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

COMMISSION FILE NUMBER: 814-01108

Corporate Capital Trust II

(Exact name of registrant as specified in its charter)


Delaware		47-1595504
(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 every Interactive Data File required to be submitted 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 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 12,396,661 shares of the registrant’s common stock outstanding as of November 8, 2019.

TABLE OF CONTENTS


		PAGE
PART I—FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS		1

	Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018		1

	Unaudited Statements of Operations for the three and nine months ended September 30, 2019 and 2018		2

	Unaudited Statements of Changes in Net Assets for the three and nine months ended September 30, 2019 and 2018		3

	Unaudited Statements of Cash Flows for the nine months ended September 30, 2019 and 2018		4

	Schedules of Investments as of September 30, 2019 (Unaudited) and December 31, 2018		5

	Notes to Unaudited Financial Statements		22

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		48

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		64

Item 4.	CONTROLS AND PROCEDURES		65

PART II—OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS		67

Item 1A.	RISK FACTORS		67

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		67

Item 3.	DEFAULTS UPON SENIOR SECURITIES		67

Item 4.	MINE SAFETY DISCLOSURES		67

Item 5.	OTHER INFORMATION		67

Item 6.	EXHIBITS		68

	SIGNATURES		69

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Corporate Capital Trust II

Balance Sheets

(in thousands, except share and per share amounts)


	September 30, 2019 (Unaudited)		December 31, 2018
Assets
Investments, at fair value (amortized cost—$194,401 and $183,365, respectively)	$	187,399	$	175,166
Cash		962		3,618
Foreign currency, at fair value (cost—$366 and $866, respectively)		363		861
Due from Advisor		—		165
Receivable for investments sold and repaid		462		1,804
Income receivable		1,943		1,734
Unrealized appreciation on foreign currency forward contracts		363		457
Deferred financing costs		72		153
Prepaid expenses and other assets		49		30

Total assets	$	191,613	$	183,988

Liabilities
Credit facility payable	$	79,728	$	73,933
Payable for investments purchased		2,390		793
Shareholder distributions payable		1,796		281
Management fees payable		699		695
Subordinated income incentive fees payable		351		—
Administrative services expense payable		252		223
Interest payable		81		182
Trustees’ fees payable		3		—
Accrued professional services		87		262
Other accrued expenses and liabilities		392		449

Total liabilities		85,779		76,818

Net assets	$	105,834	$	107,170

Commitments and contingencies (Note 10)
Components of Net Assets
Preferred stock, $0.001 par value per share, 100,000,000 shares authorized, none issued and outstanding	$	—	$	—
Common stock, $0.001 par value per share, 1,000,000,000 shares authorized, 12,302,271 and 12,539,720 shares issued and outstanding, respectively		12		13
Capital in excess of par value		111,945		114,130
Retained earnings (accumulated deficit)		(6,123)		(6,973)

Net assets	$	105,834	$	107,170

Net asset value per share of common stock at period end	$	8.60	$	8.55

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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	$	4,209		$	4,173		$	12,525		$	11,377
Fee income		162			52			453			348
Dividend income		662			20			1,002			47

Total investment income		5,033			4,245			13,980			11,772

Operating expenses
Management fees		699			724			2,071			2,295
Capital gains incentive fees		—			185			—			(79	)
Subordinated income incentive fees		351			—			716			—
Administrative services expenses		103			—			265			364
Stock transfer agent fees		115			15			274			76
Accounting and administrative fees		116			121			350			364
Interest expense		1,009			977			3,077			2,350
Trustees’ fees		77			72			231			200
Distribution and shareholder servicing fees		—			—			—			376
Offering costs		—			—			—			20
Other general and administrative expenses		563			457			1,026			1,255

Total operating expenses		3,033			2,551			8,010			7,221
Expense support		—			(44	)		—			(625	)

Net operating expenses		3,033			2,507			8,010			6,596

Net investment income		2,000			1,738			5,970			5,176

Realized and unrealized gain (loss)
Net realized gain (loss) on:
Investments		(809	)		101			(1,211	)		332
Foreign currency forward contracts		—			—			—			(1	)
Foreign currency transactions		7			(10	)		54			(31	)

Net realized gain (loss)		(802	)		91			(1,157	)		300

Net change in unrealized appreciation (depreciation) on:
Investments		(1,324	)		875			1,197			(1,007	)
Foreign currency forward contracts		63			(71	)		(94	)		112
Foreign currency translation		298			27			304			197

Net change in unrealized appreciation (depreciation)		(963	)		831			1,407			(698	)

Total net realized and unrealized gain (loss)		(1,765	)		922			250			(398	)

Net increase (decrease) in net assets resulting from operations	$	235		$	2,660		$	6,220		$	4,778

Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)	$	0.02		$	0.21		$	0.51		$	0.38

Weighted average shares outstanding		12,286,250			12,588,969			12,260,166			12,733,097

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited Statements of Changes in Net Assets

(in thousands, except share and per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Operations
Net investment income	$	2,000		$	1,738		$	5,970		$	5,176
Net realized gain (loss) on investments, foreign currency forward contracts and foreign currency transactions		(802	)		91			(1,157	)		300
Net change in unrealized appreciation (depreciation) on investments, foreign currency forward contracts and foreign currency translation		(963	)		831			1,407			(698	)

Net increase in net assets resulting from operations		235			2,660			6,220			4,778

Shareholder distributions
Distributions to shareholders⁽¹⁾		(1,787	)		(1,839	)		(5,370	)		(5,583	)

Net decrease in net assets resulting from shareholder distributions		(1,787	)		(1,839	)		(5,370	)		(5,583	)

Capital share transactions
Issuance of common stock		—			—			—			1,270
Reinvestment of shareholder distributions		810			886			1,643			2,744
Repurchases of common stock		—			(3,298	)		(3,829	)		(4,138	)

Net increase (decrease) in net assets resulting from capital share transactions		810			(2,412	)		(2,186	)		(124	)

Total increase (decrease) in net assets		(742	)		(1,591	)		(1,336	)		(929	)
Net assets at beginning of period		106,576			117,133			107,170			116,471

Net assets at end of period	$	105,834		$	115,542		$	105,834		$	115,542

(1)	The Company estimates that none of the distributions declared during the nine months ended September 30, 2019 would be classified as a tax basis return of capital.

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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	$	6,220		$	4,778
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments		(44,942	)		(82,627	)
Paid-in-kind interest		(176	)		(75	)
Proceeds from sales and repayments of investments		33,387			59,405
Net realized (gain) loss on investments		1,211			(332	)
Net change in unrealized (appreciation) depreciation on investments		(1,197	)		1,007
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts		94			(112	)
Net change in unrealized (appreciation) depreciation on foreign currency translation		270			2
(Gain) loss on borrowings in foreign currency		(574	)		(199	)
Amortization of premium/discount, net		(516	)		(949	)
Amortization of deferred financing costs		81			80
(Increase) decrease in due from Advisor		165			448
(Increase) decrease in receivable for investments sold and repaid		1,342			544
(Increase) decrease in interest receivable		(209	)		(686	)
(Increase) decrease in prepaid expenses and other assets		(19	)		214
Increase (decrease) in payable for investments purchased		1,597			(3,091	)
Increase (decrease) in management fees payable		4			168
Increase (decrease) in accrued capital gains fees		—			(79	)
Increase (decrease) in subordinated income incentive fees payable		351			—
Increase (decrease) in administrative services expense payable		29			68
Increase (decrease) in interest payable		(101	)		(68	)
Increase (decrease) in trustees’ fees payable		3			(3	)
Increase (decrease) in accrued distribution and shareholder servicing fees		—			(95	)
Increase (decrease) in accrued professional services		(175	)		(44	)
Increase (decrease) in other accrued expenses and liabilities		(57	)		318

Net cash provided by (used in) operating activities		(3,212	)		(21,328	)

Cash flows from financing activities
Issuance of common stock		—			1,270
Repurchases of common stock		(3,829	)		(4,138	)
Shareholder distributions		(2,212	)		(2,839	)
Borrowings under credit facility		24,073			53,068
Repayments of credit facility		(17,704	)		(30,398	)

Net cash provided by (used in) financing activities		328			16,963

Effect of exchange rate changes on cash		(270	)		(2	)

Net increase (decrease) in cash		(3,154	)		(4,367	)
Cash and foreign currency at beginning of period		4,479			7,489

Cash and foreign currency at end of period	$	1,325		$	3,122

Supplemental disclosure
Cash paid for interest	$	3,097		$	2,339

Distributions reinvested	$	1,643		$	2,744

Excise taxes paid	$	69		$	27

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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—103.3%
Accuride Corp	(e)	Capital Goods	L+525	1.0%	11/17/23	$	452	$	440	$	382
Acosta Holdco Inc	(k)	Commercial & Professional Services	L+325	1.0%	9/26/21		5,135		4,642		1,611
Advantage Sales & Marketing Inc		Commercial & Professional Services	L+325	1.0%	7/23/21		2,791		2,715		2,614
American Tire Distributors Inc		Automobiles & Components	L+600, 1.0% PIK (1.0% Max PIK)	1.0%	9/1/23		244		244		242
American Tire Distributors Inc		Automobiles & Components	L+750	1.0%	9/2/24		1,536		1,365		1,358
Ammeraal Beltech Holding BV	(g)	Capital Goods	E+375		7/30/25	€	1,000		1,176		1,056
Apex Group Limited	(f)(g)(j)	Diversified Financials	L+650	1.3%	6/15/23	$	89		87		89
Apex Group Limited	(f)(g)	Diversified Financials	L+650	1.3%	6/15/25		288		283		288
Apex Group Limited	(f)(g)	Diversified Financials	L+700	1.0%	6/15/25		1,056		1,052		1,055
Apex Group Limited	(f)(g)	Diversified Financials	L+700	1.3%	6/15/25		596		586		595
Apex Group Limited	(f)(g)	Diversified Financials	L+700	1.5%	6/15/25	£	888		1,128		1,098
Arrotex Australia Group Pty Ltd	(f)(g)	Pharmaceuticals, Biotechnology & Life Sciences	B+525	1.0%	7/10/24	A$	1,854		1,272		1,232
Belk Inc		Retailing	L+475	1.0%	12/12/22	$	4,835		4,482		3,556
Berner Food & Beverage LLC	(f)	Food & Staples Retailing	L+875	1.0%	2/2/23		4,323		4,295		4,338
Brand Energy & Infrastructure Services Inc		Capital Goods	L+425	1.0%	6/21/24		239		235		234
Bugaboo International BV	(f)(g)	Consumer Durables & Apparel	E+700, 7.8% PIK (7.8% Max PIK)		3/20/25	€	1,534		1,801		1,649
Caprock Midstream LLC		Energy	L+475		11/3/25	$	613		610		554
CEPSA Holdco (Matador Bidco)	(e)(g)	Energy	L+475		6/19/26		270		267		271
CHS/Community Health Systems, Inc.	(g)	Health Care Equipment & Services	8.0%		3/15/26		111		108		111
Conservice LLC	(f)(j)	Consumer Services	L+525		11/29/24		66		65		65
Conservice LLC	(f)	Consumer Services	L+525		11/29/24		1,333		1,321		1,330
Conservice LLC	(f)(j)	Consumer Services	L+525		11/29/24		56		56		56
Constellis Holdings LLC	(f)	Capital Goods	L+625	1.0%	4/15/22		1,812		1,790		1,534

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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)
CSM Bakery Products		Food, Beverage & Tobacco	L+400	1.0%	7/3/20	$	435	$	418	$	407
CTI Foods Holding Co LLC	(f)	Food, Beverage & Tobacco	L+700	1.0%	5/3/24		28		28		28
Diamond Resorts International Inc		Consumer Services	L+375	1.0%	9/2/23		1,003		959		979
Distribution International Inc		Retailing	L+575	1.0%	12/15/23		7,444		6,377		6,998
Eacom Timber Corp	(f)(g)	Materials	L+650	1.0%	11/30/23		2,672		2,652		2,575
Eagle Family Foods Inc	(f)	Food, Beverage & Tobacco	L+650	1.0%	6/14/23		67		67		65
Eagle Family Foods Inc	(f)(j)	Food, Beverage & Tobacco	L+650	1.0%	6/14/23		92		91		88
Eagle Family Foods Inc	(f)	Food, Beverage & Tobacco	L+675	1.0%	6/14/24		1,048		1,038		1,008
Electronics For Imaging Inc		Technology Hardware & Equipment	L+500		7/23/26		607		577		567
Entertainment Benefits Group LLC	(f)	Media & Entertainment	L+575	1.0%	9/30/24		23		23		23
Entertainment Benefits Group LLC	(f)(j)	Media & Entertainment	L+575	1.0%	9/30/24		92		92		92
Entertainment Benefits Group LLC	(f)	Media & Entertainment	L+575	1.0%	9/30/25		685		676		676
Foresight Energy LLC	(g)(k)	Materials	L+575	1.0%	3/28/22		1,517		1,463		836
Frontline Technologies Group LLC	(f)	Software & Services	L+650	1.0%	9/18/23		5,331		5,274		5,297
ID Verde	(f)(g)(j)	Commercial & Professional Services	E+210		3/29/24	€	284		322		327
ID Verde	(f)(g)	Commercial & Professional Services	E+700		3/29/24		182		224		201
ID Verde	(f)(g)	Commercial & Professional Services	E+700		3/29/24	£	78		102		98
ID Verde	(f)(g)	Commercial & Professional Services	E+700		3/29/25	€	936		1,122		1,035
ID Verde	(f)(g)	Commercial & Professional Services	L+725		3/29/25	£	342		468		434
Industria Chimica Emiliana Srl	(f)(g)	Pharmaceuticals, Biotechnology & Life Sciences	L+650		6/30/26	€	2,012		2,145		2,128
Integro Ltd/United States	(f)	Insurance	L+575	1.0%	10/31/22	$	1,182		1,176		1,182
J S Held LLC	(f)	Insurance	L+600	1.0%	7/1/25		11		11		11
J S Held LLC	(f)(j)	Insurance	L+600	1.0%	7/1/25		143		141		141
J S Held LLC	(e)(f)	Insurance	L+600	1.0%	7/1/25		1,336		1,323		1,322
J S Held LLC	(f)(j)	Insurance	L+600	1.0%	7/1/25		328		328		325
Jo-Ann Stores Inc		Retailing	L+500	1.0%	10/20/23		3,303		3,282		2,289
Lipari Foods LLC	(f)	Food & Staples Retailing	L+588	1.0%	1/6/25		4,689		4,655		4,684

