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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

☒

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

☐

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: 814-01151

FS Investment Corporation IV

(Exact name of registrant as specified in its charter)

	Maryland			47-3258730
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
	201 Rouse Boulevard Philadelphia, Pennsylvania			19112
	(Address of principal executive offices)			(Zip Code)

(215) 495-1150

(Registrant’s telephone number, including area code)

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 ☒ 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

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

Securities registered pursuant to Section 12(b) of the Act: None

	Title of each class			Trading Symbol(s)			Name of each exchange on which registered
	N/A			N/A			N/A

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

There were 31,939,548 shares of the registrant’s Class T common stock outstanding as of November 8, 2019.

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	Page
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018		1
Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018		2
Unaudited Consolidated Statements of Changes in Net Assets for the three and nine months ended September 30, 2019 and 2018		3
Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018		4
Consolidated Schedules of Investments as of September 30, 2019 (Unaudited) and December 31, 2018		5
Notes to Unaudited Consolidated Financial Statements		16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		46
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		63
ITEM 4. CONTROLS AND PROCEDURES		64
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		65
ITEM 1A. RISK FACTORS		65
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		65
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		65
ITEM 4. MINE SAFETY DISCLOSURES		65
ITEM 5. OTHER INFORMATION		65
ITEM 6. EXHIBITS		65
SIGNATURES		69

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PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

FS Investment Corporation IV

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

	September 30, 2019 (Unaudited)			December 31, 2018
Assets
Investments, at fair value (amortized cost—$327,360 and $295,875, respectively)		$	323,647		$	288,841
Cash			11,630			16,651
Foreign currency, at fair value (cost—$259 and $114, respectively)			258			114
Due from counterparty			56,283			67,529
Receivable for investments sold and repaid			1,595			29
Income receivable			4,044			3,073
Receivable due on total return swap(1)			—			532
Unrealized appreciation on foreign currency forward contracts			121			—
Prepaid expenses and other assets			37			17
Total assets		$	397,615		$	376,786
Liabilities
Unrealized depreciation on total return swap(1)		$	4,775		$	4,689
Unrealized depreciation on foreign currency forward contracts			38			—
Payable for investments purchased			5,525			—
Payable due on total return swap(1)			80			—
Credit facility payable(1)			45,000			35,000
Stockholder distributions payable			934			933
Distribution fees payable			665			631
Management fees payable			1,497			1,357
Subordinated income incentive fees payable(2)			848			903
Administrative services expense payable			168			101
Interest payable(1)			1,492			374
Directors’ fees payable			32			91
Other accrued expenses and liabilities			907			769
Total liabilities			61,961			44,848
Commitments and contingencies(3)
Stockholders’ equity
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding			—			—
Class A common stock, $0.001 par value, 250,000,000 shares authorized, none issued and outstanding			—			—
Class D common stock, $0.001 par value, 250,000,000 shares authorized, none issued and outstanding			—			—
Class T common stock, $0.001 par value, 250,000,000 shares authorized, 31,851,789 and 31,584,470 shares issued and outstanding, respectively			32			32
Class I common stock, $0.001 par value, 350,000,000 shares authorized, none issued and outstanding			—			—
Capital in excess of par value			345,033			342,137
Retained earnings (accumulated deficit)			(9,411)			(10,231)
Total stockholders’ equity			335,654			331,938
Total liabilities and stockholders’ equity		$	397,615		$	376,786
Net asset value per share of common stock at period end		$	10.54		$	10.51

(1)

See Note 9 for a discussion of the Company’s financing arrangements.

(2)

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

(3)

See Note 10 for a discussion of the Company’s commitments and contingencies.

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Investment income
Interest income		$	7,153		$	6,260		$	21,513		$	18,375
Paid-in-kind interest income			699			373			1,542			935
Fee income			427			300			1,497			858
Dividend income			81			16			81			31
Total investment income			8,360			6,949			24,633			20,199
Operating expenses
Management fees(1)			1,497			1,365			4,298			4,658
Subordinated income incentive fees(2)			848			213			3,189			585
Capital gains incentive fees(2)			—			150			—			(764)
Administrative services expenses			126			123			344			354
Stock transfer agent fees			50			50			150			150
Accounting and administrative fees			33			38			113			116
Interest expense(3)			404			161			1,118			619
Distribution fees			796			797			2,363			2,858
Directors’ fees			16			108			59			468
Other general and administrative expenses			549			241			1,178			785
Operating expenses			4,319			3,246			12,812			9,829
Management fee waiver(1)			—			—			—			(253)
Net expenses			4,319			3,246			12,812			9,576
Net investment income (loss)			4,041			3,703			11,821			10,623
Realized and unrealized gain/loss
Net realized gain (loss) on investments			703			(27)			(927)			695
Net realized gain (loss) on total return swap(3)			(267)			1,706			3,429			6,771
Net realized gain (loss) on foreign currency			(52)			—			(81)			—
Net change in unrealized appreciation (depreciation) on investments			(3,739)			764			3,321			(3,196)
Net change in unrealized appreciation (depreciation) on total return swap(3)			(693)			(139)			(86)			(2,896)
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts			83			—			83			—
Net change in unrealized gain (loss) on foreign currency			(3)			—			(1)			—
Total net realized and unrealized gain/loss			(3,968)			2,304			5,738			1,374
Net increase (decrease) in net assets resulting from operations		$	73		$	6,007		$	17,559		$	11,997
Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)		$	0.00		$	0.19		$	0.56		$	0.38
Weighted average shares outstanding			31,719,108			31,618,771			31,545,405			31,639,008

(1)

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

(2)

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

(3)

See Note 9 for a discussion of the Company’s financing arrangements.

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

Unaudited Consolidated Statements of Changes in Net Assets
(in thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Operations
Net investment income (loss)		$	4,041		$	3,703		$	11,821		$	10,623
Net realized gain (loss) on investments, total return swap and foreign currency(1)			384			1,679			2,421			7,466
Net change in unrealized appreciation (depreciation) on investments			(3,739)			764			3,321			(3,196)
Net change in unrealized appreciation (depreciation) on total return swap(1)			(693)			(139)			(86)			(2,896)
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts			83			—			83			—
Net change in unrealized gain (loss) on foreign currency			(3)			—			(1)			—
Net increase (decrease) in net assets resulting from operations			73			6,007			17,559			11,997
Stockholder distributions(2)
Distributions to stockholders			(5,615)			(5,545)			(16,739)			(16,354)
Net decrease in net assets resulting from stockholder distributions			(5,615)			(5,545)			(16,739)			(16,354)
Capital share transactions(3)
Reinvestment of stockholder distributions			2,856			3,177			8,666			9,608
Repurchases of common stock			—			(3,521)			(5,770)			(7,981)
Net increase in net assets resulting from capital share transactions			2,856			(344)			2,896			1,627
Total increase (decrease) in net assets			(2,686)			118			3,716			(2,730)
Net assets at beginning of period			338,340			348,689			331,938			351,537
Net assets at end of period		$	335,654		$	348,807		$	335,654		$	348,807

(1)

See Note 9 for a discussion of the Company’s financing arrangements.

(2)

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

(3)

See Note 3 for a discussion of the Company’s capital share transactions.

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Nine Months Ended September 30,
	2019			2018
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations		$	17,559		$	11,997
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments			(121,514)			(82,492)
Paid-in-kind interest			(1,542)			(935)
Proceeds from sales and repayments of investments			91,103			66,562
Net realized (gain) loss on investments			927			(695)
Net change in unrealized (appreciation) depreciation on investments			(3,321)			3,196
Net change in unrealized (appreciation) depreciation on total return swap(1)			86			2,896
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts			(83)			—
Accretion of discount			(459)			(406)
(Increase) decrease in due from counterparty			11,246			12,990
(Increase) decrease in receivable for investments sold and repaid			(1,566)			1,815
(Increase) decrease in income receivable			(971)			(1,033)
(Increase) decrease in receivable due on total return swap(1)			532			(910)
(Increase) decrease in prepaid expenses and other assets			(20)			(16)
Increase (decrease) in payable for investments purchased			5,525			2,093
Increase (decrease) in payable due on total return swap(1)			80			—
Increase (decrease) in distribution fees payable			34			338
Increase (decrease) in management fees payable			140			(231)
Increase (decrease) in subordinated income incentive fees payable			(55)			213
Increase (decrease) in accrued capital gains incentive fees			—			(1,003)
Increase (decrease) in administrative services expense payable			67			44
Increase (decrease) in interest payable(1)			1,118			93
Increase (decrease) in directors’ fees payable			(59)			(17)
Increase (decrease) in other accrued expenses and liabilities			138			30
Net cash provided by (used in) operating activities			(1,035)			14,529
Cash flows from financing activities
Repurchases of common stock			(5,770)			(7,981)
Borrowings under credit facility(1)			42,500			25,000
Repayments under credit facility(1)			(32,500)			(34,900)
Distributions paid			(8,072)			(6,194)
Net cash provided by financing activities			(3,842)			(24,075)
Total increase (decrease) in cash			(4,877)			(9,546)
Cash and foreign currency at beginning of period			16,765			31,977
Cash and foreign currency at end of period		$	11,888		$	22,431
Supplemental disclosure
Non-cash purchase of investments		$	(2,814)		$	(9,583)
Non-cash sales of investments		$	2,814		$	9,583
Distributions reinvested		$	8,666		$	9,608
Excise and state taxes paid		$	296		$	225

(1)

See Note 9 for a discussion of the Company’s financing arrangements. During the nine months ended September 30, 2019 and 2018, the Company paid $0 and $526, respectively, in interest expense on the credit facility.

