage Through Tranche of Portfolio CompaniesExcluding Equity/Other and Collateralized Securities                          |  |                    | 5.1x   |  |                   |   | 4.7x   | 
|% of Investments on Non-Accrual (based on fair value)                                                                                 |  |                    | 1.9%   |  |                   |   |       | 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations                                       |  |                    | 9.2%   |  |                   |   | 9.6%   | 
|Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct OriginationsExcluding Non-Income
Producing Assets |  |                    | 10.0%  |  |                   |   | 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 September 30, 2016 and December 31, 2015:



|                                  |  |                    |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|--------------------------------- |  | ------------------ | --------- |  | ----------------------- |  | --- | ---------- |  | - | ----------------------- |  |  |  | --- | -
|                                  |  | September 30, 2016 |           |  | December 31, 2015       | 
|Portfolio Composition by Strategy |  | Fair Value         |           |  | Percentage 
ofPortfolio |  |     | Fair Value |  |   | Percentage 
ofPortfolio | 
|Direct Originations               |  | $                  | 3,498,218 |  |                         |  | 80  | %          |  | $ | 3,568,330               |  |  |  | 79  | %
|Opportunistic                     |  |                    | 619,892   |  |                         |  | 14  | %          |  |   | 587,065                 |  |  |  | 13  | %
|Broadly Syndicated/Other          |  |                    | 283,458   |  |                         |  | 6   | %          |  |   | 377,480                 |  |  |  | 8   | %
|                                  |  |                    |           |  |                         |  |     |            |  |   |                         |  |  |  |     |  
|Total                             |  | $                  | 4,401,568 |  |                         |  | 100 | %          |  | $ | 4,532,875               |  |  |  | 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 September 30, 2016 and December 31, 2015:



|                                               |  |                               |           |  |                         |  |     |           |  |   |                         |  |  |  |     |  
|---------------------------------------------- |  | ----------------------------- | --------- |  | ----------------------- |  | --- | --------- |  | - | ----------------------- |  |  |  | --- | -
|                                               |  | September 30, 2016(Unaudited) |           |  | December 31, 2015       | 
|Industry Classification                        |  | FairValue                     |           |  | Percentageof 
Portfolio |  |     | FairValue |  |   | Percentageof 
Portfolio | 
|Automobiles & Components                       |  | $                             | 197,794   |  |                         |  | 4   | %         |  | $ | 234,923                 |  |  |  | 5   | %
|Capital Goods                                  |  |                               | 432,561   |  |                         |  | 10  | %         |  |   | 474,141                 |  |  |  | 11  | %
|Commercial & Professional Services             |  |                               | 382,155   |  |                         |  | 9   | %         |  |   | 335,256                 |  |  |  | 7   | %
|Consumer Durables & Apparel                    |  |                               | 349,317   |  |                         |  | 8   | %         |  |   | 351,431                 |  |  |  | 8   | %
|Consumer Services                              |  |                               | 572,761   |  |                         |  | 13  | %         |  |   | 470,309                 |  |  |  | 10  | %
|Diversified Financials                         |  |                               | 208,265   |  |                         |  | 5   | %         |  |   | 275,053                 |  |  |  | 6   | %
|Energy                                         |  |                               | 736,092   |  |                         |  | 17  | %         |  |   | 624,508                 |  |  |  | 14  | %
|Food & Staples Retailing                       |  |                               | 6,524     |  |                         |  | 0   | %         |  |   | 7,566                   |  |  |  | 0   | %
|Food, Beverage & Tobacco                       |  |                               |          |  |                         |  |    |           |  |   | 4,310                   |  |  |  | 0   | %
|Health Care Equipment & Services               |  |                               | 76,846    |  |                         |  | 2   | %         |  |   | 98,425                  |  |  |  | 2   | %
|Insurance                                      |  |                               | 83,917    |  |                         |  | 2   | %         |  |   | 83,488                  |  |  |  | 2   | %
|Materials                                      |  |                               | 317,390   |  |                         |  | 7   | %         |  |   | 337,665                 |  |  |  | 7   | %
|Media                                          |  |                               | 147,970   |  |                         |  | 3   | %         |  |   | 102,906                 |  |  |  | 2   | %
|Pharmaceuticals, Biotechnology & Life Sciences |  |                               | 2,372     |  |                         |  | 0   | %         |  |   | 2,659                   |  |  |  | 0   | %
|Real Estate                                    |  |                               |          |  |                         |  |    |           |  |   | 1,707                   |  |  |  | 0   | %
|Retailing                                      |  |                               | 48,977    |  |                         |  | 1   | %         |  |   | 113,654                 |  |  |  | 3   | %
|Semiconductors & Semiconductor Equipment       |  |                               | 15,373    |  |                         |  | 0   | %         |  |   | 15,397                  |  |  |  | 0   | %
|Software & Services                            |  |                               | 437,277   |  |                         |  | 10  | %         |  |   | 490,803                 |  |  |  | 11  | %
|Technology Hardware & Equipment                |  |                               | 109,916   |  |                         |  | 2   | %         |  |   | 234,989                 |  |  |  | 5   | %
|Telecommunication Services                     |  |                               | 159,795   |  |                         |  | 4   | %         |  |   | 158,383                 |  |  |  | 4   | %
|Transportation                                 |  |                               | 116,266   |  |                         |  | 3   | %         |  |   | 115,302                 |  |  |  | 3   | %
|                                               |  |                               |           |  |                         |  |     |           |  |   |                         |  |  |  |     |  
|Total                                          |  | $                             | 4,401,568 |  |                         |  | 100 | %         |  | $ | 4,532,875               |  |  |  | 100 | %
|                                               |  |                               |           |  |                         |  |     |           |  |   |                         |  |  |  |     |  

As of September 30, 2016, except for ASG Technologies Group, Inc. (formerly Allen Systems Group,
Inc.), in which we held two senior secured loans and two equity/other investments, and JW Aluminum Co., in which we held a senior secured loan and two equity/other investments, we were not an affiliated person of any of our portfolio
companies, as defined in the 1940 Act. As of September 30, 2016, we did not control any of our portfolio companies, as defined in the 1940 Act.

As of December 31, 2015, except for Allen Systems Group, Inc., in which we held a senior secured loan and an equity/other investment, and JW Aluminum Co., in which we held a senior secured loan and
two equity/other investments, we were not an affiliated person of any of our portfolio companies, as defined in the 1940 Act. As of December 31, 2015, we did not control any of our portfolio companies, as defined in the 1940
Act.