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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)
Lipari Foods LLC	(f)(j)	Food & Staples Retailing	L+588	1.0%	1/6/25	$	973	$	973	$	972
MedAssets Inc		Health Care Equipment & Services	L+450	1.0%	10/20/22		70		70		64
Monitronics International Inc	(e)	Commercial & Professional Services	L+650	1.3%	3/29/24		2,453		2,390		2,266
Monitronics International Inc		Commercial & Professional Services	L+500	1.5%	7/3/24		202		202		203
Monitronics International Inc	(j)	Commercial & Professional Services	L+500	1.5%	7/3/24		1,162		1,162		1,165
Monitronics International Inc		Commercial & Professional Services	L+500	1.5%	7/3/24		692		692		697
Multi-Color Corp	(g)	Commercial & Professional Services	6.8%		7/15/26		576		576		600
NCI Inc	(f)	Software & Services	L+750	1.0%	8/15/24		4,195		4,154		4,087
One Call Care Management Inc		Insurance	L+400	1.0%	11/27/20		24		22		21
One Call Care Management Inc		Insurance	L+525	1.0%	11/27/22		556		475		440
Onvoy LLC		Telecommunication Services	L+450	1.0%	2/10/24		154		140		129
PAE Holding Corp		Capital Goods	L+550	1.0%	10/20/22		50		50		50
Peak 10 Holding Corp		Telecommunication Services	L+350		8/1/24		68		64		59
Project Marron	(f)(g)	Consumer Services	L+625		7/3/25	A$	731		513		493
Project Marron	(f)(g)	Consumer Services	L+625		7/2/25	C$	574		437		433
Qdoba Restaurant Corp		Consumer Services	L+700	1.0%	3/21/25	$	1,970		1,936		1,999
Quorum Health Corp		Health Care Equipment & Services	L+675	1.0%	4/29/22		4,414		4,405		4,359
Reliant Rehab Hospital Cincinnati LLC	(f)	Health Care Equipment & Services	L+675	1.0%	9/2/24		2,304		2,286		2,265
Revere Superior Holdings, Inc	(f)	Software & Services	L+675	1.0%	11/21/22		5,896		5,854		5,954
Revere Superior Holdings, Inc	(f)(j)	Software & Services	L+675	1.0%	11/21/22		352		347		356
Savers Inc	(f)	Retailing	L+650, 0.8% PIK (0.8% Max PIK)	1.5%	3/28/24		1,054		1,042		1,044
Savers Inc	(f)	Retailing	L+700, 0.8% PIK (0.8% Max PIK)	1.0%	3/28/24	C$	1,464		1,078		1,115
Sequa Corp	(e)	Materials	L+500	1.0%	11/28/21	$	1,532		1,538		1,521
SIRVA Worldwide Inc		Commercial & Professional Services	L+550		8/4/25		455		449		442
Smart & Final Stores LLC	(g)	Food & Staples Retailing	L+675		6/20/25		2,549		2,300		2,334
Smart Foodservice	(g)	Food & Staples Retailing	L+475		6/20/26		362		359		364

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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)
SMART Global Holdings Inc	(f)(g)(j)	Semiconductors & Semiconductor Equipment	L+400		2/9/21	$	96	$	96		$	91
SMART Global Holdings Inc	(f)(g)	Semiconductors & Semiconductor Equipment	L+625	1.0%	8/9/22		3,319		3,285			3,334
Staples Canada	(f)(g)	Retailing	L+700	1.0%	9/12/24	C$	4,531		3,671			3,462
Sutherland Global Services Inc	(g)	Software & Services	L+538	1.0%	4/23/21	$	2,194		2,160			2,179
Tangoe LLC	(f)	Software & Services	L+650	1.0%	11/28/25		1,984		1,966			1,986
Team Health Inc		Health Care Equipment & Services	L+275	1.0%	2/6/24		960		935			796
Torrid Inc	(f)	Retailing	L+675	1.0%	12/14/24		786		777			778
Total Safety US Inc		Capital Goods	L+600	1.0%	8/16/25		511		455			484
Virgin Pulse Inc	(f)	Software & Services	L+650	1.0%	5/22/25		3,058		3,037			3,038
Vivint Inc	(e)	Commercial & Professional Services	L+500		4/1/24		68		66			67
Wheels Up Partners LLC	(f)	Transportation	L+855	1.0%	1/26/21		620		619			620
Wheels Up Partners LLC	(f)	Transportation	L+855	1.0%	8/26/21		331		329			331
Wheels Up Partners LLC	(f)	Transportation	L+710	1.0%	6/30/24		1,116		1,112			1,120
Wheels Up Partners LLC	(f)	Transportation	L+710	1.0%	11/1/24		460		457			462
Wheels Up Partners LLC	(f)	Transportation	L+710	1.0%	12/21/24		1,722		1,713			1,728
WireCo WorldGroup Inc		Capital Goods	L+500	1.0%	9/29/23		96		95			94

Total Senior Secured Loans—First Lien									119,341			113,136
Unfunded Loan Commitments									(3,760	)		(3,760	)

Net Senior Secured Loans—First Lien									115,581			109,376

Senior Secured Loans—Second Lien—33.6%
Access CIG LLC		Software & Services	L+775		2/27/26		211		209			211
Advantage Sales & Marketing Inc		Commercial & Professional Services	L+650	1.0%	7/25/22		542		497			471
Albany Molecular Research Inc		Pharmaceuticals, Biotechnology & Life Sciences	L+700	1.0%	8/30/25		913		910			909
Ammeraal Beltech Holding BV	(f)(g)	Capital Goods	L+800		7/27/26		2,018		1,981			1,956
Applied Systems Inc		Software & Services	L+700	1.0%	9/19/25		2,624		2,624			2,660

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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)
athenahealth Inc	(f)	Health Care Equipment & Services	L+850		2/11/27	$	2,516	$	2,493	$	2,538
BCA Marketplace PLC	(e)(f)(g)	Retailing	L+825		9/4/27	£	1,179		1,436		1,436
CommerceHub Inc	(f)	Software & Services	L+775		5/21/26	$	3,222		3,137		3,169
EaglePicher Technologies LLC		Capital Goods	L+725		3/8/26		450		447		436
Electronics For Imaging Inc		Technology Hardware & Equipment	L+900		7/23/27		152		144		140
Emerald Performance Materials LLC		Materials	L+775	1.0%	8/1/22		37		37		37
Excelitas Technologies Corp		Technology Hardware & Equipment	L+750	1.0%	12/1/25		811		804		814
Integro Ltd/United States	(f)	Insurance	L+925	1.0%	10/30/23		222		220		222
Invictus		Materials	L+675		3/30/26		151		150		140
LBM Borrower LLC		Capital Goods	L+925	1.0%	8/20/23		900		896		886
Misys Ltd	(g)	Software & Services	L+725	1.0%	6/13/25		1,918		1,911		1,842
NEP Broadcasting LLC		Media & Entertainment	L+700		10/19/26		80		79		79
New Arclin US Holding Corp	(g)	Materials	L+875	1.0%	2/14/25		289		286		287
OEConnection LLC	(f)	Software & Services	L+825		9/25/27		837		829		829
One Call Care Management Inc	(f)	Insurance	L+375, 6.0% PIK (6.0% Max PIK)	1.0%	4/11/24		1,249		1,240		1,020
Paradigm Acquisition Corp		Health Care Equipment & Services	L+750		10/26/26		267		267		266
Polyconcept North America Inc	(f)	Consumer Durables & Apparel	L+1,000	1.0%	2/16/24		624		613		630
Pure Fishing Inc	(f)	Consumer Durables & Apparel	L+838	1.0%	12/31/26		1,806		1,788		1,575
Rise Baking Company	(f)	Food, Beverage & Tobacco	L+800	1.0%	8/9/26		694		688		682
Sequa Corp		Materials	L+900	1.0%	4/28/22		4,024		4,054		3,972
SIRVA Worldwide Inc		Commercial & Professional Services	L+950		8/3/26		417		388		363
SMG/PA		Consumer Services	L+700		1/23/26		230		231		233
Sparta Systems Inc	(f)	Software & Services	L+825	1.0%	7/27/25		2,438		2,408		2,185
Transplace		Transportation	L+875	1.0%	10/6/25		3,289		3,220		3,223
Vantage Specialty Chemicals Inc		Materials	L+825	1.0%	10/27/25		755		745		679
WireCo WorldGroup Inc		Capital Goods	L+900	1.0%	9/30/24		1,632		1,628		1,616

Total Senior Secured Loans—Second Lien									36,360		35,506

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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)
Other Senior Secured Debt—6.6%
Cleaver-Brooks Inc		Capital Goods	7.9%		3/1/23	$	349	$	349	$	332
Cornerstone Chemical Co		Materials	6.8%		8/15/24		2,682		2,685		2,490
Enterprise Development Authority		Consumer Services	12.0%		7/15/24		26		27		29
Frontier Communications Corp	(g)	Telecommunication Services	8.5%		4/1/26		885		870		887
Genesys Telecommunications Laboratories Inc		Technology Hardware & Equipment	10.0%		11/30/24		596		652		646
MultiPlan Inc		Health Care Equipment & Services	7.1%		6/1/24		127		128		118
Vivint Inc		Commercial & Professional Services	7.9%		12/1/22		1,752		1,734		1,756
Vivint Inc		Commercial & Professional Services	7.6%		9/1/23		821		755		735

Total Other Senior Secured Debt									7,200		6,993

Subordinated Debt—19.5%
athenahealth Inc	(f)	Health Care Equipment & Services	L+1,125 PIK (L+1,125 Max PIK)		2/11/27		1,258		1,258		1,266
ClubCorp Club Operations Inc		Consumer Services	8.5%		9/15/25		5,260		5,177		4,431
GFL Environmental Inc	(g)	Commercial & Professional Services	8.5%		5/1/27		653		670		726
Hub International Ltd		Insurance	7.0%		5/1/26		359		356		370
Kenan Advantage Group Inc		Transportation	7.9%		7/31/23		3,262		3,357		2,936
LifePoint Hospitals Inc		Health Care Equipment & Services	9.8%		12/1/26		926		926		993
PAREXEL International Corp		Pharmaceuticals, Biotechnology & Life Sciences	6.4%		9/1/25		610		592		564
Ply Gem Holdings Inc		Capital Goods	8.0%		4/15/26		527		510		520
Quorum Health Corp		Health Care Equipment & Services	11.6%		4/15/23		250		251		226
SRS Distribution Inc		Capital Goods	8.3%		7/1/26		3,010		2,998		3,078
Team Health Inc		Health Care Equipment & Services	6.4%		2/1/25		1,943		1,732		1,352
Vertiv Group Corp		Technology Hardware & Equipment	9.3%		10/15/24		3,081		3,054		2,985
Vivint Inc		Commercial & Professional Services	8.8%		12/1/20		1,170		1,107		1,151

Total Subordinated Debt									21,988		20,598

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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)
Asset Based Finance—9.9%
Abacus JV, Private Equity		(f)(g)	Insurance					499,320	$	499		$	499
Accelerator Investments Aggregator LP, Private Equity		(f)(g)(i)	Diversified Financials					153,628		177			168
Altavair NewCo, Private Equity		(f)(g)	Capital Goods					204,187		204			226
Australis Maritime, Private Equity		(f)(g)(i)	Transportation					210,162		210			210
Home Partners JV, Structured Mezzanine		(f)(g)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29	$	524		524			524
Home Partners JV, Structured Mezzanine		(f)(g)(j)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29	$	524		524			524
Home Partners JV, Common Stock		(f)(g)(i)	Real Estate					262,043		262			271
Home Partners JV, Private Equity		(g)(i)	Real Estate					14,139		14			1
KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest		(f)(g)	Capital Goods					5,461,574		5,462			6,796
Lenovo Group Ltd, Structured Mezzanine		(f)(g)	Technology Hardware & Equipment	8.0%		6/22/22	€	181		206			197
Lenovo Group Ltd, Structured Mezzanine		(f)(g)	Technology Hardware & Equipment	8.0%		6/22/22	$	380		380			380
Lenovo Group Ltd, Structured Mezzanine		(f)(g)	Technology Hardware & Equipment	12.0%		6/22/22	€	115		131			126
Lenovo Group Ltd, Structured Mezzanine		(f)(g)	Technology Hardware & Equipment	12.0%		6/22/22	$	242		242			242
Pretium Partners LLC P2, Structured Mezzanine		(f)(g)	Real Estate	9.5%		5/29/25	$	568		568			573
Sofi Lending Corp, 2019-C R1		(f)(g)	Diversified Financials			11/16/48	$	520		295			294
Toorak Capital Funding LLC, Membership Interest		(f)(g)	Diversified Financials					13,218		13			13

Total Asset Based Finance										9,711			11,044
Unfunded Commitment										(524	)		(524	)

Net Asset Based Finance										9,187			10,520

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited 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)
Equity/Other—4.2%
CTI Foods Holding Co LLC, Common Stock		(f)(i)	Food, Beverage & Tobacco				$	56		$ 7	$	7
Misys Ltd, Preferred Stock		(f)(g)	Software & Services	L+1,025				2,841		2,788		2,795
Polyconcept North America Inc, Class A-1 Units		(f)(i)	Consumer Durables & Apparel					624		62		109
VICI Properties Inc, Common Stock			Consumer Services					66,020		1,228		1,495

Total Equity/Other										4,085		4,406

TOTAL INVESTMENTS—177.1%		(h)								$ 194,401		187,399

LIABILITIES IN EXCESS OF OTHER ASSETS—(77.1%)												(81,565	)

NET ASSETS—100.0%											$	105,834

Foreign Currency Forward Contracts


Foreign Currency	Settlement Date		Counterparty		Notional Amount and Transaction		US$ Value at Settlement Date		US$ Value at September 30, 2019		Unrealized Appreciation (Depreciation)
CAD		October 10, 2019		JP Morgan Chase Bank	C$	5,690 Sold	$	4,642	$	4,296	$	346
EUR		July 17, 2023		JP Morgan Chase Bank	€	107 Sold		144		127		17

Total							$	4,786	$	4,423	$	363

(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. PIK income accruals may be adjusted based on the fair value of the underlying investment. Variable rate securities with no floor rate use the respective benchmark rate in all cases.

See notes to unaudited financial statements.

Corporate Capital Trust II

Unaudited Schedule of Investments (continued)

As of September 30, 2019

(in thousands, except share amounts)

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

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

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

(f)	Security is classified as Level 3 whereby fair value was determined by the Company’s board of trustees (see Note 8).

(g)

The investment is not a qualifying asset as defined in Section 55(a) under 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, 74.7% of the Company’s total assets represented qualifying assets.

(h)

As of September 30, 2019, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $3,126; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $10,635; the net unrealized depreciation was $7,509; the aggregate cost of securities for Federal income tax purposes was $194,908.

(i)	Security is non-income producing.

(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)	Asset is on non-accrual status.

Abbreviations:

A$ - Australian Dollar; local currency investment amount is denominated in Australian Dollar. A$1.00 / U.S. $0.67 as of September 30, 2019.

C$ - Canadian Dollar; local currency investment amount is denominated in Canadian Dollar. C$1.00 / U.S. $0.76 as of September 30, 2019.

€ - Euro; local currency investment amount is denominated in Euros. €1.00 / U.S. $1.09 as of September 30, 2019.

£ - British Pound Sterling; local currency investment amount is denominated in British Pound Sterling. £1.00 / U.S. $1.23 as of September 30, 2019.

