TABLE OF CONTENTS

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: 814-01047

FS Investment Corporation III

(Exact name of registrant as specified in its charter)

	Maryland			90-0994912
	(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) 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 293,921,821 shares of the registrant’s 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		28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		60
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		77
ITEM 4. CONTROLS AND PROCEDURES		78
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		80
ITEM 1A. RISK FACTORS		80
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		80
ITEM 3. DEFAULTS UPON SENIOR SECURITIES		80
ITEM 4. MINE SAFETY DISCLOSURES		80
ITEM 5. OTHER INFORMATION		80
ITEM 6. EXHIBITS		80
SIGNATURES		86

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PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

FS Investment Corporation III

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

	September 30, 2019 (Unaudited)			December 31, 2018
Assets
Investments, at fair value
Non-controlled/unaffiliated investments (amortized cost—$3,812,963 and $3,710,247, respectively)		$	3,681,159		$	3,574,417
Non-controlled/affiliated investments (amortized cost—$38,477 and $86,851, respectively)			23,132			36,866
Total investments, at fair value (amortized cost—$3,851,440 and $3,797,098, respectively)			3,704,291			3,611,283
Cash			80,028			65,501
Foreign currency, at fair value (cost—$2,311 and $1,830, respectively)			2,305			1,847
Collateral held at broker for open interest rate swap contracts			25,920			—
Due from counterparty			36,038			128,764
Receivable for investments sold and repaid			9,986			1,028
Interest receivable			38,124			30,126
Deferred financing costs			7,391			4,524
Receivable due on total return swap(1)			798			1,071
Receivable on interest rate swaps			1,726			259
Prepaid expenses and other assets			161			39
Total assets		$	3,906,768		$	3,844,442
Liabilities
Unrealized depreciation on total return swap(1)		$	5,974		$	22,062
Unrealized depreciation on interest rate swaps			20,920			2,614
Payable for investments purchased			197,799			367,728
Repurchase agreement payable (net of deferred financing costs of $0 and $214, respectively)(1)			—			299,786
Credit facilities payable (net of deferred financing costs of $1,697 and $2,092, respectively)(1)			1,455,357			897,502
Stockholder distributions payable			9,952			9,401
Management fees payable			14,166			13,300
Subordinated income incentive fees payable(2)			5,835			9,525
Administrative services expense payable			1,321			425
Interest payable(1)			14,735			13,008
Interest rate swap income payable			1,956			261
Directors’ fees payable			113			215
Other accrued expenses and liabilities			4,002			1,644
Total liabilities			1,732,130			1,637,471
Commitments and contingencies(3)
Stockholders’ equity
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding			—			—
Common stock, $0.001 par value, 550,000,000 shares authorized, 292,986,312 and 290,353,680 shares issued and outstanding, respectively			293			290
Capital in excess of par value			2,546,626			2,526,632
Retained earnings (accumulated deficit)			(372,281)			(319,951)
Total stockholders’ equity			2,174,638			2,206,971
Total liabilities and stockholders’ equity		$	3,906,768		$	3,844,442
Net asset value per share of common stock at period end		$	7.42		$	7.60

(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.

(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 III

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
From non-controlled/unaffiliated investments:
Interest income		$	76,891		$	71,536		$	247,081		$	221,286
Paid-in-kind interest income			7,347			10,424			17,240			22,939
Fee income			5,374			8,659			16,437			15,823
Dividend income			659			353			915			430
From non-controlled/affiliated investments:
Interest income			569			1,225			1,582			3,287
Paid-in-kind interest income			414			559			1,043			982
Fee income			2			388			23			871
Total investment income			91,256			93,144			284,321			265,618
Operating expenses
Management fees(1)			14,166			13,724			43,201			47,248
Subordinated income incentive fees(2)			5,835			12,827			29,644			25,631
Administrative services expenses			1,325			919			2,522			2,435
Stock transfer agent fees			351			346			1,154			1,124
Accounting and administrative fees			277			274			787			834
Interest expense			19,122			17,709			61,185			48,961
Directors’ fees			97			200			288			913
Other general and administrative expenses			3,089			743			4,712			2,249
Operating expenses			44,262			46,742			143,493			129,395
Management fees waiver(1)			—			—			—			(2,594)
Net expenses			44,262			46,742			143,493			126,801
Net investment income			46,994			46,402			140,828			138,817
Realized and unrealized gain/loss
Net realized gain (loss) on investments:
Non-controlled/unaffiliated investments			(2,580)			2,882			(33,244)			(20,152)
Non-controlled/affiliated investments			—			—			(32,809)			(29,568)
Net realized gain (loss) on total return swap(3)			1,643			4,021			(13,641)			14,258
Net realized gain (loss) on interest rate swaps			(435)			—			(435)			—
Net realized gain (loss) on foreign currency			219			(516)			254			(290)
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/unaffiliated investments			(32,424)			(25,549)			4,026			(46,387)
Non-controlled/affiliated investments			311			(174)			34,640			22,090
Net change in unrealized appreciation (depreciation) on total return swap(3)			(3,091)			939			16,088			(6,246)
Net change in unrealized appreciation (depreciation) on interest rate swaps			(2,327)			—			(18,306)			—
Net change in unrealized gain (loss) on foreign currency			2,956			216			2,145			(253)
Total net realized gain (loss) and unrealized appreciation (depreciation)			(35,728)			(18,181)			(41,282)			(66,548)
Net increase (decrease) in net assets resulting from operations		$	11,266		$	28,221		$	99,546		$	72,269
Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)		$	0.04		$	0.10		$	0.34		$	0.25
Weighted average shares outstanding			292,059,888			288,969,053			290,145,165			289,044,461

(1)

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

(2)

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

(3)

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

See notes to unaudited consolidated financial statements.