In general, under the 1940 Act, we would be presumed to control a portfolio company if we owned more than
25% 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 and other unfunded arrangements that are in the form of lines of credit, revolving
credit facilities, delayed draw credit facilities or other investments, pursuant to which we may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of September 30,
2016, we had eighteen senior secured loan investments with aggregate unfunded commitments of $172,348. As of December 31, 2015, we had eighteen senior secured loan investments with aggregate unfunded commitments of $203,409, one senior secured
bond investment with an



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unfunded commitment of $3,638 and two unfunded commitments to purchase up to $467 and $246, respectively, in shares of preferred stock of Altus Power America Holdings, LLC and common equity of
Sunnova Holdings, LLC. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise. For additional details regarding our unfunded debt investments, see our unaudited
consolidated schedule of investments as of September 30, 2016 and audited consolidated schedule of investments as of December 31, 2015.

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 September 30, 2016 and December 31, 2015:



|                  |  |                    |           |  |                         |  |     |           |  |   |                         |  |  |  |     |  
|----------------- |  | ------------------ | --------- |  | ----------------------- |  | --- | --------- |  | - | ----------------------- |  |  |  | --- | -
|                  |  | September 30, 2016 |           |  | December 31, 2015       | 
|Investment Rating |  | FairValue          |           |  | Percentage 
ofPortfolio |  |     | FairValue |  |   | Percentage 
ofPortfolio | 
|1                 |  | $                  | 439,142   |  |                         |  | 10  | %         |  | $ | 291,690                 |  |  |  | 6   | %
|2                 |  |                    | 3,067,646 |  |                         |  | 70  | %         |  |   | 3,301,347               |  |  |  | 73  | %
|3                 |  |                    | 779,463   |  |                         |  | 18  | %         |  |   | 798,045                 |  |  |  | 18  | %
|4                 |  |                    | 30,239    |  |                         |  | 0   | %         |  |   | 122,185                 |  |  |  | 3   | %
|5                 |  |                    | 85,078    |  |                         |  | 2   | %         |  |   | 19,608                  |  |  |  | 0   | %
|                  |  |                    |           |  |                         |  |     |           |  |   |                         |  |  |  |     |  
|Total             |  | $                  | 4,401,568 |  |                         |  | 100 | %         |  | $ | 4,532,875               |  |  |  | 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 September 30, 2016 and 2015

Revenues

We generated investment income of $119,066 and $122,227 for the three months ended September 30, 2016 and 2015,
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



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distributions earned on equity/other investments in our portfolio. Such revenues represent $108,231 and $116,171 of cash income earned as well as $10,835 and $6,056 in non-cash portions relating
to accretion of discount and PIK interest for the three months ended September 30, 2016 and 2015, 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.

During the three months ended September 30, 2016 and 2015, we generated $110,541 and $117,764, respectively, of interest
income, which represented 92.8% and 96.3%, respectively, of total investment income. 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.

During the three months ended September 30, 2016 and 2015, we generated $8,525 and $4,463, respectively, of fee income, which represented
7.2% and 3.7%, respectively, of total investment income. Fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and other non-recurring fees. As such, fee income is generally
dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.

The decrease in interest income and the increase in fee income during the three months ended September 30, 2016 compared to the three months ended September 30, 2015 was primarily due to the prepayment
and refinancing of several large investments during the three months ended September 30, 2016.

During the three months ended
September 30, 2016 and 2015, we did not generate any dividend income.

Expenses

Our net operating expenses were $56,844 and $57,822 for the three months ended September 30, 2016 and 2015, respectively. Our operating
expenses include base management fees attributed to FSIC II Advisor of $21,555 and $22,213, net of waivers by FSIC II Advisor of base management fees to which it was otherwise entitled of $3,080 and $3,174, for the three months ended September 30,
2016 and 2015, respectively. Our operating expenses also include administrative services expenses attributed to FSIC II Advisor of $1,039 and $992 for the three months ended September 30, 2016 and 2015, respectively.

FSIC II Advisor is eligible to receive incentive fees based on our performance. During the three months ended September 30, 2016 and
2015, we accrued a subordinated incentive fee on income of $14,252 and $16,102, respectively. During the three months ended September 30, 2016 and 2015, we did not accrue any capital gains incentive fees. See Critical Accounting
PoliciesCapital Gains Incentive Fee for additional information about how the incentive fees are calculated.

We
recorded interest expense of $17,668 and $16,035 for the three months ended September 30, 2016 and 2015, respectively, in connection with our financing arrangements. For the three months ended September 30, 2016 and 2015, fees and expenses incurred
with our fund administrator, which provides various accounting and administrative services to us, totaled $368 and $402, respectively, and fees and expenses incurred with our stock transfer agent totaled $506 and $464, respectively. Fees for our
board of directors were $290 and $324 for the three months ended September 30, 2016 and 2015, respectively.



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Our other general and administrative expenses totaled $1,166 and $1,290 for the three months
ended September 30, 2016 and 2015, respectively, and consisted of the following:



|                                                                |  |                                 |       |  |      |   |       | 
|--------------------------------------------------------------- |  | ------------------------------- | ----- |  | ---- | - | ----- | 
|                                                                |  | Three Months EndedSeptember 30, |      
|                                                                |  | 2016                            |       |  | 2015 |  
|Expenses associated with our independent audit and related fees |  | $                               | 89    |  |      | $ | 110   | 
|Legal fees                                                      |  |                                 | 157   |  |      |   | 205   | 
|Printing fees                                                   |  |                                 | 387   |  |      |   | 428   | 
|Other                                                           |  |                                 | 533   |  |      |   | 547   | 
|                                                                |  |                                 |       |  |      |   |       | 
|Total                                                           |  | $                               | 1,166 |  |      | $ | 1,290 | 
|                                                                |  |                                 |       |  |      |   |       | 

During the three months ended September 30, 2016 and 2015, the ratio of our net expenses to our average
net assets was 2.04% and 1.98%, respectively. During the three months ended September 30, 2016 and 2015, the ratio of our net expenses to average net assets included $17,668 and $16,035, respectively, related to interest expense and $14,252 and
$16,102, respectively, related to accruals of incentive fees. Without such expenses, our ratio of net expenses to average net assets would have been 0.89% and 0.88% for the three months ended September 30, 2016 and 2015, 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 $62,222 ($0.19 per share) and $64,405 ($0.20 per share) for the three months ended September 30, 2016
and 2015, respectively. The decrease in net investment income can primarily be attributed to the prepayment and refinancing of several large investments during the three months ended September 30, 2016.

Net Realized Gains or Losses

We sold investments and received principal repayments of $343,884 and $250,192, respectively, during the three months ended September 30, 2016, from which we realized a net loss of $40,479. During the
three months ended September 30, 2016, we also realized a net loss of $5 from settlements on foreign currency. We sold investments and received principal repayments of $185,797 and $76,607, respectively, during the three months ended September 30,
2015, from which we realized a net loss of $4,565. During the three months ended September 30, 2015, we also realized a net loss of $7 from settlements on foreign currency.