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—55.6%
ABB CONCISE Optical Group LLC	(l)	Retailing	L+500		1.0%	6/15/23		$	841		$	844		$	802
Acosta Holdco Inc	(i)(j)(l)	Commercial & Professional Services	L+325		1.0%	9/26/21			2,670			1,981			838
All Systems Holding LLC		Commercial & Professional Services	L+625		1.0%	10/31/23			5,924			5,924			5,983
All Systems Holding LLC	(e)	Commercial & Professional Services	L+625		1.0%	10/31/23			2,434			2,434			2,458
American Tire Distributors Inc	(l)	Automobiles & Components	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	9/1/23			272			257			270
Ammeraal Beltech Holding BV	(g)(l)	Capital Goods	E+375			7/30/25		€	1,000			1,157			1,056
Apex Group Limited	(e)(g)	Diversified Financials	L+650		1.3%	6/15/23		$	211			206			211
Apex Group Limited	(g)	Diversified Financials	L+650		1.3%	6/15/25			686			675			685
Apex Group Limited	(g)	Diversified Financials	L+700		1.0%	6/15/25			2,515			2,505			2,513
Apex Group Limited	(g)	Diversified Financials	L+700		1.3%	6/15/25			1,419			1,394			1,417
Apex Group Limited	(g)	Diversified Financials	L+700		1.5%	6/15/25		£	2,914			3,701			3,602
Arrotex Australia Group Pty Ltd	(g)	Pharmaceuticals, Biotechnology & Life Sciences	B+525		1.0%	7/10/24		A$	5,174			3,551			3,438
AVF Parent LLC	(i)(j)	Retailing	L+725		1.3%	3/1/24		$	13,585			13,585			7,728
Borden Dairy Co		Food, Beverage & Tobacco	L+750		1.0%	7/6/23			4,375			4,375			3,811
CEPSA Holdco (Matador Bidco)	(g)(h)(l)	Energy	L+475			6/19/26			547			542			549
CHS/Community Health Systems, Inc.	(f)(g)(l)	Health Care Equipment & Services	8.0%			3/15/26			1,920			1,866			1,920
Conservice LLC	(e)	Consumer Services	L+525			11/29/24			156			155			155
Conservice LLC		Consumer Services	L+525			11/29/24			3,173			3,146			3,168
Conservice LLC	(e)	Consumer Services	L+525			11/29/24			133			132			133
Constellis Holdings LLC		Capital Goods	L+625		1.0%	4/15/22			4,314			4,261			3,653
CSafe Global		Capital Goods	L+650		1.0%	11/1/21			104			104			104
CSafe Global	(e)	Capital Goods	L+650		1.0%	11/1/21			157			157			156
CSafe Global		Capital Goods	L+650		1.0%	10/31/23			2,477			2,477			2,465
CSafe Global	(e)	Capital Goods	L+650		1.0%	10/31/23			522			522			519
Eagle Family Foods Inc		Food, Beverage & Tobacco	L+650		1.0%	6/14/23			160			159			154
Eagle Family Foods Inc	(e)	Food, Beverage & Tobacco	L+650		1.0%	6/14/23			219			217			211
Eagle Family Foods Inc		Food, Beverage & Tobacco	L+675		1.0%	6/14/24			2,494			2,471			2,399
Empire Today LLC		Retailing	L+650		1.0%	11/17/22			2,918			2,918			2,918
Entertainment Benefits Group LLC		Media & Entertainment	L+575		1.0%	9/30/24			65			65			65
Entertainment Benefits Group LLC	(e)	Media & Entertainment	L+575		1.0%	9/30/24			258			258			258
Entertainment Benefits Group LLC		Media & Entertainment	L+575		1.0%	9/30/25			1,933			1,909			1,909

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
FullBeauty Brands Holdings Corp		Retailing	L+1,000		1.0%	2/7/22		$	184		$	184		$	180
FullBeauty Brands Holdings Corp	(l)	Retailing	L+900		1.0%	2/7/24			1,075			1,051			564
Hudson Technologies Co	(g)	Commercial & Professional Services	L+1,025		1.0%	10/10/23			5,550			5,508			3,094
Icynene Group Ltd		Materials	L+700		1.0%	11/30/24			6,878			6,878			6,898
Industria Chimica Emiliana Srl	(g)	Pharmaceuticals, Biotechnology & Life Sciences	L+650			6/30/26		€	5,615			5,986			5,940
J S Held LLC		Insurance	L+600		1.0%	7/1/25		$	30			30			30
J S Held LLC	(e)	Insurance	L+600		1.0%	7/1/25			398			394			394
J S Held LLC		Insurance	L+600		1.0%	7/1/25			3,729			3,695			3,692
J S Held LLC	(e)	Insurance	L+600		1.0%	7/1/25			915			915			906
JSS Holdings Ltd		Capital Goods	L+800, 0.0% PIK (2.5% Max PIK)		1.0%	3/31/23			9,993			9,927			10,292
Kodiak BP LLC		Capital Goods	L+725		1.0%	12/1/24			13,336			13,336			13,203
Lipari Foods LLC		Food & Staples Retailing	L+588		1.0%	1/6/25			11,165			11,082			11,152
Lipari Foods LLC	(e)	Food & Staples Retailing	L+588		1.0%	1/6/25			2,316			2,316			2,313
Monitronics International Inc	(l)	Commercial & Professional Services	L+650		1.3%	3/29/24			1,165			1,122			1,077
Monitronics International Inc	(l)	Commercial & Professional Services	L+500		1.5%	7/3/24			565			565			566
Monitronics International Inc	(e)(l)	Commercial & Professional Services	L+500		1.5%	7/3/24			3,244			3,244			3,253
Monitronics International Inc	(l)	Commercial & Professional Services	L+500		1.5%	7/3/24			1,930			1,930			1,947
Murray Energy Corp		Energy	L+900		1.0%	2/12/21			1,000			996			1,002
North Haven Cadence Buyer Inc	(e)	Consumer Services	L+500		1.0%	9/2/21			188			188			187
North Haven Cadence Buyer Inc		Consumer Services	L+650		1.0%	9/2/22			1,774			1,774			1,767
North Haven Cadence Buyer Inc	(e)	Consumer Services	L+650		1.0%	9/2/22			1,271			1,271			1,266
North Haven Cadence Buyer Inc		Consumer Services	L+794		1.0%	9/2/22			3,656			3,656			3,642
One Call Care Management Inc	(l)	Insurance	L+400		1.0%	11/27/20			28			25			25
One Call Care Management Inc	(l)	Insurance	L+525		1.0%	11/27/22			643			549			509
PF Chang’s China Bistro Inc	(l)	Consumer Services	L+625			3/1/26			526			521			450
Power Distribution Inc		Capital Goods	L+725		1.3%	1/25/23			4,661			4,661			4,189
Project Marron	(g)	Consumer Services	L+625			7/3/25		A$	1,966			1,283			1,326
Project Marron	(g)	Consumer Services	L+625			7/2/25		C$	1,544			1,177			1,166
Propulsion Acquisition LLC	(l)	Capital Goods	L+600		1.0%	7/13/21		$	7,436			7,385			7,362
Reliant Rehab Hospital Cincinnati LLC		Health Care Equipment & Services	L+675		1.0%	9/2/24			5,485			5,442			5,392
Safariland LLC		Capital Goods	L+725		1.1%	11/18/23			106			106			102
Safariland LLC		Capital Goods	L+775		1.1%	11/18/23			4,660			4,660			4,473