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FS Investment Corporation III

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		$	46,994		$	46,402		$	140,828		$	138,817
Net realized gain (loss) on investments, total return swap, interest rate swaps and foreign currency(1)			(1,153)			6,387			(79,875)			(35,752)
Net change in unrealized appreciation (depreciation) on investments, total return swap and interest rate swaps			(37,531)			(24,784)			36,448			(30,543)
Net change in unrealized gain (loss) on foreign currency			2,956			216			2,145			(253)
Net increase in net assets resulting from operations			11,266			28,221			99,546			72,269
Stockholder distributions(2)
Distributions to stockholders			(50,946)			(50,481)			(151,876)			(151,460)
Net decrease in net assets resulting from stockholder distributions			(50,946)			(50,481)			(151,876)			(151,460)
Capital share transactions(3)
Reinvestment of stockholder distributions			21,180			22,997			64,344			70,953
Repurchases of common stock			—			(23,677)			(44,347)			(72,893)
Net increase (decrease) in net assets resulting from capital share transactions			21,180			(680)			19,997			(1,940)
Total increase (decrease) in net assets			(18,500)			(22,940)			(32,333)			(81,131)
Net assets at beginning of period			2,193,138			2,330,533			2,206,971			2,388,724
Net assets at end of period		$	2,174,638		$	2,307,593		$	2,174,638		$	2,307,593

(1)

See Note 7 for a discussion of these financial instruments.

(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 III

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		$	99,546		$	72,269
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments			(1,203,449)			(1,089,493)
Paid-in-kind interest			(18,283)			(23,921)
Proceeds from sales and repayments of investments			1,108,376			1,133,149
Net realized (gain) loss on investments			66,053			49,720
Net change in unrealized (appreciation) depreciation on investments			(38,666)			24,297
Net change in unrealized (appreciation) depreciation on total return swap			(16,088)			6,246
Net change in unrealized (appreciation) depreciation on interest rate swaps			18,306			—
Accretion of discount			(7,039)			(3,308)
Amortization of deferred financing costs			1,940			2,063
Net change in unrealized (gain) loss on borrowings in foreign currency			(2,168)			—
(Increase) decrease in due from counterparty			92,726			(16,684)
(Increase) decrease in receivable for investments sold and repaid			(8,958)			(25,895)
(Increase) decrease in interest receivable			(7,998)			1,075
(Increase) decrease in receivable due on total return swap			273			(4,945)
(Increase) decrease in receivable on interest rate swaps			(1,467)			—
(Increase) decrease in prepaid expenses and other assets			(122)			173
Increase (decrease) in payable for investments purchased			(169,929)			(17,297)
Increase (decrease) in management fees payable			866			(3,291)
Increase (decrease) in subordinated income incentive fees payable			(3,690)			(1,660)
Increase (decrease) in administrative services expense payable			896			577
Increase (decrease) in interest rate swap income payable			1,695			—
Increase (decrease) in interest payable(1)			1,727			1,422
Increase (decrease) in directors’ fees payable			(102)			(6)
Increase (decrease) in other accrued expenses and liabilities			2,358			(921)
Net cash provided by (used in) operating activities			(83,197)			103,570
Cash flows from financing activities
Repurchases of common stock			(44,347)			(72,893)
Distributions paid			(86,981)			(71,303)
Borrowings under credit facilities(1)			965,774			715,521
Repayments of credit facilities(1)			(706,146)			(868,503)
Deferred financing costs paid			(4,198)			(6,406)
Net cash provided by (used in) financing activities			124,102			(303,584)
Total increase (decrease) in cash			40,905			(200,014)
Cash, restricted cash and foreign currency at beginning of period			67,348			368,344
Cash, restricted cash and foreign currency at end of period(2)		$	108,253		$	168,330
Supplemental disclosure
Non-cash purchase of investments		$	(52,880)		$	(167,082)
Non-cash sales of investments		$	52,880		$	167,082
Distributions reinvested		$	64,344		$	70,953
Excise and state taxes paid		$	128		$	573

(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 $46,117 and $35,675, respectively, in interest expense on the credit facilities and $11,401 and $9,801, respectively, in interest expense pursuant to the repurchase agreement.

(2)

As of September 30, 2019 and 2018, balance includes cash of $82,333 and $168,330, respectively and restricted cash and collateral of $25,920 and $0, respectively.

See notes to unaudited consolidated financial statements.

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FS Investment Corporation III

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—119.5%
5 Arch Income Fund 2, LLC	(i)(n)	Diversified Financials	10.5%			11/18/23		$	113,307		$	113,307		$	113,062
5 Arch Income Fund 2, LLC	(i)(j)(n)	Diversified Financials	10.5%			11/18/23			35,092			35,092			35,017
Accuride Corp	(q)(r)	Capital Goods	L+525		1.0%	11/17/23			4,665			3,915			3,945
Acosta Holdco Inc	(k)(l)(q)	Commercial & Professional Services	L+325		1.0%	9/26/21			14,183			10,525			4,450
Advantage Sales & Marketing Inc	(q)	Commercial & Professional Services	L+325		1.0%	7/23/21			16,695			15,158			15,633
All Systems Holding LLC	(f)(g)(h)	Commercial & Professional Services	L+625		1.0%	10/31/23			69,277			69,277			69,970
All Systems Holding LLC	(j)	Commercial & Professional Services	L+625		1.0%	10/31/23			11,970			11,970			12,090
Alstom SA	(i)(q)	Transportation	L+450		1.0%	8/29/21			6,189			5,954			5,988
Altus Power America Inc		Energy	L+750		1.5%	9/30/21			3,750			3,750			3,642
American Tire Distributors Inc	(q)	Automobiles & Components	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	9/1/23			1,447			1,365			1,436
American Tire Distributors Inc	(q)	Automobiles & Components	L+750		1.0%	9/2/24			10,841			9,642			9,584
Ammeraal Beltech Holding BV	(i)(q)	Capital Goods	E+375			7/30/25		€	1,268			1,466			1,339
Apex Group Limited	(i)(j)	Diversified Financials	L+650		1.3%	6/15/23		$	1,957			1,911			1,955
Apex Group Limited	(i)	Diversified Financials	L+650		1.3%	6/15/25			6,350			6,244			6,344
Apex Group Limited	(i)	Diversified Financials	L+700		1.0%	6/15/25			23,278			23,189			23,256
Apex Group Limited	(f)(i)	Diversified Financials	L+700		1.3%	6/15/25			13,130			12,904			13,117
Apex Group Limited	(i)	Diversified Financials	L+700		1.5%	6/15/25		£	19,449			24,703			24,041
Arrotex Australia Group Pty Ltd	(i)	Pharmaceuticals, Biotechnology & Life Sciences	B+525		1.0%	7/10/24		A$	40,732			27,950			27,068
Aspect Software Inc	(j)	Software & Services	L+500		1.0%	7/15/23		$	2,422			2,422			2,422
Aspect Software Inc	(f)	Software & Services	L+500		1.0%	1/15/24			15,595			13,943			14,094
ATX Networks Corp	(g)(i)(q)	Technology Hardware & Equipment	L+600, 1.0% PIK (1.0% Max PIK)		1.0%	6/11/21			49,218			48,109			46,511
AVF Parent LLC	(k)(l)	Retailing	L+725		1.3%	3/1/24			28,868			28,632			16,422
Belk Inc	(q)	Retailing	L+475		1.0%	12/12/22			21,705			18,102			15,965
Borden Dairy Co	(f)(g)	Food, Beverage & Tobacco	L+750		1.0%	7/6/23			48,125			48,125			41,922
Brand Energy & Infrastructure Services Inc	(q)	Capital Goods	L+425		1.0%	6/21/24			11,450			10,968			11,221
Caprock Midstream LLC	(q)	Energy	L+475			11/3/25			5,005			4,551			4,521
CEPSA Holdco (Matador Bidco)	(i)(q)(r)	Energy	L+475			6/19/26			2,154			2,132			2,162
CHS/Community Health Systems, Inc.	(e)(i)(q)(p)	Health Care Equipment & Services	8.0%			3/15/26			8,299			8,063			8,299
Conservice LLC	(j)	Consumer Services	L+525			11/29/24			1,446			1,434			1,437