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

For the three months ended September 30, 2016, the net change in unrealized appreciation (depreciation) on investments totaled $136,227,
the net change in unrealized appreciation (depreciation) on the secured borrowing was $(94) and the net change in unrealized gain (loss) on foreign currency was $0. For the three months ended September 30, 2015, the net change in unrealized
appreciation (depreciation) on investments totaled $(122,439) and the net change in unrealized gain (loss) on foreign currency was $(113). The net change in unrealized appreciation (depreciation) on our investments during the three months ended
September 30, 2016 was primarily driven by improvement in the high yield markets, a general tightening of credit spreads and an increase in the valuation of the Caesars Entertainment Operating Co., Inc. loans following positive developments in
restructuring efforts concerning these loans.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended September 30, 2016 and 2015, the net increase (decrease) in net assets resulting from operations was $157,871
($0.49 per share) and $(62,719) ($(0.20) per share), respectively.



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Comparison of the Nine Months Ended September 30, 2016 and 2015

Revenues

We generated
investment income of $360,267 and $405,797 for the nine months ended September 30, 2016 and 2015, 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 $333,501 and $386,886 of cash income earned as well as $26,766 and $18,911 in non-cash
portions relating to accretion of discount and PIK interest for the nine months ended September 30, 2016 and 2015, 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.

During the nine months ended September 30, 2016 and 2015, we generated $340,179 and $354,810,
respectively, of interest income, which represented 94.4% and 87.5%, respectively, of total investment income. 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.

During the nine months ended September 30, 2016 and 2015, we generated $20,088 and $45,183, respectively, of fee income, which
represented 5.6% and 11.1%, respectively, of total investment income. Fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and other non-recurring fees. As such, fee income is
generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.

The decrease in interest and fee income in the aggregate during the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015 was primarily due to reduced leverage,
prepayments of higher-yielding assets and increased equity holdings as a result of restructurings during the nine months ended September 30, 2016.

During the nine months ended September 30, 2016 and 2015, we generated $0 and $5,804, respectively, of dividend income, which represented 0.0% and 1.4%, respectively, of total investment income.

Expenses

Our net operating expenses were $171,711 and $180,168 for the nine months ended September 30, 2016 and 2015, respectively. Our operating
expenses include base management fees attributed to FSIC II Advisor of $63,865 and $67,651, net of waivers by FSIC II Advisor of base management fees to which it was otherwise entitled of $9,124 and $7,176, for the nine months ended September 30,
2016 and 2015, respectively. Our operating expenses also include administrative services expenses attributed to FSIC II Advisor of $3,096 and $3,208 for the nine months ended September 30, 2016 and 2015, respectively.

FSIC II Advisor is eligible to receive incentive fees based on our performance. During the nine months ended September 30, 2016 and 2015,
we accrued a subordinated incentive fee on income of $45,836 and $56,410, respectively. During the nine months ended September 30, 2016 and 2015, we did not accrue any capital gains incentive fees. See Critical Accounting
PoliciesCapital Gains Incentive Fee for additional information about how the incentive fees are calculated.

We
recorded interest expense of $51,827 and $45,740 for the nine months ended September 30, 2016 and 2015, respectively, in connection with our financing arrangements. For the nine months ended September 30, 2016 and 2015, fees and expenses incurred
with our fund administrator, which provides various accounting and administrative services to us, totaled $1,069 and $1,258, respectively, and fees and expenses incurred with our stock transfer agent totaled $1,549 and $1,482, respectively. Fees for
our board of directors were $835 and $736 for the nine months ended September 30, 2016 and 2015, respectively.



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Our other general and administrative expenses totaled $3,634 and $3,683 for the nine months
ended September 30, 2016 and 2015, respectively, and consisted of the following:



|                                                                |  |                                |       |  |      |   |       | 
|--------------------------------------------------------------- |  | ------------------------------ | ----- |  | ---- | - | ----- | 
|                                                                |  | Nine Months EndedSeptember 30, |      
|                                                                |  | 2016                           |       |  | 2015 |  
|Expenses associated with our independent audit and related fees |  | $                              | 309   |  |      | $ | 329   | 
|Compensation of our chief compliance officer(1)                 |  |                                |      |  |      |   | 30    | 
|Legal fees                                                      |  |                                | 432   |  |      |   | 606   | 
|Printing fees                                                   |  |                                | 1,281 |  |      |   | 975   | 
|Other                                                           |  |                                | 1,612 |  |      |   | 1,743 | 
|                                                                |  |                                |       |  |      |   |       | 
|Total                                                           |  | $                              | 3,634 |  |      | $ | 3,683 | 
|                                                                |  |                                |       |  |      |   |       | 



|(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 FS Investments and does not receive any direct compensation from us in this capacity.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the nine months ended September 30, 2016 and 2015, the ratio of our net expenses to our average net assets was 6.34% and 6.15%,
respectively. During the nine months ended September 30, 2016 and 2015, the ratio of our net expenses to average net assets included $51,827 and $45,740, respectively, related to interest expense and $45,836 and $56,410, respectively, related to
accruals of incentive fees. Without such expenses, our ratio of net expenses to average net assets would have been 2.73% and 2.66% for the nine months ended September 30, 2016 and 2015, 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 $188,556 ($0.58 per share) and $225,629 ($0.71 per share) for the nine months ended September 30, 2016
and 2015, respectively. The decrease in net investment income can be attributed to the prepayment of several large investments and receipt of dividend income during the nine months ended September 30, 2015.

Net Realized Gains or Losses

We sold investments and received principal repayments of $511,389 and $592,768, respectively, during the nine months ended September 30, 2016, from which we realized a net loss of $87,300. During the nine
months ended September 30, 2016, we also realized a net loss of $2 from settlements on foreign currency. We sold investments and received principal repayments of $642,715 and $451,386, respectively, during the nine months ended September 30, 2015,
from which we realized a net loss of $16,261. During the nine months ended September 30, 2015, we also realized net losses of $19,588 and $301, respectively, on our credit default swaps and from settlements on foreign currency.

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

For the nine months ended September 30, 2016, the net change in unrealized appreciation (depreciation) on
investments totaled $222,436, the net change in unrealized appreciation (depreciation) on the secured borrowing was $(94) and the net change in unrealized gain (loss) on foreign currency was $0. For the nine months ended September 30, 2015, the net
change in unrealized appreciation (depreciation) on investments totaled $(153,403), the net change in unrealized gain (loss) on foreign currency was $7 and the net change in unrealized appreciation (depreciation) on our credit default swaps was
$19,426. The net change in unrealized appreciation (depreciation)



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on our investments during the nine months ended September 30, 2016 was primarily driven by improvement in the high yield markets, a general tightening of credit spreads and improvements with
respect to certain of our energy investments.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the nine months ended September 30, 2016 and 2015, the net increase (decrease) in net assets resulting from operations was $323,596
($1.00 per share) and $55,509 ($0.18 per share), respectively.