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Savers Inc		Retailing	L+650, 0.8% PIK (0.8% Max PIK)		1.5%	3/28/24		$	2,838		$	2,805		$	2,809
Savers Inc		Retailing	L+700, 0.8% PIK (0.8% Max PIK)		1.0%	3/28/24		C$	3,941			2,902			3,000
Sequa Corp	(h)(l)	Materials	L+500		1.0%	11/28/21		$	41			41			41
Sequel Youth & Family Services LLC		Health Care Equipment & Services	L+700		1.0%	9/1/23			1,214			1,214			1,226
Sequel Youth & Family Services LLC		Health Care Equipment & Services	L+800			9/1/23			7,000			7,000			7,070
Sorenson Communications LLC	(l)	Telecommunication Services	L+650			4/29/24			5,066			4,876			5,072
Tangoe LLC		Software & Services	L+650		1.0%	11/28/25			4,724			4,681			4,730
Torrid Inc		Retailing	L+675		1.0%	12/14/24			2,193			2,170			2,171
Total Safety US Inc	(h)(l)	Capital Goods	L+600		1.0%	8/16/25			1,048			933			993
Trace3 Inc		Software & Services	L+675		1.0%	8/3/24			7,450			7,450			7,310
Vertiv Group Corp	(l)	Technology Hardware & Equipment	L+400		1.0%	11/30/23			558			533			533
Virgin Pulse Inc		Software & Services	L+650		1.0%	5/22/25			10,081			10,012			10,013
Total Senior Secured Loans—First Lien												210,422			198,875
Unfunded Loan Commitments												(12,409)			(12,409)
Net Senior Secured Loans—First Lien												198,013			186,466
Senior Secured Loans—Second Lien—8.9%
Ammeraal Beltech Holding BV	(g)	Capital Goods	L+800			7/27/26			4,804			4,716			4,656
athenahealth Inc		Health Care Equipment & Services	L+850			2/11/27			5,990			5,935			6,043
BCA Marketplace PLC	(g)(h)	Retailing	L+825			9/4/27		£	3,290			4,008			4,008
Chisholm Oil & Gas Operating LLC		Energy	L+800		1.0%	3/21/24		$	6,000			6,000			6,060
Electronics For Imaging Inc	(l)	Technology Hardware & Equipment	L+900			7/23/27			423			402			392
Emerald Performance Materials LLC	(l)	Materials	L+775		1.0%	8/1/22			29			29			29
OEConnection LLC		Software & Services	L+825			9/25/27			2,337			2,314			2,314
One Call Care Management Inc		Insurance	L+375, 6.0% PIK (6.0% Max PIK)		1.0%	4/11/24			1,445			1,434			1,180
Pure Fishing Inc		Consumer Durables & Apparel	L+838		1.0%	12/31/26			4,301			4,260			3,749
Rise Baking Company		Food, Beverage & Tobacco	L+800		1.0%	8/9/26			1,652			1,637			1,624
Total Senior Secured Loans—Second Lien												30,735			30,055
Other Senior Secured Debt—7.9%
APTIM Corp	(f)(l)	Diversified Financials	7.8%			6/15/25			3,286			3,286			2,349
Artesyn Embedded Technologies Inc	(f)(l)	Technology Hardware & Equipment	9.8%			10/15/20			673			656			676
Black Swan Energy Ltd	(g)	Energy	9.0%			1/20/24			1,334			1,334			1,327
Enterprise Development Authority	(f)(l)	Consumer Services	12.0%			7/15/24			978			1,014			1,076

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Frontier Communications Corp	(f)(g)(l)	Telecommunication Services	8.5%		4/1/26		$	3,126		$	3,031		$	3,134
Genesys Telecommunications Laboratories Inc	(f)(l)	Technology Hardware & Equipment	10.0%		11/30/24			428			468			464
JC Penney Corp Inc	(f)(g)(l)	Retailing	5.7%		6/1/20			38			35			36
JW Aluminum Co	(f)(l)	Materials	10.3%		6/1/26			759			759			803
Lycra	(f)(g)(l)	Consumer Durables & Apparel	7.5%		5/1/25			1,913			1,917			1,726
MultiPlan Inc	(f)(l)	Health Care Equipment & Services	7.1%		6/1/24			2,027			2,041			1,878
PAREXEL International Corp	(f)(l)	Pharmaceuticals, Biotechnology & Life Sciences	6.4%		9/1/25			21			20			19
Pattonair Holdings Ltd	(f)(g)(l)	Capital Goods	9.0%		11/1/22			1,974			2,027			2,078
Ply Gem Holdings Inc	(f)(l)	Capital Goods	8.0%		4/15/26			2,390			2,294			2,360
Velvet Energy Ltd	(g)	Energy	9.0%		10/5/23			3,000			3,000			3,068
Vivint Inc	(f)(l)	Commercial & Professional Services	7.9%		12/1/22			3,471			3,428			3,480
Vivint Inc	(f)(l)	Commercial & Professional Services	7.6%		9/1/23			2,299			2,132			2,058
Total Other Senior Secured Debt											27,442			26,532
Subordinated Debt—16.5%
All Systems Holding LLC		Commercial & Professional Services	10.0% PIK (10.0% Max PIK)		10/31/22			7			7			7
Ascent Resources Utica Holdings LLC / ARU Finance Corp	(f)(l)	Energy	10.0%		4/1/22			6,500			6,500			6,531
athenahealth Inc		Health Care Equipment & Services	L+1,125 PIK (L+1,125 Max PIK)		2/11/27			3,262			3,262			3,283
Avantor Inc	(f)(l)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%		10/1/25			7,500			7,502			8,447
ClubCorp Club Operations Inc	(f)(l)	Consumer Services	8.5%		9/15/25			3,339			3,232			2,813
Diamond Resorts International Inc	(f)(l)	Consumer Services	10.8%		9/1/24			933			972			966
GFL Environmental Inc	(f)(g)(l)	Commercial & Professional Services	8.5%		5/1/27			2,574			2,644			2,860
Hub International Ltd	(f)(l)	Insurance	7.0%		5/1/26			1,001			987			1,032
Intelsat Jackson Holdings SA	(f)(g)(l)	Media & Entertainment	5.5%		8/1/23			1,761			1,610			1,652
Ken Garff Automotive LLC	(f)(l)	Retailing	7.5%		8/15/23			1,837			1,850			1,931
LifePoint Hospitals Inc	(f)(l)	Health Care Equipment & Services	9.8%		12/1/26			2,856			2,865			3,063
Nouryon (fka Akzo Nobel Specialty Chemicals)	(f)(g)(l)	Materials	8.0%		10/1/26			1,783			1,773			1,787
Plastipak Holdings Inc	(f)(l)	Materials	6.3%		10/15/25			284			266			238

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Quorum Health Corp	(f)(l)	Health Care Equipment & Services	11.6%		4/15/23		$	735		$	732		$	663
SRS Distribution Inc	(f)(l)	Capital Goods	8.3%		7/1/26			3,567			3,520			3,647
Stars Group Holdings BV	(f)(g)(l)	Consumer Services	7.0%		7/15/26			521			521			556
Team Health Inc	(f)(l)	Health Care Equipment & Services	6.4%		2/1/25			2,412			2,145			1,679
Vertiv Group Corp	(f)(l)	Technology Hardware & Equipment	9.3%		10/15/24			5,073			5,017			4,914
Vivint Inc	(f)(l)	Commercial & Professional Services	8.8%		12/1/20			2,645			2,582			2,602
York Risk Services Group Inc	(f)(l)	Insurance	8.5%		10/1/22			6,595			6,373			6,735
Total Subordinated Debt											54,360			55,406