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments

As of December 31, 2018

(in thousands, except share amounts)


Portfolio Company^(a)(b)	Footnotes	Industry	Rate	Floor			Maturity Date		Principal Amount^(c)		Cost^(d)		Fair Value
Senior Secured Loans—First Lien—87.5%
Accuride Corp	(n)	Capital Goods	L+525		1.0	%		11/17/23	$	413	$	408	$	396
Acosta Holdco Inc	(l)	Commercial & Professional Services	L+325		1.0	%		9/26/21		5,175		4,704		3,179
Advantage Sales & Marketing Inc	(l)	Commercial & Professional Services	L+325		1.0	%		7/23/21		2,813		2,710		2,499
American Tire Distributors Inc	(j)(l)	Automobiles & Components	L+650, 1.0% PIK (1.0% Max PIK)		1.0	%		9/1/23		244		244		228
American Tire Distributors Inc	(l)	Automobiles & Components	L+750		1.0	%		8/30/24		1,548		1,376		1,274
Ammeraal Beltech Holding BV (NLD)	(g)(h)(o)	Capital Goods	E+375					7/30/25	€	1,000		1,176		1,140
Apex Group Limited (GBR)	(f)(g)(h)(n)(q)	Diversified Financials	L+650					6/15/23	$	89		86		76
Apex Group Limited (GBR)	(f)(g)(h)(n)	Diversified Financials	L+650		1.0	%		6/15/25		600		589		577
Apex Group Limited (GBR)	(f)(g)(h)(n)(q)	Diversified Financials	L+650		1.0	%		6/15/25		290		284		278
Apex Group Limited (GBR)	(f)(g)(h)(n)	Diversified Financials	L+650		1.0	%		6/15/25		97		95		93
Apex Group Limited (GBR)	(f)(g)(h)(n)(q)	Diversified Financials	L+650		1.0	%		6/15/25		145		143		139
Belk Inc	(n)	Retailing	L+475		1.0	%		12/12/22		4,885		4,460		3,964
Berner Food & Beverage LLC	(f)(n)	Food & Staples Retailing	L+675		1.0	%		2/2/23		4,372		4,338		4,225
Bugaboo International BV (NLD)	(f)(g)(h)(j)(o)	Consumer Durables & Apparel	E+700, 7.8% PIK (7.8% Max PIK)					3/20/25	€	1,215		1,447		1,372
Caprock Midstream LLC	(m)	Energy	L+475					11/3/25	$	615		612		573
Constellis Holdings LLC / Constellis Finance Corp	(f)(n)	Capital Goods	L+575		1.0	%		4/1/22		1,825		1,798		1,798
Diamond Resorts International Inc	(l)	Consumer Services	L+375		1.0	%		9/2/23		1,011		959		945
Distribution International Inc	(n)	Retailing	L+500		1.0	%		12/15/21		7,482		6,698		6,659
Eacom Timber Corp (CAN)	(f)(g)(h)(n)	Materials	L+650		1.0	%		11/30/23		2,782		2,758		2,773
Eagle Family Foods Inc	(f)(l)(q)	Food, Beverage & Tobacco	L+650		1.0	%		6/14/23		159		158		136
Eagle Family Foods Inc	(f)(l)	Food, Beverage & Tobacco	L+650		1.0	%		6/14/24		1,056		1,045		1,039
Foresight Energy LLC	(g)(n)	Materials	L+575		1.0	%		3/28/22		1,557		1,487		1,533

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments (continued)

As of December 31, 2018

(in thousands, except share amounts)


Portfolio Company^(a)(b)	Footnotes	Industry	Rate	Floor			Maturity Date	Principal Amount^(c)		Cost^(d)		Fair Value
Frontline Technologies Group LLC	(f)(l)(q)	Software & Services	L+650		1.0	%	9/18/23	$	889	$	879	$	891
Frontline Technologies Group LLC	(f)(l)	Software & Services	L+650		1.0	%	9/18/23		4,479		4,423		4,486
ID Verde (FRA)	(f)(g)(h)(o)	Commercial & Professional Services	E+700				3/29/24	€	138		124		135
ID Verde (FRA)	(f)(g)(h)(o)(q)	Commercial & Professional Services	E+700				3/29/24	€	92		158		153
ID Verde (FRA)	(f)(g)(h)(o)	Commercial & Professional Services	E+700				3/29/25	€	936		1,120		1,076
ID Verde (FRA)	(f)(g)(h)(o)	Commercial & Professional Services	E+725				3/29/25	£	378		514		485
Integro Ltd/United States	(f)(n)	Insurance	L+575				10/30/22	$	1,191		1,186		1,191
Jo-Ann Stores Inc	(n)	Retailing	L+500		1.0	%	10/20/23		3,395		3,371		3,247
Jostens Inc	(e)(n)	Consumer Services	L+550				12/19/25		612		594		597
MedAssets Inc	(l)	Health Care Equipment & Services	L+450		1.0	%	10/20/22		71		71		68
Misys Ltd	(e)(g)(n)	Software & Services	L+350		1.0	%	6/13/24		207		192		193
Monitronics International Inc	(g)(n)	Commercial & Professional Services	L+550		1.0	%	9/30/22		2,007		1,975		1,800
NCI Inc	(f)(l)	Software & Services	L+750		1.0	%	8/15/24		4,276		4,233		4,240
Onvoy LLC	(n)	Telecommunication Services	L+450		1.0	%	2/10/24		155		139		140
Patriot Well Solutions LLC	(f)(l)	Energy	L+875		1.0	%	5/1/21		325		322		321
Patriot Well Solutions LLC	(f)(n)	Energy	L+875		1.0	%	5/1/21		667		658		658
Qdoba Restaurant Corp	(l)	Consumer Services	L+700		1.0	%	3/21/25		1,985		1,948		1,975
Quorum Health Corp	(l)	Health Care Equipment & Services	L+675		1.0	%	4/29/22		4,501		4,490		4,476
Reliant Rehab Hospital Cincinnati LLC	(f)(l)	Health Care Equipment & Services	L+675		1.0	%	8/30/24		2,122		2,102		2,116
Revere Superior Holdings, Inc	(f)(n)	Software & Services	L+675		1.0	%	11/21/22		4,697		4,657		4,711
Revere Superior Holdings, Inc	(f)(n)	Software & Services	L+675		1.0	%	11/21/22		352		346		308
Revere Superior Holdings, Inc	(f)(n)	Software & Services	L+675		1.0	%	11/21/22		1,243		1,233		1,240
Savers Inc	(n)	Retailing	L+375		1.3	%	7/9/19		1,062		1,030		1,017
Sequa Corp	(n)	Materials	L+500		1.0	%	11/28/21		1,530		1,539		1,467
SIRVA Worldwide Inc	(n)	Commercial & Professional Services	L+550				8/2/25		464		457		456
SMART Global Holdings Inc	(f)(g)(n)(q)	Semiconductors & Semiconductor Equipment	L+400				8/9/22		96		96		89

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments (continued)

As of December 31, 2018

(in thousands, except share amounts)


Portfolio Company^(a)(b)	Footnotes		Industry	Rate	Floor			Maturity Date	Principal Amount^(c)		Cost^(d)			Fair Value
SMART Global Holdings Inc		(f)(g)(n)	Semiconductors & Semiconductor Equipment	L+625		1.0	%	8/9/22	$	3,319	$	3,277		$	3,353
Staples Canada (CAN)		(f)(g)(h)(n)	Retailing	L+700		1.0	%	9/12/24	C$	5,149		4,166			3,811
Sutherland Global Services Inc		(g)(n)	Software & Services	L+538		1.0	%	4/23/21	$	1,794		1,754			1,694
Sutherland Global Services Inc		(g)(n)	Software & Services	L+538		1.0	%	4/23/21		418		409			394
Tangoe LLC		(f)(l)	Software & Services	L+650		1.0	%	11/28/25		2,007		1,987			1,987
Team Health Inc		(l)	Health Care Equipment & Services	L+275		1.0	%	2/6/24		967		939			869
Utility One Source LP		(l)	Capital Goods	L+550		1.0	%	4/18/23		3,272		3,257			3,272
Virgin Pulse Inc		(f)(n)	Software & Services	L+650		1.0	%	5/22/25		3,081		3,059			2,986
Wheels Up Partners LLC		(f)(n)	Transportation	L+855		1.0	%	1/26/21		724		724			724
Wheels Up Partners LLC		(f)(n)	Transportation	L+855		1.0	%	8/26/21		372		372			371
Wheels Up Partners LLC		(f)(n)	Transportation	L+710		1.0	%	6/30/24		1,220		1,220			1,225
Wheels Up Partners LLC		(f)(n)	Transportation	L+710		1.0	%	8/1/24		809		801			812
Wheels Up Partners LLC		(f)(n)	Transportation	L+710		1.0	%	11/1/24		502		502			504
Wheels Up Partners LLC		(f)(n)	Transportation	L+710		1.0	%	12/21/24		790		790			793
Wheels Up Partners LLC		(f)(n)	Transportation	L+710		1.0	%	12/21/24		257		255			258
WireCo WorldGroup Inc		(e)(l)	Capital Goods	L+500		1.0	%	9/29/23		97		96			96

Total Senior Secured Loans—First Lien												99,040			95,581
Unfunded Loan Commitments												(1,804	)		(1,804	)

Net Senior Secured Loans—First Lien												97,236			93,777

Senior Secured Loans—Second Lien—32.0%
Access CIG LLC		(n)	Software & Services	L+775				2/27/26		211		209			209
Advantage Sales & Marketing Inc		(l)	Commercial & Professional Services	L+650		1.0	%	7/25/22		542		483			429
Albany Molecular Research Inc		(l)	Pharmaceuticals, Biotechnology & Life Sciences	L+700		1.0	%	8/28/25		913		909			906
Ammeraal Beltech Holding BV (NLD)		(f)(g)(h)(n)	Capital Goods	L+800				7/27/26		2,018		1,979			1,974

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments (continued)

As of December 31, 2018

(in thousands, except share amounts)


Portfolio Company^(a)(b)	Footnotes	Industry	Rate	Floor			Maturity Date	Principal Amount^(c)		Cost^(d)		Fair Value
Applied Systems Inc	(l)	Software & Services	L+700		1.0	%	9/19/25	$	2,624	$	2,624	$	2,581
CommerceHub Inc	(f)(l)	Software & Services	L+775				5/21/26		3,222		3,133		3,016
CTI Foods Holding Co LLC	(n)(p)(r)	Food, Beverage & Tobacco	L+725		1.0	%	6/28/21		222		211		24
Direct ChassisLink Inc	(n)	Transportation	L+600				6/15/23		587		584		566
EaglePicher Technologies LLC	(l)	Capital Goods	L+725				3/8/26		450		447		441
Excelitas Technologies Corp	(l)	Technology Hardware & Equipment	L+750		1.0	%	12/1/25		811		804		777
Grocery Outlet Inc	(n)	Food & Staples Retailing	L+725				10/22/26		382		378		380
Higginbotham Insurance Agency Inc	(f)(l)	Insurance	L+725		1.0	%	12/19/25		1,304		1,293		1,303
Integro Ltd/United States	(f)(n)	Insurance	L+925				10/30/23		222		220		222
Invictus	(m)	Materials	L+675				3/30/26		451		452		451
iParadigms Holdings LLC	(n)	Software & Services	L+725		1.0	%	7/29/22		183		180		182
Jo-Ann Stores Inc	(n)	Retailing	L+925		1.0	%	5/21/24		396		391		384
LBM Borrower LLC	(n)	Capital Goods	L+925		1.0	%	8/20/23		900		895		882
Misys Ltd	(e)(g)(n)	Software & Services	L+725		1.0	%	6/13/25		1,918		1,911		1,777
New Arclin US Holding Corp	(g)(l)	Materials	L+875		1.0	%	2/14/25		289		286		289
One Call Care Management Inc	(f)(j)(l)	Insurance	L+375, 6.0% PIK (6.0% Max PIK)				4/11/24		1,198		1,188		1,148
Paradigm Acquisition Corp	(n)	Health Care Equipment & Services	L+750				10/26/26		267		267		269
Polyconcept North America Inc	(f)(l)	Consumer Durables & Apparel	L+1000		1.0	%	2/16/24		624		613		643
Press Ganey Holdings Inc	(l)	Health Care Equipment & Services	L+650		1.0	%	10/21/24		1,066		1,080		1,061
Pure Fishing Inc	(f)(n)	Consumer Durables & Apparel	L+838		1.0	%	12/31/26		1,806		1,788		1,788
Rise Baking Company	(f)(l)	Food, Beverage & Tobacco	L+800		1.0	%	8/9/26		694		687		687
Sequa Corp	(n)	Materials	L+900		1.0	%	4/28/22		4,024		4,061		3,823
SIRVA Worldwide Inc	(n)	Commercial & Professional Services	L+950				8/2/26		417		386		369
SMG/PA	(l)	Consumer Services	L+700				1/23/26		230		231		227
Sparta Systems Inc	(f)(l)	Software & Services	L+825		1.0	%	7/27/25		2,438		2,405		2,099
Transplace	(l)	Transportation	L+875		1.0	%	10/6/25		3,289		3,218		2,993
Vantage Specialty Chemicals Inc	(n)	Materials	L+825		1.0	%	10/26/25		755		745		741

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments (continued)

As of December 31, 2018

(in thousands, except share amounts)


Portfolio Company^(a)(b)	Footnotes	Industry	Rate	Floor	Maturity Date	Principal Amount^(c)		Cost^(d)		Fair Value
WireCo WorldGroup Inc	(l)	Capital Goods	L+900	1.0%	9/30/24	$	1,632	$	1,628	$	1,636

Total Senior Secured Loans—Second Lien									35,686		34,277

Other Senior Secured Debt—6.9%
Cleaver-Brooks Inc	(i)	Capital Goods	7.9%		3/1/23		625		625		611
Cornerstone Chemical Co	(i)	Materials	6.8%		8/15/24		2,682		2,686		2,362
Frontier Communications Corp	(g)(i)	Telecommunication Services	8.5%		4/1/26		353		353		309
Genesys Telecommunications Laboratories Inc	(i)	Technology Hardware & Equipment	10.0%		11/30/24		672		742		707
Pattonair Holdings Ltd	(g)(i)	Capital Goods	9.0%		11/1/22		1,057		1,071		1,068
Surgery Partners Holdings LLC	(i)	Health Care Equipment & Services	8.9%		4/15/21		18		18		18
Vivint Inc		Commercial & Professional Services	7.9%		12/1/22		1,752		1,731		1,660
Vivint Inc		Commercial & Professional Services	7.6%		9/1/23		821		744		672

Total Other Senior Secured Debt									7,970		7,407

Subordinated Debt—27.0%
Allegheny Technologies Inc	(g)	Materials	7.9%		8/15/23		850		829		871
CDK Global Inc	(g)	Software & Services	4.9%		6/1/27		7		7		7
ClubCorp Club Operations Inc	(i)	Consumer Services	8.5%		9/15/25		5,260		5,169		4,734
Consolidated Energy Finance SA (LUX)	(g)(h)(i)	Materials	6.5%		5/15/26		201		201		192
Datatel Inc	(i)	Software & Services	9.0%		9/30/23		102		107		103
Hub International Ltd	(i)	Insurance	7.0%		5/1/26		1,180		1,179		1,069
Kenan Advantage Group Inc	(i)	Transportation	7.9%		7/31/23		3,262		3,371		3,140
LifePoint Hospitals Inc	(i)	Health Care Equipment & Services	9.8%		12/1/26		921		921		877
PAREXEL International Corp	(i)	Pharmaceuticals, Biotechnology & Life Sciences	6.4%		9/1/25		610		591		545
Ply Gem Holdings Inc	(i)	Capital Goods	8.0%		4/15/26		1,666		1,634		1,533
Quorum Health Corp		Health Care Equipment & Services	11.6%		4/15/23		268		269		255
Reynolds Group Holdings Inc		Materials	8.0%		12/15/25		849		929		838