Financial Condition, Liquidity and Capital Resources

Overview

As of
September 30, 2016, we had $428,036 in cash, which we and our wholly-owned financing subsidiaries held in custodial accounts, and $282,121 in borrowings available under our financing arrangements, subject to borrowing base and other
limitations. As of September 30, 2016, we had eighteen senior secured loan investments with aggregate unfunded commitments of $172,348. We maintain sufficient cash on hand, available borrowings and liquid securities 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 as well as from the issuance of shares under our distribution reinvestment plan, and principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage 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 received 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 nine months ended September 30,
2016 was $106,401 for which we issued 12,541,507 shares of common stock. During the period from October 1, 2016 to November 2, 2016, we issued 1,192,639 shares of common stock pursuant to our distribution reinvestment plan at an average
price per share of $8.85 for gross proceeds of $10,555.

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.



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The following table provides information concerning our repurchases of shares of common
stock pursuant to our share repurchase program during the nine months ended September 30, 2016 and 2015:



|                           |  |                 |                 |  |                   |  |           |                                                    |  |  |                                                                  |   |  |                           |      |   |                                             |   |       |  |  |   |        | 
|-------------------------- |  | --------------- | --------------- |  | ----------------- |  | --------- | -------------------------------------------------- |  |  | ---------------------------------------------------------------- | - |  | ------------------------- | ---- | - | ------------------------------------------- | - | ----- |  |  | - | ------ | 
|For the Three Months Ended |  | Repurchase Date |                 |  | SharesRepurchased |  |           | Percentageof Shares Tendered That Were Repurchased |  |  | Percentage ofOutstandingSharesRepurchasedas of
theRepurchaseDate |   |  | RepurchasePrice Per Share |      |   | AggregateConsiderationfor RepurchasedShares |  
|Fiscal 2015                |  |                 |                 |  |                   |  |           |                                                    |  |  |                                                                  |   |  |                           |      |   |                                             |   |       |  |  |   |        | 
|December 31, 2014          |  |                 | January 2, 2015 |  |                   |  | 578,569   |                                                    |  |  | 100                                                              | % |  |                           | 0.18 | % |                                             | $ | 9.500 |  |  | $ | 5,496  | 
|March 31, 2015             |  |                 | April 1, 2015   |  |                   |  | 885,509   |                                                    |  |  | 100                                                              | % |  |                           | 0.28 | % |                                             | $ | 9.450 |  |  | $ | 8,368  | 
|June 30, 2015              |  |                 | July 1, 2015    |  |                   |  | 997,845   |                                                    |  |  | 100                                                              | % |  |                           | 0.31 | % |                                             | $ | 9.450 |  |  | $ | 9,430  | 
|Fiscal 2016                |  |                 |                 |  |                   |  |           |                                                    |  |  |                                                                  |   |  |                           |      |   |                                             |   |       |  |  |   |        | 
|December 31, 2015          |  |                 | January 4, 2016 |  |                   |  | 1,779,357 |                                                    |  |  | 100                                                              | % |  |                           | 0.55 | % |                                             | $ | 8.550 |  |  | $ | 15,214 | 
|March 31, 2016             |  |                 | April 1, 2016   |  |                   |  | 2,715,325 |                                                    |  |  | 100                                                              | % |  |                           | 0.84 | % |                                             | $ | 8.300 |  |  | $ | 22,537 | 
|June 30, 2016              |  |                 | July 1, 2016    |  |                   |  | 2,874,151 |                                                    |  |  | 100                                                              | % |  |                           | 0.88 | % |                                             | $ | 8.550 |  |  | $ | 24,574 | 

On October 1, 2016, we repurchased 3,329,647 shares of common stock (representing 100% of the shares of
the common stock tendered for repurchase and 1.02% of the shares outstanding as of such date) at $8.85 per share for aggregate consideration totaling $29,467.

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

Financing Arrangements

Below is a summary of our outstanding financing
arrangements as of September 30, 2016:



|                                  |  |                           |  |                      |  |                   |         |  |                 |   |         |              |  |                  
|--------------------------------- |  | ------------------------- |  | -------------------- |  | ----------------- | ------- |  | --------------- | - | ------- | ------------ |  | -----------------
|Arrangement                       |  | Type of Arrangement       |  | Rate                 |  | AmountOutstanding |         |  | AmountAvailable |   |         | MaturityDate
|JPM Facility(1)                   |  | Repurchase Agreement      |  | 3.25%                |  | $                 | 550,000 |  |                 | $ |        |              |  | May 20, 2017     
|Goldman Facility                  |  | Repurchase Agreement      |  | L+2.50%              |  | $                 | 400,000 |  |                 | $ |        |              |  | December 15, 2018
|Cooper River Credit Facility      |  | Revolving Credit Facility |  | L+2.25%              |  | $                 | 158,533 |  |                 | $ | 41,467  |              |  | May 29, 2020     
|Wissahickon Creek Credit Facility |  | Revolving Credit Facility |  | L+1.50% to L+2.50%   |  | $                 | 225,146 |  |                 | $ | 24,854  |              |  | February 19, 2019
|Darby Creek Credit Facility(2)    |  | Revolving Credit Facility |  | L+2.50%              |  | $                 | 210,000 |  |                 | $ | 40,000  |              |  | August 19, 2020  
|Dunning Creek Credit Facility     |  | Revolving Credit Facility |  | L+1.70%              |  | $                 | 94,200  |  |                 | $ | 55,800  |              |  | May 14, 2017     
|Juniata River Credit Facility(1)  |  | Term Loan Credit Facility |  | L+2.50%              |  | $                 | 300,000 |  |                 | $ |        |              |  | November 14, 2019
|FSIC II Revolving Credit Facility |  | Revolving Credit Facility |  | L+1.75%              |  | $                 |        |  |                 | $ | 120,000 |              |  | February 23, 2021
|Partial Loan Sale                 |  | Secured Borrowing         |  | L+4.50% (1.0% floor) |  | $                 | 8,214   |  |                 | $ |        |              |  | July 29, 2022    



|(1) | On October 11, 2016, Lehigh River and Cobbs Creek entered into amendments to the JPM facility which, among other things, resulted in (a) the prepayment and termination
of the JPM facility; and (b) the merger of Lehigh River into Juniata River. In addition, in connection with the foregoing transactions, Juniata River entered into amendments to the Juniata River facility which, among other things, (i) provided for
an immediate upsize of $550,000, resulting in a total facility amount of $850,000, (ii) extended the maturity date of the facility to October 11, 2020 and (iii) increased the margin payable of borrowing to 2.6833% over the three-month LIBOR.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | On August 19, 2016, the Darby Creek Credit Facility was amended to extend (a) the end of the revolving period from August 20, 2016 to February 19, 2019 and (b) the
maturity date from February 20, 2018 to August 19, 2020.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our average borrowings and weighted average interest
rate, including the effect of non-usage fees, for the nine months ended September 30, 2016 were $2,070,641 and 3.13%, respectively. As of September 30, 2016, our weighted average effective interest rate on borrowings, including the effect of
non-usage fees, was 3.20%.

