FS KKR Capital 10K 2020 Annual report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 814-00757

FS KKR Capital Corp.

(Exact name of registrant as specified in its charter)


Maryland		26-1630040
(State of Incorporation)		(I.R.S. Employer Identification Number)

201 Rouse Boulevard Philadelphia, Pennsylvania		19112
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (215) 495-1150

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	FSK	The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of common stock held by non-affiliates of the registrant (assuming solely for the purpose of this disclosure, but without conceding, all executive officers and directors of the registrant are “affiliates”), as of June 30, 2020, the last business day of the registrant’s most recently completed second fiscal quarter, was approximately $1.7 billion.

There were 123,755,965 shares of the registrant’s common stock outstanding as of February 25, 2021.

Documents Incorporated by Reference

The contents of the amendment to this Annual Report on Form 10-K, which will be filed with the U.S. Securities and Exchange Commission within 120 days following the end of the registrant’s fiscal year, are incorporated by reference into Part III of this Annual Report on Form 10-K.

TABLE OF CONTENTS


		Page
PART I
ITEM 1.	BUSINESS	1
ITEM 1A.	RISK FACTORS	18
ITEM 1B.	UNRESOLVED STAFF COMMENTS	46
ITEM 2.	PROPERTIES	46
ITEM 3.	LEGAL PROCEEDINGS	46
ITEM 4.	MINE SAFETY DISCLOSURES	46

PART II
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	47
ITEM 6.	SELECTED FINANCIAL DATA	50
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	51
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	67
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	70
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	161
ITEM 9A.	CONTROLS AND PROCEDURES	161
ITEM 9B.	OTHER INFORMATION	162

PART III
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	163
ITEM 11.	EXECUTIVE COMPENSATION	163
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	163
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	163
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	163

PART IV
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	164
ITEM 16.	FORM 10-K SUMMARY	167
	SIGNATURES	168

PART I

Many of the amounts and percentages presented in Part I have been rounded for convenience of presentation.

Item 1.

Business.

Summary

FS KKR Capital Corp. (NYSE: FSK), or the Company, which may also be referred to as “we,” “us” or “our,” was incorporated under the general corporation laws of the State of Maryland on December 21, 2007 and formally commenced investment operations on January 2, 2009. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. As such, we are required to comply with certain regulatory requirements. In addition, we have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of December 31, 2020, we had total assets of approximately $7.2 billion.

We are managed by FS/KKR Advisor, LLC, or the Advisor, a registered investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act, which oversees the management of our operations and is responsible for making investment decisions with respect to our portfolio. Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We seek to meet our investment objectives by:

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utilizing the experience and expertise of the management team of the Advisor;

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employing a defensive investment approach focused on long-term credit performance and principal protection;

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focusing primarily on debt investments in a broad array of private U.S. companies, including middle-market companies, which we define as companies with annual earnings before interest, taxes, depreciation and amortization, or EBITDA, of $25 million to $100 million at the time of investment;

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investing primarily in established, stable enterprises with positive cash flows; and

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maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio, such as an event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company.

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 and certain asset-based financing loans of private U.S. companies. Although we do not expect a significant portion of our portfolio to be comprised of subordinated loans, there is no limit on the amount of such loans in which we may invest. We may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the “over-the-counter,” or 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, including through a co-investment with a financial sponsor or possibly the restructuring of an investment. 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 structures of our portfolio companies 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. Such investment opportunities 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 three to four years. However, we may invest in loans and securities with any maturity or duration. Our debt investments may be rated by a nationally recognized statistical rating organization, or NRSRO, and, in such case, generally will carry a rating below investment grade (rated lower than “Baa3” by Moody’s Investors Service, Inc., or Moody’s, or lower than “BBB-” by Standard & Poor’s Ratings Services, or S&P). We may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by a NRSRO.

To seek to enhance our returns, we employ leverage as market conditions permit and at the discretion of the Advisor, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act. Prior to June 14, 2019, in accordance with the 1940 Act, we were allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, following approval by our stockholders, our asset coverage requirement was reduced from 200% to 150%.

As a BDC, we are subject to certain regulatory restrictions in making our 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 U.S. Securities and Exchange Commission, or 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 January 5, 2021, the SEC granted exemptive relief permitting us, 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 Advisors (US) LLC, or KKR Credit, with our co-investment affiliates. We believe this relief enhances our ability to further our investment objectives and strategy. We believe this relief may also increase favorable investment opportunities for us in part by allowing us to participate in larger investments, together with our co-investment affiliates, than would be available to us if such relief had not been obtained.

Corporate Capital Trust, Inc. Acquisition

On December 19, 2018, we completed our acquisition of Corporate Capital Trust, Inc., or CCT, pursuant to that certain Agreement and Plan of Merger, or the 2018 Merger Agreement, dated as of July 22, 2018, by and among us, CCT, IC Acquisition, Inc., a former wholly-owned subsidiary of the Company, or Merger Sub, and the Advisor. Pursuant to the 2018 Merger Agreement, CCT was first merged with and into Merger Sub, with CCT as the surviving corporation, and, immediately following such merger, CCT was then merged with and into the Company, with the Company as the surviving company, or the 2018 Merger. In accordance with the terms of the 2018 Merger Agreement, at the time of the transactions contemplated by the 2018 Merger Agreement, each outstanding share of CCT common stock was converted into the right to receive 2.3552 shares of our common stock. As a result, we issued an aggregate of approximately 292,324,670 shares of our common stock to former CCT stockholders. Following the consummation of the 2018 Merger, we entered into a new investment advisory agreement with the Advisor, or the investment advisory agreement. Share and exchange ratio amounts in the foregoing do not reflect the Reverse Stock Split as discussed below.

Reverse Stock Split

On June 15, 2020, the Company filed Articles of Amendment to its Articles of Incorporation, or the Reverse Stock Split Amendment, with the State Department of Assessments and Taxation of the State of Maryland to effect a 4 to 1 reverse split of the Company’s shares of common stock, or the Reverse Stock Split. The Reverse Stock Split became effective in accordance with the terms of the Reverse Stock Split Amendment on June 15, 2020. As a result of the Reverse Stock Split, every four shares of the Company’s common stock issued and outstanding were automatically combined into one share of the Company’s common stock, and the number of outstanding shares of the Company’s common stock was reduced from approximately 495.0 million to approximately 123.8 million as of June 15, 2020. The Reverse Stock Split did not modify the rights or preferences of the Company’s common stock. The Company also filed a separate Articles of Amendment to its Articles of Incorporation with the State Department of Assessments and Taxation of the State of Maryland to provide that there would be no change in the par value of $0.001 per share as a result of the Reverse Stock Split.

Pending Merger with FSKR

On November 23, 2020, the Company entered into an Agreement and Plan of Merger, or the 2020 Merger Agreement, with FS KKR Capital Corp II., a Maryland corporation, or FSKR and, together with the Company, the Funds, Rocky Merger Sub, Inc., a Maryland corporation and wholly-owned subsidiary of FSK, or Merger Sub, and the Advisor. The 2020 Merger Agreement provides that, subject to the conditions set forth in the 2020 Merger Agreement, Merger Sub will merge with and into FSKR, with FSKR continuing as the surviving company and as a wholly-owned subsidiary of the Company, or the First Merger, and, immediately thereafter, FSKR will merge with and into the Company, with the Company continuing as the surviving company or, together with the First Merger, the 2021 Merger. See Note 14 to our consolidated financial statements included in this annual report on Form 10-K for additional information.

About the Advisor

The Advisor is a Delaware limited liability company, located at 201 Rouse Boulevard, Philadelphia, PA 19112, registered as an investment adviser with the SEC under the Advisers Act. The Advisor is a partnership between an affiliate of Franklin

Square Holdings, L.P. (which does business as FS Investments), or FS Investments, and KKR Credit. Our chairman and chief executive officer, Michael C. Forman, serves as the Advisor’s chairman and chief executive officer.

The Advisor has significant experience in private lending and private equity investing, and has developed an expertise in using all levels of a firm’s capital structure to produce income-generating investments, while focusing on risk management. The Advisor also has extensive knowledge of the managerial, operational and regulatory requirements of publicly registered alternative asset entities, such as BDCs. We believe that the active and ongoing participation by the Advisor, FS Investments, KKR Credit and their respective affiliates in the credit markets, and the depth of experience and disciplined investment approach of the Advisor, will allow the Advisor to successfully execute our investment strategies.

Our board of directors, which is comprised of a majority of independent directors, oversees and monitors our investment performance, and beginning with the second anniversary of the effective date of the investment advisory agreement, will review the investment advisory agreement to determine, among other things, whether the fees payable under such agreement are reasonable in light of the services provided.

About FS Investments

FS Investments is a leading asset manager dedicated to helping individuals, financial professionals and institutions design better portfolios. The firm provides access to alternative sources of income and growth, and focuses on setting industry standards for investor protection, education and transparency. FS Investments is headquartered in Philadelphia, PA, with offices in New York, NY, Orlando, FL and Leawood, KS. The firm had approximately $23 billion in assets under management as of December 31, 2020.

About KKR Credit

KKR Credit is a Delaware limited liability company, located at 555 California Street, 50th Floor, San Francisco, CA 94104, registered as an investment adviser with the SEC under the Advisers Act. It had approximately $78 billion of assets under management as of December 31, 2020 across investment funds, structured finance vehicles, specialty finance companies and separately managed accounts that invest capital in both liquid and illiquid credit strategies on behalf of some of the largest public and private pension plans, global financial institutions, university endowments and other institutional and public market investors. Its investment professionals utilize an industry and thematic approach to investing and benefit from access, where appropriate, to the broader resources and intellectual capital of KKR & Co. Inc., or KKR & Co.

KKR Credit is a subsidiary of KKR & Co., a leading global investment firm with approximately $252 billion in assets under management as of December 31, 2020, that manages investments across multiple asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic manager partnerships that manage hedge funds. KKR & Co. aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR & Co. portfolio companies. KKR & Co. invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business.

Potential Market Opportunity

We believe significant investment opportunities will continue to present themselves in the senior secured and second lien secured loan asset class, as well as investments in debt securities of middle market companies.

Attractive Opportunities in Senior Secured and Second Lien Secured Loans

The variable rate structure of most senior secured and second lien secured loans present significant opportunities across the asset class, particularly within a rising interest rate environment. Additionally, the strong defensive characteristics inherent to many securities across the asset class make them compelling to many investors. Because senior secured debt has priority in payment among an issuer’s security holders (i.e., holders are due to receive payment before junior creditors and equity holders), they carry the least potential risk within the issuer’s capital structure. Further, senior secured debt investments are secured by the issuer’s assets, which may be seized in the event of a default. Senior secured loans generally also carry restrictive covenants aimed at ensuring repayment before junior creditors, including unsecured bondholders and other security holders, preserving collateral to protect against credit deterioration.