See notes to unaudited consolidated financial statements.

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FS Investment Corporation III

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)
Conservice LLC		Consumer Services	L+525			11/29/24		$	29,368		$	29,114		$	29,319
Conservice LLC	(j)	Consumer Services	L+525			11/29/24			1,229			1,224			1,227
Constellis Holdings LLC	(g)	Capital Goods	L+625		1.0%	4/15/22			39,924			39,441			33,813
CSafe Global		Capital Goods	L+650		1.0%	11/1/21			1,043			1,043			1,038
CSafe Global	(j)	Capital Goods	L+650		1.0%	11/1/21			1,565			1,565			1,557
CSafe Global	(f)	Capital Goods	L+650		1.0%	10/31/23			24,773			24,773			24,649
CSafe Global	(j)	Capital Goods	L+650		1.0%	10/31/23			5,217			5,217			5,191
CSM Bakery Products	(q)(r)	Food, Beverage & Tobacco	L+400		1.0%	7/3/20			6,354			6,048			5,941
Dayton Superior Corp	(q)	Materials	L+800, 6.0% PIK (6.0% Max PIK)		1.0%	11/15/21			3,560			2,844			1,869
Diamond Resorts International Inc	(f)(q)	Consumer Services	L+375		1.0%	9/2/23			37,607			35,605			36,724
Distribution International Inc	(q)	Retailing	L+575		1.0%	12/15/23			368			330			346
Eagle Family Foods Inc		Food, Beverage & Tobacco	L+650		1.0%	6/14/23			1,481			1,468			1,424
Eagle Family Foods Inc	(j)	Food, Beverage & Tobacco	L+650		1.0%	6/14/23			2,026			2,009			1,949
Eagle Family Foods Inc	(f)	Food, Beverage & Tobacco	L+675		1.0%	6/14/24			23,088			22,872			22,205
Eagleclaw Midstream Ventures LLC	(q)	Energy	L+425		1.0%	6/24/24			5,481			5,050			5,052
Electronics For Imaging Inc	(q)	Technology Hardware & Equipment	L+500			7/23/26			13,327			12,673			12,461
Empire Today LLC	(f)(g)	Retailing	L+650		1.0%	11/17/22			43,763			43,763			43,773
Entertainment Benefits Group LLC		Media & Entertainment	L+575		1.0%	9/30/24			504			504			504
Entertainment Benefits Group LLC	(j)	Media & Entertainment	L+575		1.0%	9/30/24			2,017			2,017			2,017
Entertainment Benefits Group LLC	(f)	Media & Entertainment	L+575		1.0%	9/30/25			15,085			14,897			14,897
Fairway Group Holdings Corp	(s)	Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)			8/28/23			4,243			4,108			4,243
Fairway Group Holdings Corp	(s)	Food & Staples Retailing	12.0% PIK (12.0% Max PIK)		1.0%	11/27/23			7,601			7,601			6,973
Fairway Group Holdings Corp	(k)(l)(s)	Food & Staples Retailing	10.0% PIK (10.0% Max PIK)		1.0%	11/28/23			4,786			3,916			209
FHC Health Systems Inc	(q)	Health Care Equipment & Services	L+400		1.0%	12/23/21			8,768			7,530			8,775
Foresight Energy LLC	(i)(k)(l)(q)	Materials	L+575		1.0%	3/28/22			12,128			8,966			6,681
Fox Head Inc	(f)	Consumer Durables & Apparel	L+850		1.0%	12/19/20			6,518			6,518			6,133
FullBeauty Brands Holdings Corp		Retailing	L+1,000		1.0%	2/7/22			310			310			302
FullBeauty Brands Holdings Corp	(q)	Retailing	L+900		1.0%	2/7/24			1,808			1,767			949
Greystone Equity Member Corp	(i)	Diversified Financials	L+725		3.8%	4/1/26			109,692			109,692			108,732
Greystone Equity Member Corp	(i)(j)	Diversified Financials	L+725		3.8%	4/1/26			9,558			9,558			9,474
HM Dunn Co Inc	(k)(l)(s)	Capital Goods	L+875 PIK (L+875 Max PIK)		1.0%	6/30/21			7,150			5,786			2,511
HM Dunn Co Inc	(s)	Capital Goods	15.0% PIK (15.0% Max PIK)			6/30/21			416			416			416