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



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RIC Status and Distributions

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

The following table reflects the cash distributions per share that we have declared and paid on our common stock during the
nine months ended September 30, 2016 and 2015:



|                           |  |              |        |  |        |   |        | 
|-------------------------- |  | ------------ | ------ |  | ------ | - | ------ | 
|                           |  | Distribution |       
|For the Three Months Ended |  | Per Share    |        |  | Amount |  
|Fiscal 2015                |  |              |        |  |        |   |        | 
|March 31, 2015             |  | $            | 0.1885 |  |        | $ | 59,177 | 
|June 30, 2015              |  | $            | 0.1885 |  |        | $ | 59,567 | 
|September 30, 2015         |  | $            | 0.1885 |  |        | $ | 60,023 | 
|Fiscal 2016                |  |              |        |  |        |   |        | 
|March 31, 2016             |  | $            | 0.1885 |  |        | $ | 60,744 | 
|June 30, 2016              |  | $            | 0.1885 |  |        | $ | 60,976 | 
|September 30, 2016         |  | $            | 0.1885 |  |        | $ | 61,155 | 

On August 3, 2016 and November 3, 2016, our board of directors declared regular monthly cash
distributions for October 2016 through December 2016 and January 2017 through March 2017, respectively, each 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 our board of directors.



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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.

Under our distribution reinvestment 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 FS Investments 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
statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our stockholders.

Pursuant to
the expense reimbursement agreement, FS Investments 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 FS Investments 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 nine months ended September 30, 2016 and 2015 was funded through the reimbursement of operating expenses by FS Investments. 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. FS Investments and its affiliates have no obligation to waive advisory fees or otherwise reimburse expenses in future periods.



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The following table reflects the sources of the cash distributions on a tax basis that we
have paid on our common stock during the nine months ended September 30, 2016 and 2015:



|                                                          |  |                                 |         |  |            |  |     |                    |  |   |            |  |  |  |     |  
|--------------------------------------------------------- |  | ------------------------------- | ------- |  | ---------- |  | --- | ------------------ |  | - | ---------- |  |  |  | --- | -
|                                                          |  | Nine Months Ended September 30, |        
|                                                          |  | 2016                            |         |  | 2015       | 
|Source of Distribution                                    |  | DistributionAmount              |         |  | Percentage |  |     | DistributionAmount |  |   | Percentage | 
|Offering proceeds                                         |  | $                               |        |  |            |  |    |                    |  | $ |           |  |  |  |    |  
|Borrowings                                                |  |                                 |        |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Net investment income(1)                                  |  |                                 | 176,987 |  |            |  | 97  | %                  |  |   | 178,767    |  |  |  | 100 | %
|Short-term capital gains proceeds from the sale of assets |  |                                 |        |  |            |  |    |                    |  |   |           |  |  |  |    |  
|Long-term capital gains proceeds from the sale of assets  |  |                                 | 5,888   |  |            |  | 3   | %                  |  |   |           |  |  |  |    |  
|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                                                     |  | $                               | 182,875 |  |            |  | 100 | %                  |  | $ | 178,767    |  |  |  | 100 | %
|                                                          |  |                                 |         |  |            |  |     |                    |  |   |            |  |  |  |     |  



|(1) | During the nine months ended September 30, 2016 and 2015, 92.6% and 95.3%, respectively, of our gross investment income was attributable to cash income earned, 2.5% and
2.6%, respectively, was attributable to non-cash accretion of discount and 4.9% and 2.1%, respectively, was attributable to PIK interest.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our net investment income on a tax basis for the nine months ended September 30, 2016 and 2015 was $186,883 and $192,192, respectively. As of September 30, 2016, we had $55,989 of undistributed net
investment income, $0 of distributable realized gains and $78,819 of capital loss carryover on a tax basis. As of December 31, 2015, we had $51,981 of undistributed net investment income and realized capital gains on a tax basis.

See Note 5 to our unaudited consolidated financial statements included herein for additional information regarding our distributions,
including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income for the nine months ended September 30, 2016 and 2015.

Critical Accounting Policies

Our financial statements are prepared in
conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
periods. Critical accounting policies are those that require the application of managements most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain
and that may change in subsequent periods. In preparing the financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other
factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results
of operations to those of companies in similar businesses. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.

Valuation of Portfolio Investments

We determine the net asset value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of directors. In connection with that determination,
FSIC II Advisor



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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 independent third-party valuation services.

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

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



| |  |  | our quarterly fair valuation process begins with FSIC II Advisors management team reviewing and documenting valuations of each portfolio company
or investment, which valuations may be obtained from an independent third-party valuation service, if applicable;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | FSIC II Advisors management team then provides the valuation committee with the preliminary valuations for each portfolio company or investment;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | preliminary valuations are then discussed with the valuation committee;
| | - |  | -----------------------------------------------------------------------



| |  |  | the valuation committee reviews the preliminary valuations and FSIC II Advisors management team, together with our independent third-party
valuation services, if applicable, supplement the preliminary valuations to reflect any comments provided by the valuation committee;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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

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



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considered include the borrowers ability to adequately service its debt, the fair market value of the borrower 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 (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.

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

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

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

The fair values of our investments are determined in good faith by our board of directors. Our
board of directors is 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 board of directors has delegated
day-to-day responsibility for implementing our valuation policy to FSIC II Advisors management team, and has authorized FSIC II Advisors management team to utilize independent third-party valuation and pricing services that have been
approved by our board of directors. The valuation committee is responsible for overseeing FSIC II Advisors implementation of the valuation process.

Our investments as of September 30, 2016 consisted primarily of debt investments that were acquired directly from the issuer. Sixty senior secured loan investments, three senior secured bond
investments and ten subordinated debt investments, 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 our 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 EBITDA, cash flows, net income, revenues, or in limited instances, book value or liquidation value. Three equity/other investments, which were traded on an active public market, were valued at their respective closing prices as of
September 30, 2016.



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Except as described above, we valued our other investments, including five 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, 2015 consisted primarily of debt investments that were acquired directly from the issuer. Fifty-five senior secured loan investments, three senior secured bond
investments, eight 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 our 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 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
December 31, 2015. Two senior secured loan investments, which were newly-issued and purchased near December 31, 2015, were valued at cost, as our board of directors determined that the cost of such investments was the best indication of
its fair value. Except as described above, we valued our 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
third-party pricing services or independent dealers, or where our board of directors otherwise determines that the use of such 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. The valuation committee and our board of directors reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with our valuation
policy.

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. Our policy is to place investments on non-accrual status when there is reasonable doubt that interest
income will be collected. We consider many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the
overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that we will receive any
previously accrued interest, then the interest income will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest.
Non-accrual investments may be restored to accrual status when principal and interest become current and are likely to remain current based on our judgment.