Opportunity in Middle Market Private Companies

In addition to investing in senior secured and second lien secured loans, we believe that the market for lending to private companies, particularly middle market private companies within the United States, is underserved and presents a compelling investment opportunity. The following characteristics support our belief:

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Large Target Market. Middle market U.S. companies have historically represented a significant portion of the growth segment of the U.S. economy. These companies also often require substantial capital investment to grow their businesses. Historically, significant private equity capital has been available for investment in middle market companies and we expect that private equity firms will continue to leverage their investments in middle market companies with senior secured and second lien secured loans.

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Limited Investment Competition. Despite the size of the market, regulatory changes and other factors have diminished the role of traditional financial institutions in providing financing to middle market companies in favor of lending to large corporate clients and leading syndication efforts for capital markets transactions. Further, we believe a limited number of of lenders are willing to hold large amounts of middle market loans. As a result, we believe our ability to eliminate syndication risk by holding middle market loans is a competitive advantage.

Lending and originating new loans to middle market companies, which are often private, generally requires a greater dedication of a lender’s time and resources compared to lending to larger companies as it is often more difficult to make investments in, and acquire information, about smaller companies . Many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly directly originated investments in middle market companies, which may result in their overlooking many attractive investment opportunities. Middle market companies also may require more active monitoring and participation on the lender’s part. We believe that many large financial organizations, which often have relatively high cost structures, are not suited to deal with these factors and instead emphasize services and transactions to larger corporate clients, resulting in a reduction in the availability of financing to middle market companies.

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Attractive Market Segment. The underserved nature of such a large segment of the market can at times create significant investment opportunities. In many environments, lending to middle market companies may offer more attractive economics than lending to larger corporations in terms of transaction pricing, up-front and ongoing fees, prepayment penalties, stricter covenants and quality collateral. In addition, middle market companies often have simpler capital structures and carry less leverage than larger companies, thus aiding the structuring and negotiation process and allowing us greater flexibility in structuring favorable transactions.

Potential Competitive Strengths

We believe that we offer investors the following potential competitive strengths:

Large, scalable, global platform with seasoned investment professionals

We believe that the breadth and depth of the experience of the Advisor and its affiliates, which are dedicated to sourcing, structuring, executing, monitoring and harvesting a broad range of private investments, provide us with a significant competitive advantage in sourcing and analyzing attractive investment opportunities. Our investment platform is supported by approximately 125 dedicated investment professionals at KKR Credit located in nine global cities. We also benefit from the expertise, network and resources of KKR & Co., which has over 400 investment professionals located in twenty global cities. The individual members of these teams have diverse investment backgrounds, with prior experience at investment banks, commercial banks, other asset managers and operating companies. We believe this diverse experience provides an in-depth understanding of the strategic, financial and operational challenges and opportunities of middle-market companies.

Utilization of long-standing relationships and international capital market capabilities to source investments

The Advisor and its affiliates have worked diligently over many years to build strategic relationships with private equity firms, banks and trading desks globally. Our and our affiliates’ long history of serving as a reliable financing partner to middle-market sponsors, even during periods of significant market dislocation, has enhanced our reputation. We believe that our network of relationships will continue to produce attractive investment opportunities.

The Advisor also leverages the intellectual capital, industry experience and global network of KKR & Co.’s Capital Markets franchise to support the origination of new private credit investment opportunities. Through KKR & Co.’s Capital

Markets franchise, the Advisor benefits from expanded sources of deal flow, real-time market intelligence on pricing trends and continuous dialogue with issuers and sponsors to provide holistic financing solutions to current and prospective portfolio companies. In addition, KKR & Co.’s Capital Markets franchise gives us the ability to access and originate larger transactions and enhances the Advisor’s ability to manage risk.

Focus on larger middle market companies and customized one-stop credit solutions

We are focused on providing customized credit solutions to private upper middle market companies, which we generally define as companies with annual EBITDA of at least $50 million at the time of our investment. Based on its size and scale, the KKR Credit platform is able to originate, commit to and hold positions in excess of $1 billion in a given transaction. This size allows us to serve in the lead financing role for certain larger middle market companies with more than $100 million in EBITDA. We believe our ability to underwrite an entire transaction provides financial sponsors and companies with a greater degree of financing certainty and further enhances our competitive position. The KKR Credit platform also offers a variety of financing structures and has the flexibility to structure investments to meet the needs of companies. Finally, we believe that the upper end of the middle market is less competitive as fewer lenders have the requisite size and scale to provide holistic solutions for these companies.

Long-term investment horizon

Our long-term investment horizon gives us great flexibility, which we believe allows us to maximize returns on our investments. Unlike most private equity and venture capital funds, as well as many private debt funds, we are not required to return capital to our stockholders once we exit a portfolio investment. We believe that freedom from such capital return requirements, which allows us to invest using a longer-term focus, provides us with the opportunity to increase total returns on invested capital, compared to other private company investment vehicles.

Disciplined, income-oriented investment philosophy

The Advisor employs a defensive investment approach focused on long-term credit performance and principal protection. This investment approach involves a multi-stage selection process for each investment opportunity, as well as ongoing monitoring of each investment made, with particular emphasis on early detection of deteriorating credit conditions at portfolio companies which would result in adverse portfolio developments. This strategy is designed to maximize current income and minimize the risk of capital loss while maintaining the potential for long-term capital appreciation.

Investment expertise across all levels of the corporate capital structure

The Advisor believes that its broad expertise and experience investing at all levels of a company’s capital structure enable us to manage risk while affording us the opportunity for significant returns on our investments. We attempt to capitalize on this expertise in an effort to produce and maintain an investment portfolio that will perform in a broad range of economic conditions.

Ability to create bespoke financing solutions through asset-based opportunities

The Advisor believes that there is an expansive and growing opportunity to create customized solutions in underserved asset classes, including across the aircraft, consumer finance and auto and equipment finance sectors. The Advisor will seek to identify investments with strong collateral protection, a low correlation to the broader markets and equity-like upside potential.

Maintenance of portfolio diversification

In addition to focusing our investments in middle-market companies, we seek to invest across various industries. The Advisor monitors our investment portfolio to ensure we have acceptable industry balance, using industry and market metrics as key indicators. By monitoring our investment portfolio for industry balance, we seek to reduce the effects of economic downturns associated with any particular industry or market sector. Notwithstanding our intent to invest across a variety of industries, we may from time to time hold securities of a single portfolio company that comprise more than 5.0% of our total assets and/or more than 10.0% of the outstanding voting securities of the portfolio company. For that reason, we are classified as a non-diversified management investment company under the 1940 Act.

Investment Strategy

Our principal focus is to invest in senior secured and second lien secured loans of private middle market U.S. companies, and to a lesser extent, subordinated loans and certain asset-based financing 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, including through a co-investment with a financial sponsor or possibly the restructuring of an investment. In addition, a portion of our portfolio may be comprised of bonds, structured products, other debt securities and derivatives. 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 structures of our portfolio companies 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. Such investment opportunities 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.

When identifying prospective portfolio companies, we focus primarily on the attributes set forth below, which we believe will help us generate higher total returns with an acceptable level of risk. While these criteria provide general guidelines for our investment decisions, if we believe the benefits of investing are sufficiently strong, not all of these criteria necessarily will be met by each portfolio company in which we choose to invest. These attributes are:

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Leading, defensible market positions. We seek to invest in companies that have developed strong competitive positions within their respective markets and exhibit the potential to maintain sufficient cash flows and profitability to service our debt in a range of economic environments. We seek companies that can protect their competitive advantages through scale, scope, customer loyalty, product pricing or product quality versus their competitors, thereby minimizing business risk and protecting profitability.

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Investing in stable companies with positive cash flow. We seek to invest in established, stable companies with strong profitability and cash flows. Such companies, we believe, are well-positioned to maintain consistent cash flow to service and repay our loans and maintain growth in their businesses or market share. We do not intend to invest to any significant degree in start-up companies, turnaround situations or companies with speculative business plans.

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Proven management teams. We focus on companies that have experienced management teams with an established track record of success. We typically prefer our portfolio companies to have proper incentives in place, which may include non-cash and performance-based compensation, to align management’s goals with ours.

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Private equity sponsorship. Often we seek to participate in transactions sponsored by what we believe to be sophisticated and seasoned private equity firms. The Advisor believes that a private equity sponsor’s willingness to invest significant sums of equity capital into a company is an endorsement of the quality of the investment opportunity. Further, by co-investing with such experienced private equity firms which commit significant sums of equity capital ranking junior in priority of payment to our debt investments, we may benefit from the due diligence review performed by the private equity firm, in addition to our own due diligence review. Further, strong private equity sponsors with significant investments at risk may have both the ability and incentive to contribute additional capital in difficult economic times should operational or financial issues arise, which could provide additional protections for our investments.

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Allocation among various issuers and industries. We seek to allocate our portfolio broadly among issuers and industries, thereby attempting to reduce the risk of a downturn in any one company or industry having a disproportionate adverse impact on the value of our portfolio.

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Viable exit strategy. While we attempt to invest in securities that may be sold in a privately negotiated OTC market, providing us a means by which we may exit our positions, we expect that a large portion of our portfolio may not be sold on this secondary market. For any investments that are not able to be sold within this market, we focus primarily on investing in companies whose business models and growth prospects offer attractive exit possibilities, including repayment of our investments, an initial public offering of equity securities, a merger, a sale or a recapitalization, in each case with the potential for capital gains.

Joint Venture

We also co-invest with South Carolina Retirement Systems Group Trust, or SCRS, through Strategic Credit Opportunities Partners, LLC, or SCJV, a joint venture with SCRS. SCJV invests its capital in a range of investments, including senior secured

loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. We and SCRS each have 50% voting control of SCJV and together are required to agree on all investment decisions as well as certain other significant actions for SCJV. As of December 31, 2020, SCJV had total capital commitments of $1 billion, $875 million of which was from us and the remaining $125 million of which was from SCRS. As of December 31, 2020, we had funded approximately $809.2 million of our commitment. Additionally, as of December 31, 2020, SCJV had $328.0 million of borrowing capacity. As of December 31, 2020, our investment in SCJV was approximately $712.5 million at fair value. We do not consolidate SCJV in our consolidated financial statements.

Investment Types

We primarily focus on the following investment types:

Senior Secured Loans

Senior secured loans are situated at the top of a company’s capital structure. Because these loans generally have priority in payment, they carry the least risk among all investments in a firm. Generally, our senior secured loans are expected to have maturities of three to seven years, offer some form of amortization, and have first priority security interests in the assets of the borrower. Generally, we expect that the interest rate on our senior secured loans typically will have variable rates over a standard benchmark, such as the prime rate or the London Interbank Offered Rate, or LIBOR.