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)
HM Dunn Co Inc	(j)(s)	Capital Goods	15.0% PIK (15.0% Max PIK)			6/30/21		$	247		$	247		$	247
Hudson Technologies Co	(i)	Commercial & Professional Services	L+1,025		1.0%	10/10/23			7,769			7,711			4,331
Icynene Group Ltd	(f)(g)(h)	Materials	L+700		1.0%	11/30/24			75,653			75,653			75,884
Industria Chimica Emiliana Srl	(i)	Pharmaceuticals, Biotechnology & Life Sciences	L+650			6/30/26		€	44,205			47,125			46,761
Industria Chimica Emiliana Srl	(i)(j)	Pharmaceuticals, Biotechnology & Life Sciences	L+650			6/30/26			6,271			6,863			6,634
Ivanti Software Inc	(q)	Software & Services	L+425		1.0%	1/20/24		$	7,370			7,341			7,357
J S Held LLC		Insurance	L+600		1.0%	7/1/25			236			233			233
J S Held LLC	(j)	Insurance	L+600		1.0%	7/1/25			3,132			3,102			3,100
J S Held LLC	(g)	Insurance	L+600		1.0%	7/1/25			29,359			29,085			29,065
J S Held LLC	(j)	Insurance	L+600		1.0%	7/1/25			7,207			7,207			7,134
JC Penney Corp Inc	(i)(q)	Retailing	L+425		1.0%	6/23/23			2,274			1,950			1,987
Jo-Ann Stores Inc	(q)	Retailing	L+500		1.0%	10/20/23			3,019			2,161			2,092
Jostens Inc	(q)	Consumer Services	L+550			12/19/25			3,941			3,841			3,937
JSS Holdings Ltd	(f)(g)(h)	Capital Goods	L+800, 0.0% PIK (2.5% Max PIK)		1.0%	3/31/23			65,951			65,518			67,930
Kodiak BP LLC	(f)(g)(h)	Capital Goods	L+725		1.0%	12/1/24			95,522			95,522			94,566
Kodiak BP LLC	(j)	Capital Goods	L+725		1.0%	12/1/24			5,609			5,609			5,553
Laird PLC	(i)(q)(r)	Technology Hardware & Equipment	L+450			7/9/25			460			423			424
LBM Borrower LLC	(f)(q)	Capital Goods	L+375		1.0%	8/20/22			5,282			4,986			5,286
LD Intermediate Holdings Inc	(q)	Software & Services	L+588		1.0%	12/9/22			9,125			8,302			9,072
Lipari Foods LLC	(h)	Food & Staples Retailing	L+588		1.0%	1/6/25			103,337			102,571			103,220
Lipari Foods LLC	(j)	Food & Staples Retailing	L+588		1.0%	1/6/25			21,437			21,437			21,412
Mitel US Holdings Inc	(q)	Technology Hardware & Equipment	L+450			11/30/25			228			221			213
Monitronics International Inc	(q)(r)	Commercial & Professional Services	L+650		1.3%	3/29/24			17,416			16,605			16,093
Monitronics International Inc	(q)	Commercial & Professional Services	L+500		1.5%	7/3/24			4,446			4,446			4,457
Monitronics International Inc	(j)(q)	Commercial & Professional Services	L+500		1.5%	7/3/24			25,541			25,541			25,605
Monitronics International Inc	(q)	Commercial & Professional Services	L+500		1.5%	7/3/24			15,195			15,195			15,328
Multi-Color Corp	(i)(q)	Commercial & Professional Services	6.8%			7/15/26			5,773			5,815			6,015
Murray Energy Corp		Energy	L+900		1.0%	2/12/21			9,258			9,217			9,273
NaviHealth Inc.	(q)	Health Care Equipment & Services	L+500			8/1/25			9,998			9,900			9,973
North Haven Cadence Buyer Inc	(j)	Consumer Services	L+500		1.0%	9/2/21			750			750			750
North Haven Cadence Buyer Inc		Consumer Services	L+650		1.0%	9/2/22			4,063			4,063			4,048

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)
North Haven Cadence Buyer Inc	(j)	Consumer Services	L+650		1.0%	9/2/22		$	5,083		$	5,083		$	5,064
North Haven Cadence Buyer Inc	(f)(g)	Consumer Services	L+794		1.0%	9/2/22			17,686			17,687			17,620
One Call Care Management Inc	(q)	Insurance	L+400		1.0%	11/27/20			56			50			49
One Call Care Management Inc	(q)	Insurance	L+525		1.0%	11/27/22			1,287			1,098			1,019
P2 Energy Solutions, Inc.	(q)	Software & Services	L+400		1.0%	10/30/20			2,399			2,370			2,378
PAE Holding Corp	(q)	Capital Goods	L+550		1.0%	10/20/22			2,271			2,282			2,281
Peak 10 Holding Corp	(q)	Telecommunication Services	L+350			8/1/24			11,402			9,856			9,884
PF Chang’s China Bistro Inc	(q)	Consumer Services	L+625			3/1/26			8,611			8,530			7,362
PHRC License LLC	(f)	Consumer Services	L+850, 0.3% PIK (4.3% Max PIK)		1.5%	4/28/22			16,593			16,593			16,697
Power Distribution Inc		Capital Goods	L+725		1.3%	1/25/23			18,644			18,644			16,757
Production Resource Group LLC	(f)(h)	Media & Entertainment	L+700		1.0%	8/21/24			173,008			173,008			152,463
Project Marron	(i)	Consumer Services	L+625			7/3/25		C$	15,648			10,209			10,557
Project Marron	(i)	Consumer Services	L+625			7/2/25		A$	12,291			9,369			9,281
Propulsion Acquisition LLC	(f)(h)(q)	Capital Goods	L+600		1.0%	7/13/21		$	54,140			53,455			53,598
PSKW LLC	(f)(g)(h)	Health Care Equipment & Services	L+769		1.0%	11/25/21			172,364			172,262			172,364
Reliant Rehab Hospital Cincinnati LLC	(g)	Health Care Equipment & Services	L+675		1.0%	9/2/24			50,766			50,366			49,905
Roadrunner Intermediate Acquisition Co LLC	(f)(g)(h)	Health Care Equipment & Services	L+675		1.0%	3/15/23			90,215			90,215			87,799
Safariland LLC		Capital Goods	L+725		1.1%	11/18/23			955			955			917
Safariland LLC	(f)	Capital Goods	L+775		1.1%	11/18/23			41,938			41,938			40,260
Savers Inc		Retailing	L+650, 0.8% PIK (0.8% Max PIK)		1.5%	3/28/24			22,584			22,326			22,357
Savers Inc		Retailing	L+700, 0.8% PIK (0.8% Max PIK)		1.0%	3/28/24		C$	31,363			23,094			23,879
Sequa Corp	(q)(r)	Materials	L+500		1.0%	11/28/21		$	24,053			23,744			23,888
Sequel Youth & Family Services LLC	(g)	Health Care Equipment & Services	L+700		1.0%	9/1/23			2,254			2,254			2,277
Sequel Youth & Family Services LLC	(f)	Health Care Equipment & Services	L+800			9/1/23			13,000			13,000			13,130
Sequential Brands Group Inc.	(f)	Consumer Durables & Apparel	L+875			2/7/24			96,542			94,891			95,697
SI Group Inc	(q)	Materials	L+475			10/15/25			793			771			773
SIRVA Worldwide Inc	(q)	Commercial & Professional Services	L+550			8/4/25			3,088			2,991			2,995
Smart & Final Stores LLC	(h)(i)(q)	Food & Staples Retailing	L+675			6/20/25			25,538			23,093			23,389
Smart Foodservice	(i)(q)	Food & Staples Retailing	L+475			6/20/26			2,894			2,866			2,909
Sorenson Communications LLC	(q)	Telecommunication Services	L+650			4/29/24			22,966			22,107			22,995