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments (continued)

As of December 31, 2018

(in thousands, except share amounts)


Portfolio Company^(a)(b)	Footnotes	Industry	Rate	Floor	Maturity Date	Principal Amount^(c)		Cost^(d)		Fair Value
Reynolds Group Holdings Inc		Materials	8.4%		4/15/27	$	2,653	$	2,940	$	2,637
SRS Distribution Inc	(i)	Capital Goods	8.3%		7/1/26		3,010		2,997		2,769
Surgery Partners Holdings LLC	(i)	Health Care Equipment & Services	6.8%		7/1/25		548		502		474
Team Health Inc	(i)	Health Care Equipment & Services	6.4%		2/1/25		1,943		1,710		1,586
Tenet Healthcare Corp	(g)	Health Care Equipment & Services	7.0%		8/1/25		31		31		29
Triumph Group Inc		Capital Goods	7.8%		8/15/25		217		217		192
Vertiv Group Corp	(i)	Technology Hardware & Equipment	9.3%		10/15/24		6,124		6,324		5,450
Vivint Inc		Commercial & Professional Services	8.8%		12/1/20		1,695		1,571		1,617

Total Subordinated Debt									31,499		28,918


Portfolio Company^(a)(b)	Footnotes		Industry		Rate	No. of Shares		Cost^(d)		Fair Value
Asset Based Finance—6.3%
Accelerator Investments Aggregator LP (NLD)		(f)(g)(h)(p)		Diversified Financials			107,825	$	126	$	123
Australis Maritime (MHL)		(f)(g)(h)		Transportation			43,819		44		44
KKR Zeno Aggregator LP (K2 Aviation) (IRE)		(f)(g)(h)		Capital Goods			5,630,570		5,631		5,631
Montgomery Credit Holdings LP		(f)(g)(p)		Diversified Financials			1,095,595		1,095		975

Total Asset Based Finance									6,896		6,773

Equity/Other—3.8%
Misys Ltd, Preferred Stock		(f)(g)(j)(n)		Software & Services	L+1025		2,842		2,788		2,682
Polyconcept North America Inc, Class A - 1 Units		(f)		Consumer Durables & Apparel			624		62		92
VICI Properties Inc, Common Stock				Consumer Services			66,020		1,228		1,240

Total Equity/Other									4,078		4,014

TOTAL INVESTMENTS—163.5%		(k)						$	183,365		175,166

OTHER ASSETS IN EXCESS OF LIABILITIES—(63.5%)											(67,996)

NET ASSETS—100.0%										$	107,170

Derivative Instruments (Note 7)—0.4%

Foreign currency forward contracts										$	457

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments (continued)

As of December 31, 2018

(in thousands, except share amounts)

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

(b)	Non-controlled/non-affiliated investments as defined by the Investment Company Act of 1940, as amended (“1940 Act”), unless otherwise indicated. Non-controlled/non-affiliated investments are investments that are neither controlled investments nor affiliated investments.

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

(d)	Represents amortized cost for debt securities and cost for equity investments translated to U.S. dollars.

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

(f)	Investments classified as Level 3 whereby fair value was determined by the Company’s board of trustees (see Note 2).

(g)

The investment is not a qualifying asset as defined in Section 55(a) under 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, 80.0% of the Company’s total assets represented qualifying assets.

(h)	A portfolio company domiciled in a foreign country. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.

(i)

This security was acquired in a transaction that was exempt from the registration requirements of the Securities Act, pursuant to Rule 144A thereunder. This security may be resold only in transactions that are exempt from the registration requirements of the Securities Act, normally to qualified institutional buyers.

(j)	The issuer of this security may elect at any time to capitalize distributions or interest.

(k)

As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $570; the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $9,053; the net unrealized depreciation was $8,483; the aggregate cost of investments for federal income tax purposes was $183,649.

(l)	The interest rate on these investments is subject to a base rate of 1-Month LIBOR, which at December 31, 2018 was 2.52%. The current base rate for each investment may be different from the reference rate on December 31, 2018.

(m)	The interest rate on these investments is subject to a base rate of 2-Month LIBOR, which at December 31, 2018 was 2.62%. The current base rate for each investment may be different from the reference rate on December 31, 2018.

(n)	The interest rate on these investments is subject to a base rate of 3-Month LIBOR, which at December 31, 2018 was 2.81%. The current base rate for each investment may be different from the reference rate on December 31, 2018.

(o)	The interest rate on these investments is subject to a base rate of 3-Month Euro Interbank Offered Rate, which at December 31, 2018 was approximately (0.31)%. The current base rate for each investment may be different from the reference rate on December 31, 2018.

(p)	Security is non-income producing.

(q)	Security is an unfunded loan commitment.

(r)	Security is on non-accrual status.

See notes to unaudited financial statements.

Corporate Capital Trust II

Schedule of Investments (continued)

As of December 31, 2018

(in thousands, except share amounts)

Abbreviations:

C$ - Canadian Dollar; local currency investment amount is denominated in Canadian Dollar. C$ 1 / U.S. $0.73 as of December 31, 2018.

€ - Local currency investment amount is denominated in Euros. € 1 / U.S. $1.15 as of December 31, 2018.

£ - Local currency investment amount is denominated in British Pound Sterling. £ 1 / U.S. $1.28 as of December 31, 2018.

CAN = Canada

CDOR = Canadian Banker Acceptance Rate

E = EURIBOR - Euro Interbank Offered Rate

FRA = France

GBR = United Kingdom

IRE = Ireland

L = LIBOR - London Interbank Offered Rate, typically 3-Month

LUX = Luxembourg

MHL = Marshall Islands

NLD = Netherlands

PIK = Payment-in-kind; the issuance of additional securities by the borrower to settle interest payment obligations.

See notes to unaudited financial statements.

Corporate Capital Trust II

Notes to Unaudited Financial Statements

(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization

Corporate Capital Trust II, or the Company, was formed as a Delaware statutory trust on August 12, 2014. The Company is a non-diversified, closed-end management investment company and 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.

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 agreement, dated as of April 9, 2018, or the investment advisory agreement. Since inception and through April 8, 2018, the Company was externally managed by CNL Fund Advisors II, LLC, or CNL, as investment adviser and KKR Credit Advisors (US) LLC, or KKR, as investment sub-adviser, or together, the Former Advisors.

On May 31, 2019, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with FS Investment Corporation II, a Maryland corporation, or FSIC II, FS Investment Corporation III, a Maryland corporation, or FSIC III, FS Investment Corporation IV, a Maryland corporation, or FSIC IV and, together with the Company, FSIC II and FSIC III, 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 the Company, with the Company continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, or Merger 2A, and, immediately thereafter, the Company 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 FSIC IV, with FSIC IV continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, or Merger 3A, and, immediately thereafter, FSIC IV will merge with and into FSIC II, with FSIC II continuing as the surviving company or, together with Merger 3A, Merger 3 and, together with Merger 1 and Merger 2, the Mergers. See Note 12 for additional information.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited 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

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

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 financial statements should be read in conjunction with its audited 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 balance sheet and schedule of investments are derived from the Company’s audited 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 Topic 946, Financial Services—Investment Companies.

Use of Estimates: The preparation of the unaudited financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Subordinated Income Incentive Fee: Pursuant to the terms of the Investment Advisory Agreement, a subordinated incentive fee on income is determined and payable in arrears as of the end of each calendar quarter (or upon termination of the Investment Advisory Agreement). A subordinated incentive fee on income is payable to the Advisor each calendar quarter if the Company’s “pre-incentive fee net investment fee income” (as defined in the Investment Advisory Agreement and approved by the Company’s board of trustees) exceeds the 1.75% “quarterly preferred return” to the Company’s shareholders (the ratio of pre-incentive fee net investment income divided by average adjusted capital). Once the Company’s pre-incentive fee net investment income in any quarter exceeds the quarterly preferred return of 1.75%, the Advisor will be entitled to a fee equal to the amount of the Company’s pre-incentive fee net investment income in excess of the quarterly preferred return, until the Company’s pre-incentive fee net investment income for such quarter equals 2.1875% of the Company’s average adjusted capital. Thereafter, the Advisor will be entitled to receive 20.0% of the Company’s pre-incentive fee net investment income.

Capital Gains Incentive Fee: Pursuant to the terms of the Investment Advisory Agreement, an 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 Agreement). This fee equals 20.0% of the Company’s incentive fee on capital gains, which equals the Company’s realized capital gains on a cumulative basis since inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees. The Company accrues for the capital gains incentive fee, which, if earned, is paid annually. The Company accrues the incentive fee on capital gains based on net realized and unrealized gains; however, the fee payable to the Advisor is based on realized gains and no such fee is payable with respect to unrealized gains unless and until such gains are actually realized.

Reclassifications: Certain amounts in the unaudited financial statements as of and for the three and nine months ended September 30, 2018 and the audited 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 financial statements as of and for the three and nine months ended September 30, 2019.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

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 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 $384 in structuring fee revenue. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

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.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 3. Share Transactions

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


	Nine Months Ended September 30,
	2019						2018⁽¹⁾
	Shares			Amount			Shares			Amount
Gross Proceeds from Offering		—		$	—			136,070		$	1,331
Reinvestment of Distributions		188,771			1,643			296,059			2,744

Total Gross Proceeds		188,771			1,643			432,129			4,075
Commissions and Dealer Manager Fees		—			—			—			(61	)

Net Proceeds to Company		188,771			1,643			432,129			4,014
Repurchases of Common Shares		(426,220	)		(3,829	)		(448,151	)		(4,138	)

Net Proceeds from Share Transactions		(237,449	)	$	(2,186	)		(16,022	)	$	(124	)

(1)	The Company terminated its Offering to new investors effective April 30, 2018. However, the Company continues to issue new shares under its distribution reinvestment plan.

During the period from October 1, 2019 to November 8, 2019, the Company issued 94,390 shares of common stock pursuant to its distribution reinvestment plan, or DRP, at a price per share of $8.55 for gross proceeds of $807. 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. Historically, the Company limited repurchases in each quarter to 2.5% of the weighted average number of shares of common stock outstanding. The Company may limit the number of shares to be repurchased during any calendar year to the number of shares it can repurchase with the proceeds it receives from the issuance of shares of its common stock under its distribution reinvestment plan. At the discretion of the Company’s board of trustees, the Company may also use cash on hand, cash available from borrowings and cash from the sale of investments as of the end of the applicable period to repurchase shares. The Company’s board of trustees may amend, suspend or terminate the share repurchase program upon 30 days’ notice.

On May 31, 2019, in conjunction with the announced Merger Agreement, the Company’s board of trustees suspended the Company’s share repurchase program.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 3. Share Transactions (continued)

The following table provides information concerning the Company’s repurchases of shares of common stock pursuant to its share repurchase program during the nine months ended September 30, 2019 and 2018:


For the Three Months Ended	Repurchase Date		Shares Repurchased		Percentage of Shares Tendered That Were Repurchased		Percentage of Outstanding Shares Repurchased		Repurchase Price Per Share		Aggregate Consideration for Repurchased Shares
Fiscal 2018
December 31, 2017		February 20, 2018		91,276		37%		0.72%	$	9.20	$	840
June 30, 2018		July 2, 2018		356,875		100%		2.77%	$	9.24		3,298

Total				448,151							$	4,138

Fiscal 2019
December 31, 2018		January 7, 2019		315,173		90%		2.51%	$	9.14	$	2,881
March 31, 2019		April 9, 2019		111,047		100%		0.90%	$	8.54		948
June 30, 2019⁽¹⁾		—		—		—		—		—		—

Total				426,220							$	3,829

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

Note 4. Related Party Transactions

Managing Dealer Agreement and Distribution and Shareholder Servicing Plan

The Company was a party to a managing dealer agreement with CNL Securities Corp., an affiliate of CNL. CNL Securities Corp. which served as the managing dealer of the Company’s Offering and in connection therewith received up-front selling commissions of up to 2.00% of gross offering proceeds, up-front dealer manager fees of up to 2.75% of gross offering proceeds and ongoing distribution and shareholder servicing fees at an annualized rate of 1.25% of the Company’s most recently published net asset value per share, excluding shares issued through the distribution reinvestment plan. All or any portion of these fees were re-allowed to participating brokers.

On March 16, 2017, the board of trustees approved an amended and restated managing dealer agreement, or the Managing Dealer Agreement, between the Company and the managing dealer and approved an amended and restated distribution and shareholder servicing plan for the Company, or the Distribution and Shareholder Servicing Plan, which lowered the ongoing distribution and shareholder servicing fee paid to the managing dealer from an annualized rate of 1.25% to an annualized rate of 1.00% of the Company’s net asset value per share. On April 9, 2018, the Managing Dealer Agreement and the Distribution and Shareholder Servicing Plan were terminated effective April 30, 2018.

Investment Advisory Agreements

On April 9, 2018, the Company terminated the Former Investment Advisory Agreement (as defined below) and concurrently entered into the Investment Advisory Agreement with the Advisor. Pursuant to the Investment Advisory Agreement, the Company pays the Advisor a fee for their services consisting of two components – a

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

base management fee based on the average value of the Company’s gross assets and incentive fees based on the Company’s performance. The incentive fee consists of (i) a subordinated incentive fee on income and (ii) an incentive fee on capital gains. Under the Investment Advisory Agreement, the Advisor is entitled to an annual base management fee of 1.50% of the average value of the Company’s gross assets, as compared to the annual rate of 2.00% under the Former Investment Advisory Agreement. In addition, the calculation of the base management fee under the Investment Advisory Agreement excludes cash and cash equivalents from gross assets, as compared to the Former Investment Advisory Agreement, which included cash and cash equivalents within the definition of gross assets. Under the Investment Advisory Agreement, the Advisor serves as the sole investment adviser of the Company. See Note 2 for a discussion of the capital gains and subordinated income incentive fees that the Advisor may be entitled to under the Investment Advisory Agreement.

Previously, the Company was a party to an investment advisory agreement with CNL, or the Former Investment Advisory Agreement, for the overall management of the Company’s activities. CNL was a party to a sub-advisory agreement with KKR, or the Former Sub-Advisory Agreement, under which KKR was responsible for the day-to-day management of the Company’s investment portfolio. Pursuant to the Former Investment Advisory Agreement, CNL earned (i) a management fee equal to an annual rate of 2.00% of the Company’s average gross assets, and (ii) an incentive fee based on the Company’s performance. The incentive fee consisted of (i) a subordinated incentive fee on income and (ii) an incentive fee on capital gains. CNL compensated KKR for advisory services that it provided to the Company with 50% of the fees that CNL received under the Former Investment Advisory Agreement.

A subordinated incentive fee on income is payable to the Advisor each calendar quarter if the Company’s pre-incentive fee net investment fee income (as defined in the Investment Advisory Agreement and approved by the Company’s board of trustees) exceeds the 1.75% quarterly preferred return to the Company’s shareholders (the ratio of pre-incentive fee net investment income divided by average adjusted capital).