Second Lien Secured Loans

Second lien secured loans are immediately junior to senior secured loans and have substantially the same maturities, collateral and covenant structures as senior secured loans. Second lien secured loans, however, are granted a second priority security interest in the assets of the borrower, which means that any realization of collateral will generally be applied to pay senior secured loans in full before second lien secured loans are paid and the value of the collateral may not be sufficient to repay in full both senior secured loans and second lien secured loans. In return for this junior ranking, second lien secured loans generally offer higher returns compared to senior secured debt. These higher returns come in the form of higher interest and in some cases the potential for equity participation through warrants, though to a lesser extent than with subordinated loans. Generally, we expect these loans to carry a fixed rate, or a floating current yield over a standard benchmark. In addition, we may receive additional returns from any warrants we may receive in connection with these investments.

Senior Secured Bonds

Senior secured bonds are generally secured by collateral on a senior, pari passu or junior basis with other debt instruments in an issuer’s capital structure and have similar maturities and covenant structures as senior secured loans. Generally, we expect these investments to carry a fixed rate.

Subordinated Debt

In addition to senior secured loans, second lien secured loans and senior secured bonds, we may invest a portion of our assets in subordinated debt. Subordinated debt investments usually rank junior in priority of payment to senior debt and are often unsecured, but are situated above preferred equity and common equity in the capital structure. In return for their junior status compared to senior debt, subordinated debt investments typically offer higher returns through both higher interest rates and possible equity ownership in the form of warrants, enabling the lender to participate in the capital appreciation of the borrower. These warrants typically require only a nominal cost to exercise. We generally target subordinated debt with interest-only payments throughout the life of the security, with the principal due at maturity. Typically, subordinated debt investments have maturities of five to ten years. Generally, we expect these securities to carry a fixed rate, or a floating current yield over a standard benchmark. In addition, we may receive additional returns from any warrants we may receive in connection with these investments. In some cases, a portion of the total interest may accrue or be paid-in-kind, or PIK.

Equity and Equity-Related Securities

While we intend to maintain our focus on investments in debt securities, from time to time, when we see the potential for extraordinary gain, or in connection with securing particularly favorable terms in a debt investment, we may enter into investments in preferred or common equity, typically in conjunction with a private equity sponsor we believe to be sophisticated and seasoned. In addition, we may receive the right to make equity investments in a portfolio company whose debt securities we hold in connection with the next equity financing round for that company. This right may provide us with the opportunity to further enhance our returns over time through equity investments in our portfolio companies. In addition, we may hold 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, generally obtained in conjunction with one of our debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm. In the future, we may achieve liquidity through a merger or acquisition of a portfolio company, a public offering of a portfolio company’s stock or by exercising our right, if any, to require a portfolio company to repurchase the equity-related securities we hold.

Convertible Securities

We may invest in convertible securities, such as bonds, debentures, notes, preferred stocks or other securities that may be converted into, or exchanged for, a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula.

Non-U.S. Securities

We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies and securities of companies in emerging markets, to the extent permitted by the 1940 Act.

Investments in Asset-Based Opportunities

We may invest in asset-based opportunities through joint ventures, investment platforms, private investment funds or other business entities that provide one or more of the following services: origination or sourcing of potential investment opportunities, due diligence and negotiation of potential investment opportunities and/or servicing, development and management (including turnaround) and disposition of investments. Such investments may be in or alongside existing or newly formed operators, consultants and/or managers that pursue such opportunities and may or may not include capital and/or assets contributed by third party investors. Such investments may include opportunities to direct-finance physical assets, such as airplanes and ships, and/or operating assets, such as financial service entities, as opposed to investment securities, or to invest in origination and/or servicing platforms directly. These asset-based opportunities are expected to offer mezzanine-like structural downside protection as well as asset collateral, and equity-like upside that can be achieved through appreciation at the asset-level or, in the case of platforms, through growth of the enterprise value. Key areas of focus include, without limitation, aircraft, real estate and consumer finance.

Structured Products

We may invest in structured products, which may include collateralized debt obligations, collateralized bond obligations, collateralized loan obligations, structured notes and credit-linked notes. The issuers of such investment products may be structured as trusts or other types of pooled investment vehicles. Such products may also involve the deposit with or purchase by an entity of the underlying investments and the issuance by that entity of one or more classes of securities backed by, or representing interests in, the underlying investments or referencing an indicator related to such investments.

Derivatives

We may also invest from time to time in derivatives, including total return swaps, interest rate swaps, credit default swaps and foreign currency forward contracts. We anticipate that any use of derivatives would primarily be as a substitute for investing in conventional securities or to hedge potential risk that is identified by the Advisor.

Investments with Third-Parties

We may co-invest with third parties through partnerships, joint ventures or other entities, thereby acquiring jointly-controlled or non-controlling interests in certain investments in conjunction with participation by one or more third parties in such investment. Such joint venture partners or third party managers may include former personnel of the Advisor or its affiliates or associated persons.

Cash and Cash Equivalents

We may maintain a certain level of cash or equivalent instruments, including money market funds, to make follow-on investments, if necessary, in existing portfolio companies or to take advantage of new opportunities.

Comparison of Targeted Debt Investments to Corporate Bonds

Loans to private companies are debt instruments that can be compared to corporate bonds to aid an investor’s understanding. As with corporate bonds, loans to private companies can range in credit quality depending on security-specific

factors, including total leverage, amount of leverage senior to the security in question, variability in the issuer’s cash flows, the quality of assets securing debt and the degree to which such assets cover the subject company’s debt obligations. As is the case in the corporate bond market, we will require greater returns for securities that we perceive to carry increased risk. The companies in which we invest may be leveraged, often as a result of leveraged buyouts or other recapitalization transactions, and, in many cases, will not be rated by national rating agencies. When our targeted debt investments do carry ratings from a NRSRO, we believe that such ratings generally will be below investment grade (rated lower than “Baa3” by Moody’s or lower than “BBB-” by S&P). To the extent we make unrated investments, we believe that such investments would likely receive similar ratings if they were to be examined by a NRSRO. Compared to below-investment grade corporate bonds that are typically available to the public, our targeted senior secured and second lien secured loan investments are higher in the capital structure, have priority in receiving payment, are secured by the issuer’s assets, allow the lender to seize collateral if necessary, and generally exhibit higher rates of recovery in the event of default. Corporate bonds, on the other hand, are often unsecured obligations of the issuer.

The market for loans to private companies possesses several key differences compared to the corporate bond market. For instance, due to a possible lack of debt ratings for certain middle market firms, and also due to the reduced availability of information for private companies, investors must conduct extensive due diligence investigations before committing to an investment. This intensive due diligence process gives the investor significant access to management, which is often not possible in the case of corporate bondholders, who rely on underwriters, debt rating agencies and publicly available information for due diligence reviews and monitoring of corporate issuers. While holding these investments, private debt investors often receive monthly or quarterly updates on the portfolio company’s financial performance, along with possible representation on the company’s board of directors, which allows the investor to take remedial action quickly if conditions happen to deteriorate. Due to reduced liquidity, the relative scarcity of capital and extensive due diligence and expertise required on the part of the investor, we believe that private debt securities typically offer higher returns than corporate bonds of equivalent credit quality.

Investment Process

The investment professionals employed by the Advisor or its affiliates have spent their careers developing the resources necessary to invest in private companies. Our current transaction process is highlighted below.

Our Transaction Process

LOGO

Sourcing

The relationships of the Advisor and its affiliates provide us with access to a robust and established pipeline of investment opportunities sourced from a variety of different investment channels, including private equity sponsors, non-sponsored corporates, financial advisors, banks, brokers and family offices.

Evaluation

Screening. Once a potential investment has been identified, the Advisor screens the opportunity and makes a preliminary determination concerning whether to proceed with a more comprehensive deal-level due diligence review.

Pipeline/Risk Update. Upon review of the full deal pipeline, the Advisor raises key risks and issues to determine whether or not an investment meets our basic investment criteria and offers an acceptable probability of attractive returns with identifiable downside risk. The objective is for the Advisor to identify a suitable and attractive opportunity for a more comprehensive due diligence review based on the facts and circumstances surrounding the investment.

Deal-level Q&A: After an investment has been identified and preliminary due diligence has been completed, screening memos and a credit research analysis is prepared. These reports are reviewed by the Advisor’s investment committee, or the Investment Committee, to discuss key diligence and structuring issues. Following the Advisor’s review, the Investment Committee will complete any incremental due diligence prior to formal Investment Committee approval. Though each transaction may involve a somewhat different approach, the Advisor’s diligence of each opportunity could include:

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a full operational analysis to identify the key risks and opportunities of the target’s business, including a detailed review of historical and projected financial results;

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a detailed analysis of industry dynamics, competitive position, regulatory, tax and legal matters;

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on-site visits, if deemed necessary;

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background checks to further evaluate management and other key personnel;

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a review by legal and accounting professionals, environmental or other industry consultants, if necessary;

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financial sponsor due diligence, including portfolio company and lender reference checks, if necessary; and

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a review of management’s experience and track record.

Execution

Following any incremental due diligence, the Investment Committee is presented with a formal recommendation for approval. Once the Investment Committee has determined that the portfolio company is suitable for investment, the Advisor works with the management team of the prospective company to finalize the structure and terms of the investment. We believe that structuring transactions appropriately is a key factor to producing strong investment results. Accordingly, we will actively consider transaction structures and seek to process and negotiate terms that provide the best opportunities for superior risk-adjusted returns.

Post-Investment Monitoring

Portfolio Monitoring. The Advisor monitors our portfolio with a focus toward anticipating negative credit events. To maintain portfolio company performance and help to ensure a successful exit, the Advisor works closely with, as applicable, the lead equity sponsor, loan syndicator, portfolio company management, consultants, advisers and other security holders to discuss financial position, compliance with covenants, financial requirements and execution of the company’s business plan. In addition, depending on the size, nature and performance of the transaction, we may occupy a seat or serve as an observer on a portfolio company’s board of directors or similar governing body.

Typically, the Advisor receives financial reports detailing operating performance, sales volumes, cost of goods sold, operating expenses, operating margins, cash flows, financial position and other key operating metrics on a quarterly basis from our portfolio companies. The Advisor uses this data, combined with due diligence gained through contact with the company’s customers, suppliers, competitors, market research and other methods, to conduct an ongoing, rigorous assessment of the company’s operating performance and prospects.

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. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Portfolio Asset Quality” for a description of the conditions associated with each investment rating.