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)
Sungard Availability Services Capital Inc		Software & Services	L+750		1.0%	2/3/22		$	1,760		$	1,710		$	1,822
Sungard Availability Services Capital Inc	(j)	Software & Services	L+750		1.0%	2/3/22			1,760			1,710			1,822
Sutherland Global Services Inc	(i)(q)	Software & Services	L+538		1.0%	4/23/21			11,899			11,311			11,813
Swift Worldwide Resources Holdco Ltd		Energy	L+1,000, 1.0% PIK (1.0% Max PIK)		1.0%	7/20/21			17,507			17,507			17,507
Tangoe LLC	(g)	Software & Services	L+650		1.0%	11/28/25			43,723			43,325			43,775
Team Health Inc	(q)	Health Care Equipment & Services	L+275		1.0%	2/6/24			88			74			73
Torrid Inc	(f)	Retailing	L+675		1.0%	12/14/24			17,267			17,081			17,088
Total Safety US Inc	(q)	Capital Goods	L+600		1.0%	8/16/25			4,090			3,690			3,873
Trace3 Inc	(f)(g)	Software & Services	L+675		1.0%	8/3/24			37,248			37,248			36,550
Vertiv Group Corp	(q)	Technology Hardware & Equipment	L+400		1.0%	11/30/23			12,595			11,983			12,017
Virgin Pulse Inc	(f)(g)(h)	Software & Services	L+650		1.0%	5/22/25			67,396			66,932			66,938
Vivint Inc	(f)(q)	Commercial & Professional Services	L+500			4/1/24			20,770			19,943			20,406
Warren Resources Inc	(s)	Energy	L+1,000, 1.0% PIK (1.0% Max PIK)		1.0%	5/22/20			6,223			6,223			6,223
West Corp	(q)	Software & Services	L+350		1.0%	10/10/24			4,938			4,387			4,384
West Corp	(g)(q)	Software & Services	L+400		1.0%	10/10/24			19,650			18,060			17,611
Zeta Interactive Holdings Corp	(g)(h)	Software & Services	L+750		1.0%	7/29/22			71,286			71,287			71,999
Zeta Interactive Holdings Corp	(j)	Software & Services	L+750		1.0%	7/29/22			8,357			8,357			8,441
Total Senior Secured Loans—First Lien												2,828,003			2,759,133
Unfunded Loan Commitments												(160,325)			(160,325)
Net Senior Secured Loans—First Lien												2,667,678			2,598,808
Senior Secured Loans—Second Lien—17.9%
Advantage Sales & Marketing Inc	(q)	Commercial & Professional Services	L+650		1.0%	7/25/22			4,413			3,588			3,837
American Bath Group LLC	(q)	Capital Goods	L+975		1.0%	9/30/24			3,000			2,985			3,000
Ammeraal Beltech Holding BV	(g)(i)	Capital Goods	L+800			7/27/26			44,463			43,648			43,098
Arena Energy LP	(f)(g)	Energy	L+900, 4.0% PIK (4.0% Max PIK)		1.0%	1/24/21			26,665			26,665			26,536
athenahealth Inc	(h)	Health Care Equipment & Services	L+850			2/11/27			55,444			54,928			55,930
BCA Marketplace PLC	(i)(r)	Retailing	L+825			9/4/27		£	25,901			31,550			31,550
Bellatrix Exploration Ltd	(i)	Energy	8.5%			9/11/23		$	3,744			3,744			3,744
Bellatrix Exploration Ltd	(i)(k)(l)	Energy	8.5%			9/11/23			9,000			8,253			2,946