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/ Shares			Amortized Cost			Fair Value
Asset Based Finance—2.9%
Abacus JV, Private Equity	(g)	Insurance						1,393,704		$	1,394		$	1,394
Altavair NewCo, Private Equity	(g)	Capital Goods						486,158			486			539
Australis Maritime, Private Equity	(g)(j)	Transportation						500,385			500			500
Home Partners JV, Structured Mezzanine	(g)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		$	1,411			1,411			1,411
Home Partners JV, Structured Mezzanine	(e)(g)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		$	1,411			1,411			1,411
Home Partners JV, Common Stock	(g)(j)	Real Estate						705,286			705			729
Home Partners JV, Private Equity	(g)(j)(l)	Real Estate						38,056			38			3
Lenovo Group Ltd, Structured Mezzanine	(g)	Technology Hardware & Equipment	8.0%		6/22/22		€	505			574			551
Lenovo Group Ltd, Structured Mezzanine	(g)	Technology Hardware & Equipment	8.0%		6/22/22		$	1,061			1,061			1,061
Lenovo Group Ltd, Structured Mezzanine	(g)	Technology Hardware & Equipment	12.0%		6/22/22		€	321			365			350
Lenovo Group Ltd, Structured Mezzanine	(g)	Technology Hardware & Equipment	12.0%		6/22/22		$	675			675			675
Pretium Partners LLC P2, Structured Mezzanine	(g)	Real Estate	9.5%		5/29/25		$	1,528			1,528			1,542
Sofi Lending Corp, 2019-C R1	(g)	Diversified Financials			11/16/48		$	1,452			823			822
Toorak Capital Funding LLC, Membership Interest	(g)	Diversified Financials						36,749			37			37
Total Asset Based Finance											11,008			11,025
Unfunded Commitments											(1,411)			(1,411)
Net Asset Based Finance											9,597			9,614

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Number of Shares		Cost			Fair Value(d)
Equity/Other—4.6%
All Systems Holding LLC, Common Stock	(j)	Commercial & Professional Services					4		$	39		$	47
ASG Technologies, Warrant	(j)	Software & Services			6/27/22		12,081			344			408
Chisholm Oil & Gas Operating LLC, Series A Units	(j)(k)	Energy					75,000			75			73
CSafe Global, Common Stock	(j)	Capital Goods					17,400			17			32
Empire Today LLC, Common Stock	(j)	Retailing					14			41			73
FullBeauty Brands Holdings Corp, Common Stock	(j)	Retailing					5,486			26			—
JSS Holdings Ltd, Net Profits Interest	(j)	Capital Goods					4			—			107
JW Aluminum Co, Common Stock	(j)	Materials					41			—			—
JW Aluminum Co, Preferred Stock		Materials	12.5% PIK		2/15/28		1,003			5,944			13,952
North Haven Cadence Buyer Inc, Common Stock	(j)	Consumer Services					208,333			208			484
Power Distribution Inc, Common Stock	(j)	Capital Goods					323,572			277			32
SSC (Lux) Limited S.a r.l., Common Stock	(g)(j)	Health Care Equipment & Services					11,364			227			325
Trace3 Inc, Common Stock	(j)	Software & Services					1,545			15			41
Total Equity/Other										7,213			15,574
TOTAL INVESTMENTS—96.4%									$	327,360			323,647
OTHER ASSETS IN EXCESS OF LIABILITIES—3.6%													12,007
NET ASSETS—100.0%												$	335,654

Total Return Swap																		Notional Amount									Unrealized Depreciation
Citibank TRS Facility (Note 9)			(g)																$	137,912								$	(4,775)

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Foreign currency forward contracts

Foreign Currency	Settlement Date		Counterparty	Amount and Transaction			US$ Value at Settlement Date			US$ Value at September 30, 2019			Unrealized Appreciation (Depreciation)
AUD		1/14/2020	ING Capital LLC		A$	1,872		$	1,271		$	1,267		$	4
AUD		1/14/2020	ING Capital LLC		A$	4,837			3,283			3,274			9
AUD		1/14/2020	ING Capital LLC		A$	337			229			228			1
CAD		1/14/2020	ING Capital LLC		C$	3,946			2,966			2,984			(18)
CAD		1/14/2020	ING Capital LLC		C$	1,544			1,161			1,168			(7)
EUR		1/14/2020	ING Capital LLC		€	1,000			1,124			1,099			25
EUR		1/14/2020	ING Capital LLC		€	826			929			909			20
EUR		4/8/2020	ING Capital LLC		€	5,615			6,272			6,210			62
GBP		1/14/2020	ING Capital LLC		£	2,921			3,597			3,610			(13)
Total								$	20,832		$	20,749		$	83

(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, 2019, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 2.09%, the Euro Interbank Offered Rate, or EURIBOR, or “E”, was (0.42)% and the Australian Bank Bill Swap Bid Rate, or BBSY, or “B”, was 0.95%. PIK means paid-in-kind. Variable rate securities with no floor rate use the respective benchmark rate in all cases.

(c)

Denominated in U.S. dollars unless otherwise noted.

(d)

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

(e)

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.

(f)

Security or portion thereof held within Broomall Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility with BNP Paribas Prime Brokerage, Inc., or BNP. Securities held within Broomall Funding LLC may be rehypothecated from time to time as permitted under Rule 15c-1(a)(1) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNP (see Note 9).

(g)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. 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, 2019, 84.0% of the Company’s total assets represented qualifying assets. In addition, as described in Note 9, the Company also calculates its compliance with the qualifying asset test on a “look through” basis by disregarding the value of the Company’s total return swap and treating each loan underlying the total return swap as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 83.1% of the Company’s total assets represented qualifying assets as of September 30, 2019.

(h)

Position or portion thereof unsettled as of September 30, 2019.

(i)

Security was on non-accrual status as of September 30, 2019.

(j)

Security is non-income producing.

(k)

Security held within FSIC IV Investments, LLC, a wholly-owned subsidiary of the Company.

(l)

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

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Senior Secured Loans—First Lien—48.0%
ABB CONCISE Optical Group LLC	(l)	Retailing	L+500		1.0%	6/15/23		$	848		$	851		$	814
Acosta Holdco Inc	(l)	Commercial & Professional Services	L+325		1.0%	9/26/21			2,691			2,022			1,653
Addison Holdings		Commercial & Professional Services	L+675		1.0%	12/29/23			11,976			11,976			11,996
All Systems Holding LLC		Commercial & Professional Services	L+767		1.0%	10/31/23			3,601			3,601			3,637
American Tire Distributors Inc	(l)	Automobiles & Components	L+750		1.0%	8/30/24			1,731			1,535			1,425
American Tire Distributors Inc	(l)	Automobiles & Components	L+650, 1.0% PIK (1.0% Max PIK)		1.0%	9/1/23			272			255			255
Ammeraal Beltech Holding BV	(g)(l)	Capital Goods	E+375			7/30/25		€	1,000			1,157			1,140
Apex Group Limited	(e)(g)	Diversified Financials	L+650			6/15/23		$	211			205			181
Apex Group Limited	(g)	Diversified Financials	L+650		1.0%	6/15/25			1,429			1,402			1,373
Apex Group Limited	(e)(g)	Diversified Financials	L+650		1.0%	6/15/25			690			677			662
Apex Group Limited	(g)	Diversified Financials	L+650		1.0%	6/15/25			230			226			221
Apex Group Limited	(e)(g)	Diversified Financials	L+650		1.0%	6/15/25			345			340			331
AVF Parent LLC		Retailing	L+725		1.3%	3/1/24			13,853			13,853			12,950
Borden Dairy Co		Food, Beverage & Tobacco	L+808		1.0%	7/6/23			4,375			4,375			3,978
Constellis Holdings LLC / Constellis Finance Corp		Capital Goods	L+575		1.0%	4/1/22			4,346			4,281			4,281
CSafe Global		Capital Goods	L+725		1.0%	11/1/21			26			26			26
CSafe Global	(e)	Capital Goods	L+725		1.0%	11/1/21			235			235			237
CSafe Global		Capital Goods	L+725		1.0%	10/31/23			2,234			2,233			2,256
Dade Paper and Bag Co Inc		Capital Goods	L+700		1.0%	6/10/24			422			422			405
Dade Paper and Bag Co Inc		Capital Goods	L+750		1.0%	6/10/24			3,311			3,311			3,244
Eagle Family Foods Inc	(e)	Food, Beverage & Tobacco	L+650		1.0%	6/14/23			379			375			323
Eagle Family Foods Inc		Food, Beverage & Tobacco	L+650		1.0%	6/14/24			2,513			2,487			2,475
Empire Today LLC		Retailing	L+700		1.0%	11/17/22			2,940			2,940			2,945
FullBeauty Brands Holdings Corp	(i)(j)(l)	Retailing	L+475		1.0%	10/14/22			4,824			1,439			1,469
Hudson Technologies Co	(g)	Commercial & Professional Services	L+1025		1.0%	10/10/23			5,635			5,587			4,029
Icynene Group Ltd		Materials	L+700		1.0%	11/30/24			6,930			6,930			6,739
JSS Holdings Ltd		Capital Goods	L+800, 0.0% PIK (2.5% Max PIK)		1.0%	3/31/23			9,958			9,882			10,257
Kodiak BP LLC		Capital Goods	L+725		1.0%	12/1/24			13,428			13,428			13,142
Murray Energy Corp		Energy	L+900		1.0%	2/12/21			1,000			994			996
North Haven Cadence Buyer Inc	(e)	Consumer Services	L+500		1.0%	9/2/21			188			187			188
North Haven Cadence Buyer Inc		Consumer Services	L+777		1.0%	9/2/24			1,055			1,055			1,044
North Haven Cadence Buyer Inc		Consumer Services	L+798		1.0%	9/2/24			3,656			3,656			3,620
North Haven Cadence Buyer Inc	(e)	Consumer Services	L+650		1.0%	9/2/24			750			750			743
Power Distribution Inc		Capital Goods	L+725		1.3%	1/25/23			4,891			4,891			4,891
Propulsion Acquisition LLC	(l)	Capital Goods	L+600		1.0%	7/13/21			8,281			8,199			8,198