The annual incentive fees on capital gains recorded for GAAP purposes are equal to (i) 20% of the Company’s realized and unrealized capital gains on a cumulative basis since inception, net of all realized capital losses and unrealized depreciation on a cumulative basis from inception, less (ii) the aggregate amount of any previously paid incentive fees on capital gains. For financial reporting purposes, in accordance with GAAP, the Company includes unrealized appreciation on the investment portfolio in the calculation of incentive fees on capital gains; however, such amounts are not payable by the Company unless and until the net unrealized appreciation is actually realized. The actual amount of incentive fees on capital gains that are due and payable to the Advisor is determined at the end of the calendar year.

The terms of the incentive fees are substantially the same as those to which the Former Advisors were entitled to receive under the Former Investment Advisory Agreement.

Under the terms of the Former Investment Advisory Agreement, CNL (and indirectly KKR) was entitled to receive up to 1.50% of gross offering proceeds as reimbursement for organization and offering expenses incurred by the Former Advisors on behalf of the Company. The Former Advisors had incurred organization and offering costs of approximately $5,400 as of March 31, 2018 on behalf of the Company. The Former Advisors waived the reimbursement of organization and offering expenses in connection with the Company’s gross capital raise received from the Offering from March 1, 2016 (when the Company satisfied the minimum offering requirement) through April 30, 2017, or the O&O Reimbursement Waiver. The O&O Reimbursement Waiver did not reduce

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

the amount of organization and offering expenses incurred by the Former Advisors that were eligible for reimbursement in future periods based on subsequent gross capital raised by the Company after April 30, 2017. Gross capital raised by the Company after April 30, 2017 was subject to the maximum organization and offering cost reimbursement of 1.50%. The Former Advisors were entitled to reimbursement of approximately $400 of organization and offering costs for gross capital raised for the period May 1, 2017 through April 9, 2018, all of which had been reimbursed to the Former Advisors as of April 9, 2018. A contingent obligation for the balance of organization and offering costs, subject to reimbursement based on future gross proceeds raised assuming a reinstatement of the Company’s Offering, was approximately $5,000 as of April 30, 2018.

On April 30, 2018, the Company terminated its Offering and in conjunction therewith, the Former Advisors agreed to permanently waive their rights to receive reimbursement of approximately $5,000 of organization and offering expenses that they had incurred on the Company’s behalf. As such, as of September 30, 2019, the Company had no contingent obligations to reimburse its Former Advisors for organization and offering expenses.

Administrative Services Agreements

The Company was a party to an administrative services agreement with CNL, or the Former Administrative Services Agreement, under which CNL performed, or oversaw the performance of, various administrative services on behalf of the Company. Administrative services included investor services, general ledger accounting, fund accounting, maintaining required financial records, calculating the Company’s net asset value, filing tax returns, preparing and filing SEC reports, preparing, printing, and disseminating shareholder reports and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. The Company reimbursed CNL for administrative expenses it incurred in performing its obligations.

On April 9, 2018, the Company terminated the Former Administrative Services Agreement with CNL and concurrently entered into a new administrative services agreement with the Advisor, or the Administrative Services Agreement. Under the Administrative Services Agreement, the Advisor serves as the Company’s administrator. The terms of the Administrative Services Agreement, including the services to be provided by the Advisor as administrator and the amount of reimbursements to be paid by the Company for certain administrative expenses, are substantially the same as those under the Former Administrative Services Agreement.

Expense Support Agreements

The Company was a party to an expense support and conditional reimbursement agreement, as amended and restated, or the Former Expense Support Agreement, with the Former Advisors pursuant to which the Former Advisors jointly and severally agreed to pay to the Company some or all of its operating expenses, or an Expense Support Payment, for each month during the Former Expense Support Payment Period (as defined below) in which the Company’s board of trustees declared a distribution to its shareholders. Expense Support Payments were made in accordance with the terms of the Former Expense Support Agreement. The Expense Support Payment Period commenced on March 1, 2016 and terminated effective with the termination of the Former Expense Support Agreement on April 9, 2018. The amount of Expense Support Payments provided by the Former Advisors since inception was approximately $5,400. Effective April 30, 2018, the Former Advisors waived their right to reimbursement of such Expense Support Payments.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

The Former Advisors were entitled to be reimbursed promptly by the Company, or a Reimbursement Payment, for Expense Support Payments made with respect to any class of common stock, subject to the limitation that no Reimbursement Payment may be made by the Company to the extent that it would cause the Company’s Other Operating Expenses (as defined in the Former Expense Support Agreement) for such class of common stock to exceed the lesser of (A) 1.75% of average net assets attributable to common shares on an annualized basis after taking such payment into account and (B) the percentage of average net assets attributable to shares of such class of common stock represented by Other Operating Expenses (as defined in the Former Expense Support Agreement) during the period in which such Expense Support Payment from the Former Advisors was made (provided, however, that this clause (B) did not apply to any Reimbursement Payment which related to an Expense Support Payment from the Former Advisors made during the same period).

Concurrently with the Company’s entry into the Investment Advisory Agreement and the Administrative Services Agreement, on April 9, 2018, the Company entered into a new expense support and conditional reimbursement agreement, or the Expense Support Agreement, which replaced the Former Expense Support Agreement. The Expense Support Agreement was substantially similar to the Former Expense Support Agreement.

On November 14, 2018, the Advisor announced that for any calendar month ending on or prior to September 30, 2019, it will defer the receipt of base management fees under the Investment Advisory Agreement if, and to the extent that, the Company’s distributions paid to the Company’s shareholders in the calendar month exceeds the sum of the Company’s investment company taxable income (as defined in Section 852 of the Internal Revenue Code of 1986, as amended, or the Code), net capital gains (as defined in Section 1222 of the Code) and dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent such amounts were not included in net investment company taxable income or net capital gains) in the calendar month, or collectively, the Company’s distributable funds on a tax basis. The Advisor will only receive any deferred fees in a future calendar month if, and to the extent that, the Company’s distributable funds on a tax basis in the future calendar month exceeds the Company’s distributions paid to the Company’s shareholders in such month. In light of this commitment by the Advisor, the Expense Support Agreement was terminated on November 14, 2018. The Company’s conditional obligation to reimburse the Advisor pursuant to the terms of the Expense Support Agreement survived the termination of such agreement.

During the nine months ended September 30, 2019, the Advisor did not defer the receipt of any base management fees. As of September 30, 2019, there were no deferred base management fees subject to future payment by the Company.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

The following table describes the fees and expenses accrued under the Investment Advisory Agreement, the Former Investment Advisory Agreement, the Administrative Services Agreement, the Former Administrative Services Agreement, the Expense Support Agreement and the Former Expense Support Agreement, as applicable, 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 Agreement	Description	2019		2018		2019		2018
CNL Securities Corp.	Managing Dealer Agreement	Up-front Selling Commissions and Dealer Manager Fees	$	—	$	—	$	—	$	61
CNL Securities Corp.	Managing Dealer Agreement	Distribution and Shareholder Servicing Fees	$	—	$	—	$	—	$	376
CNL and KKR	Former Investment Advisory Agreement	Offering Costs	$	—	$	—	$	—	$	20
FS/KKR Advisor, CNL and KKR	Investment Advisory Agreement Former Investment Advisory Agreement	Base Management Fee⁽¹⁾	$	699	$	724	$	2,071	$	2,295
FS/KKR Advisor, CNL and KKR	Investment Advisory Agreement Former Investment Advisory Agreement	Capital Gains Incentive Fee⁽²⁾	$	—	$	185	$	—	$	(79)
FS/KKR Advisor, CNL and KKR	Investment Advisory Agreement Former Investment Advisory Agreement	Subordinated Incentive Fee on Income⁽³⁾	$	351	$	—	$	716	$	—
FS/KKR Advisor and CNL	Administrative Services Agreement Former Administrative Services Agreement	Administrative Services Expenses⁽⁴⁾	$	103	$	—	$	265	$	364
FS/KKR Advisor, CNL and KKR	Expense Support Agreement Former Expense Support Agreement	Expense Support⁽¹⁾	$	—	$	(44)	$	—	$	(625)

(1)	During the nine months ended September 30, 2019, $1,902 of base management fees were paid to the Advisor and $165 of expense support payments due from the Advisor were used to offset management fees payable. As of September 30, 2019, $699 in base management fees were payable to the Advisor.

(2)	During the nine months ended September 30, 2019 and 2018, no capital gains incentive fees were paid to the Advisor and/or Former Advisors. As of September 30, 2019, no capital gains incentive fees were payable to the Advisor.

(3)	During the nine months ended September 30, 2019, $365 of subordinated incentive fees on income were paid to the Advisor. As of September 30, 2019, a subordinated incentive fee on income of $351 was payable to the Advisor.

(4)	During the nine months ended September 30, 2019, $53 of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by the Advisor, and the remainder

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (continued)

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 $11 and $16 for the nine months ended September 30, 2019 and 2018, respectively. The Company paid $236 in administrative services expenses to the Advisor during the nine months ended September 30, 2019.

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 FS Investment Corporation IV, or together with the Company, the Fund Complex, 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 Advisors (US) LLC, 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 shareholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For additional information regarding potential conflicts of interest, see the Company’s annual report on Form 10-K for the year ended December 31, 2018.

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 April 3, 2018, or the SEC Exemptive 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, including investments originated and directly negotiated by the Advisor or KKR Credit, with certain affiliates of the Advisor. The SEC Exemptive Order extended the co-investment exemptive order previously granted by the SEC to the Company in June 2017.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Distributions

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


	Distribution
For the Three Months Ended	Per Share		Amount
Fiscal 2018
March 31, 2018	$	0.14625	$	1,868
June 30, 2018		0.14625		1,876
September 30, 2018		0.14625		1,839

Total	$	0.43875	$	5,583

Fiscal 2019
March 31, 2019	$	0.14625	$	1,796
June 30, 2019		0.14625		1,787
September 30, 2019		0.14625		1,787

Total	$	0.43875	$	5,370

The Company currently intends to declare and pay regular cash distributions on a quarterly basis. On October 29, 2019, the Company’s board of trustees declared a regular quarterly cash distribution of $0.14625 per share, which will be paid on or about January 15, 2020 to shareholders of record as of the close of business on December 31, 2019. The timing and amount of any future distributions to shareholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of trustees.

The Company has adopted a distribution reinvestment plan for its shareholders. As a result, if the Company makes a cash distribution, its shareholders who have elected to participate in the distribution reinvestment plan will have their cash distribution automatically reinvested in additional shares of the Company’s 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 shareholders from any sources of funds legally available to it, including proceeds from the sale of shares of the Company’s common stock, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets 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 shareholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 5. Distributions (continued)

The Company estimates that none of the distributions declared during the nine months ended September 30, 2019 would be classified as a tax basis return of capital. None of the distributions declared during the year ended December 31, 2018 were classified as a tax basis return of capital. As of September 30, 2019 and December 31, 2018, the Company had undistributed net investment income of $894 and $294, respectively.

The total and the sources of declared distributions on a GAAP basis for the nine months ended September 30, 2019 and 2018 are presented in the table below:


	Nine Months Ended September 30,
	2019						2018
	Per Share		Amount		Allocation		Per Share		Amount		Allocation
Net investment income	$	0.44	$	5,370		100.0%	$	0.41	$	5,176		92.7%
Net realized gains		—		—		—		0.02		300		5.4%
Distributions in excess of net investment income		—		—		—		0.01		107		1.9%

Total declared distributions	$	0.44	$	5,370		100.0%	$	0.44	$	5,583		100.0%

Net investment income includes Expense Support Payments of $625 which supported distributions during the nine months ended September 30, 2018. Sources of distributions, other than net investment income and realized gains on a GAAP basis, include (i) the ordinary income component of prior year tax basis undistributed earnings and (ii) required adjustments to GAAP net investment income and realized gains in the current period to determine taxable income available for distributions.

Note 6. Investment Portfolio

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of September 30, 2019 and December 31, 2018:


	September 30, 2019 (Unaudited)						December 31, 2018
	Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio		Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	115,581	$	109,376		58.4%	$	97,236	$	93,777		53.6%
Senior Secured Loans—Second Lien		36,360		35,506		18.9%		35,686		34,277		19.6%
Other Senior Secured Debt		7,200		6,993		3.7%		7,970		7,407		4.2%
Subordinated Debt		21,988		20,598		11.0%		31,499		28,918		16.5%
Asset Based Finance		9,187		10,520		5.6%		6,896		6,773		3.8%
Equity/Other		4,085		4,406		2.4%		4,078		4,014		2.3%

Total	$	194,401	$	187,399		100.0%	$	183,365	$	175,166		100.0%

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

In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 6. Investment Portfolio (continued)

policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities. As of September 30, 2019 and December 31, 2018, the Company did not hold investments in any portfolio companies of which it is deemed to “control” or be an “affiliated person.”

The Company’s investment portfolio may contain loans and other unfunded arrangements that are in the form of lines of credit, revolving credit facilities, delayed draw credit facilities or other investments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of September 30, 2019, the Company had unfunded debt investments with aggregate unfunded commitments of $4,284 and unfunded equity/other commitments of $7,562. As of December 31, 2018, the Company had unfunded debt investments with aggregate unfunded commitments of $1,804 and unfunded equity commitments of $9,531. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise. See Note 10 for additional details regarding the Company’s unfunded commitments.