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

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the Financial Accounting Standards Board, or 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:

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our quarterly fair valuation process begins by the Advisor providing financial and operating information with respect to each portfolio company or investment to our independent third-party valuation service providers;

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our independent third-party valuation service providers review this information, along with other public and private information, and provide the Advisor with a valuation range for each portfolio company or investment;

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the Advisor then discusses the independent third-party valuation service providers’ valuation ranges and provides the valuation committee of the board of directors, or the valuation committee, with a valuation recommendation for each investment, along with supporting materials;

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preliminary valuations are then discussed with the valuation committee;

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

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following the completion of its review, our valuation committee recommends that our board of directors approves the fair valuations determined by the valuation committee; and

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our board of directors discusses the valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of the Advisor, the valuation committee and our independent third-party valuation service providers.

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

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

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

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

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

securities received at the time of origination. Our board of directors subsequently values these warrants or other equity securities received at their fair value.

The fair values of our investments are determined in good faith by our board of directors. Our board of directors is responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process. Our board of directors has delegated day-to-day responsibility for implementing our valuation policy to the Advisor, and has authorized the Advisor to utilize independent third-party valuation and pricing services that have been approved by our board of directors. The valuation committee is responsible for overseeing the Advisor’s implementation of the valuation process.

Managerial Assistance. As a BDC, we must offer, and provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Depending on the nature of the assistance required, the Advisor will provide such managerial assistance on our behalf to portfolio companies that request this assistance. To the extent fees are paid for these services, we, rather than the Advisor, will retain any fees paid for such assistance.

Exit

While we attempt to invest in securities that may be sold in a privately negotiated OTC market, providing us a means by which we may exit our positions, we expect that a large portion of our portfolio may not be sold on this secondary market. For any investments that are not able to be sold within this market, we focus primarily on investing in companies whose business models and growth prospects offer attractive exit possibilities, including repayment of our investments, an initial public offering of equity securities, a merger, a sale or a recapitalization, in each case with the potential for capital gains to the extent we maintain an equity interest in the underlying portfolio company.

Risk Management

We seek to limit the downside potential of our investment portfolio by, among other things:

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applying our investment strategy guidelines for portfolio investments;

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requiring a total return on investments (including both interest and potential appreciation) that adequately compensates us for credit risk;

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allocating our portfolio among various issuers and industries, size permitting, with an adequate number of companies, across different industries, with different types of collateral; and

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negotiating or seeking debt investments with covenants or features that protect us while affording portfolio companies flexibility in managing their businesses consistent with preservation of capital, which may include affirmative and negative covenants, default penalties, lien protection, change of control provisions and board rights.

We may also enter into interest rate hedging transactions at the sole discretion of the Advisor. Such transactions will enable us to selectively modify interest rate exposure as market conditions dictate.

Affirmative Covenants

Affirmative covenants require borrowers to take actions that are meant to ensure the solvency of the company, facilitate the lender’s monitoring of the borrower, and ensure payment of interest and loan principal due to lenders. Examples of affirmative covenants include covenants requiring the borrower to maintain adequate insurance, accounting and tax records, and to produce frequent financial reports for the benefit of the lender.

Negative Covenants

Negative covenants impose restrictions on the borrower and are meant to protect lenders from actions that the borrower may take that could harm the credit quality of the lender’s investments. Examples of negative covenants include restrictions on the payment of dividends and restrictions on the issuance of additional debt without the lender’s approval. In addition, certain covenants restrict a borrower’s activities by requiring it to meet certain earnings interest coverage ratio and leverage ratio requirements. These covenants are also referred to as financial or maintenance covenants.

Operating and Regulatory Structure

Our investment activities are managed by the Advisor and supervised by our board of directors, a majority of whom are independent. Under the investment advisory agreement, we have agreed to pay the Advisor an annual base management fee based on the average weekly value of our gross assets (excluding cash and cash equivalents) and an incentive fee based on our performance. See Notes 2 and 4 to our consolidated financial statements included in this annual report on Form 10-K for a description of the fees we pay to the Advisor.

From time to time, the Advisor may enter into sub-advisory relationships with registered investment advisers that possess skills or attributes that the Advisor believes will aid it in achieving our investment objectives. 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 our administration agreement, dated April 9, 2018, or the administration 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 no less than quarterly for all costs and expenses incurred by the Advisor in performing its obligations and providing personnel and facilities under the administration agreement. 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 directors 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. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to the Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.

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.

As a BDC, we are required to comply with certain regulatory requirements. Also, while we are permitted to finance investments using debt, our ability to use debt will be limited in certain significant respects pursuant to the 1940 Act. Within the limits of existing regulation, we will adjust our use of debt, according to market conditions, to the level we believe will allow us to generate maximum risk-adjusted returns. See “—Regulation.” We have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a RIC under the Code.

Regulation

We have elected to be regulated as a BDC under the 1940 Act and as a RIC under the Code. The 1940 Act contains prohibitions and restrictions relating to transactions between BDCs and their affiliates, principal underwriters and affiliates of those affiliates or underwriters, as described below. The 1940 Act also requires that a majority of our directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities. The 1940 Act defines “a majority of the outstanding voting securities” as the lesser of (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of our outstanding voting securities are present or represented by proxy or (ii) 50% of our outstanding voting securities.

We will generally not be able to issue and sell our common stock at a price per share, after deducting underwriting commissions and discounts, that is below our net asset value per share. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if our board of directors determines that such sale is in our best interests and the best interests of our stockholders, and our stockholders

approve such sale. At the 2020 annual stockholders meeting, our stockholders approved the sale of shares of our common stock at a price below the then-current net asset value per share, subject to certain conditions, during the period beginning on July 15, 2020 and expiring on July 15, 2021. We currently do not intend to utilize this authority to sell shares of our common stock at a price below the then-current net asset value per share. In addition, we may generally issue new shares of our common stock at a price below net asset value per share in rights offerings to existing stockholders, in payment of dividends and in certain other limited circumstances.

As a BDC, we are subject to certain regulatory restrictions in making our 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 January 5, 2021, the SEC granted exemptive relief permitting us, 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 our co-investment affiliates. Under the terms of this relief, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objectives and strategy and any criteria established by our board of directors.

Under the 1940 Act, we may only invest up to 30% of our portfolio in entities that are not considered “eligible portfolio companies” under the 1940 Act, including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the 1940 Act and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the 1940 Act.

We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of our portfolio companies. We may enter into hedging transactions to manage the risks associated with interest rate and currency fluctuations. We may purchase or otherwise receive warrants or options to purchase the common stock of our portfolio companies in connection with acquisition financings or other investments. In connection with such an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances.

We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, we generally cannot acquire more than 3% of the voting stock of any investment company (as defined in the 1940 Act), invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of investment companies in the aggregate. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses.

On June 14, 2019, our stockholders approved the application of the modified asset coverage requirement set forth in Section 61(a)(2) of the 1940 Act, as amended by the Small Business Credit Availability Act. As a result, we are permitted, under specified conditions, to issue multiple classes of debt and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance, such that the Company’s maximum debt to equity ratio increased from a prior maximum of 1.0x (equivalent of $1 of debt outstanding for each $1 equity) to a maximum of 2.0x (equivalent to $2 of debt outstanding for each $1 of equity). In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary purposes without regard to asset coverage.

Securities Exchange Act and Sarbanes-Oxley Act Compliance

We are subject to the reporting and disclosure requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, including the filing of quarterly, annual and current reports, proxy statements and other required items. In addition, we are subject to the Sarbanes-Oxley Act, which imposes a wide variety of regulatory requirements on publicly-held companies and their insiders. Many of these requirements affect us. For example:

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pursuant to Rule 13a-14 promulgated under the Exchange Act, our chief executive officer and chief financial officer are required to certify the accuracy of the financial statements contained in our periodic reports;

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pursuant to Item 307 of Regulation S-K, our periodic reports are required to disclose our conclusions about the effectiveness of our disclosure controls and procedures;

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pursuant to Rule 13a-15 promulgated under the Exchange Act, our management is required to prepare a report regarding its assessment of our internal control over financial reporting; and

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pursuant to Item 308 of Regulation S-K, our auditors must attest to, and report on, our management’s assessment of our internal control over financial reporting.

The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and take actions necessary to ensure that we are in compliance therewith.

The New York Stock Exchange Corporate Governance Regulations

The New York Stock Exchange, or NYSE, has adopted corporate governance regulations with which listed companies must comply. We believe we currently are in compliance with such corporate governance listing standards. We intend to monitor our compliance with all future listing standards and to take reasonably necessary actions to ensure that we stay in compliance.

Taxation as a RIC

We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we timely distribute each tax year as distributions to our stockholders. To qualify for and maintain our qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, in order to maintain RIC tax treatment, we must distribute to our stockholders, for each tax year, distributions generally of an amount at least equal to 90% of our “investment company taxable income,” which is generally the sum of our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses, determined without regard to any deduction for distributions paid, or the Annual Distribution Requirement.

If we:

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qualify as a RIC; and

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satisfy the Annual Distribution Requirement,

then we will not be subject to U.S. federal income tax on the portion of our income or capital gains we distribute (or are deemed to distribute) as distributions to our stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gains not distributed (or deemed distributed) as distributions to our stockholders.

As a RIC, we will be subject to a 4% nondeductible federal excise tax on certain undistributed income unless we distribute distributions in a timely manner to our stockholders generally of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (as 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, or the Excise Tax Avoidance Requirement. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our U.S. stockholders, on December 31 of the calendar year in which the distribution was declared.

We have previously incurred, and may incur in the future, such excise tax on a portion of our income and capital gains. While we intend to distribute income and capital gains to minimize exposure to the 4% excise tax, we may not be able to, or may choose not to, distribute amounts sufficient to avoid the imposition of the tax entirely. In that event, we generally will be liable for the excise tax only on the amount by which we do not meet the excise tax avoidance requirement.

In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:

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continue to qualify as a BDC under the 1940 Act at all times during each tax year;

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derive in each tax year at least 90% of our gross income from dividends, interest, payments with respect to certain securities, loans, gains from the sale of stock or other securities, net income from certain “qualified publicly-traded partnerships,” or other income derived with respect to our business of investing in such stock or other securities, or the 90% Income Test; and

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diversify our holdings so that at the end of each quarter of the tax year:

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at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of such issuer; and

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no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly-traded partnerships,” or the Diversification Tests.

A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income. If our expenses in a given tax year exceed our investment company taxable income, we may experience a net operating loss for that tax year. However, a RIC is not permitted to carry forward net operating losses to subsequent tax years and such net operating losses do not pass through to its stockholders. In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain. A RIC may not use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but may carry forward such net capital losses, and use them to offset future capital gains, indefinitely. Due to these limits on deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during those years.