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor		Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Reliant Rehab Hospital Cincinnati LLC		Health Care Equipment & Services	L+675		1.0%	8/30/24		$	5,052		$	5,004		$	5,037
Safariland LLC		Capital Goods	L+765		1.1%	11/18/23			4,766			4,766			4,271
Sequel Youth & Family Services LLC		Health Care Equipment & Services	L+700		1.0%	9/1/23			1,223			1,223			1,245
Sequel Youth & Family Services LLC		Health Care Equipment & Services	L+800			9/1/23			7,000			7,000			7,125
SSC (Lux) Limited S.a r.l.	(g)	Health Care Equipment & Services	L+750		1.0%	9/10/24			6,385			6,385			6,449
Tangoe LLC		Software & Services	L+650		1.0%	11/28/25			4,778			4,731			4,730
Trace3 Inc		Diversified Financials	L+675		1.0%	8/5/24			7,516			7,516			7,440
Virgin Pulse Inc		Software & Services	L+650		1.0%	5/22/25			10,158			10,081			9,842
Westbridge Technologies Inc	(l)	Technology Hardware & Equipment	L+850		1.0%	4/28/23			2,850			2,805			2,857
York Risk Services Group Inc	(l)	Insurance	L+375		1.0%	10/1/21			980			975			919
Total Senior Secured Loans—First Lien												166,269			162,039
Unfunded Loan Commitments												(2,769)			(2,769)
Net Senior Secured Loans—First Lien												163,500			159,270
Senior Secured Loans—Second Lien—8.6%
Ammeraal Beltech Holding BV	(g)	Capital Goods	L+800			7/27/26			4,804			4,710			4,700
Centric Group LLC	(l)	Retailing	L+800		1.0%	2/1/24			8,500			8,488			8,384
Chisholm Oil & Gas Operating LLC		Energy	L+800		1.0%	3/21/24			6,000			6,000			5,929
LBM Borrower LLC	(l)	Capital Goods	L+925		1.0%	8/20/23			2,427			2,385			2,378
One Call Care Management Inc		Insurance	L+375, 6.0% PIK (6.0% Max PIK)			4/11/24			1,386			1,374			1,327
Pure Fishing Inc		Consumer Durables & Apparel	L+838		1.0%	12/31/26			4,301			4,258			4,258
Rise Baking Company		Food, Beverage & Tobacco	L+800		1.0%	8/9/26			1,652			1,636			1,637
Total Senior Secured Loans—Second Lien												28,851			28,613
Other Senior Secured Debt—8.0%
Akzo Nobel Specialty Chemicals	(f)(g)(l)	Materials	8.0%			10/1/26			618			618			579
APTIM Corp	(f)(l)	Diversified Financials	7.8%			6/15/25			8,783			8,783			6,642
Artesyn Embedded Technologies Inc	(f)(l)	Technology Hardware & Equipment	9.8%			10/15/20			482			465			446
Avantor Inc	(f)(l)	Pharmaceuticals, Biotechnology & Life Sciences	6.0%			10/1/24			1,282			1,282			1,261
Black Swan Energy Ltd	(g)	Energy	9.0%			1/20/24			1,334			1,334			1,287
Boyne USA Inc	(f)(l)	Consumer Services	7.3%			5/1/25			16			17			17
DJO Finance LLC / DJO Finance Corp	(f)(l)	Health Care Equipment & Services	8.1%			6/15/21			2,113			2,128			2,182
Genesys Telecommunications Laboratories Inc	(f)(l)	Technology Hardware & Equipment	10.0%			11/30/24			428			473			450
JC Penney Corp Inc	(f)(g)(l)	Retailing	5.7%			6/1/20			38			35			30
JW Aluminum Co	(l)	Materials	10.3%			6/1/26			759			759			757
Lycra	(f)(g)(l)	Consumer Durables & Apparel	7.5%			5/1/25			1,015			1,027			955

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity	Principal Amount(c)			Amortized Cost			Fair Value(d)
Numericable-SFR	(f)(g)(l)	Software & Services	8.1%		2/1/27		$	333		$	333		$	315
Pattonair Holdings Ltd	(f)(g)(l)	Capital Goods	9.0%		11/1/22			1,259			1,302			1,272
Ply Gem Holdings Inc	(f)(l)	Capital Goods	8.0%		4/15/26			2,390			2,286			2,199
Velvet Energy Ltd	(g)	Energy	9.0%		10/5/23			3,000			3,000			3,024
Vivint Inc	(f)(l)	Commercial & Professional Services	7.6%		9/1/23			2,299			2,107			1,881
Vivint Inc	(f)(l)	Commercial & Professional Services	7.9%		12/1/22			3,471			3,420			3,289
Total Other Senior Secured Debt											29,369			26,586
Subordinated Debt—19.3%
All Systems Holding LLC		Commercial & Professional Services	10.0% PIK (10.0% Max PIK)		10/31/22			7			7			7
Ascent Resources Utica Holdings LLC / ARU Finance Corp	(f)(l)	Energy	10.0%		4/1/22			6,500			6,500			6,652
Avantor Inc	(f)(l)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%		10/1/25			12,500			12,502			12,508
CEC Entertainment Inc	(f)(l)	Consumer Services	8.0%		2/15/22			7,100			6,805			6,390
ClubCorp Club Operations Inc	(f)(l)	Consumer Services	8.5%		9/15/25			3,339			3,221			3,005
Diamond Resorts International Inc	(f)(l)	Consumer Services	10.8%		9/1/24			933			977			842
Exterran Energy Solutions LP / EES Finance Corp	(f)(g)(l)	Energy	8.1%		5/1/25			2,743			2,743			2,645
Great Lakes Dredge & Dock Corp	(f)(g)(l)	Capital Goods	8.0%		5/15/22			4,105			4,105			4,174
Intelsat Jackson Holdings SA	(f)(g)(l)	Media	5.5%		8/1/23			1,761			1,585			1,549
Ken Garff Automotive LLC	(f)(l)	Retailing	7.5%		8/15/23			1,837			1,852			1,823
LifePoint Hospitals Inc	(f)(l)	Health Care Equipment & Services	9.8%		12/1/26			2,344			2,318			2,233
PF Chang’s China Bistro Inc	(f)(l)	Consumer Services	10.3%		6/30/20			2,633			2,492			2,404
Quorum Health Corp	(f)(l)	Health Care Equipment & Services	11.6%		4/15/23			786			783			749
SRS Distribution Inc	(f)(l)	Capital Goods	8.3%		7/1/26			3,567			3,516			3,282
Stars Group Holdings BV	(f)(g)(l)	Consumer Services	7.0%		7/15/26			521			521			506
Surgery Partners Holdings LLC	(f)(l)	Health Care Equipment & Services	6.8%		7/1/25			416			397			360
Team Health Inc	(f)(l)	Health Care Equipment & Services	6.4%		2/1/25			2,412			2,117			1,969
Vertiv Group Corp	(f)(l)	Technology Hardware & Equipment	9.3%		10/15/24			5,082			5,018			4,523
Vivint Inc	(f)(l)	Commercial & Professional Services	8.8%		12/1/20			2,327			2,236			2,219
York Risk Services Group Inc	(f)(l)	Insurance	8.5%		10/1/22			8,695			8,323			6,087
Total Subordinated Debt											68,018			63,927
Asset Based Finance—0.0%
Australis Maritime, Private Equity	(g)(j)	Transportation						104,330			104			104
Total Asset Based Finance											104			104