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of September 30, 2019 and December 31, 2018:


	September 30, 2019 (Unaudited)					December 31, 2018
Industry Classification	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
Automobiles & Components	$	1,600		0.9	%	$	1,502		0.9	%
Capital Goods		19,680		10.5	%		23,439		13.4	%
Commercial & Professional Services		15,478		8.3	%		14,372		8.2	%
Consumer Durables & Apparel		3,963		2.1	%		3,895		2.2	%
Consumer Services		11,422		6.1	%		9,718		5.5	%
Diversified Financials		3,513		1.9	%		1,748		1.0	%
Energy		825		0.4	%		1,552		0.9	%
Food & Staples Retailing		11,719		6.2	%		4,605		2.6	%
Food, Beverage & Tobacco		2,194		1.2	%		1,728		1.0	%
Health Care Equipment & Services		14,354		7.7	%		12,098		6.9	%
Insurance		5,084		2.7	%		4,933		2.8	%
Materials		12,537		6.7	%		17,977		10.3	%
Media & Entertainment		778		0.4	%		—		—
Pharmaceuticals, Biotechnology & Life Sciences		4,833		2.6	%		1,451		0.8	%
Real Estate		1,369		0.7	%		—		—
Retailing		20,678		11.0	%		19,082		10.9	%
Semiconductors & Semiconductor Equipment		3,329		1.8	%		3,346		1.9	%
Software & Services		36,241		19.3	%		34,907		19.9	%
Technology Hardware & Equipment		6,097		3.2	%		6,934		4.0	%
Telecommunication Services		1,075		0.6	%		449		0.3	%
Transportation		10,630		5.7	%		11,430		6.5	%

Total	$	187,399		100.0	%	$	175,166		100.0	%

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Financial Instruments

The following is a summary of the fair value and location of the Company’s derivative instruments in the balance sheets held as of September 30, 2019 and December 31, 2018:


		Fair Value
Derivative Instrument	Statement Location	September 30, 2019 (Unaudited)		December 31, 2018
Foreign currency forward contracts	Unrealized appreciation on foreign currency forward contracts	$	363	$	457

Total		$	363	$	457

Net realized and unrealized gains and losses on derivative instruments recorded by the Company for the three and nine months ended September 30, 2019 and 2018 are in the following locations in the unaudited statements of operations:


		Net Realized Gains (Losses)
		Three Months Ended September 30,				Nine Months Ended September 30,
Derivative Instrument	Statement Location	2019		2018		2019		2018
Foreign currency forward contracts	Net realized gain (loss) on foreign currency forward contracts	$	—	$	—	$	—	$	(1)

Total		$	—	$	—	$	—	$	(1)


		Net Unrealized Gains (Losses)
		Three Months Ended September 30,				Nine Months Ended September 30,
Derivative Instrument	Statement Location	2019		2018		2019		2018
Foreign currency forward contracts	Net change in unrealized appreciation (depreciation) on foreign currency forward contracts	$	63	$	(71)	$	(94)	$	112

Total		$	63	$	(71)	$	(94)	$	112

Foreign Currency Forward Contracts

The Company may enter into foreign currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of the Company’s investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts. The Company attempts to limit counterparty risk by only dealing with well-known counterparties.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Financial Instruments (continued)

The Company was a party to two foreign currency forward contracts during the period which related to economic hedging of the Company’s foreign currency denominated debt investments. As of September 30, 2019 and December 31, 2018, the Company’s open foreign currency forward contracts were as follows:


Foreign Currency	Settlement Date	Counterparty	Notional Amount and Transaction	US$ Value at Settlement Date		US$ Value at September 30, 2019		Unrealized Appreciation

CAD	October 10, 2019	JP Morgan Chase Bank	C$ 5,690 Sold	$	4,642	$	4,296	$	346
EUR	July 17, 2023	JP Morgan Chase Bank	€ 107 Sold		144		127		17


Total				$	4,786	$	4,423	$	363



Foreign Currency	Settlement Date	Counterparty	Notional Amount and Transaction	US$ Value at Settlement Date		US$ Value at December 31, 2018		Unrealized Appreciation

CAD	October 10, 2019	JP Morgan Chase Bank	C$ 5,690 Sold	$	4,642	$	4,191	$	451
EUR	July 17, 2023	JP Morgan Chase Bank	€ 107 Sold		144		138		6

Total				$	4,786	$	4,329	$	457

The following table presents the Company’s derivative assets by counterparty, net of amounts available for offset under a master netting agreement and net of the related collateral received by the Company for assets as of September 30, 2019:


Counterparty	Derivative Assets Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Received⁽¹⁾		Cash Collateral Received⁽¹⁾		Net Amount of Derivative Assets⁽²⁾
JP Morgan Chase Bank	$	363		—		—		—	$	363

(1)	In some instances, the actual amount of the collateral received may be more than the amount shown due to overcollateralization.

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

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 7. Financial Instruments (continued)

As of September 30, 2019 and December 31, 2018, the combined contractual notional balance of the Company’s foreign currency forward contracts totaled $4,423 and $4,329, respectively, all of which related to hedging of the Company’s foreign currency denominated debt investments. The tables below display the Company’s foreign currency denominated debt investments and foreign currency forward contracts, summarized by foreign currency type as of September 30, 2019 and December 31, 2018:


	Debt Investments Denominated in Foreign Currencies As of September 30, 2019						Hedges As of September 30, 2019
Foreign Currency	Par Value in Local Currency		Par Value in U.S. Dollars		Fair Value		Net Foreign Currency Hedge Amount in Local Currency		Net Foreign Currency Hedge Amount in U.S. Dollars

Australian Dollars	A$	2,585	$	1,732	$	1,725	A$	—	$	—

Canadian Dollars	C$	6,569		4,992		5,010	C$	5,690		4,296

Euros	€	5,664		6,174		6,074	€	107		127

British Pound Sterling	£	2,487		3,059		3,066	£	—		—


Total			$	15,957	$	15,875			$	4,423


	Debt Investments Denominated in Foreign Currencies As of December 31, 2018						Hedges As of December 31, 2018
Foreign Currency	Par Value in Local Currency		Par Value in U.S. Dollars		Fair Value		Net Foreign Currency Hedge Amount in Local Currency		Net Foreign Currency Hedge Amount in U.S. Dollars

Canadian Dollars	C$	5,149	$	3,759	$	3,811	C$	5,690	$	4,191

Euros	€	3,289		3,782		3,718	€	107		138

British Pound Sterling	£	378		484		485	£	—		—



Total			$	8,025	$	8,014			$	4,329

Note 8. Fair Value of Financial Instruments

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

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

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

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

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

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

As of September 30, 2019 and December 31, 2018, the Company’s investments were categorized as follows in the fair value hierarchy:


	September 30, 2019 (Unaudited)
	Level 1		Level 2		Level 3		Total

Senior Secured Loans—First Lien	$	—	$	43,236	$	66,140	$	109,376

Senior Secured Loans—Second Lien		—		19,264		16,242		35,506

Other Senior Secured Debt		—		6,993		—		6,993

Subordinated Debt		—		19,332		1,266		20,598

Asset Based Finance		—		1		10,519		10,520

Equity/Other		1,495		—		2,911		4,406



Total Investments	$	1,495	$	88,826	$	97,078	$	187,399


	December 31, 2018
	Level 1		Level 2		Level 3		Total
Senior Secured Loans—First Lien	$	—	$	44,151	$	49,626	$	93,777

Senior Secured Loans—Second Lien		—		21,397		12,880		34,277

Other Senior Secured Debt		—		7,407		—		7,407

Subordinated Debt		—		28,918		—		28,918

Asset Based Finance		—		—		6,773		6,773

Equity/Other		1,240		—		2,774		4,014


Total Investments	$	1,240	$	101,873	$	72,053	$	175,166

In addition, the Company had foreign currency forward contracts, as described in Note 7, which were categorized as Level 2 in the fair value hierarchy as of September 30, 2019 and December 31, 2018.

The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated repayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments,

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Company’s board of trustees determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Company typically values its other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent third-party pricing services and screened for validity by such services and are typically classified as Level 2 within the fair value hierarchy.

The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. The audit committee for valuation of the Company’s board of trustees, or the audit committee, and the board of trustees reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company’s valuation policy.

The following tables provide reconciliations for the nine months ended September 30, 2019 and 2018 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:


	For the Nine Months Ended September 30, 2019
	Senior Secured Loans—First Lien		Senior Secured Loans—Second Lien		Subordinated Debt		Asset Based Finance		Equity/Other		Total
Fair value at beginning of period	$	49,626	$	12,880	$	—	$	6,773	$	2,774	$	72,053
Purchases		19,611		4,756		1,258		3,826		7		29,458
Paid-in-kind interest		125		51		—		—		—		176
Net realized gain (loss)		(50)		2		—		(171)		—		(219)
Net change in unrealized appreciation (depreciation)		(187)		(165)		8		1,469		130		1,255
Sales and repayments		(3,070)		(1,295)		—		(1,378)		—		(5,743)
Net discount accretion		85		13		—		—		—		98
Net transfers in or out of Level 3		—		—		—		—		—		—

Fair value at end of period	$	66,140	$	16,242	$	1,266	$	10,519	$	2,911	$	97,078

The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	(201)	$	(155)	$	8	$	1,349	$	130	$	1,131

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)


	For the Nine Months Ended September 30, 2018
	Senior Secured Loans—First Lien		Senior Secured Loans—Second Lien		Asset Based Finance		Equity/Other		Total
Fair value at beginning of period	$	27,061	$	4,964	$	2,682	$	2,814	$	37,521
Purchases		20,342		7,157		4,462		—		31,961
Paid-in-kind interest		54		21		—		—		75
Net realized gain (loss)		(6)		—		—		—		(6)
Net change in unrealized appreciation (depreciation)		(333)		(58)		(126)		(17)		(534)
Sales and repayments		(1,462)		(654)		(1,166)		—		(3,282)
Net discount accretion		96		17		—		—		113
Net transfers in or out of Level 3		—		—		—		—		—

Fair value at end of period	$	45,752	$	11,447	$	5,852	$	2,797	$	65,848

The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	(329)	$	(52)	$	(126)	$	(17)	$	(524)

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of September 30, 2019 and December 31, 2018 were as follows:

Type of Investment

Fair Value at
September 30, 2019⁽¹⁾
(Unaudited)

Valuation

Technique⁽²⁾

Unobservable
Input

Range
(Weighted Average)⁽³⁾

Impact to
Valuation from an
Increase in Input⁽⁴⁾

Senior Debt

77,290

Discounted Cash Flow

Discount Rate

6.50% - 16.43%
(9.15%)

Decrease

5,092

Cost

Subordinated Debt

1,266

Discounted Cash Flow

Discount Rate

13.18% - 13.18%
(13.18%)

Decrease

Asset Based Finance

8,834

Discounted Cash Flow

Discount Rate

7.80% - 12.90%
(11.96%)

Decrease

877

Cost

795

Other⁽⁵⁾

Waterfall

EBITDA Multiple

1.36x - 1.36x
(1.36x)

Increase

Equity/Other

2,795

Discounted Cash Flow

Discount Rate

12.78% - 12.78%
(12.78%)

Decrease

116

Waterfall

EBITDA Multiple

8.80x - 9.30x
(9.27x)

Increase

Total

97,078

Type of Investment

Fair Value at
December 31, 2018⁽¹⁾

Valuation

Technique⁽²⁾

Unobservable
Input

Range
(Weighted Average)⁽³⁾

Impact to
Valuation from an
Increase in Input⁽⁴⁾

Senior Debt

56,933

Discounted Cash Flow

Discount Rate

7.68% - 15.55%
(10.90%)

Decrease

5,573

Cost

N/A

Asset Based Finance

975

Discounted Cash Flow

Discount Rate

10.96%
(10.96%)

Decrease

5,798

Cost

N/A

Equity/Other

2,682

Discounted Cash Flow

Discount Rate

15.59%
(15.59%)

Decrease

Market Comparables

Illiquidity
Discount

10.00%
(10.00%)

Decrease

Total

72,053

(1)	Certain investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value.

(2)

For the assets and investments that have more than one valuation technique, the Company may rely on the stated techniques individually or in the aggregate based on a weight ascribed to each valuation technique, ranging from 0 – 100%. Indicative dealer quotes obtained for valuation purposes are reviewed by the Company relative to other valuation techniques.

(3)	Weighted average amounts are based on the estimated fair values.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

(4)

This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

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

Note 9. Financing Arrangements

On July 14, 2017, the Company entered into a senior secured revolving credit agreement, or as amended, the Credit Agreement. The Credit Agreement provides for a revolving credit facility, or the Revolving Credit Facility, consisting of loans to be made in dollars and other foreign currencies in an initial aggregate principal amount of $70,000, which was increased to $82,000 on June 11, 2018. Availability under the Revolving Credit Facility will terminate on December 31, 2019, and the outstanding loans under the Revolving Credit Facility will mature on July 14, 2020.

Under the Revolving Credit Facility, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar revolving credit facilities. The Company was in compliance with all covenants required by the Revolving Credit Facility as of September 30, 2019 and December 31, 2018.

As of September 30, 2019 and December 31, 2018, the principal amount outstanding on the Revolving Credit Facility was approximately $79,728 and $73,933, respectively. Of the $79,728 principal outstanding as of September 30, 2019, approximately $1,720, $642, $6,342 and $1,624 were denominated in Australian dollars, Canadian dollars, Euros and British pound sterling, respectively. Of the $73,933 principal outstanding as of December 31, 2018, approximately $73, $3,770 and $440 were denominated in Canadian dollars, Euros and British pound sterling, respectively.

The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the Revolving Credit Facility for the three and nine months ended September 30, 2019 and 2018 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Interest expense	$	978	$	943	$	2,982	$	2,226
Unused commitment fees		4		6		14		44
Amortization of deferred financing costs		27		28		81		80

Total interest expense	$	1,009	$	977	$	3,077	$	2,350

Weighted average interest rate⁽¹⁾		4.9%		4.9%		5.1%		4.8%
Average borrowings	$	79,095	$	76,773	$	78,310	$	63,183

(1)	Weighted average interest rates include the effect of unused commitment fees.

The weighted average effective interest rate and weighted average remaining years to maturity of the Company’s outstanding borrowings as of September 30, 2019 were approximately 4.6% and 0.8 years, respectively.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies

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

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

As of September 30, 2019, the Company had a contingent obligation to reimburse the Advisor for expense support payments of $165. On April 30, 2018, the Former Advisors agreed to permanently waive the Company’s obligation to reimburse the Former Advisors approximately $5,400 in expense support payments not previously reimbursed under the Former Expense Support Agreement and approximately $5,000 of organization and offering expenses that they had incurred on the Company’s behalf. As such, as of September 30, 2019, the Company had no contingent obligations to reimburse its Former Advisors for expense support and organization and offering expenses. See Note 4 for further detail of the agreements with the Advisor and the Former Advisors.

Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s balance sheets. Since these commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company has sufficient liquidity to fund these commitments. As of September 30, 2019, the Company’s unfunded commitments consisted of the following:


Category / Company⁽¹⁾	Commitment Amount
Senior Secured Loans—First Lien
Apex Group Limited	$	87
Conservice LLC		65
Conservice LLC		56
Eagle Family Foods Inc		91
Entertainment Benefits Group LLC		92
ID Verde		322
J S Held LLC		141
J S Held LLC		328
Lipari Foods LLC		973
Monitronics International Inc		1,162
Revere Superior Holdings, Inc		347
SMART Global Holdings Inc		96
Asset Based Finance
Home Partners JV, Structured Mezzanine		524

Total	$	4,284

Unfunded equity/other commitments	$	7,562

(1)	May be commitments to one or more entities affiliated with the named company.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 10. Commitments and Contingencies (continued)

As of September 30, 2019, the Company’s unfunded debt commitments have a fair value representing unrealized appreciation (depreciation) of $7. The Company funds its equity/other investments as it receives funding notices from the portfolio companies. As of September 30, 2019, the Company’s unfunded equity/other commitments have a fair value of zero.

In the normal course of business, the Company may enter into guarantees on behalf of portfolio companies. Under such arrangements, the Company would be required to make payments to third parties if the portfolio companies were to default on their related payment obligations. The Company had no such guarantees outstanding as of September 30, 2019 and December 31, 2018.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 11. Financial Highlights

The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2019 and 2018:


	Nine Months Ended September 30,
	2019		2018
Per Share Data:⁽¹⁾
Net asset value, beginning of period	$	8.55	$	9.20
Results of operations⁽²⁾
Net investment income, before expense support		0.49		0.36
Expense support		—		0.05

Net investment income		0.49		0.41
Net realized gain (loss) and unrealized appreciation (depreciation)		0.00		(0.03)

Net increase (decrease) in net assets resulting from operations		0.49		0.38

Shareholder distributions⁽³⁾
Distributions from net investment income		(0.44)		(0.41)
Distributions from net realized gains		—		(0.02)
Distributions in excess of net investment income⁽⁴⁾		—		(0.01)

Net decrease in net assets resulting from shareholder distributions		(0.44)		(0.44)

Issuance of common stock⁽⁵⁾		0.01		0.00
Repurchases of common stock⁽⁶⁾		(0.01)		0.00

Net increase (decrease) in net assets resulting from capital share transactions		0.00		0.00

Net asset value, end of period	$	8.60	$	9.14

Total return based on net asset value⁽⁷⁾		5.77%		4.16%

Ratio/Supplemental Data:
Net assets, end of period	$	105,834	$	115,542
Average net assets⁽⁸⁾	$	106,804	$	116,916
Average borrowings⁽⁸⁾	$	78,310	$	63,183
Shares outstanding, end of period		12,302,271		12,640,594
Weighted average shares outstanding		12,260,166		12,733,097
Ratios to average net assets:⁽⁸⁾
Total operating expenses before expense support		7.50%		6.18%
Total operating expenses after expense support		7.50%		5.64%
Net investment income		5.59%		4.43%
Portfolio turnover		18%		34%
Total amount of senior securities outstanding, exclusive of treasury securities	$	79,728	$	75,471
Asset coverage per unit⁽⁹⁾		2.33		2.53

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

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

(3)	The per share data for distributions is the actual amount of distributions paid or payable per share of common stock outstanding during the entire period; distributions per share are rounded to the nearest $0.01.