For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, if we hold debt instruments that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each tax year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same tax year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we have elected to amortize market discount and include such amounts in our taxable income in the current tax year, instead of upon their disposition, as an election not to do so would limit our ability to deduct interest expense for tax purposes.

We invest a portion of our net assets in below investment grade instruments. Investments in these types of instruments may present special tax issues for us. U.S. federal income tax rules are not entirely clear about issues such as when we may cease to accrue interest, original issue discount or market discount, when and to what extent deductions may be taken for bad debts or worthless instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt instruments in a bankruptcy or workout context are taxable. We will address these and other issues to the extent necessary in order to seek to ensure that we distribute sufficient income to avoid any material U.S. federal income or excise tax.

Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the tax year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under Subchapter M of the Code. We may have to sell or otherwise dispose of some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

Although we do not presently expect to do so, we are authorized to borrow funds and to sell or otherwise dispose of assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met.

See “—Regulation—Senior Securities.” Moreover, our ability to sell or otherwise dispose of assets to meet the Annual Distribution Requirement may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we sell or otherwise dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

A portfolio company in which we invest may face financial difficulties that require us to work-out, modify or otherwise restructure our investment in the portfolio company. Any such transaction could, depending upon the specific terms of the transaction, result in unusable capital losses and future non-cash income. Any such transaction could also result in our receiving assets that give rise to non-qualifying income for purposes of the 90% Income Test or otherwise would not count toward satisfying the Diversification Tests.

Some of the income that we might otherwise earn, such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an equity investment in an operating partnership, may not satisfy the 90% Income Test. To manage the risk that such income might disqualify us as a RIC for failure to satisfy the 90% Income Test, one or more subsidiary entities treated as U.S. corporations for entity-level income tax purposes may be employed to earn such income and (if applicable) hold the related asset. Such subsidiary entities will be required to pay U.S. federal income tax on their earnings, which ultimately will reduce the yield to our stockholders on such fees and income.

Competition

Our primary competitors for investments include other BDCs and investment funds (including private equity funds, mezzanine funds and CLO funds). In addition, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in middle market private U.S. companies. We also compete with traditional financial services companies such as commercial banks. We believe we will be able to compete with these entities for financing opportunities on the basis of, among other things, the experience of the Advisor and its affiliates.

Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of capital and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have and may not be subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or the restrictions that the Code imposes on us as a RIC. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than us.

Employees

We do not currently have any employees. Each of our executive officers is a principal, officer or employee of the Advisor or its affiliates, which manages and oversees our investment operations. In the future, the Advisor may directly retain personnel based upon its needs.

Available Information

We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. This information is available free of charge by calling us collect at (215) 495-1150 or on our website at www.fskkradvisor.com/fsk. Information contained on our website is not incorporated into this annual report on Form 10-K and you should not consider such information to be part of this annual report on Form 10-K. Such information is also available from the EDGAR database on the SEC’s web site at www.sec.gov.

Item 1A.

Risk Factors

Investing in our securities involves a number of significant risks. In addition to the other information contained in this annual report on Form 10-K, investors should consider carefully the following information before making an investment in our securities. If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected. In such case, the net asset value and market price of our common stock could decline or the value of our debt or equity investments may decline, and investors may lose all or part of their investment. Please refer also to those risk factors relating to our proposed merger with FS KKR Capital Corp. II included under the caption “Risk Factors—Risks Relating to the Merger” in pre-effective amendment no.1 to our registration statement on Form N-14 (333-251667) filed with the SEC on February 25, 2021, which are incorporated herein by reference.

Summary of Risk Factors

The following is a summary of the principal risk factors associated with an investment in the Company. Further details regarding each risk included in the below summary list can be found further below.

Risks Related to Our Business and Structure

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If our investment advisory agreement were to be terminated, or if the Advisor loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.

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The inability of the Advisor to generate investment opportunities through relationships with private equity sponsors, investment banks and commercial banks could adversely affect our business.

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We operate in a highly competitive market for investment opportunities.

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Our board of directors may change our policies and strategies without prior notice or stockholder approval.

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The SBCA Act allows us to incur additional leverage.

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Future legislation or rules could modify how we treat and use derivatives and other financial arrangements.

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Compliance with regulations applicable to us as a public company will involve significant expenditures.

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Failure to maintain safeguard the security of our data could compromise our ability to conduct business.

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We and our Advisor could be the target of litigation, including in connection with stockholder activism.

Risks Related to the Advisory and its Affiliates

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The Advisor and its affiliates face conflicts of interest as a result of arrangements between us and the Advisor and related to obligations the Advisor and its affiliates have to our affiliates and to other clients.

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We may be obligated to pay the Advisor incentive compensation on income that we have not received.

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We may face additional competition because employees of the Advisor are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.

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The Advisor’s liability to us is limited, and we are required to indemnify it against certain liabilities, which may lead it to act in a riskier manner on our behalf than it would when acting for its own account.

Risks Related to Business Development Companies and RICs

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Failure to maintain our status as a BDC would reduce our operating flexibility.

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We will be subject to corporate-level income tax if we are unable to qualify as a RIC or to satisfy the RIC annual distribution requirements, and our investments may be subject to corporate-level income tax.

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Our ability to acquire investments may be adversely affected if we cannot obtain financing.

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The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.

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Regulations governing our operation as a BDC and a RIC will affect our ability and means to raise additional capital or borrow for investment purposes, which may have a negative effect on our growth.

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Our ability to enter into transactions with our affiliates is restricted.

Risks Related to our Investments

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Our investments in prospective portfolio companies may be risky, and we could lose all of our investment.

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International investments create additional risks.

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Our investments in private investment funds subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.

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We may acquire financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce the cash available to service debt or for distribution to stockholders.

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There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims. If there is a default, the value of any collateral securing our debt investments may not be sufficient to repay in full both the other creditors and us.

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We generally will not control our portfolio companies.

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Declines in market values or fair market values of our investments could result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value.

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A significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith by our board of directors and, as a result, there is uncertainty as to the value of our portfolio investments.

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We are exposed to risks associated with changes in interest rates.

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A covenant breach by our portfolio companies may harm our operating results.

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Our portfolio companies may be highly leveraged.

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We may not realize gains from our equity investments.

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An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.

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A lack of liquidity in certain of our investments may adversely affect our business.

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We may not have the funds or ability to make additional investments in our portfolio companies.

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Prepayments of our debt investments by our portfolio companies could adversely impact our results.

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Our investments may include original issue discount and PIK instruments.

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We may from time to time enter into derivative transactions which expose us to certain risks.

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We may invest through special purpose vehicles, which may entail greater risks.

Risks Related to Debt Financing

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We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common stock and may increase the risk of investing in our common stock.

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The agreements governing our debt financing arrangements contain various covenants which, if not complied with, could have a material adverse effect on our ability to meet our investment obligations.

Risks Related to an Investment in Our Common Stock

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There is a risk that investors in our common stock may not receive distributions.

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Portions of the distributions that we make may represent a return of capital to stockholders.

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Our shares of common stock may trade at a discount to net asset value and we may issue shares at prices below our then-current net asset value.

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We may pay distributions from offering proceeds, borrowings or the sale of assets.

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A stockholder’s interest in us will be diluted if we issue additional shares.

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Certain provisions of our charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.

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The net asset value and/or market price of our common stock may fluctuate significantly.

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Holders of any preferred stock that we issue will have the right to elect members of the board of directors.

General Risk Factors

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Events outside of our control, including public health crises, could negatively affect our operations.

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If the current period of capital market disruption and instability continues, investors in our equity securities may not receive distributions consistent with historical levels or at all, and the valuation of our investments and our ability to raise capital could be negatively impacted.

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Global economic, political and market conditions may adversely affect our business and financial condition.

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Changes to U.S. tariff and import/export regulations may negatively affect our portfolio companies.

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Economic sanction laws in the U.S. and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies.

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Future economic downturns could impair our portfolio companies and harm our operating results.

Risks Related to Our Business and Structure

Our ability to achieve our investment objectives depends on the Advisor’s ability to manage and support our investment process and if our agreement with the Advisor were to be terminated, or if the Advisor loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.

Because we have no employees, we depend on the investment expertise, skill and network of business contacts of the Advisor. The Advisor evaluates, negotiates, structures, executes, monitors and services our investments. Our future success depends to a significant extent on the continued service of the Advisor, as well as its senior management team. The departure of any members of the Advisor’s senior management team could have a material adverse effect on our ability to achieve our investment objectives.

Our ability to achieve our investment objectives depends on the Advisor’s ability to identify, analyze, invest in, finance and monitor companies that meet our investment criteria. The Advisor’s capabilities in structuring the investment process, providing competent, attentive and efficient services to us, and facilitating access to financing on acceptable terms depend on the employment of investment professionals in an adequate number and of adequate sophistication to match the corresponding flow of transactions. To achieve our investment objectives, the Advisor may need to hire, train, supervise and manage new investment professionals to participate in our investment selection and monitoring process. The Advisor may not be able to find investment professionals in a timely manner or at all. Failure to support our investment process could have a material adverse effect on our business, financial condition and results of operations.

In addition, each of our investment advisory agreement and administration agreement with the Advisor has termination provisions that allow the parties to terminate the agreements without penalty. The investment advisory agreement and administration agreement may each be terminated at any time, without penalty, by the Advisor, upon 60 days’ notice to us. If the investment advisory agreement is terminated, it may adversely affect the quality of our investment opportunities. In addition, in the event such agreement is terminated, it may be difficult for us to replace the Advisor and the termination of such agreement may adversely impact the terms of any existing or future financing arrangement, which could have a material adverse effect on our business and financial condition.

The Advisor is a recently-formed investment adviser with a limited track record of acting as an investment adviser to a BDC, and any failure by the Advisor to manage and support our investment process may hinder the achievement of our investment objectives.

The Advisor is a recently-formed investment adviser jointly operated by an affiliate of FS Investments and KKR Credit with limited prior experience acting as an investment adviser to a BDC. The 1940 Act and the Code impose numerous constraints on the operations of BDCs that do not apply to other investment vehicles. While both affiliates of FS Investments and KKR Credit have individually acted as investment advisers to BDCs previously, the Advisor’s limited experience in managing a portfolio of assets under the constraints of the 1940 Act and the Code may hinder the Advisor’s ability to take advantage of attractive investment opportunities and, as a result, may adversely affect our ability to achieve our investment objectives. FS Investments’ and KKR Credit’s individual track records and achievements are not necessarily indicative of the future results they will achieve as a joint investment adviser. Accordingly, we can offer no assurance that we will replicate the historical performance of other investment companies with which FS Investments and KKR Credit have been affiliated, and we caution that our investment returns could be lower than the returns achieved by such other companies.