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

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

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor	Maturity		Number of Shares		Cost			Fair Value(d)
Equity/Other—3.1%
All Systems Holding LLC, Common Stock		Commercial & Professional Services						4		$	39		$	45
ASG Technologies, Warrants	(j)	Software & Services				6/27/2022		12,081			344			351
Chisholm Oil & Gas Operating LLC, Series A Units	(j)(k)	Energy						75,000			75			32
CSafe Global, Common Stock	(j)	Capital Goods						17,400			17			24
Empire Today LLC, Common Stock	(j)	Retailing						14			41			40
JSS Holdings Ltd, Net Profits Interest	(j)	Capital Goods						—			—			64
JW Aluminum Co, Common Stock	(j)	Materials						41			—			—
JW Aluminum Co, Preferred Stock		Materials	12.5% PIK			11/17/2025		1,003			4,835			9,039
North Haven Cadence Buyer Inc, Common Equity	(j)	Consumer Services						208,333			208			318
Power Distribution Inc, Common Stock	(j)	Capital Goods						230,769			231			121
SSC (Lux) Limited S.a r.l., Common Stock	(g)(j)	Health Care Equipment & Services						11,364			227			278
Trace3 Inc, Common Stock		Diversified Financials						1,545			16			29
Total Equity/Other											6,033			10,341
TOTAL INVESTMENTS—87.0%										$	295,875			288,841
OTHER ASSETS IN EXCESS OF LIABILITIES—13.0%														43,097
NET ASSETS—100.0%													$	331,938

Total Return Swap																		Notional Amount									Unrealized Appreciation
Citibank TRS Facility (Note 9)			(g)																$	171,065								$	(4,689)

(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, 2018, the three-month London Interbank Offered Rate, or LIBOR or “L,” was 2.81% and the Euro Interbank Offered Rate, or EURIBOR, or “E”, was (0.31)%. PIK means paid-in-kind.

(c)

Denominated in U.S. dollars unless otherwise noted.

(d)

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

(e)

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.

(f)

(g)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. 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, 2018, 90.8% of the Company’s total assets represented qualifying assets. In addition, as described in Note 9, the Company also calculates its compliance with the qualifying asset test on a “look through” basis by disregarding the value of the Company’s total return swap and treating each loan underlying the total return swap as either a qualifying asset or non-qualifying asset based on whether the obligor is an eligible portfolio company. On this basis, 89.9% of the Company’s total assets represented qualifying assets as of December 31, 2018.

(h)

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

(i)

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

(j)

Security is non-income producing.

(k)

Security held within FSIC IV Investments, LLC, a wholly-owned subsidiary of the Company.

(l)

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

See notes to unaudited consolidated financial statements.

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FS Investment Corporation IV

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

Note 1. Principal Business and Organization

FS Investment Corporation IV, or the Company, was incorporated under the general corporation laws of the State of Maryland on February 25, 2015 and formally commenced investment operations on January 6, 2016. In November 2017, the Company closed its continuous public offering of Class T common stock to new investors. 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, 2019, the Company had various wholly-owned subsidiaries, including special-purpose financing subsidiaries and subsidiaries through which it holds interests in portfolio companies. The unaudited consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of September 30, 2019. All significant intercompany transactions have been eliminated in consolidation.

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. The Company’s portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle-market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. In addition, a portion of the Company’s portfolio may be comprised of equity and equity-related securities, corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps.

The Company is externally managed by FS/KKR Advisor, LLC, or the Advisor, pursuant to an investment advisory and administrative services agreement, dated as of April 9, 2018, or the investment advisory and administrative services agreement. On April 9, 2018, GSO / Blackstone Debt Funds Management LLC, or GDFM, resigned as the investment sub-adviser to the Company and terminated the investment sub-advisory agreement, or the investment sub-advisory agreement, between FSIC IV Advisor, LLC, or FSIC IV Advisor, and GDFM, effective April 9, 2018. In connection with GDFM’s resignation as the investment sub-adviser to the Company, on April 9, 2018, the Company entered into the investment advisory and administrative services agreement, which replaced an investment advisory and administrative services agreement, dated September 21, 2015, or the FSIC IV Advisor investment advisory and administrative services agreement, by and between the Company and FSIC IV Advisor.

On May 31, 2019, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with Corporate Capital Trust II, a Delaware statutory trust, or CCT II, FS Investment Corporation II, a Maryland corporation, or FSIC II, FS Investment Corporation III, a Maryland corporation, or FSIC III and, collectively with the Company, FSIC II and CCT II, the Funds, NT Acquisition 1, Inc., a Maryland corporation and wholly-owned subsidiary of FSIC II, or Merger Sub 1, NT Acquisition 2, Inc., a Delaware corporation and wholly-owned subsidiary of FSIC II, or Merger Sub 2, NT Acquisition 3, Inc., a Maryland corporation and wholly-owned subsidiary of FSIC II, or Merger Sub 3, and the Advisor. The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, (i) Merger Sub 1 will merge with and into FSIC III, with FSIC III continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, or Merger 1A, and, immediately thereafter, FSIC III will merge with and into FSIC II, with FSIC II continuing as the surviving company or, together with Merger 1A, Merger 1, (ii) Merger Sub 2 will merge with and into CCT II, with CCT II continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, or Merger 2A, and, immediately thereafter, CCT II will merge with and into FSIC II, with FSIC II continuing as the surviving company or, together with Merger 2A, Merger 2, and (iii) Merger Sub 3 will merge with and into the Company, with the Company continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, or Merger 3A, and, immediately thereafter, the Company will merge with and into FSIC II, with FSIC II continuing as the surviving company or, together with the Merger 3A, Merger 3 and, collectively with Merger 1 and Merger 2, the Mergers. See Note 12 for additional information.

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FS Investment Corporation IV

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

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 accounting principles generally accepted in the United States of America, 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, 2018 included in the Company’s annual report on Form 10-K for the year ended December 31, 2018. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The December 31, 2018 consolidated balance sheet and consolidated schedule of investments are derived from the Company’s audited consolidated financial statements as of and for the year ended December 31, 2018. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Accounting Standards Codification, or ASC, Topic 946, Financial Services—Investment Companies.

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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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). 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 each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any capital gain incentive fees previously paid by the Company. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fees as if it were due and payable as of the end of such period. 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 the Advisor if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

The Company “looks through” its total return swap, or TRS, between its wholly-owned financing subsidiary Cheltenham Funding LLC, or Cheltenham Funding, and Citibank, N.A., or Citibank, in calculating the capital gains incentive fee. Under this methodology, the portion of the net settlement payments received by the Company pursuant to the TRS which would have represented net investment income to the Company had the Company held the loans underlying the TRS directly is treated as net investment income subject to the subordinated incentive fee on income payable to the Advisor pursuant to the investment advisory and administrative services agreement, rather than as realized capital gains in accordance with GAAP, and any unrealized depreciation on individual loans underlying the TRS further reduces the capital gains incentive fee payable to the Advisor with respect to realized gains. See Note 9 for additional information regarding the Company’s TRS.

TABLE OF CONTENTS

FS Investment Corporation IV

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

Note 2. Summary of Significant Accounting Policies (continued)

Subordinated Income Incentive Fee: Pursuant to the terms of the investment advisory and administrative services agreement, the Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the investment advisory and administrative services agreement, 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 1.75% per quarter (1.875% under the FSIC IV Advisor investment advisory and administrative services agreement), or an annualized hurdle rate of 7.0% (7.5% under the FSIC IV Advisor investment advisory and administrative services agreement). For purposes of this fee, “adjusted capital” means cumulative gross proceeds generated from sales of the Company’s common stock (including proceeds from its distribution reinvestment plan) reduced for amounts paid for share repurchases pursuant to the Company’s share repurchase program. As a result, the Advisor will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.75% (1.875% under the FSIC IV Advisor investment advisory and administrative services agreement). Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, the 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 2.1875%, or 8.75% annually (2.34375%, or 9.375% annually under the FSIC IV Advisor investment advisory and administrative services agreement), of the Company’s adjusted capital. Thereafter, the Advisor will be entitled to receive 20.0% of the pre-incentive fee net investment income.

Reclassifications: Certain amounts in the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2018 and the audited consolidated financial statements as of and for the year ended December 31, 2018 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2019.

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

Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are

TABLE OF CONTENTS

FS Investment Corporation IV

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

Note 2. Summary of Significant Accounting Policies (continued)

recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. For the nine months ended September 30, 2019, the Company recognized $1,118 in structuring fee revenue. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

Derivative Instruments: The Company’s derivative instruments include foreign currency forward contracts. The Company recognizes all derivative instruments as assets or liabilities at fair value in its consolidated financial statements. Derivative contracts entered into by the Company are not designated as hedging instruments, and as a result, the Company presents changes in fair value through net change in unrealized appreciation (depreciation) on derivative instruments in the consolidated statements of operations. Realized gains and losses of the derivative instruments are included in net realized gains (losses) on derivative instruments in the consolidated statements of operations.