(4)	See Note 5 for further information on the source of distributions from other than net investment income and realized gains.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 11. Financial Highlights (continued)

(5)

The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock in the Company’s continuous public offering and pursuant to the DRP. The issuance of common stock at a price, net of selling commissions and dealer manager fees, that is greater than the net asset value per share results in an increase in net asset value per share. The per share impact of the Company’s DRP is an increase to the net asset value of less than $0.01 per share during the nine months ended September 30, 2018.

(6)	The per share impact of the Company’s repurchases of common stock reflects a change in net asset value of less than $0.01 per share during the nine months ended September 30, 2018.

(7)

The total return based on net asset value is a measure of the change in total value for shareholders who held the Company’s common stock at the beginning and end of the period, including distributions declared during the period. Total return based on net asset value is based on (i) net asset value per share on the first day of the period, (ii) the net asset value per share on the last day of the period, of (A) one share plus (B) any fractional shares issued in connection with the reinvestment of monthly or quarterly distributions, and (iii) distributions payable relating to one share, if any, on the last day of the period. The total return based on net asset value calculation assumes that (i) monthly or quarterly cash distributions are reinvested in accordance with the Company’s distribution reinvestment plan and (ii) the fractional shares issued pursuant to the distribution reinvestment plan are issued at the then current public offering price, net of sales load, on each monthly or quarterly distribution payment date. Since there is no public market for the Company’s shares, terminal market value per share is assumed to be equal to net asset value per share on the last day of the period presented. The Company’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. Investment performance is presented without regard to sales load that may be incurred by shareholders in the purchase of the Company’s shares of common stock. Total return is not annualized.

(8)	The computation of average net assets and average borrowings during the period is based on the daily value of net assets and borrowing balances, respectively.

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

Note 12. Fund Mergers

On May 31, 2019, the Funds entered into the Merger Agreement with Merger Sub 1, Merger Sub 2, 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, and, immediately thereafter, FSIC III will merge with and into FSIC II, with FSIC II continuing as the surviving company, (ii) Merger Sub 2 will merge with and into the Company, with the Company continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, and, immediately thereafter, the Company will merge with and into FSIC II, with FSIC II continuing as the surviving company and (iii) Merger Sub 3 will merge with and into FSIC IV, with FSIC IV continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, and, immediately thereafter, FSIC IV will merge with and into FSIC II, with FSIC II continuing as the surviving company. The parties to the Merger Agreement intend the Mergers to be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

Corporate Capital Trust II

Notes to Unaudited Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 12. Fund Mergers (continued)

Merger 3A will equal the net asset value per share of FSIC III common stock, the Company’s common stock and FSIC IV common stock, respectively (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger), divided by the net asset value per share of FSIC II common stock (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger).

Consummation of the Mergers, which is currently anticipated to occur during the fourth quarter of 2019, is subject to certain closing conditions, including (1) requisite approvals of the applicable Funds’ stockholders, (2) certain required charter amendments for each of the Funds, (3) the absence of certain legal impediments to the consummation of the Mergers, (4) effectiveness of the registration statement on Form N-14, which includes a joint proxy statement of the Funds and a prospectus of FSIC II, and (5) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement. Merger 1A (involving a wholly-owned subsidiary of FSIC II and FSIC III) is a condition precedent to each of the Mergers. Therefore, Merger 2A (including a wholly-owned subsidiary of FSIC II and the Company) will not occur unless Merger 1A also occurs. No other Merger is a condition precedent to any other Merger.

The Merger Agreement also contains certain termination rights in favor of each Fund including if the Mergers are not completed on or before May 31, 2020 or if the requisite approvals of the applicable Funds’ stockholders are not obtained.

On November 6, 2019, each of the Funds held its annual stockholder meeting at which stockholders voted on the applicable Mergers, the Recapitalization Transactions and certain other proposals. The stockholders of each of the Funds approved the applicable Mergers and the Recapitalization Transaction, but each of the FSIC II, FSIC III and FSIC IV adjourned its respective annual stockholder meeting until November 22, 2019 with respect to certain other proposals, including proposals necessary to consummate the Mergers and the Recapitalization Transaction. The stockholders of the Company approved all proposals necessary to consummate the Mergers and the Recapitalization Transaction.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands, except share and per share amounts)

The information contained in this section should be read in conjunction with our financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us,” “our” and the “Company” refer to Corporate Capital Trust II.

Forward-Looking Statements

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

•

our future operating results;

•

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

•

the impact of the investments that we expect to make;

•

the ability of our portfolio companies to achieve their objectives;

•

our current and expected financings and investments;

•

receiving and maintaining corporate credit ratings and changes in the general interest rate environment;

•

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

•

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

•

our contractual arrangements and relationships with third parties;

•

actual and potential conflicts of interest with the other funds in the Fund Complex, their respective current or future investment advisers or any of their affiliates;

•

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

•

our use of financial leverage;

•

the ability of the Advisor to locate suitable investments for us and to monitor and administer our investments;

•

the ability of the Advisor or its affiliates to attract and retain highly talented professionals;

•

our ability to maintain our qualification as a RIC and as a BDC;

•

the impact on our business of the Dodd-Frank Act, and the rules and regulations issued thereunder;

•

the effect of changes to tax legislation on us and the portfolio companies in which we may invest and our and their tax position;

•

the tax status of the enterprises in which we may invest; and

•

the Mergers, the likelihood the Mergers are completed and the anticipated timing of their completion.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include:

•

changes in the economy;

•

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

•

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

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Shareholders are advised to consult any additional disclosures that we may make directly to shareholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act.

Overview

We are a non-diversified, closed-end management investment company that has elected to be treated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. We commenced operations on March 1, 2016 when we satisfied our minimum offering requirement. Formed as a Delaware statutory trust on August 12, 2014, we were externally managed by our Former Advisors through April 8, 2018 under the Former Investment Advisory Agreement and the Former Administrative Services Agreement.

On April 9, 2018, we entered into the Investment Advisory Agreement with the Advisor. The Investment Advisory Agreement replaced the Former Investment Advisory Agreement with KKR and CNL. In addition, we entered into the Administrative Services Agreement, which replaced the Former Administrative Services Agreement between us and CNL.

Through April 8, 2018, our Former Advisors were, and commencing April 9, 2018, our Advisor is responsible for sourcing potential investments, conducting due diligence on prospective investments, analyzing investment opportunities, structuring investments, determining the securities and other assets that we purchase, retain or sell and monitoring our portfolio on an ongoing basis, as well as providing the administrative services necessary for our company to operate. Our Former Advisors were, and our Advisor is, registered as investment advisers with the SEC.

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We pursue our investment objective by investing primarily in the debt of middle market U.S. companies with a focus on originated transactions sourced through the network of the Advisor and its affiliates. We define direct originations as any investment where the Advisor or its affiliates negotiates the terms of the transaction beyond just the price, which, for example, may include negotiating financial covenants, maturity dates or interest rate terms. These directly originated transactions include participation in other originated transactions where there may be third parties involved, or a bank acting as an intermediary, for a closely held club, or similar transactions.

Our portfolio is comprised primarily of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the OTC market or directly from our target companies as primary market or directly originated investments. In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as

additional consideration. We may also purchase or otherwise acquire interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for common stock or other equity or the cash value of common stock or other equity, in our target companies, generally in conjunction with one of our debt investments, including through the restructuring of such investments, or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In addition, a portion of our portfolio may be comprised of corporate bonds, structured products, other debt securities and derivatives, including total return swaps and credit default swaps. The Advisor will seek to tailor our investment focus as market conditions evolve. Depending on market conditions, we may increase or decrease our exposure to less senior portions of the capital structure or otherwise make opportunistic investments, such as where the market price of loans, bonds or other securities reflects a lower value than deemed warranted by the Advisor’s fundamental analysis, which may occur due to general dislocations in the markets, a misunderstanding by the market of a particular company or an industry being out of favor with the broader investment community and may include event driven investments, anchor orders and structured products.

The senior secured loans, second lien secured loans and senior secured bonds in which we invest generally have stated terms of three to seven years and subordinated debt investments that we make generally have stated terms of up to ten years, but the expected average life of such securities is generally between three and seven years. However, there is no limit on the maturity or duration of any security in our portfolio. Our debt investments may be rated by a NRSRO and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s or lower than “BBB-” by S&P). We also invest in non-rated debt securities.

Revenues

The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net unrealized appreciation or depreciation on investments and net unrealized gain or loss on foreign currency. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations.

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

Expenses

Our primary operating expenses include the payment of management and incentive fees and other expenses under the Investment Advisory Agreement and the Administrative Services Agreement, interest expense from financing arrangements and other indebtedness, and other expenses necessary for our operations. The management and incentive fees compensate the Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.

The Advisor oversees our 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

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

Pursuant to the Administrative Services Agreement, we reimburse the Advisor for expenses necessary to perform services related to our administration and operations, including the Advisor’s allocable portion of the compensation and related expenses of certain personnel of FS Investments and KKR Credit providing administrative services to us on behalf of the Advisor. We reimburse the Advisor quarterly for expenses necessary to perform services related to our 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 we estimate we 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 us based on factors such as total assets, revenues, time allocations and/or other reasonable metrics. Our board of trustees reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of administrative expenses among us and certain affiliates of the Advisor and assesses the reasonableness of such reimbursements.

We bear all other expenses of our operations and transactions, including all other expenses incurred by the Advisor in performing services for us and administrative personnel paid by FS Investments and KKR Credit.

In addition, we have contracted with State Street Bank and Trust Company to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by the Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.

Pending Merger with FSIC II

On May 31, 2019, the Funds, Merger Sub 1, Merger Sub 2, Merger Sub 3 and the Advisor entered into the Merger Agreement. 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, and, immediately thereafter, FSIC III will merge with and into FSIC II, with FSIC II continuing as the surviving company, (ii) Merger Sub 2 will merge with and into the Company, with the Company continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, and, immediately thereafter, the Company will merge with and into FSIC II, with FSIC II continuing as the surviving company, and (iii) Merger Sub 3 will merge with and into FSIC IV, with FSIC IV continuing as the surviving company and as a wholly-owned subsidiary of FSIC II, and, immediately thereafter, FSIC IV will merge with and into FSIC II, with FSIC II continuing as the surviving company. See Note 12 for additional information. The parties to the Merger Agreement intend the Mergers to be treated as a “reorganization” within the meaning of Section 368(a) of the Code.

In the Mergers, each share of FSIC III common stock, the Company’s common stock and FSIC IV common stock issued and outstanding immediately prior to the effective time of Merger 1A, Merger 2A and Merger 3A, respectively, will be converted into the right to receive a number of shares of FSIC II common stock equal to the applicable Exchange Ratio. The Exchange Ratio for each of Merger 1A, Merger 2A and Merger 3A will equal the net asset value per share of FSIC III common stock, the Company’s common stock and FSIC IV common stock, respectively (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger), divided by the net asset value per share of FSIC II common stock (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the applicable Merger).

The Merger Agreement contains representations, warranties and covenants, including, among others, covenants relating to the operation of each of the Funds’ and the Advisor’s businesses during the period prior to the closing of the Mergers. The Funds have agreed to convene and hold meetings of their respective stockholders for the purpose of obtaining the required approvals of the Funds’ stockholders, respectively, and have agreed to recommend that their stockholders approve their respective proposals.

The Merger Agreement provides that the board of directors or trustees of each Fund may not solicit proposals relating to alternative transactions, or, subject to certain exceptions, enter into discussions or negotiations or provide information in connection with any proposal for an alternative transaction. However, each of the Funds may, subject to certain conditions, change its recommendation to its respective stockholders, terminate the Merger Agreement and enter into an agreement with respect to a superior alternative proposal if the board of directors or trustees of such Fund determines in its reasonable good faith judgment, after consultation with its outside legal counsel, that the failure to take such action would be reasonably likely to breach its standard of conduct under applicable law (taking into account any changes to the Merger Agreement proposed by the other Funds).

Consummation of the Mergers, which is currently anticipated to occur during the fourth quarter of 2019, is subject to certain closing conditions, including (1) requisite approvals of the Funds’ stockholders, (2) certain required charter amendments for each of the Funds, (3) the absence of certain legal impediments to the consummation of the Mergers, (4) effectiveness of the registration statement on Form N-14, which includes a joint proxy statement of FSIC II, FSIC III, the Company and FSIC IV, and a prospectus of FSIC II, and (5) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement. Merger 1A (involving a wholly-owned subsidiary of FSIC II and FSIC III) is a condition precedent to each of the Mergers. Therefore, Merger 2A (including a wholly-owned subsidiary of FSIC II and the Company) will not occur unless Merger 1A also occurs. No other Merger is a condition precedent to any other Merger.

Portfolio Investment Activity for the Three and Nine Months Ended September 30, 2019 and for the Year Ended December 31, 2018

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three and nine months ended September 30, 2019:


Net Investment Activity	For the Three Months Ended September 30, 2019		For the Nine Months Ended September 30, 2019
Purchases	$	19,017	$	44,942
Sales and Repayments		(12,514)		(33,387)

Net Portfolio Activity	$	6,503	$	11,555


	For the Three Months Ended September 30, 2019				For the Nine Months Ended September 30, 2019
New Investment Activity by Asset Class	Purchases		Percentage		Purchases		Percentage
Senior Secured Loans—First Lien	$	14,006		73.6%	$	32,575		72.5%
Senior Secured Loans—Second Lien		2,524		13.3%		5,015		11.2%
Other Senior Secured Debt		317		1.7%		672		1.5%
Subordinated Debt		543		2.9%		2,833		6.3%
Asset Based Finance		1,627		8.5%		3,840		8.5%
Equity/Other		—		—		7		0.0%

Total	$	19,017		100.0%	$	44,942		100.0%

The following table summarizes the composition of our investment portfolio at cost and fair value as of September 30, 2019 and December 31, 2018:


	September 30, 2019 (Unaudited)						December 31, 2018
	Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio		Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	115,581	$	109,376		58.4%	$	97,236	$	93,777		53.6%
Senior Secured Loans—Second Lien		36,360		35,506		18.9%		35,686		34,277		19.6%
Other Senior Secured Debt		7,200		6,993		3.7%		7,970		7,407		4.2%
Subordinated Debt		21,988		20,598		11.0%		31,499		28,918		16.5%
Asset Based Finance		9,187		10,520		5.6%		6,896		6,773		3.8%
Equity/Other		4,085		4,406		2.4%		4,078		4,014		2.3%

Total	$	194,401	$	187,399		100.0%	$	183,365	$	175,166		100.0%

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

The following table presents certain selected information regarding the composition of our investment portfolio as of September 30, 2019 and December 31, 2018:


	September 30, 2019			December 31, 2018
Number of Portfolio Companies		110			94
% Variable Rate Debt Investments (based on fair value)⁽¹⁾⁽²⁾		77.8	%		74.6	%
% Fixed Rate Debt Investments (based on fair value)⁽¹⁾⁽²⁾		15.5	%		20.8	%
% Other Income Producing Investments (based on fair value)⁽³⁾		5.0	%		4.0	%
% Non-Income Producing Investments (based on fair value)⁽²⁾		0.4	%		0.6	%
% of Investments on Non-Accrual (based on fair value)		1.3	%		—
Weighted Average Annual Yield on Accruing Debt Investments⁽²⁾⁽⁴⁾		9.4	%		9.5	%
Weighted Average Annual Yield on All Debt Investments⁽⁵⁾		9.1	%		9.5	%

(1)	“Debt Investments” means investments that pay or are expected to pay a stated interest rate, stated dividend rate or other similar stated return.