Because our business model depends to a significant extent upon relationships with private equity sponsors, investment banks and commercial banks, the inability of the Advisor to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.

If the Advisor fails to maintain its existing relationships with private equity sponsors, investment banks and commercial banks on which it relies to provide us with potential investment opportunities, or develop new relationships with other sponsors or sources of investment opportunities, we may not be able to grow our investment portfolio. In addition, individuals with whom the Advisor has relationships generally are not obligated to provide us with investment opportunities, and, therefore, there is no assurance that such relationships will generate investment opportunities for us.

We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.

A number of entities compete with us to make the types of investments that we plan to make and we believe that recent market trends, including sustained periods of low interest rates, have increased the number of competitors seeking to invest in loans to private, middle market companies in the United States. We compete with public and private funds, commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity and hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, we believe some of our competitors have access to funding sources that are not available to us. In addition, some of our competitors could have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a business development company or the source of income, asset diversification and distribution requirements we must satisfy to maintain our qualification as a RIC. The competitive pressures we face could have a material adverse effect on our business, financial condition, results of operations and cash flows. As a result of this competition, we can provide no assurance that we will be able to take advantage of attractive investment opportunities that arise from time to time, and we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objective.

The amount of capital in the private debt markets and overall competition for loans could result in short term returns for us that are lower than our long-term targets. In addition, one of the effects of the COVID-19 pandemic has been a decrease in the number of new investment opportunities in U.S. middle market companies during 2020, and we can offer no assurance about when, or if, the number of U.S. middle market company investing opportunities will equal or exceed those available prior to the COVID-19 pandemic. In the event these conditions continue for an extended amount of time, they could have a material adverse effect on our business, financial condition and results of operations.

Identifying, structuring and consummating investments involves competition among capital providers and market and transaction uncertainty. The Advisor can provide no assurance that it will able to identify a sufficient number of suitable investment opportunities or to avoid prepayment of existing investments to satisfy our investment objectives, including as necessary to effectively structure credit facilities or other forms of leverage. The loan origination market is very competitive, which can result in loan terms that are more favorable to borrowers, and conversely less favorable to lenders, such as lower interest rates and fees, weaker borrower financial and other covenants, borrower rights to cure defaults, and other terms more favorable to borrowers than current or historical norms. Increased competition could cause us to make more loans that are “cov-lite” in nature and, in a distressed scenario, there can be no assurance that these loans will retain the same value as loans with a full package of covenants. As a result of these conditions, the market for leveraged loans could become less advantageous

than expected for us, and this could increase default rates, decrease recovery rates or otherwise harm our returns. The risk of prepayment is also higher in the current competitive environment if borrowers are offered more favorable terms by other lenders. The financial markets have experienced substantial fluctuations in prices and liquidity for leveraged loans. Any further disruption in the credit and other financial markets could have substantial negative effects on general economic conditions, the availability of required capital for companies and the operating performance of such companies. These conditions also could result in increased default rates and credit downgrades, and affect the liquidity and pricing of the investments made by us. Conversely, periods of economic stability and increased competition among capital providers could increase the difficulty of locating investments that are desirable for us.

With respect to the investments we make, we do not seek to compete based primarily on the interest rates we offer, and we believe that some of our competitors could make loans with interest rates that will be lower than the rates we offer. In the secondary market for acquiring existing loans, we compete generally on the basis of pricing terms. With respect to all investments, we could lose some investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we could experience decreased net interest income, lower yields and increased risk of credit loss. We could also compete for investment opportunities with accounts managed or sponsored by Advisor or its affiliates. Although Advisor allocates opportunities in accordance with its allocation policy, allocations to such other accounts will reduce the amount and frequency of opportunities available to us and thus not necessarily be in the best interests of us and our securityholders. Moreover, the performance of investments will not be known at the time of allocation.

Our board of directors may change our operating policies and strategies without prior notice or stockholder approval.

Our board of directors has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without stockholder approval. Moreover, we have significant investment flexibility within our investment strategies. Therefore, we may invest our assets in ways with which investors may not agree. We also cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and the value of our stock. However, the effects might be adverse, which could negatively impact our ability to pay stockholders distributions and cause them to lose all or part of their investment.

Changes in laws or regulations governing our operations or the operations of our business partners may adversely affect our business or cause us to alter our business strategy.

We, our portfolio companies and our business partners are subject to regulation at the local, state and federal level. New legislation may be enacted, amended or repealed or new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make and the deductibility of interest expense by our portfolio companies, potentially with retroactive effect. For example, certain provisions of the Dodd-Frank Act, which influences many aspects of the financial services industry, have been amended or repealed and the Code has been substantially amended and reformed. New or repealed legislation, interpretations, rulings or regulations could require changes to certain business practices of us or our portfolio companies, negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. In addition, any changes to the laws and regulations governing our operations, including with respect to permitted investments, may cause us to alter our investment strategy to avail ourselves of new or different opportunities or make other changes to our business. Such changes could result in material differences to our strategies and plans as set forth in this annual report on Form 10-K and may result in our investment focus shifting from the areas of expertise of the Advisor to other types of investments in which the Advisor may have less expertise or little or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the value of a stockholder’s investment.

The SBCA Act allows us to incur additional leverage.

On March 23, 2018, the Small Business Credit Availability Act, or the SBCA Act, became law. The SBCA Act, among other things, amends Section 61(a) of the 1940 Act to add a new Section 61(a)(2) which reduces the asset coverage requirements for senior securities applicable to BDCs from 200% to 150% provided that certain disclosure and approval requirements are met. Effective June 15, 2019, following approval by our stockholders, our asset coverage requirement was reduced from 200% to 150%, such that the Company’s maximum debt to equity ratio increased from a prior maximum of 1.0x (equivalent of $1 of debt outstanding for each $1 of equity) to a maximum of 2.0x (equivalent to $2 of debt outstanding for each $1 of equity). As a result, we are able to incur substantial additional indebtedness, and, therefore the risk of an investment in us may increase. See “Risks Related to Debt Financing—We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common stock and may increase the risk of investing in our common stock.”

Future legislation or rules could modify how we treat derivatives and other financial arrangements, or place conditions on our use of derivatives and other financial arrangements.

Future legislation or rules may modify how we treat derivatives and other financial arrangements, or place conditions on our use of derivatives and other financial arrangements. For example, the SEC in October 2020 adopted Rule 18f-4, which is designed to modernize the regulation of the use of derivatives by registered investment companies and BDCs. Among other things, Rule 18f-4 limits a fund’s derivatives exposure through a value-at-risk test and requires the adoption and implementation of a derivatives risk management program for certain derivatives users. Additionally, subject to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users and would not be subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC also eliminated the asset segregation and cover framework arising from prior SEC guidance for covering derivatives and certain financial instruments. Compliance with Rule 18f-4 will be required in August 2022. Rule 18f-4 could limit the Company’s ability to engage in certain derivatives and other transactions and/or increase the costs of such transactions, which could adversely affect the value or performance of the Company.

As a public company, we are subject to regulations not applicable to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to comply with such regulations will involve significant expenditures, and non-compliance with such regulations may adversely affect us.

As a public company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC and the listing standards of the NYSE. Our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act and rules and regulations of the SEC thereunder. In particular, our management is required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. Section 404 of the Sarbanes-Oxley Act also generally requires an attestation from our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.

We incur significant expenses in connection with our compliance with the Sarbanes-Oxley Act and other regulations applicable to public companies, which may negatively impact our financial performance and our ability to make distributions. Compliance with such regulations also requires a significant amount of our management’s time and attention. For example, we cannot be certain as to the timing of the completion of our Sarbanes-Oxley mandated evaluations, testings and remediation actions, if any, or the impact of the same on our operations, and we may not be able to ensure that the process is effective or that our internal control over financial reporting are or will be deemed effective in the future. In the event that we are unable to maintain an effective system of internal control and maintain compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.

We may experience fluctuations in our quarterly results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate payable on the debt securities we acquire, the level of our expenses, variations in and the timing of fee income and the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.

If we, our affiliates and our and their respective third-party service providers are unable to maintain the availability of electronic data systems and safeguard the security of data, our ability to conduct business may be compromised, which could impair our liquidity, disrupt our business, damage our reputation or otherwise adversely affect our business.

Cybersecurity refers to the combination of technologies, processes, and procedures established to protect information technology systems and data from unauthorized access, attack, or damage. We, our affiliates and our and their respective third-party service providers are subject to cybersecurity risks. Cybersecurity risks have significantly increased in recent years and, while we have not experienced any material losses relating to cyber attacks or other information security breaches, we could suffer such losses in the future. Our, our affiliates and our and their respective third-party service providers’ computer systems, software and networks may be vulnerable to unauthorized access, computer viruses or other malicious code and other events that could have a security impact. If one or more of such events occur, this potentially could jeopardize confidential and other information, including nonpublic personal information and sensitive business data, processed and stored in, and transmitted through, computer systems and networks, or otherwise cause interruptions or malfunctions in our operations or the operations of

our affiliates and our and their respective third-party service providers. This could result in significant losses, reputational damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations. Privacy and information security laws and regulation changes, and compliance with those changes, may result in cost increases due to system changes and the development of new administrative processes. In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks.

We and our Advisor could be the target of litigation.

We and our Advisor could become the target of securities class action litigation or other similar claims if our common stock price fluctuates significantly or for other reasons. The proceedings could continue without resolution for long periods of time and the outcome of any such proceedings could materially adversely affect our business, financial condition, and/or operating results. Any litigation or other similar claims could consume substantial amounts of our management’s time and attention, and that time and attention and the devotion of associated resources could, at times, be disproportionate to the amounts at stake. Litigation and other claims are subject to inherent uncertainties, and a material adverse impact on our financial statements could occur for the period in which the effect of an unfavorable final outcome in litigation or other similar claims becomes probable and reasonably estimable. In addition, we could incur expenses associated with defending ourselves against litigation and other similar claims, and these expenses could be material to our earnings in future periods.

Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, hinder the execution of our investment strategy or impact our stock price.

Stockholder activism, which could take many forms, including making public demands that we consider certain strategic alternatives for the Company, engaging in public campaigns to attempt to influence our corporate governance and/or our management, and commencing proxy contests to attempt to elect the activists’ representatives or others to our board of directors, or arise in a variety of situations, has been increasing in the BDC space recently. While we are currently not subject to any stockholder activism, due to our proposed merger with FS KKR Capital Corp II., potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of stockholder activism. Stockholder activism could result in substantial costs and divert management’s and our board of directors’ attention and resources from our business. Additionally, such stockholder activism could give rise to perceived uncertainties as to our future and adversely affect our relationships with service providers and our portfolio companies. Also, we may be required to incur significant legal and other expenses related to any activist stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism.