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
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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.

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

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

We follow the guidance in ASC Topic 860 when accounting for loan participations and other partial loan sales. This guidance requires a
participation or other partial loan sale to meet the definition of a participating interest, as defined in the guidance, in order for sale treatment to be allowed. Participations or other partial loan sales which do not meet the definition of a
participating interest remain on our consolidated balance sheets and the proceeds are recorded as a secured borrowing until the participation or other partial loan sale meets the definition. Secured borrowings are carried at fair value to correspond
with the related investments, which are carried at fair value.

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 American Institute of Certified Public Accountants 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%. For purposes of this fee,
adjusted capital means cumulative gross proceeds generated from sales of our common stock (including proceeds from our distribution reinvestment plan) reduced for distributions paid to stockholders from proceeds of non-liquidating
dispositions of our investments and



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amounts paid for share repurchases pursuant to our share repurchase program. 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 interest and penalties, if any, related to unrecognized tax liabilities as income
tax expense in our consolidated statements of operations. During the nine months ended September 30, 2016 and 2015, we did not incur any interest or penalties.

Contractual Obligations

We have entered into an agreement with FSIC II
Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory and administrative services agreement are equal to (a) an annual base management fee of 2.0% of
the average value of our gross assets and (b) an incentive fee based on our performance. FSIC II Advisor and, to the extent it is required to provide such services, GDFM, are reimbursed for administrative expenses incurred on our behalf. 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 and administrative services agreement so that the fee received equals 1.75% of the average
value of our gross assets. See Note 4 to our unaudited consolidated financial statements included herein and Related Party TransactionsCompensation of the Investment Adviser for a discussion of this agreement.

A summary of our significant contractual payment obligations related to the repayment of our outstanding indebtedness at
September 30, 2016 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)(9)                   |  | $                      | 550,000 |  |                  | $ | 550,000 |           |  |   |          |  |  |                   |        |  |  |   |      | 
|Goldman Facility(2)                  |  | $                      | 400,000 |  |                  | $ | 400,000 |           |  |   |          |  |  |                   |        |  |  |   |      | 
|Cooper River Credit Facility(3)      |  | $                      | 158,533 |  |                  |   |        |           |  |   |          |  |  | $                 | 158,533 |  |  |   |      | 
|Wissahickon Creek Credit Facility(4) |  | $                      | 225,146 |  |                  |   |        |           |  | $ | 225,146   |  |  |                   |        |  |  |   |      | 
|Darby Creek Credit Facility(5)       |  | $                      | 210,000 |  |                  |   |        |           |  |   |          |  |  | $                 | 210,000 |  |  |   |      | 
|Dunning Creek Credit Facility(6)     |  | $                      | 94,200  |  |                  | $ | 94,200  |           |  |   |          |  |  |                   |        |  |  |   |      | 
|Juniata River Credit Facility(7)(9)  |  | $                      | 300,000 |  |                  |   |        |           |  |   |          |  |  | $                 | 300,000 |  |  |   |      | 
|FSIC II Revolving Credit Facility(8) |  | $                      |        |  |                  |   |        |           |  |   |          |  |  |                   |        |  |  |   |      | 
|Partial Loan Sale(10)                |  | $                      | 8,214   |  |                  |   |        |           |  |   |          |  |  |                   |        |  |  | $ | 8,214 | 



|(1) | At September 30, 2016, no amounts remained unused under the JPM facility. See footnote 9 below.
|--- | -----------------------------------------------------------------------------------------------



|(2) | At September 30, 2016, no amounts remained unused under the Goldman facility. Amounts outstanding under the Goldman facility will mature, and all accrued and
unpaid interest thereunder will be due and payable, on December 15, 2018.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | At September 30, 2016, $41,467 remained unused under the Cooper River facility. Amounts outstanding under the Cooper River facility will mature, and all accrued
and unpaid interest thereunder will be due and payable, on May 29, 2020.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(4) | At September 30, 2016, $24,854 remained unused under the Wissahickon Creek facility. Amounts outstanding 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 September 30, 2016, $40,000 remained unused under the Darby Creek facility. Amounts outstanding under the Darby Creek facility will mature, and all accrued and
unpaid interest thereunder will be due and payable, on August 19, 2020.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | At September 30, 2016, $55,800 remained unused under the Dunning Creek facility. Amounts outstanding under the Dunning Creek facility will mature, and all accrued
and unpaid interest thereunder will be due and payable, on May 14, 2017.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | At September 30, 2016, no amounts remained unused under the Juniata River facility. Amounts outstanding under the Juniata River facility will mature, and all
accrued and unpaid interest thereunder will be due and payable, on November 14, 2019.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | At September 30, 2016, $120,000, the full amount available remained unused under the ING facility. Amounts outstanding under the ING facility will mature, and all
accrued and unpaid interest thereunder will be due and payable, on February 23, 2021.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | On October 11, 2016, Lehigh River and Cobbs Creek entered into amendments to the JPM facility, which, among other things, resulted in (a) prepayment and termination of
the JPM facility; and (b) the merger of Lehigh River into Juniata River. In addition, in connection with the foregoing transactions, Juniata River entered into amendments to the Juniata River facility which, among other things, (i) provided for an
immediate upsize of $550,000, resulting in a total facility amount of $850,000, (ii) extended the maturity date of the facility to October 11, 2020 and (iii) increased the margin payable of borrowing to 2.6833% over the three-month LIBOR.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(10) | All amounts will mature, and all accrued and unpaid interest thereunder will be due and payable, on July 29, 2022.
|---- | ------------------------------------------------------------------------------------------------------------------

Off-Balance Sheet Arrangements

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

Related Party Transactions

Compensation of the Investment Adviser

Pursuant to the investment advisory and administrative services agreement, FSIC II Advisor is entitled to an annual base management fee of
2.0% of the average value of our gross assets and an incentive fee based on our performance. The investment sub-advisory agreement provides that GDFM will receive 50% of all management and incentive fees payable to FSIC II Advisor under the
investment advisory and administrative services agreement with respect to each year. 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 our gross assets. 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 FS Investments providing administrative services to us on behalf of FSIC II Advisor.