(2)	Does not include investments on non-accrual status.

(3)	“Other Income Producing Investments” means investments that pay or are expected to pay interest, dividends or other income to the Company on an ongoing basis but do not have a stated interest rate, stated dividend rate or other similar stated return.

(4)

The Weighted Average Annual Yield on Accruing Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each accruing Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each accruing Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period.

(5)

The Weighted Average Annual Yield on All Debt Investments is computed as (i) the sum of (a) the stated annual interest rate, dividend rate or other similar stated return of each Debt Investment, multiplied by its par amount, adjusted to U.S. dollars and for any partial income accrual when necessary, as of the end of the applicable reporting period, plus (b) the annual amortization of the purchase or original issue discount or premium of each Debt Investment; divided by (ii) the total amortized cost of Debt Investments included in the calculated group as of the end of the applicable reporting period.

For the nine months ended September 30, 2019, our total return based on net asset value was 5.77% as compared to 4.16% for the nine months ended September 30, 2018. See footnote 7 to the table included in Note 11 to our unaudited financial statements included herein for information regarding the calculation of our total return based on net asset value.

Direct Originations

The following table presents certain selected information regarding our direct originations as of September 30, 2019 and December 31, 2018:


Characteristics of All Direct Originations held in Portfolio	September 30, 2019		December 31, 2018
Number of Portfolio Companies		47		31
% of Investments on Non-Accrual		—		—
Total Cost of Direct Originations	$	96,942	$	73,193
Total Fair Value of Direct Originations	$	97,044	$	72,053
% of Total Investments, at Fair Value		51.8%		41.1%
Weighted Average Annual Yield on Accruing Debt Investments⁽¹⁾		9.5%		10.2%
Weighted Average Annual Yield on All Debt Investments⁽²⁾		9.5%		10.1%

(1)

(2)

Portfolio Composition by Industry Classification

See Note 6 to our unaudited financial statements included herein for additional information regarding the composition of our investment portfolio by industry classification.

Portfolio Asset Quality

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

an investment rating scale of 1 to 4. The following is a description of the conditions associated with each investment rating:


Investment Rating		Summary Description

1		Performing investment—generally executing in accordance with plan and there are no concerns about the portfolio company’s performance or ability to meet covenant requirements.

2		Performing investment—no concern about repayment of both interest and our cost basis but company’s recent performance or trends in the industry require closer monitoring.

3		Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment.

4		Underperforming investment—concerns about the recoverability of principal or interest.

The following table shows the distribution of our investments on the 1 to 4 investment rating scale at fair value as of September 30, 2019 and December 31, 2018:


	September 30, 2019				December 31, 2018
Investment Rating	Fair Value		Percentage of Portfolio		Fair Value		Percentage of Portfolio
1	$	90,131		48%	$	80,548		46%
2		93,330		50%		90,011		51%
3		2,327		1%		1,404		1%
4		1,611		1%		3,203		2%

Total	$	187,399		100%	$	175,166		100%

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

Results of Operations

Comparison of the Three and Nine Months Ended September 30, 2019 and 2018

Revenues

Our investment income for the three and nine months ended September 30, 2019 and 2018 was as follows:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
	Amount		Percentage of Total Income		Amount		Percentage of Total Income		Amount		Percentage of Total Income		Amount		Percentage of Total Income
Interest income	$	4,209		83.6%	$	4,173		98.3%	$	12,525		89.6%	$	11,377		96.6%
Fee income		162		3.2%		52		1.2%		453		3.2%		348		3.0%
Dividend and other income		662		13.2%		20		0.5%		1,002		7.2%		47		0.4%

Total investment income	$	5,033		100.0%	$	4,245		100.0%	$	13,980		100.0%	$	11,772		100.0%

The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. Fee income is transaction-based, and typically consists of prepayment fees and structuring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.

The increase in income during the three and nine months ended September 30, 2019 compared to the three and nine months ended September 30, 2018 can primarily be attributed to the increase of dividend income as well as the increase in average investments held in our portfolio, along with higher yielding assets, resulting in increased interest income during the three months ended September 30, 2019.

Expenses

Our operating expenses for the three and nine months ended September 30, 2019 and 2018 were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Management fees	$	699	$	724	$	2,071	$	2,295
Capital gains incentive fees		—		185		—		(79)
Subordinated income incentive fees		351		—		716		—
Administrative services expenses		103		—		265		364
Stock transfer agent fees		115		15		274		76
Accounting and administrative fees		116		121		350		364
Interest expense		1,009		977		3,077		2,350
Trustees’ fees		77		72		231		200
Distribution and shareholder servicing fees		—		—		—		376
Offering costs		—		—		—		20
Other general and administrative expenses		563		457		1,026		1,255

Total operating expenses		3,033		2,551		8,010		7,221
Expense support		—		(44)		—		(625)

Total net expenses	$	3,033	$	2,507	$	8,010	$	6,596

The following table reflects selected expense ratios as a percent of average net assets for the three and nine months ended September 30, 2019 and 2018:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Ratio of operating expenses to average net assets		2.86%		2.22%		7.50%		6.18%
Ratio of expense support to average net assets⁽¹⁾		—		(0.04)%		—		(0.54)%

Ratio of net operating expenses to average net assets		2.86%		2.18%		7.50%		5.64%
Ratio of incentive fees and interest expense to average net assets⁽¹⁾		1.28%		1.01%		3.55%		1.94%

Ratio of net operating expenses, excluding certain expenses, to average net assets		1.58%		1.17%		3.95%		3.70%

(1)	Ratio data may be rounded in order to recompute the ending ratio of net operating expenses to average net assets or net operating expenses, excluding certain expenses, to average net assets.

Incentive fees and interest expense, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in amounts outstanding under our financing arrangements and benchmark interest rates such as LIBOR, among other factors.

Net Investment Income

Our net investment income totaled $2,000 ($0.16 per share) and $1,738 ($0.14 per share) for the three months ended September 30, 2019 and 2018, respectively. The increase in net investment income can be attributed primarily to higher dividend income, as discussed above, during the three months ended September 30, 2019.

Our net investment income totaled $5,970 ($0.49 per share) and $5,176 ($0.41 per share) for the nine months ended September 30, 2019 and 2018, respectively. The increase in net investment income can be attributed primarily to higher interest income and dividend income, as discussed above, during the nine months ended September 30, 2019.

Net Realized Gains or Losses

Our net realized gains (losses) for the three and nine months ended September 30, 2019 and 2018 were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net realized gain (loss) on investments⁽¹⁾	$	(809	)	$	101		$	(1,211	)	$	332
Net realized gain (loss) on foreign currency forward contracts		—			—			—			(1	)
Net realized gain (loss) on foreign currency transactions		7			(10	)		54			(31	)

Total net realized gain (loss)	$	(802	)	$	91		$	(1,157	)	$	300

(1)

We sold investments and received principal repayments, respectively, of $9,957 and $2,557 during the three months ended September 30, 2019 and $4,356 and $7,717 during the three months ended September 30, 2018. We sold investments and received principal repayments, respectively, of $25,623 and $7,764 during the nine months ended September 30, 2019 and $38,229 and $21,176 during the nine months ended September 30, 2018.

Net Change in Unrealized Appreciation (Depreciation)

Our net change in unrealized appreciation (depreciation) for the three and nine months ended September 30, 2019 and 2018 were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net change in unrealized appreciation (depreciation) on investments	$	(1,324)		$	875		$	1,197		$	(1,007	)
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts		63			(71	)		(94	)		112
Net change in unrealized appreciation (depreciation) on foreign currency translation		298			27			304			197

Total net change in unrealized appreciation (depreciation)	$	(963	)	$	831		$	1,407		$	(698	)

During the three months ended September 30, 2019, the net change in unrealized appreciation (depreciation) was primarily driven by the decrease in valuation of our Senior Secured Loan investments. During the nine months ended September 30, 2019, the net change in unrealized appreciation (depreciation) was primarily driven by the increase in valuation of our Asset Based Finance and Subordinated Debt investments.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended September 30, 2019 and 2018, the net increase (decrease) in net assets resulting from operations was $235 ($0.02 per share) and $2,660 ($0.21 per share), respectively.

For the nine months ended September 30, 2019 and 2018, the net increase (decrease) in net assets resulting from operations was $6,220 ($0.51 per share) and $4,778 ($0.38 per share), respectively.

Financial Condition, Liquidity and Capital Resources

Overview

As of September 30, 2019, we had approximately $1,325 in cash and foreign currency and $2,272 in borrowings available under our revolving credit facility, subject to borrowing base and other limitations. Proceeds from sales of investments and principal payments totaled $25,623 and $7,764, respectively, during the nine months ended September 30, 2019. As of September 30, 2019, we had unfunded debt investments with aggregate unfunded commitments of $4,284 and unfunded equity/other commitments of $7,562. We maintain sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.

Our capital resources and liquidity are primarily derived from (i) cash flows from operations, including sales and repayments, (ii) our distribution reinvestment plan and (iii) borrowings under our credit facility. Our primary uses of funds include (i) investments in portfolio companies, (ii) distributions to our shareholders, (iii) repurchases under our share repurchase program, (iv) interest payments on borrowings under our credit facility and (v) operating expenses. We expect to use proceeds from the sales and repayments of our investment portfolio and proceeds from borrowings under our credit facility to finance our investment activities at our discretion.

Financing Arrangements

On July 14, 2017, we entered into the Credit Agreement which provides for the Revolving Credit Facility, consisting of loans to be made in dollars and other foreign currencies in an aggregate principal amount of up to $82,000. Availability under the Revolving Credit Facility will terminate on December 31, 2019, or the Revolver Termination Date, and the outstanding loans under the Revolving Credit Facility will mature on July 14, 2020.

The Revolving Credit Facility also requires mandatory prepayment of interest and principal upon certain events during the term-out period commencing on the Revolver Termination Date. The stated borrowing rate under the Revolving Credit Facility is based on LIBOR or with respect to borrowings in foreign currencies on a base rate applicable to such currency borrowings plus an applicable spread of 2.75%, or on an “alternate base rate” (as defined in the Credit Agreement). The Revolving Credit Facility includes an “accordion” feature that allows us, under certain circumstances, to increase the size of the facility to a maximum of $200,000. Under the Revolving Credit Facility, we have made certain representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar revolving credit facilities. During the nine months ended September 30, 2019, we borrowed approximately $24,073 and repaid approximately $17,704 on our Revolving Credit Facility. We have and will continue to use proceeds from borrowings to make investments in portfolio companies.

See Note 9 to our unaudited financial statements included herein for additional information regarding our financing arrangements.

RIC Status and Distributions

We have elected to be subject to tax as a RIC under Subchapter M of the Code. In order to qualify for RIC tax treatment, we must, among other things, make distributions of an amount at least equal to 90% of our

investment company taxable income, determined without regard to any deduction for distributions paid, each tax year. As long as the distributions are declared by the later of the fifteenth day of the ninth month following the close of a tax year or the due date of the tax return for such tax year, including extensions, distributions paid up to twelve months after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our shareholders to qualify for and maintain our RIC tax status each tax year. We are also subject to a 4% nondeductible federal excise tax on certain undistributed income unless we make distributions in a timely manner to our shareholders generally of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to shareholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our shareholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.

Subject to applicable legal restrictions and the sole discretion of our board of trustees, we intend to authorize, declare and pay regular cash distributions on a quarterly basis. We will calculate each shareholder’s specific distribution amount for the period using record and declaration dates and each shareholder’s distributions will begin to accrue on the date that shares of our common stock are issued to such shareholder. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of trustees.

During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a shareholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our shareholders. No portion of the distributions paid during the nine months ended September 30, 2019 and 2018 represented a return of capital.

We intend to continue to make our regular distributions in the form of cash, out of assets legally available for distribution, except for those shareholders who receive their distributions in the form of shares of our common stock under the DRP. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. shareholder.

The following table reflects the cash distributions per share and the total amount of distributions that we have declared on our common stock during the nine months ended September 30, 2019 and 2018:


	Distribution
For the Three Months Ended	Per Share		Amount
Fiscal 2018
March 31, 2018	$	0.14625	$	1,868
June 30, 2018		0.14625		1,876
September 30, 2018		0.14625		1,839

Total	$	0.43875	$	5,583

Fiscal 2019
March 31, 2019	$	0.14625	$	1,796
June 30, 2019		0.14625		1,787
September 30, 2019		0.14625		1,787

Total	$	0.43875	$	5,370

See Note 5 to our unaudited financial statements included herein for additional information regarding our distributions for the nine months ended September 30, 2019 and 2018.

Critical Accounting Policies

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

Valuation of Portfolio Investments

We determine the fair value of our investment portfolio each quarter. Securities are valued at fair value as determined in good faith by our board of trustees. In connection with that determination, the Advisor provides our board of trustees with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the FASB, clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair

value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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

•

our quarterly fair valuation process begins with the Advisor reviewing and documenting valuations of each portfolio company or investment, which valuations are obtained from an independent third-party valuation service, and provide a valuation range;

•

the Advisor then provides the audit committee with its valuation recommendation for each portfolio company or investment, along with supporting materials;

•

preliminary valuations are then discussed with the audit committee;

•

our audit committee reviews the preliminary valuations and the Advisor, together with our independent third-party valuation services, if applicable, supplement the preliminary valuations to reflect any comments provided by the audit committee;

•

following its review, the audit committee will recommend that our board of trustees approve our fair valuations; and

•

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

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our financial statements. In making its determination of fair value, our board of trustees may use any approved independent third-party pricing or valuation services. However, our board of trustees is not required to determine fair value in accordance with the valuation provided by any single source, and may use any relevant data, including information obtained from the Advisor or any approved independent third-party valuation or pricing service that our board of trustees deems to be reliable in determining fair value under the circumstances. Below is a description of factors that the Advisor, any approved independent third-party valuation services and our board of trustees may consider when determining the fair value of our investments.

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

For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (i.e., the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.

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

The Advisor, any approved independent third-party valuation services and our board of trustees may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. The Advisor, any approved independent third-party valuation services and our board of trustees may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) fina

Corporate Capital Trust II 10-Q