Risks Related to the Advisor and its Affiliates

The Advisor and its affiliates, including our officers and some of our directors, face conflicts of interest as a result of compensation arrangements between us and the Advisor, which could result in actions that are not in the best interests of our stockholders.

The Advisor and its affiliates receive substantial fees from us in return for their services, and these fees could influence the advice provided to us. We pay to the Advisor an incentive fee that is based on the performance of our portfolio and an annual base management fee that is based on the average weekly value of our gross assets. Because the incentive fee is based on the performance of our portfolio, the Advisor may be incentivized to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement. The way in which the incentive fee is determined may also encourage the Advisor to use leverage to increase the return on our investments. In addition, because the base management fee is based upon the average weekly value of our gross assets, which includes any borrowings for investment purposes, the Advisor may be incentivized to recommend the use of leverage or the issuance of additional equity to make additional investments and increase the average weekly value of our gross assets. Under certain circumstances, the use of leverage may increase the likelihood of default, which could disfavor holders of our common stock. Our compensation arrangements could therefore result in our making riskier or more speculative investments, or relying more on leverage to make investments, than would otherwise be the case. This could result in higher investment losses, particularly during cyclical economic downturns.

We may be obligated to pay the Advisor incentive compensation on income that we have not received.

Any incentive fee payable by us that relates to our net investment income may be computed and paid on income that may include interest that has been accrued but not yet received. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously included in the calculation of the incentive fee will become

uncollectible. The Advisor is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.

For U.S. federal income tax purposes, we are required to recognize taxable income (such as deferred interest that is accrued as original issue discount) in some circumstances in which we do not receive a corresponding payment in cash. Under such circumstances, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. This difficulty in making the required distribution may be amplified to the extent that we are required to pay an incentive fee with respect to such accrued income. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

There may be conflicts of interest related to obligations the Advisor’s senior management and investment teams have to our affiliates and to other clients.

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 we do, or of investment vehicles managed by the same personnel. For example, the Advisor is also the investment adviser to FS KKR Capital Corp. II, 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. 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 our best interests or in the best interest of our stockholders. Our investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles. For example, we rely on the Advisor to manage our day-to-day activities and to implement our investment strategy. The Advisor and certain of its affiliates are presently, and plan in the future to continue to be, involved with activities which are unrelated to us. As a result of these activities, the Advisor, its employees and certain of its affiliates will have conflicts of interest in allocating their time between us and other activities in which they are or may become involved, including the management of other entities affiliated with FS Investments or KKR Credit. The Advisor and its employees will devote only as much of its or their time to our business as the Advisor and its employees, in their judgment, determine is reasonably required, which may be substantially less than their full time.

The time and resources that individuals employed by the Advisor devote to us may be diverted and we may face additional competition due to the fact that individuals employed by the Advisor are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.

Neither the Advisor, nor persons providing services to us on behalf of the Advisor, are prohibited from raising money for and managing another investment entity that makes the same types of investments as those we target. As a result, the time and resources that these individuals may devote to us may be diverted. In addition, we may compete with any such investment entity for the same investors and investment opportunities.

The Advisor’s liability is limited under each of the investment advisory agreement and the administration agreement, and we are required to indemnify it against certain liabilities, which may lead it to act in a riskier manner on our behalf than it would when acting for its own account.

Pursuant to each of the investment advisory agreement and the administration agreement, the Advisor and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with, or acting on behalf of, the Advisor will not be liable to us for their acts under the investment advisory agreement or the administration agreement, as applicable, absent willful misfeasance, bad faith or gross negligence in the performance of their duties. We have agreed to indemnify, defend and protect the Advisor and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons and any other person or entity affiliated with, or acting on behalf of, the Advisor with respect to all damages, liabilities, costs and expenses resulting from acts of the Advisor not arising out of willful misfeasance, bad faith or gross negligence in the performance of their duties under the investment advisory agreement or the administration agreement, as applicable. These protections may lead the Advisor to act in a riskier manner when acting on our behalf than it would when acting for its own account.

Risks Related to Business Development Companies

Failure to maintain our status as a BDC would reduce our operating flexibility.

If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility.

We are uncertain of our sources for funding our future capital needs and if we cannot obtain debt or equity financing on acceptable terms, or at all, our ability to acquire investments and to expand our operations will be adversely affected.

Any working capital reserves we maintain may not be sufficient for investment purposes, and we may require debt or equity financing to operate. We may also need to access the capital markets to refinance existing debt obligations to the extent maturing obligations are not repaid with cash flows from operations. In order to maintain RIC tax treatment, we must distribute distributions to our stockholders each tax year on a timely basis generally of an amount at least equal to 90% of our investment company taxable income, determined without regard to any deduction for distributions paid, and the amounts of such distributions will therefore not be available to fund investment originations or to repay maturing debt. In addition, with certain limited exceptions, we are only allowed to borrow amounts or issue debt securities or preferred stock, which we refer to collectively as “senior securities,” such that our asset coverage, as calculated pursuant to the 1940 Act, equals at least 150% immediately after such borrowing, which, in certain circumstances, may restrict our ability to borrow or issue debt securities or preferred stock. In the event that we develop a need for additional capital in the future for investments or for any other reason, and we cannot obtain debt or equity financing on acceptable terms, or at all, our ability to acquire investments and to expand our operations will be adversely affected. As a result, we would be less able to allocate our portfolio among various issuers and industries and achieve our investment objectives, which may negatively impact our results of operations and reduce our ability to make distributions to our stockholders.

As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of such acquisition, at least 70% of our total assets are qualifying assets. Therefore, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets. Similarly, these rules could prevent us from making additional investments in existing portfolio companies, which could result in the dilution of our position, or could require us to dispose of investments at an inopportune time to comply with the 1940 Act. If we were forced to sell non-qualifying investments in the portfolio for compliance purposes, the proceeds from such sale could be significantly less than the current value of such investments. Conversely, if we fail to invest a sufficient portion of our assets in qualifying assets, we could lose our status as a BDC, which would subject us to substantially more regulatory restrictions and significantly decrease our operating flexibility.

Regulations governing our operation as a BDC and a RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.

As a result of our need to satisfy the Annual Distribution Requirement in order to maintain RIC tax treatment under Subchapter M of the Code, we may need to periodically access the capital markets to raise cash to fund new investments. We may issue “senior securities,” as defined in the 1940 Act, including issuing preferred stock, borrowing money from banks or other financial institutions, or issuing debt securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such incurrence or issuance. Our ability to issue certain other types of securities is also limited. Under the 1940 Act, we are also generally prohibited from issuing or selling our common stock at a price per share, after deducting underwriting commissions, that is below our net asset value per share, without first obtaining approval for such issuance from our stockholders and our independent directors. Compliance with these limitations on our ability to raise capital may unfavorably limit our investment opportunities. These limitations may also reduce our ability in comparison to other companies to profit from favorable spreads between the rates at which we can borrow and the rates at which we can lend.

In addition, because we incur indebtedness for investment purposes, if the value of our assets declines, we may be unable to satisfy the asset coverage test under the 1940 Act, which would prohibit us from paying distributions and, as a result, could cause us to be subject to corporate-level tax on our income and capital gains, regardless of the amount of distributions paid. If we cannot satisfy the asset coverage test, we may be required to sell a portion of our investments and, depending on the nature of our debt financing, repay a portion of our indebtedness at a time when such sales may be disadvantageous.

Our ability to enter into transactions with our affiliates is restricted.

We are prohibited under the 1940 Act from participating in certain transactions with certain of our affiliates without the prior approval of a majority of the independent members of our board of directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities will be our affiliate for purposes of the 1940 Act, and we will generally be prohibited from buying or selling any securities from or to such affiliate, absent the prior approval of our board of directors. The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our board of directors and, in some cases, the SEC. In an order dated January 5, 2021, the SEC granted exemptive relief permitting us, 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 our co-investment affiliates. If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons to the extent not covered by the exemptive relief, absent the prior approval of the SEC. Similar restrictions limit our ability to transact business with our officers or directors or their respective affiliates. As a result of these restrictions, we may be prohibited from buying or selling any security from or to any portfolio company of a fund managed by the Advisor without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.

Risks Related to Our Investments

Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.

Our investments in senior secured loans, second lien secured loans, senior secured bonds, subordinated debt and equity of private U.S. companies, including middle market companies, may be risky and there is no limit on the amount of any such investments in which we may invest.

Senior Secured Loans, Second Lien Secured Loans and Senior Secured Bonds. There is a risk that any collateral pledged by portfolio companies in which we have taken a security interest may decrease in value over time or lose its entire value, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. To the extent our debt investment is collateralized by the securities of a portfolio company’s subsidiaries, such securities may lose some or all of their value in the event of the bankruptcy or insolvency of the portfolio company. Also, in some circumstances, our security interest may be contractually or structurally subordinated to claims of other creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the debt. Secured debt that is under-collateralized involves a greater risk of loss. In addition, second lien secured debt is granted a second priority security interest in collateral, which means that any realization of collateral will generally be applied to pay senior secured debt in full before second lien secured debt is paid. Consequently, the fact that debt is secured does not guarantee that we will receive principal and interest payments according to the debt’s terms, or at all, or that we will be able to collect on the debt should we be forced to enforce our remedies.

Subordinated Debt. Our subordinated debt investments will generally rank junior in priority of payment to senior debt and will generally be unsecured. This may result in a heightened level of risk and volatility or a loss of principal, which could lead to the loss of the entire investment. These investments may involve additional risks that could adversely affect our investment returns. To the extent interest payments associated with such debt are deferred, such debt may be subject to greater fluctuations in valuations, and such debt could subject us and our stockholders to non-cash income. Because we will not receive any principal repayments prior to the maturity of some of our subordinated debt investments, such investments will be of greater risk than amortizing loans.

Equity and Equity-Related Securities. We may make select equity investments. In addition, in connection with our debt investments, we on occasion receive equity interests such as warrants or options as additional consideration. The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.

Convertible Securities. We may invest in convertible securities, such as bonds, debentures, notes, preferred stocks or other securities that may be converted into, or exchanged for, a specified amount of common stock of the same or different issuer within a particular period of time at a specified price or formula. A convertible security may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument. If a convertible security held by us is

called for redemption, it will be required to permit the issuer to redeem the security, convert it into the underlying common stock or sell it to a third party. Any of these actions could have an adverse effect on our ability to achieve our investment objective.