The following table describes the fees and expenses we accrued under the investment advisory and administrative services agreement during
the three and nine months ended September 30, 2016 and 2015:



|                |  |                                                           |  |                                         |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|--------------- |  | --------------------------------------------------------- |  | --------------------------------------- |  | ------------------------------- | ------ |  | ------------------------------ | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                |  |                                                           |  |                                         |  | Three Months EndedSeptember 30, |        |  | Nine Months EndedSeptember 30, |  
|Related Party   |  | Source Agreement                                          |  | Description                             |  | 2016                            |        |  | 2015                           |   |        | 2016 |  |   | 2015   | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Base Management Fee(1)                  |  | $                               | 21,555 |  |                                | $ | 22,213 |      |  | $ | 63,865 |  |  | $ | 67,651 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Subordinated Incentive Fee on Income(2) |  | $                               | 14,252 |  |                                | $ | 16,102 |      |  | $ | 45,836 |  |  | $ | 56,410 | 
|FSIC II Advisor |  | Investment Advisory and Administrative Services Agreement |  | Administrative Services Expenses(3)     |  | $                               | 1,039  |  |                                | $ | 992    |      |  | $ | 3,096  |  |  | $ | 3,208  | 



|(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 and administrative services agreement so that the fee received equals 1.75% of the average value of our gross
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | assets. As a result, the amounts shown for the three and nine months ended September 30, 2016 are net of waivers of $3,080 and $9,124, respectively, and the amounts shown for the three and nine
months ended September 30, 2015 are net of waivers of $3,174 and $7,176, respectively. During the nine months ended September 30, 2016 and 2015, $63,839 and $68,507, respectively, in base management fees were paid to FSIC II Advisor. As of
September 30, 2016, $21,555 in base management fees were payable to FSIC II Advisor.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | During the nine months ended September 30, 2016 and 2015, $47,838 and $55,642, respectively, of subordinated incentive fees on income were paid to FSIC II Advisor. As
of September 30, 2016, a subordinated incentive fee on income of $14,252 was payable to FSIC II Advisor.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | During the nine months ended September 30, 2016 and 2015, $2,955 and $3,030, 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 $3,327 and $3,488 in administrative services expenses to FSIC II Advisor during the nine months ended September
30, 2016 and 2015, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See Note 4 to our unaudited consolidated financial statements included herein
for additional information regarding our agreements with FSIC II Advisor, as well as our other related party transactions and relationships, including our potential conflicts of interest, our exemptive relief order from the SEC and our expense
reimbursement agreement with FS Investments.



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

(in thousands)

We are subject to financial market risks, including changes
in interest rates. As of September 30, 2016, 77.5% of our portfolio investments (based on fair value) paid variable interest rates, 15.3% paid fixed interest rates, 6.5% were non-income producing equity or other investments and the remaining
0.7% 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 threshold 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, Goldman facility, FSIC II Revolving credit facility and secured borrowing arrangement, 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.



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The following table shows the effect over a twelve month period of changes in interest rates
on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of September 30,
2016:



|                                     |  |                                        |         |   |                                      |   |         |                                          |  |   |                                         |  |  |  |      |  
|------------------------------------ |  | -------------------------------------- | ------- | - | ------------------------------------ | - | ------- | ---------------------------------------- |  | - | --------------------------------------- |  |  |  | ---- | -
|Basis Point Change in Interest Rates |  | Increase(Decrease)in InterestIncome(1) |         |   | Increase(Decrease)in InterestExpense |   |         | Increase(Decrease) 
inNet InterestIncome |  |   | PercentageChange in 
NetInterest Income | 
|Down 85 basis points                 |  | $                                      | (2,412  | ) |                                      | $ | (10,446 | )                                        |  | $ | 8,034                                   |  |  |  | 2.2  | %
|No change                            |  |                                        |        |   |                                      |   |        |                                          |  |   |                                        |  |  |  |     |  
|Up 100 basis points                  |  |                                        | 24,658  |   |                                      |   | 12,290  |                                          |  |   | 12,368                                  |  |  |  | 3.5  | %
|Up 300 basis points                  |  |                                        | 93,361  |   |                                      |   | 36,869  |                                          |  |   | 56,492                                  |  |  |  | 15.8 | %
|Up 500 basis points                  |  |                                        | 162,499 |   |                                      |   | 61,449  |                                          |  |   | 101,050                                 |  |  |  | 28.2 | %



|(1) | Assumes no defaults or prepayments by portfolio companies over the next twelve months.
|--- | --------------------------------------------------------------------------------------

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate
risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from
changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the nine months ended September 30, 2016 and 2015, 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
September 30, 2016.

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 September 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.



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PART IIOTHER INFORMATION



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

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



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

There have
been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2015.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.
|------- | ------------------------------------------------------------

The table below provides information concerning our repurchases of shares of our common stock during the three months ended September 30, 2016, 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 | 
|July 1 to July 31, 2016           |  |                                | 2,874,151 |  |                            | $ | 8.55 |                                                                              |  |  | 2,874,151                                                                  |  |  |  | (1 | )
|August 1 to August 31, 2016       |  |                                |          |  |                            |   |     |                                                                              |  |  |                                                                           |  |  |  |   |  
|September 1 to September 30, 2016 |  |                                |          |  |                            |   |     |                                                                              |  |  |                                                                           |  |  |  |   |  
|                                  |  |                                |           |  |                            |   |      |                                                                              |  |  |                                                                            |  |  |  |    |  
|Total                             |  |                                | 2,874,151 |  |                            | $ | 8.55 |                                                                              |  |  | 2,874,151                                                                  |  |  |  | (1 | )
|                                  |  |                                |           |  |                            |   |      |                                                                              |  |  |                                                                            |  |  |  |    |  



|(1) | The maximum number of shares available for repurchase on July 1, 2016 was 7,929,117. A description of the calculation of the maximum number of shares of our common
stock that may be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements included herein.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



|Item 3. | Defaults upon Senior Securities.
|------- | --------------------------------

Not applicable.



|Item 4. | Mine Safety Disclosures.
|------- | ------------------------

Not applicable.



|Item 5. | Other Information.
|------- | ------------------

None.



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|Item 6. | Exhibits.
|------- | ---------