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)
Byrider Finance LLC		Automobiles & Components	L+1,000, 0.5% PIK (4.0% Max PIK)		1.3%	6/7/22		$	5,962		$	5,962		$	5,947
CDS US Intermediate Holdings Inc	(f)(i)(q)	Media & Entertainment	L+825		1.0%	7/10/23			18,000			16,312			16,632
Chisholm Oil & Gas Operating LLC		Energy	L+800		1.0%	3/21/24			16,000			16,000			16,160
Electronics For Imaging Inc	(q)	Technology Hardware & Equipment	L+900			7/23/27			3,332			3,168			3,082
Emerald Performance Materials LLC	(q)(r)	Materials	L+775		1.0%	8/1/22			5,107			5,079			5,043
Excelitas Technologies Corp	(q)	Technology Hardware & Equipment	L+750		1.0%	12/1/25			6,648			6,666			6,671
Fairway Group Holdings Corp	(k)(l)(s)	Food & Staples Retailing	4.0%, 11.0% PIK (11.0% Max PIK)		1.0%	2/24/24			4,283			3,436			—
Gruden Acquisition Inc	(h)(q)	Transportation	L+850		1.0%	8/18/23			10,000			9,749			9,946
LBM Borrower LLC	(f)(q)	Capital Goods	L+925		1.0%	8/20/23			32,387			31,669			31,881
Misys Ltd	(i)(q)(r)	Software & Services	L+725		1.0%	6/13/25			5,357			5,238			5,146
NEP Broadcasting LLC	(q)	Media & Entertainment	L+700			10/19/26			1,928			1,891			1,893
OEConnection LLC		Software & Services	L+825			9/25/27			18,398			18,215			18,214
One Call Care Management Inc	(g)(h)	Insurance	L+375, 6.0% PIK (6.0% Max PIK)		1.0%	4/11/24			2,890			2,868			2,359
OPE Inmar Acquisition Inc	(f)(q)	Software & Services	L+800		1.0%	5/1/25			15,000			15,000			14,086
Paradigm Acquisition Corp	(q)	Health Care Equipment & Services	L+750			10/26/26			1,812			1,796			1,803
Peak 10 Holding Corp	(q)	Telecommunication Services	L+725		1.0%	8/1/25			7,902			7,220			5,848
Pure Fishing Inc		Consumer Durables & Apparel	L+838		1.0%	12/31/26			39,804			39,431			34,702
Rise Baking Company	(f)	Food, Beverage & Tobacco	L+800		1.0%	8/9/26			15,292			15,154			15,032
Sequa Corp	(q)	Materials	L+900		1.0%	4/28/22			5,204			4,955			5,136
SIRVA Worldwide Inc	(q)	Commercial & Professional Services	L+950			8/3/26			2,826			2,424			2,459
SMG/PA	(q)	Consumer Services	L+700			1/23/26			942			929			956
Sorenson Communications LLC	(g)	Telecommunication Services	11.5% PIK (11.5% Max PIK)			4/30/25			8,983			9,209			8,983
Titan Energy LLC	(g)(k)(l)	Energy	L+1,300 PIK (L+1,300 Max PIK)		1.0%	2/23/20			45,287			33,111			449
WireCo WorldGroup Inc	(q)	Capital Goods	L+900		1.0%	9/30/24			5,797			5,718			5,739
Total Senior Secured Loans—Second Lien												436,561			388,808
Other Senior Secured Debt—4.7%
APTIM Corp	(q)	Diversified Financials	7.8%			6/15/25			4,928			4,928			3,524
Artesyn Embedded Technologies Inc	(e)(q)(p)	Technology Hardware & Equipment	9.8%			10/15/20			970			936			975
Black Swan Energy Ltd	(i)	Energy	9.0%			1/20/24			1,333			1,333			1,326
Diamond Resorts International Inc	(h)(q)	Consumer Services	7.8%			9/1/23			11,965			11,965			12,369
Enterprise Development Authority	(e)(q)(p)	Consumer Services	12.0%			7/15/24			3,854			3,999			4,239
Frontier Communications Corp	(e)(i)(q)(p)	Telecommunication Services	8.5%			4/1/26			12,305			11,932			12,335

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)
Genesys Telecommunications Laboratories Inc	(e)(q)(p)	Technology Hardware & Equipment	10.0%			11/30/24		$	1,409		$	1,541		$	1,527
JC Penney Corp Inc	(e)(i)(q)(p)	Retailing	5.7%			6/1/20			143			133			135
JW Aluminum Co	(q)	Materials	10.3%			6/1/26			759			759			803
Lycra	(e)(i)(q)(p)	Consumer Durables & Apparel	7.5%			5/1/25			7,756			7,760			7,000
MultiPlan Inc	(e)(q)(p)	Health Care Equipment & Services	7.1%			6/1/24			7,978			8,034			7,390
PAREXEL International Corp	(e)(k)(q)(p)	Pharmaceuticals, Biotechnology & Life Sciences	6.4%			9/1/25			87			84			80
Pattonair Holdings Ltd	(e)(i)(q)(p)	Capital Goods	9.0%			11/1/22			7,766			7,971			8,174
Ply Gem Holdings Inc	(e)(q)(p)	Capital Goods	8.0%			4/15/26			8,383			8,042			8,278
Sungard Availability Services Capital Inc	(h)	Software & Services	L+400, 2.5% PIK (2.5% Max PIK)		1.0%	11/3/22			9,200			9,200			9,200
Velvet Energy Ltd	(i)	Energy	9.0%			10/5/23			4,500			4,500			4,601
Vivint Inc	(e)(h)(q)(p)	Commercial & Professional Services	7.9%			12/1/22			12,886			12,774			12,918
Vivint Inc	(e)(q)(p)	Commercial & Professional Services	7.6%			9/1/23			8,911			8,243			7,975
Total Other Senior Secured Debt												104,134			102,849
Subordinated Debt—12.5%
All Systems Holding LLC		Commercial & Professional Services	10.0% PIK (10.0% Max PIK)			10/31/22			100			100			100
Ascent Resources Utica Holdings LLC / ARU Finance Corp	(e)(q)(p)	Energy	10.0%			4/1/22			19,500			19,500			19,592
athenahealth Inc		Health Care Equipment & Services	L+1,125 PIK (L+1,125 Max PIK)			2/11/27			30,193			30,193			30,388
Avantor Inc	(g)(h)(q)	Pharmaceuticals, Biotechnology & Life Sciences	9.0%			10/1/25			52,500			52,502			59,128
Byrider Finance LLC		Automobiles & Components	20.0% PIK (20.0% Max PIK)			3/31/22			353			353			353
Calumet Specialty Products	(e)(i)(q)(p)	Energy	7.8%			4/15/23			10,300			10,260			9,605
ClubCorp Club Operations Inc	(e)(q)(p)	Consumer Services	8.5%			9/15/25			12,478			12,075			10,513
Craftworks Rest & Breweries Group Inc		Consumer Services				11/1/24			1,317			1,305			1,180
Diamond Resorts International Inc	(e)(q)(p)	Consumer Services	10.8%			9/1/24			3,453			3,599			3,574
GFL Environmental Inc	(e)(i)(q)(p)	Commercial & Professional Services	8.5%			5/1/27			10,129			10,408			11,256
Hub International Ltd	(e)(q)(p)	Insurance	7.0%			5/1/26			4,037			3,977			4,163
Intelsat Jackson Holdings SA	(e)(i)(q)(p)	Media & Entertainment	5.5%			8/1/23			3,577			3,287			3,355
Ken Garff Automotive LLC	(e)(q)(p)	Retailing	7.5%			8/15/23			4,039			4,047			4,246
Kenan Advantage Group Inc	(q)	Transportation	7.9%			7/31/23			8,518			7,221			7,666