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

Note 3. Share Transactions

Below is a summary of transactions with respect to shares of the Company’s common stock during the nine months ended September 30, 2019 and 2018:

	Nine Months Ended September 30,
	2019					2018
	Shares		Amount			Shares		Amount
Reinvestment of Distributions		804,065		$	8,666		861,311		$	9,608
Share Repurchase Program		(536,746)			(5,770)		(715,411)			(7,981)
Net Proceeds from Share Transactions		267,319		$	2,896		145,900		$	1,627

During the period from October 1, 2019 to November 8, 2019, the Company issued 87,759 shares of Class T common stock pursuant to its distribution reinvestment plan, or DRP, for gross proceeds of $939,021 at an average price per share of $10.70. For additional information regarding the terms of the DRP, see Note 5.

Share Repurchase Program

Historically, the Company has conducted quarterly tender offers pursuant to its share repurchase program. The Company’s board of directors considers 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;

TABLE OF CONTENTS

FS Investment Corporation IV

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

Note 3. Share Transactions (continued)

•

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

•

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

•

the condition of the securities markets.

Historically, the Company limited the number of shares of common stock to be repurchased during any calendar year to the lesser of (i) the number of shares of common stock that the Company could repurchase with the proceeds it received from the issuance of shares of common stock under the DRP and (ii) 10.0% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. On May 9, 2017, the board of directors of the Company amended the share repurchase program. As amended, the Company limits the maximum number of shares of common stock to be repurchased for any repurchase offer to the greater of (A) the number of shares of common stock that the Company can repurchase with the proceeds it has received from the sale of shares of common stock under the DRP during the twelve-month period ending on the date the applicable repurchase offer expires (less the amount of proceeds used to repurchase shares of common stock on each previous repurchase date for repurchase offers conducted during such twelve-month period) (the Company refers to this limitation as the twelve-month repurchase limitation) and (B) the number of shares of common stock that the Company can repurchase with the proceeds it received from the sale of shares of common stock under the DRP during the three-month period ending on the date the applicable repurchase offer expires (the Company refers to this limitation as the three-month repurchase limitation). In addition to this limitation, the maximum number of shares of common stock to be repurchased for any repurchase offer will also be limited to 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter. As a result, the maximum number of shares of common stock to be repurchased for any repurchase offer will not exceed the lesser of (i) 10% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 2.5% in each calendar quarter, and (ii) whichever is greater of the twelve-month repurchase limitation described in clause (A) above and the three-month repurchase limitation described in clause (B) above. At the discretion of the Company’s board of directors, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock. The actual number of shares of common stock that the Company offers to repurchase may be less in light of the limitations noted above. The Company’s board of directors may amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice.

On October 13, 2017, the Company further amended the terms of its share repurchase program, or the amended share repurchase program, which was first effective for the Company’s quarterly repurchase offer for the fourth quarter of 2017. Prior to amending the share repurchase program, the Company offered to repurchase shares of its common stock on a quarterly basis at a repurchase price equal to the net offering price in effect on each date of repurchase. Under the amended share repurchase program, the Company offers to repurchase shares of common stock at a price equal to the price at which shares of its common stock are issued pursuant to the DRP on the distribution date coinciding with the applicable share repurchase date. The price at which shares of common stock are issued under the DRP 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.

In conjunction with the announced Merger Agreement, the Company’s board of directors suspended the Company’s share repurchase program.

TABLE OF CONTENTS

FS Investment Corporation IV

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 its common stock pursuant to its share repurchase program during the nine months ended September 30, 2019 and 2018:

For the Three Months Ended	Repurchase Date	Shares Repurchased		Percentage of Shares Tendered That Were Repurchased		Percentage of Outstanding Shares Repurchased as of the Repurchase Date		Repurchase Price Per Share			Aggregate Consideration for Repurchased Shares
Fiscal 2018
December 31, 2017	January 10, 2018		113,036		100%		0.36%		$	11.1549		$	1,261
March 31, 2018	April 2, 2018		286,794		100%		0.90%		$	11.1549			3,199
June 30, 2018	July 2, 2018		315,581		100%		0.99%		$	11.1549			3,521
Total			715,411									$	7,981
Fiscal 2019
December 31, 2018	January 11, 2019		267,472		31%		0.85%		$	10.7500		$	2,875
March 31, 2019	April 1, 2019		269,274		30%		0.85%		$	10.7500			2,895
June 30, 2019(1)	—		—		—		—			—			—
Total			536,746									$	5,770

(1)

The Company suspended its share repurchase program on May 31, 2019.

Note 4. Related Party Transactions

Compensation of the Investment Advisor

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

Pursuant to the FSIC IV Advisor investment advisory and administrative services agreement, which was in effect until April 9, 2018, FSIC IV Advisor was entitled to an annual base management fee equal to 2.0% of the average weekly value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. Effective February 1, 2017, FSIC IV Advisor contractually agreed to permanently waive 0.25% of the base management fee to which it was entitled under the FSIC IV Advisor investment advisory and administrative services agreement, so that the fee received equaled 1.75% of the Company’s average weekly gross assets. Pursuant to the investment sub-advisory agreement, GDFM was entitled to receive 50% of all management and incentive fees payable to FSIC IV Advisor under the FSIC IV Advisor investment advisory and administrative services agreement with respect to each year.

Pursuant to the investment advisory and administrative services agreement, the Advisor oversees the Company’s day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities and other

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FS Investment Corporation IV

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

Note 4. Related Party Transactions (continued)

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

Pursuant to the investment advisory and administrative services agreement, the Company reimburses the Advisor for expenses necessary to perform services related to its administration and operations, including the Advisor’s allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P. (which does business as FS Investments) and KKR Credit Advisors (US), LLC, or KKR Credit, providing administrative services to the Company on behalf of the Advisor. The Company reimburses the Advisor no less than monthly for expenses necessary to perform services related to the Company’s administration and operations. The amount of this reimbursement is set at the lesser of (1) the Advisor’s actual costs incurred in providing such services and (2) the amount that the Company estimates it would be required to pay alternative service providers for comparable services in the same geographic location. The Advisor allocates the cost of such services to the Company based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. The Company’s board of directors reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of administrative expenses among the Company and certain affiliates of the Advisor. The Company’s board of directors then assesses the reasonableness of such reimbursements for expenses allocated to it based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party service providers known to be available. In addition, the Company’s board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company’s board of directors compares the total amount paid to the Advisor for such services as a percentage of the Company’s net assets to the same ratio as reported by other comparable BDCs. The administrative services provisions of the FSIC IV Advisor investment advisory and administrative services agreement were substantially similar to the administrative services provisions of the investment advisory and administrative services agreement.

Shares of Class T common stock are subject to annual distribution fees of 1.00% of the estimated value of such shares, as determined in accordance with applicable rules of The Financial Industry Regulatory Authority, Inc., or FINRA. The annual distribution fees are paid by the Company to FS Investment Solutions, LLC, or FS Investment Solutions or the dealer manager, pursuant to a distribution plan adopted by the Company in compliance with Rules 12b-1 and 17d-3 under the 1940 Act, as if those rules applied to the Company. Among other requirements, such plan must be approved annually by a vote of the Company’s board of directors, including the directors who are not “interested persons” as defined in the 1940 Act and have no direct or indirect financial interest in the operation of such plan or in any agreements related to such plan.

Except for Class T shares purchased by the principal of the Advisor, members of the Company’s board of directors and other individuals and entities affiliated with the Advisor, or through investment advisors whose contracts for investment advisory and related services include a fixed or “wrap” fee or other asset-based fee arrangement, annual distribution fees are expected to be reallowed to selected broker-dealers and financial representatives, unless noted in the table below. The annual distribution fees are intended to compensate the dealer manager and its affiliates, selected broker-dealers and financial representatives for services rendered and expenses incurred in connection with the ongoing marketing, sale and distribution of such shares.