|      |  |                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|3.1   |  | Articles of Amendment and Restatement of the Company. (Incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K filed on June 14,
2012.)                                                                                                                                                                                                                  
|      | 
|3.2   |  | Amended and Restated Bylaws of the Company. (Incorporated by reference to Exhibit (b) 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  |  | 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.)                                                                      
|      | 
|10.4  |  | 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.)                                                                                                                                                           
|      | 
|10.5  |  | 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.)                                                                                                                                      
|      | 
|10.6  |  | 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.)                                                                                                                                                                                                     
|      | 
|10.7  |  | 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.)                                                                                                                                            
|      | 
|10.8  |  | 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.)                                                                                                                                                                                                     
|      | 
|10.9  |  | 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.)                                                                                                                                                                                                       
|      | 
|10.10 |  | 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.)                                                                                                                                                          
|      | 
|10.11 |  | 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.)
|      | 
|10.12 |  | 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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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.13 |  | 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.)                                                                                                                                                                                                                                                    
|      | 
|10.14 |  | 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.)                                                                                                                                                                                                                                
|      | 
|10.15 |  | 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.)                                                                                                                                                                                                                                                     
|      | 
|10.16 |  | Amended and Restated Credit Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as borrower, Citibank, N.A., as administrative agent, Citibank, N.A. acting through
its Agency and Trust division, as collateral custodian and collateral agent, each of the lenders from time to time party thereto and Virtus Group, LP, as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Companys
Current Report on Form 8-K filed on June 4, 2015.)
|      | 
|10.17 |  | Amended and Restated Account Control Agreement, dated as of May 29, 2015, by and among Cooper River LLC, as pledgor, Citibank, N.A., as secured party, and Citibank, N.A., as
securities intermediary. (Incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed on June 4, 2015.)                                                                                                                                                                 
|      | 
|10.18 |  | 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.)                                                                                                                                                                                                                                                                   
|      | 
|10.19 |  | 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.)                                                                                                                                                                                                                       
|      | 
|10.20 |  | Amended and Restated Investment Management Agreement, dated as of May 29, 2015, by and between the Company, as investment manager, and Cooper River LLC. (Incorporated by reference
to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on June 4, 2015.)                                                                                                                                                                                                               
|      | 
|10.21 |  | 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.)                  
|      | 
|10.22 |  | 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.)                                                                                                                                                                                                                       
|      | 
|10.23 |  | 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.)                                                                                                                                                                                                                      
|      | 
|10.24 |  | 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.)                                                                                                         
|      | 
|10.25 |  | 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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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.26 |  | Amendment No. 1 to Loan Financing and Servicing Agreement, dated as of January 12, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as
administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.27 to the
Companys Annual Report on Form 10-K filed on March 25, 2016.)
|      | 
|10.27 |  | Amendment No. 2 to Loan Financing and Servicing Agreement, dated as of February 3, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as
administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.28 to the
Companys Annual Report on Form 10-K filed on March 25, 2016.)
|      | 
|10.28 |  | Amendment No. 3 to Loan Financing and Servicing Agreement, dated as of May 7, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as administrative
agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.29 to the Companys Annual
Report on Form 10-K filed on March 25, 2016.)     
|      | 
|10.29 |  | Amendment No. 4 to Loan Financing and Servicing Agreement, dated as of October 8, 2015, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as
administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.30 to the
Companys Annual Report on Form 10-K filed on March 25, 2016.) 
|      | 
|10.30 |  | Amendment No. 6 to Loan Financing and Servicing Agreement, dated as of August 19, 2016, by and among Darby Creek LLC, as borrower, Deutsche Bank AG, New York Branch, as
administrative agent, Wells Fargo Bank, National Association, as collateral agent and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on August 22, 2016.) 
|      | 
|10.31 |  | 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.)                                                                                                                                                                                                                   
|      | 
|10.32 |  | 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.)                                                                                                                                                                                                                      
|      | 
|10.33 |  | 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.)                                                                                                            
|      | 
|10.34 |  | 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.)                                                                                                                                           
|      | 
|10.35 |  | 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 10.1 to the Companys Current Report on Form 8-K filed on June 6, 2014.)                                                                                                                                                                                       
|      | 
|10.36 |  | Second Amendment to Credit Agreement, dated as of May 14, 2015, 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 10.36 to the Companys Annual Report on Form 10-K filed on March 25, 2016.)                                                                                                                    



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.37 |  | Third Amendment to Credit Agreement, dated as of May 13, 2016, 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 18, 2016.)                                             
|      | 
|10.38 |  | Amended and Restated Sale and Contribution Agreement, dated as of May 29, 2015, by and between the Company, as seller, and Cooper River LLC, as purchaser. (Incorporated by reference
to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on June 4, 2015.)                                                                                                                            
|      | 
|10.39 |  | 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.)                                              
|      | 
|10.40 |  | 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.)                                                                                                                          
|      | 
|10.41 |  | 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.)                                                                                                                                                
|      | 
|10.42 |  | 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.)                                                                                                                                                   
|      | 
|10.43 |  | 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.)                   
|      | 
|10.44 |  | Amendment No. 1 to Loan Agreement, dated as of October 11, 2016, by and among Juniata River LLC, as borrower, JPMorgan Chase Bank, National Association, as administrative agent and
lender, Citibank, N.A., as collateral agent and Virtus Group, LP as collateral administrator. (Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on October 13, 2016.)
|      | 
|10.45 |  | 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.)                                                                                                                                               
|      | 
|10.46 |  | Investment Management Agreement, dated as of November 14, 2014, between Juniata River LLC and FS Investment Corporation, as investment manager. (Incorporated by reference to Exhibit
10.53 to the Companys Annual Report on Form 10-K filed on March 18, 2015.)                                                                                                                                    
|      | 
|10.47 |  | 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.)                      
|      | 
|10.48 |  | 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.)                                                                                                                                             
|      | 
|10.49 |  | 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.)                                                                                                                                                                         
|      | 
|10.5  |  | 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.)                                                                                                                                                                                                                                    



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                   
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.51 |  | 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.)                                                                              
|      | 
|10.52 |  | 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.)                                                                                                                                                                               
|      | 
|10.53 |  | 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.)                                                                                                                                                          
|      | 
|10.54 |  | 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.)                                                                                                                                                           
|      | 
|10.55 |  | Senior Secured Revolving Credit Agreement, dated as of February 23, 2016, by and among the Company, ING Capital LLC, as administrative agent, and the lenders party thereto.
(Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on February 26, 2016.)                                                                                                                  
|      | 
|10.54 |  | Amendment No. 1 to Senior Secured Revolving Credit Agreement, dated April 25, 2016, by and among the Company, ING Capital LLC, as administrative agent, and the lenders party
thereto. (Incorporated by reference to Exhibit 10.53 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 filed on May 13, 2016.)                                                           
|      | 
|10.55 |  | Incremental Commitment and Assumption Agreement, dated April 26, 2016, by and among the Company, ING Capital LLC, as administrative agent, the lenders party thereto and the assuming
lenders party thereto. (Incorporated by reference to Exhibit 10.54 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016 filed on May 13, 2016.)                                     
|      | 
|10.56 |  | Guarantee, Pledge and Security Agreement, dated as of February 23, 2016, by and among the Company, ING Capital LLC, as revolving administrative agent and collateral agent, the
subsidiary guarantors party thereto and each financing agent and designated indebtedness holder party thereto. (Incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed on February 26, 2016.)
|      | 
|10.57 |  | Control Agreement, dated as of February 23, 2016, by and among the Company, ING Capital LLC, as collateral agent, and State Street Bank and Trust Company. (Incorporated by reference
to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on February 26, 2016.)                                                                                                                                    
|      | 
|31.1* |  | Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                                              
|      | 
|31.2* |  | Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                                              
|      | 
|32.1* |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                  



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



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this quarterly report to be signed on
its behalf by the undersigned, thereunto duly authorized on November 10, 2016.



FS INVESTMENT CORPORATION IIBy:

/s/ Michael C. FormanMichael C. Forman Chief Executive Officer (Principal Executive
Officer)By:

/s/ Michael LawsonMichael Lawson Chief Financial Officer (Principal Financial and Accounting
Officer)




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