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)
LifePoint Hospitals Inc	(e)(q)(p)	Health Care Equipment & Services	9.8%		12/1/26		$	11,204		$	11,531		$	12,015
Montage Resources Corp	(e)(i)(q)(p)	Energy	8.9%		7/15/23			8,175			8,077			6,295
Nouryon (fka Akzo Nobel Specialty Chemicals)	(e)(i)(q)(p)	Materials	8.0%		10/1/26			7,256			7,232			7,274
Plastipak Holdings Inc	(e)(q)	Materials	6.3%		10/15/25			1,118			1,048			936
Quorum Health Corp	(e)(q)(p)	Health Care Equipment & Services	11.6%		4/15/23			2,630			2,622			2,374
SRS Distribution Inc	(e)(q)(p)	Capital Goods	8.3%		7/1/26			13,222			13,096			13,519
Stars Group Holdings BV	(e)(i)(q)(p)	Consumer Services	7.0%		7/15/26			2,770			2,770			2,957
Team Health Inc	(e)(q)(p)	Health Care Equipment & Services	6.4%		2/1/25			9,254			8,289			6,441
Vertiv Group Corp	(e)(q)(p)	Technology Hardware & Equipment	9.3%		10/15/24			18,663			18,329			18,080
Vivint Inc	(e)(h)(q)(p)	Commercial & Professional Services	8.8%		12/1/20			10,105			9,787			9,941
York Risk Services Group Inc	(g)(h)(q)	Insurance	8.5%		10/1/22			27,344			26,160			27,925
Total Subordinated Debt											267,768			272,876

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity	Principal Amount(c)/ Shares			Amortized Cost			Fair Value(d)
Asset Based Finance—11.8%
Abacus JV, Private Equity	(i)	Insurance						10,971,302		$	10,971		$	10,971
Altavair NewCo, Private Equity	(i)	Capital Goods						4,499,673			4,500			4,986
Altus Power America Inc, Preferred Stock	(o)	Energy	9.0%, 5.0% PIK (5.0% Max PIK)		10/3/23			1,107,723			1,108			1,108
Australis Maritime, Private Equity	(i)(k)	Transportation						4,631,335			4,631			4,631
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/30/25		$	1,102			1,041			1,086
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		4/30/25		$	7,007			6,618			6,902
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/3/25		$	1,448			1,368			1,426
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/29/25		$	1,363			1,288			1,343
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	74,065			69,957			72,954
Global Jet Capital LLC, Structured Mezzanine	(i)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		$	16,491			15,576			16,244
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	1,703			1,609			1,678
Global Jet Capital LLC, Structured Mezzanine	(i)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		$	13,107			12,380			12,910
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	6,341			5,989			6,245
Global Jet Capital LLC, Structured Mezzanine	(i)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		$	1,415			1,337			1,394
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		2/17/26		$	18,963			17,911			18,678
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		4/14/26		$	11,743			11,092			11,567

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)/ Shares			Amortized Cost			Fair Value(d)
Global Jet Capital LLC, Structured Mezzanine		Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/2/26		$	17,356		$	16,394		$	17,096
Global Jet Capital LLC, Preferred Stock	(k)	Commercial & Professional Services						52,964,946			52,965			3,972
Home Partners JV, Structured Mezzanine	(i)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		$	11,226			11,226			11,226
Home Partners JV, Structured Mezzanine	(i)(j)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		$	11,226			11,226			11,226
Home Partners JV, Common Stock	(i)(k)	Real Estate						5,613,013			5,613			5,801
Home Partners JV, Private Equity	(i)(k)(q)	Real Estate						302,870			303			21
Lenovo Group Ltd, Structured Mezzanine	(i)	Technology Hardware & Equipment	8.0%		6/22/22		€	3,975			4,520			4,335
Lenovo Group Ltd, Structured Mezzanine	(i)	Technology Hardware & Equipment	8.0%		6/22/22		$	8,354			8,354			8,354
Lenovo Group Ltd, Structured Mezzanine	(i)	Technology Hardware & Equipment	12.0%		6/22/22		€	2,529			2,876			2,759
Lenovo Group Ltd, Structured Mezzanine	(i)	Technology Hardware & Equipment	12.0%		6/22/22		$	5,316			5,316			5,316
NewStar Clarendon 2014-1A Class D	(i)(k)	Diversified Financials			1/25/27		$	8,310			4,915			3,809
Pretium Partners LLC P2, Structured Mezzanine	(i)	Real Estate	9.5%		5/29/25		$	12,161			12,161			12,276
Sofi Lending Corp, 2019-C R1	(i)	Diversified Financials			11/16/48		$	11,433			6,475			6,471
Toorak Capital Funding LLC, Membership Interest	(i)	Diversified Financials						292,466			292			292
Total Asset Based Finance											310,012			267,077
Unfunded Commitments											(11,226)			(11,226)
Net Asset Based Finance											298,786			255,851

Portfolio Company(a)	Footnotes	Industry	Rate(b)	Floor(b)	Maturity		Number of Shares		Cost			Fair Value(d)
Equity/Other—3.9%
All Systems Holding LLC, Common Stock	(k)	Commercial & Professional Services						600,099		$	581		$	701
ASG Technologies, Warrant	(k)	Software & Services				6/27/22		48,325			1,377			1,632
Aspect Software Inc, Common Stock	(f)(k)	Software & Services						844,096			1,369			1,304
Aspect Software Inc, Warrant	(f)(k)	Software & Services				1/15/24		842,769			—			—
ATX Networks Corp, Common Stock	(i)(k)	Technology Hardware & Equipment						83,488			134			77
Bellatrix Exploration Ltd, Warrant	(i)(k)	Energy				9/11/23		254,987			—			—
Byrider Finance LLC, Common Stock	(k)	Automobiles & Components						278			—			—
Chisholm Oil & Gas Operating LLC, Series A Units	(k)(m)	Energy						75,000			75			73
Crossmark Holdings Inc	(k)	Media & Entertainment						1,351			—			—
CSafe Global, Common Stock	(k)	Capital Goods						173,900			174			320
Empire Today LLC, Common Stock	(k)	Retailing						206			614			1,096
Fairway Group Holdings Corp, Common Stock	(k)(s)	Food & Staples Retailing						71,465			2,296			—