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FS Investment Corporation IV

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

Note 4. Related Party Transactions (continued)

The annual distribution fees accrue daily commencing upon the initial sale of shares of common stock in the Company’s continuous public offering until an investor reaches the sales charge cap, as defined below. The accruals as of and for the nine months ended September 30, 2019 and 2018 reflect amounts beginning with the initial sale of shares of common stock in the Company’s continuous public offering through September 30, 2019 and 2018, respectively. The annual distribution fees are payable with respect to all shares of Class T common stock, other than shares issued under the DRP. The annual distribution fees will terminate for all Class T stockholders upon a liquidity event. In addition, the Company will stop paying the annual distribution fees with respect to any outstanding Class T share when the total underwriting compensation from the upfront selling commissions, dealer manager fees and annual distribution fees attributable to any share equals 7.25% of gross offering proceeds, or the sales charge cap. The sales charge cap applicable to certain shares, including shares sold prior to January 25, 2017, will be reduced by the amount of any upfront sales load that is waived for such shares or to otherwise account for any lower upfront sales load paid by an investor with respect to such shares.

The annual distribution fees for all Class T shares currently will terminate upon the earliest of (i) any Class T share purchased after January 25, 2017 reaching the applicable sales charge cap, (ii) the Company’s dealer manager advising the Company that the aggregate underwriting compensation payable from all sources (determined in accordance with applicable FINRA rules) would be in excess of 10% of the gross proceeds of this offering and (iii) a liquidity event.

The following table describes the fees and expenses the Company accrued under the FSIC IV Advisor investment advisory and administrative services agreement and the investment advisory and administrative services agreement and fees that FS Investment Solutions received pursuant to the Company’s distribution plan during the three and nine months ended September 30, 2019 and 2018:

			Three Months Ended September 30,						Nine Months Ended September 30,
Related Party	Source	Description	2019			2018			2019			2018
FSIC IV Advisor and the Advisor	FSIC IV Advisor Investment Advisory and Administrative Services Agreement and the Investment Advisory and Administrative Services Agreement	Base Management Fees(1)		$	1,497		$	1,365		$	4,298		$	4,405
FSIC IV Advisor and the Advisor	FSIC IV Advisor Investment Advisory and Administrative Services Agreement and the Investment Advisory and Administrative Services Agreement	Subordinated Incentive Fee on Income(2)		$	848		$	213		$	3,189		$	585
FSIC IV Advisor and the Advisor	FSIC IV Advisor Investment Advisory and Administrative Services Agreement and the Investment Advisory and Administrative Services Agreement	Capital Gains Incentive Fees(3)			—		$	150			—		$	(764)
FSIC IV Advisor and the Advisor	FSIC IV Advisor Investment Advisory and Administrative Services Agreement and the Investment Advisory and Administrative Services Agreement	Administrative Services Expenses(4)		$	126		$	123		$	344		$	354
FS Investment Solutions	Distribution Plan	Distribution Fees(5)		$	61		$	39		$	170		$	118

(1)

FSIC IV Advisor contractually agreed, effective February 1, 2017, to permanently waive 0.25% of its base management fee to which it is entitled under the FSIC IV Advisor investment advisory and administrative services agreement so that the fee received equaled 1.75% of the average value of the Company’s weekly gross assets. Under the investment advisory and administrative services agreement, the base management fee is equal to 1.50% of the average value of the Company’s weekly gross assets and the Advisor is not waiving any portion of such fee. As a result, the amounts shown for the three and nine months ended September 30, 2018 are net of waivers of $0 and $253, respectively. During the nine months ended September 30, 2019 and 2018, $4,158 and $4,636, respectively, in base management fees were paid to the Advisor and/or FSIC IV Advisor. As of September 30, 2019, $1,497 in base management fees were payable to the Advisor.

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FS Investment Corporation IV

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

Note 4. Related Party Transactions (continued)

(2)

During the nine months ended September 30, 2019 and 2018, $3,244 and $372, respectively, of subordinated incentive fees on income were paid to the Advisor. As of September 30, 2019, a subordinated incentive fee on income of $848 was payable to the Advisor.

(3)

During the nine months ended September 30, 2019, the Company did not accrue capital gains incentive fees based on the performance of its portfolio. During the nine months ended September 30, 2018, the Company reversed $764 of capital gains incentive fees previously accrued based on the performance of its portfolio. As of September 30, 2019, the Company did not accrue any capital gains incentive fees. As of December 31, 2018, the Company had reversed $1,742 in capital gains incentive fees previously accrued based on the performance of its portfolio. No capital gains incentive fees are actually payable by the Company with respect to unrealized gains unless and until those gains are actually realized. The Company did not pay capital gains incentive fees during the nine months ended September 30, 2019. See Note 2 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees.

(4)

During the nine months ended September 30, 2019 and 2018, $241 and $195, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by the Advisor or FSIC IV Advisor and the remainder related to other reimbursable expenses, including reimbursement of fees related to transactional expenses for prospective investments, such as fees and expenses associated with performing due diligence reviews of investments that do not close, often referred to as “broken deal” costs. Broken deal costs were $30 for the nine months ended September 30, 2019. The Company paid $277 and $310 in administrative services expenses to the Advisor and FSIC IV Advisor during the nine months ended September 30, 2019 and 2018, respectively.

(5)

Represents the distribution fees retained by FS Investment Solutions and not re-allowed to selected broker-dealers or financial representatives.

Potential Conflicts of Interest

The members of the senior management and investment teams of the Advisor serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as the Company does, or of investment vehicles managed by the same personnel. For example, the Advisor is the investment adviser to FS KKR Capital Corp., FS Investment Corporation II, FS Investment Corporation III and Corporate Capital Trust II, and the officers, managers and other personnel of the Advisor may serve in similar or other capacities for the investment advisers to future investment vehicles affiliated with FS Investments or KKR Credit. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the Company’s best interests or in the best interest of the Company’s stockholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles.

Co-Investment 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, or the FS Order, 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 IV Advisor, including FS Energy and Power Fund, FS KKR Capital Corp., FS Investment Corporation II, FS Investment Corporation III, FS Investment Corporation IV and any future BDCs that are advised by FSIC IV Advisor or its affiliated investment advisers. However, in connection with the investment advisory relationship with the Advisor, and in an effort to mitigate potential future conflicts of interest, the Company’s board of directors authorized and directed that the Company (i) withdraw from the FS Order, except with respect to any transaction in which the Company participated in reliance on the FS Order prior to April 9, 2018, and (ii) rely on an exemptive

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FS Investment Corporation IV

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

Note 4. Related Party Transactions (continued)

relief order, dated April 3, 2018, that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Advisor or KKR Credit, with certain affiliates of the Advisor.

Note 5. Distributions

The following table reflects the cash distributions per share that the Company has declared on its common stock during the nine months ended September 30, 2019 and 2018:

	Distribution(1)
For the Three Months Ended	Per Share			Amount
Fiscal 2018
March 31, 2018		$	0.17452		$	5,247
June 30, 2018			0.17545			5,562
September 30, 2018			0.17595			5,545
Total		$	0.52592		$	16,354
Fiscal 2019
March 31, 2019		$	0.17688		$	5,545
June 30, 2019			0.17758			5,579
September 30, 2019			0.17729			5,615
Total		$	0.53175		$	16,739

(1)

Distribution amounts and per share amounts shown are net of annual distribution fees, which began accruing on February 1, 2017. See Note 4 for a discussion regarding annual distribution fees.

The Company intends to declare regular cash distributions on a quarterly basis and pay such distributions on a monthly basis. On October 11, 2019, the Company’s board of directors declared a regular monthly cash distribution for October 2019 in the gross amount of $0.067258 per share. The gross amount declared includes the portion of the annual distribution fee amount, which is an expense of the Company and not paid to stockholders. These distributions, less the annual distribution fee amount, 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 DRP 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 DRP.

On October 13, 2017, the Company amended and restated its DRP, or the amended DRP, which first applied to the reinvestment of cash distributions paid on or after November 29, 2017. Under the prior DRP, cash distributions to participating stockholders were reinvested in additional shares of the Company’s common stock at a purchase price equal to the net offering price in effect on the date of issuance. Under the amended DRP, 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

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FS Investment Corporation IV

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

Note 5. Distributions (continued)

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 DRP 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 has suspended the DRP with respect to any distributions with a record date between December 1, 2019 and the closing of the Mergers.

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 pursuant to its DRP, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets and dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions (i.e., paid from ordinary income, paid from net capital gains on the sale of securities, and/or a return of capital, which is a nontaxable distribution) will be mailed to the Company’s stockholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all. No portion of the distribution paid during the nine months ended September 30, 2019 and 2018 was funded through the reimbursement of operating expenses by FS Investments or the Advisor.

The following table reflects the sources of the cash distributions paid to stockholders on a tax basis that the Company has paid on its common stock during the nine months ended September 30, 2019 and 2018:

FS Investment Corp IV 10-Q