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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)
Fox Head Inc, Common Stock	(k)	Consumer Durables & Apparel						1,142,857		$	1,143		$	134
FullBeauty Brands Holdings Corp, Common Stock	(k)	Retailing						9,228			43			—
Harvey Industries Inc, Common Stock	(k)	Capital Goods						2,000,000			2,000			6,960
HM Dunn Co Inc, Preferred Stock, Series A	(k)(s)	Capital Goods						1,929			—			—
HM Dunn Co Inc, Preferred Stock, Series B	(k)(s)	Capital Goods						1,929			—			—
JHC Acquisition LLC, Common Stock	(k)	Capital Goods						8,068			8,068			9,681
JSS Holdings Ltd, Net Profits Interest	(k)	Capital Goods						24			—			706
JW Aluminum Co, Common Stock	(k)	Materials						41			—			—
JW Aluminum Co, Preferred Stock		Materials	12.5% PIK			2/15/28		1,003			5,945			13,954
North Haven Cadence Buyer Inc, Common Stock	(k)	Consumer Services						833,333			833			1,937
Power Distribution Inc, Common Stock	(k)	Capital Goods						1,294,287			1,109			129
Ridgeback Resources Inc, Common Stock	(i)(k)	Energy						827,156			5,082			4,185
Sequential Brands Group Inc., Common Stock	(k)(q)	Consumer Durables & Apparel						125,391			1,693			28
SSC (Lux) Limited S.a r.l., Common Stock	(i)(k)	Health Care Equipment & Services						113,636			2,273			3,245
Sungard Availability Services Capital Inc, Common Stock	(g)(h)(k)	Software & Services						160,071			11,187			10,211
Sunnova Energy International Inc, Common Stock	(k)(q)	Energy						292,511			3,291			3,144
Templar Energy LLC, Common Stock	(k)(m)(q)	Energy						129,829			1,104			81
Templar Energy LLC, Preferred Stock	(k)(q)	Energy						86,061			859			—
Titan Energy LLC, Common Stock	(k)(q)	Energy						72,739			2,299			2
Trace3 Inc, Common Stock	(k)	Software & Services						7,725			77			207
Warren Resources Inc, Common Stock	(k)(s)	Energy						998,936			4,695			2,557
White Star Petroleum LLC, Common Stock	(k)(m)	Energy						1,738,244			1,478			—
Zeta Interactive Holdings Corp, Preferred Stock, Series E-1	(k)	Software & Services						1,051,348			8,357			11,738
Zeta Interactive Holdings Corp, Preferred Stock, Series F	(k)	Software & Services						956,233			8,357			10,628
Zeta Interactive Holdings Corp, Warrant	(k)	Software & Services				4/20/27		143,435			—			369
Total Equity / Other											76,513			85,099
TOTAL INVESTMENTS—170.3%										$	3,851,440			3,704,291
LIABILITIES IN EXCESS OF ASSETS—(70.3%)														(1,529,653)
NET ASSETS—100.0%													$	2,174,638

Total Return Swap																		Notional Amount									Unrealized Depreciation
Citibank TRS Facility (Note 9)																			$	—								$	(5,974)

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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

A summary of outstanding financial instruments as of September 30, 2019 is as follows:

Interest rate swaps Counterparty	Notional Amount	Company Receives Floating Rate	Company Pays Fixed Rate	Termination Date		Premiums Paid/(Received)			Value			Unrealized Appreciation (Depreciation)
JP Morgan Chase Bank	$120,000	3-Month LIBOR	2.78%		12/18/2023		$	—		$	(6,640)		$	(6,640)
JP Morgan Chase Bank	$120,000	3-Month LIBOR	2.81%		12/18/2021			—			(3,308)			(3,308)
ING Capital Markets	$150,000	3-Month LIBOR	2.59%		1/14/2024			—			(7,291)			(7,291)
ING Capital Markets	$150,000	3-Month LIBOR	2.62%		1/14/2022			—			(3,681)			(3,681)
							$	—		$	(20,920)		$	(20,920)

(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 or portion thereof held within Burholme Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility with BNP Paribas Prime Brokerage International, Ltd. (as assignee of BNP Paribas Prime Brokerage, Inc.), or BNPP. Securities held within Burholme 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 BNPP (see Note 9).

(f)

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

(g)

Security or portion thereof held within Jefferson Square Funding LLC and is pledged as collateral supporting the amounts outstanding under a term loan credit facility with JPMorgan Chase Bank, National Association (see Note 9).

(h)

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

(i)

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, 80.2% of the Company’s total assets represented qualifying assets.

(j)

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.

(k)

Security is non-income producing.

(l)

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

(m)

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

(n)

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

(o)

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

(p)

Security or portion thereof held within Burholme Funding LLC has been rehypothecated under Rule 15c-1(a)(1) of the Exchange Act, subject to the terms and conditions governing the prime brokerage facility with BNPP (see Note 9). As of September 30, 2019, the fair value of securities rehypothecated by BNPP was $101,352.

(q)

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

(r)

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

See notes to unaudited consolidated financial statements.

TABLE OF CONTENTS

FS Investment Corporation III

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

(s)

Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of September 30, 2019, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” The following table presents certain financial information with respect to investments in portfolio companies of which the Company was deemed to be an “affiliated person” for the nine months ended September 30, 2019:

Portfolio Company	Fair Value at December 31, 2018			Gross Additions(1)			Gross Reductions(2)			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at September 30, 2019			Interest Income(4)			PIK Income(4)			Fee Income(4)
Senior Secured Loans—First Lien
Aspect Software Inc		$	7,328		$	—		$	(7,663)		$	(2,060)		$	2,395		$	—		$	—		$	—		$	—
Aspect Software Inc			9,741			—			(10,386)			(2,652)			3,297			—			—			—			—
Fairway Group Holdings Corp			6,742			659			—			—			(428)			6,973			652			659			—
Fairway Group Holdings Corp			582			—			—			—			(373)			209			—			—			—
Fairway Group Holdings Corp			2,897			1,362			—			—			(16)			4,243			373			317			17
H.M. Dunn Co, Inc			1,053			—			—			—			1,458			2,511			—			—			—
H.M. Dunn Co, Inc(3)			—			416			—			—			—			416			13			20			6
Warren Resources Inc			6,176			47			—			—			—			6,223			544			47			—
Senior Secured Loans—Second Lien
Fairway Group Holdings Corp			—			—			—			—			—			—			—			—			—
Equity/Other

FS Investment Corp III 10-Q