Non-U.S. Securities. We may invest in non-U.S. securities, which may include securities denominated in U.S. dollars or in non-U.S. currencies and securities of companies in emerging markets, to the extent permitted by the 1940 Act. Because evidences of ownership of such securities usually are held outside the United States, we would be subject to additional risks if we invested in non-U.S. securities, which include possible adverse political and economic developments, seizure or nationalization of foreign deposits and adoption of governmental restrictions which might adversely affect or restrict the payment of principal and interest on the non-U.S. securities to investors located outside the country of the issuer, whether from currency blockage or otherwise. Because non-U.S. securities may be purchased with and payable in foreign currencies, the value of these assets as measured in U.S. dollars may be affected unfavorably by changes in currency rates and exchange control regulations. In addition, investing in securities of companies in emerging markets involves many risks, including potential inflationary economic environments, regulation by foreign governments, different accounting standards, political uncertainties and economic, social, political, financial, tax and security conditions in the applicable emerging market, any of which could negatively affect the value of companies in emerging markets or investments in their securities.

Investments in Asset-Based Opportunities. We may invest in asset-based opportunities through joint ventures, investment platforms, private investment funds or other business entities that provide one or more of the following services: origination or sourcing of potential investment opportunities, due diligence and negotiation of potential investment opportunities and/or servicing, development and management (including turnaround) and disposition of investments. Such investments may be in or alongside existing or newly formed operators, consultants and/or managers that pursue such opportunities and may or may not include capital and/or assets contributed by third party investors. Such investments may include opportunities to direct-finance physical assets, such as airplanes and ships, and/or operating assets, such as financial service entities, as opposed to investment securities, or to invest in origination and/or servicing platforms directly. In valuing our investments, we rely primarily on information provided by operators, consultants and/or managers. Valuations of illiquid securities involve various judgments and consideration of factors that may be subjective. There is a risk that inaccurate valuations could adversely affect the value of our common stock. We may not be able to promptly withdraw our investment in these asset-based opportunities, which may result in a loss to us and adversely affect our investment returns.

Structured Products. We may invest in structured products, which may include collateralized debt obligations, collateralized bond obligations, collateralized loan obligations, structured notes and credit-linked notes. When investing in structured products, we may invest in any level of the subordination chain, including subordinated (lower-rated) tranches and residual interests (the lowest tranche). Structured products may be highly levered and therefore, the junior debt and equity tranches that we may invest in are subject to a higher risk of total loss and deferral or nonpayment of interest than the more senior tranches to which they are subordinated. In addition, we will generally have the right to receive payments only from the issuer or counterparty, and will generally not have direct rights against the underlying borrowers or entities. Furthermore, the investments we make in structured products are at times thinly traded or have only a limited trading market. As a result, investments in such structured products may be characterized as illiquid securities.

Derivatives. We may invest from time to time in derivatives, including total return swaps, interest rate swaps, credit default swaps and foreign currency forward contracts. Derivative investments have risks, including: the imperfect correlation between the value of such instruments and our underlying assets, which creates the possibility that the loss on such instruments may be greater than the gain in the value of the underlying assets in our portfolio; the loss of principal; the possible default of the other party to the transaction; and illiquidity of the derivative investments. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding, or may not recover at all. In addition, in the event of the insolvency of a counterparty to a derivative transaction, the derivative contract would typically be terminated at its fair market value. If we are owed this fair market value in the termination of the derivative contract and our claim is unsecured, we will be treated as a general creditor of such counterparty and will not have any claim with respect to the underlying security. Certain of the derivative investments in which we may invest may, in certain circumstances, give rise to a form of financial leverage, which may magnify the risk of owning such instruments. The ability to successfully use derivative investments depends on the ability of the Advisor to predict pertinent market movements, which cannot be assured. In addition, amounts paid by us as premiums and cash or other assets held in margin accounts with respect to our derivative investments would not be available to it for other investment purposes, which may result in lost opportunities for gain.

Below Investment Grade Risk. In addition, we invest in securities that are rated below investment grade by rating agencies or that would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to

as “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. They may also be difficult to value and illiquid.

International investments create additional risks.

We expect to make investments in portfolio companies that are domiciled outside of the United States. We anticipate that up to 30% of our investments may be in these types of assets. Our investments in foreign portfolio companies are deemed “non-qualifying assets,” which means, as required by the 1940 Act, they, along with other non-qualifying assets, may not constitute more than 30% of our total assets at the time of our acquisition of any asset, after giving effect to the acquisition. Notwithstanding the limitation on our ownership of foreign portfolio companies, such investments subject us to many of the same risks as our domestic investments, as well as certain additional risks, including the following:

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foreign governmental laws, rules and policies, including those restricting the ownership of assets in the foreign country or the repatriation of profits from the foreign country to the United States;

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foreign currency devaluations that reduce the value of and returns on our foreign investments;

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adverse changes in the availability, cost and terms of investments due to the varying economic policies of a foreign country in which we invest;

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adverse changes in tax rates, the tax treatment of transaction structures and other changes in operating expenses of a particular foreign country in which we invest;

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the assessment of foreign-country taxes (including withholding taxes, transfer taxes and value added taxes, any or all of which could be significant) on income or gains from our investments in the foreign country;

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adverse changes in foreign-country laws, including those relating to taxation, bankruptcy and ownership of assets;

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changes that adversely affect the social, political and/or economic stability of a foreign country in which we invest;

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high inflation in the foreign countries in which we invest, which could increase the costs to us of investing in those countries;

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deflationary periods in the foreign countries in which we invest, which could reduce demand for our assets in those countries and diminish the value of such investments and the related investment returns to us; and

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legal and logistical barriers in the foreign countries in which we invest that materially and adversely limit our ability to enforce our contractual rights with respect to those investments.

In addition, we may make investments in countries whose governments or economies may prove unstable. Certain of the countries in which we may invest may have political, economic and legal systems that are unpredictable, unreliable or otherwise inadequate with respect to the implementation, interpretation and enforcement of laws protecting asset ownership and economic interests. In some of the countries in which we may invest, there may be a risk of nationalization, expropriation or confiscatory taxation, which may have an adverse effect on our portfolio companies in those countries and the rates of return that we are able to achieve on such investments. We may also lose the total value of any investment which is nationalized, expropriated or confiscated. The financial results and investment opportunities available to us, particularly in developing countries and emerging markets, may be materially and adversely affected by any or all of these political, economic and legal risks.

Our investments in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities, subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.

We may invest in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities which would be required to register as investment companies but for an exemption under Sections 3(c)(1) and 3(c)(7) of the 1940 Act. Our investments in private funds are subject to substantial risks. Investments in such private investment funds expose us to the risks associated with the businesses of such funds or entities as well as such private investment funds’ portfolio companies. These private investment funds may or may not be registered investment companies and, thus, may not be subject to protections afforded by the 1940 Act, covering, among other areas, liquidity requirements, governance by an independent board, affiliated transaction restrictions, leverage limitations, public disclosure requirements and custody requirements.

We rely primarily on information provided by managers of private investment funds in valuing our investments in such funds. There is a risk that inaccurate valuations provided by managers of private investment funds could adversely affect the value of our common stock. In addition, there can be no assurance that a manager of a private investment fund will provide advance notice of any material change in such private investment fund’s investment program or policies and thus, our investment portfolio may be subject to additional risks which may not be promptly identified by the Advisor. Moreover, we may not be able to withdraw our investments in certain private investment funds promptly after we make a decision to do so, which may result in a loss to us and adversely affect our investment returns.

Investments in the securities of private investment funds may also involve duplication of advisory fees and certain other expenses. By investing in private investment funds indirectly through us, you bear a pro rata portion of our advisory fees and other expenses, and also indirectly bear a pro rata portion of the advisory fees, performance-based allocations and other expenses borne by us as an investor in the private investment funds. In addition, the purchase of the shares of some private investment funds requires the payment of sales loads and (in the case of closed-end investment companies) sometimes substantial premiums above the value of such investment companies’ portfolio securities.

In addition, certain private investment funds may not provide us with the liquidity we require and would thus subject us to liquidity risk. Further, even if an investment in a private investment fund is deemed liquid at the time of investment, the private investment fund may, in the future, alter the nature of our investments and cease to be a liquid investment fund, subjecting us to liquidity risk.

We may acquire various structured financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce the cash available to service debt or for distribution to stockholders.

We may seek to hedge against interest rate and currency exchange rate fluctuations and credit risk by using structured financial instruments such as futures, options, swaps and forward contracts, subject to the requirements of the 1940 Act. Use of structured financial instruments for hedging purposes may present significant risks, including the risk of loss of the amounts invested. Defaults by the other party to a hedging transaction can result in losses in the hedging transaction. Hedging activities also involve the risk of an imperfect correlation between the hedging instrument and the asset being hedged, which could result in losses both on the hedging transaction and on the instrument being hedged. Use of hedging activities may not prevent significant losses and could increase our losses. Further, hedging transactions may reduce cash available to service our debt or pay distributions to our stockholders.

Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.

Investments in middle market companies involve some of the same risks that apply generally to investments in larger, more established companies. However, such investments have more pronounced risks in that they:

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may have limited financial resources and may be unable to meet the obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral pledged under such securities and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;

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have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tends to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns;

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are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;

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generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers and directors and members of the Advisor may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and

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may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity.

Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.

Our portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or senior to, the debt in which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to the debt instruments in which we invest. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any proceeds. After repaying such senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.

There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.

If one of our portfolio companies were to go bankrupt, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might recharacterize our debt investment and subordinate all or a portion of our claim to that of other creditors. In situations where a bankruptcy carries a high degree of political significance, our legal rights may be subordinated to other creditors. We may also be subject to lender liability claims for actions taken by us with respect to a borrower’s business or in instances where we exercise control over the borrower or render significant managerial assistance.

Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.

Certain debt investments that we make in portfolio companies may be secured on a second priority basis by the same collateral securing first priority debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by such company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the debt obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the debt obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against such company’s remaining assets, if any.

We may also make unsecured debt investments in portfolio companies, meaning that such investments will not benefit from any interest in collateral of such companies. Liens on any such portfolio company’s collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured debt agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured debt obligations after payment in full of all secured debt obligations. If such proceeds were not sufficient to repay the outstanding secured debt obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.

The rights we may have with respect to the collateral securing the debt investments we make in our portfolio companies with senior debt outstanding may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding, any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations secured by the first priority liens: the ability to cause the commencement of enforcement proceedings against the collateral; the ability to control the conduct of such proceedings; the approval of amendments to collateral documents; releases of liens on the collateral; and waivers of past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights are adversely affected.

We generally will not control our portfolio companies.

We do not expect to control most of our portfolio companies, even though we may have board representation or board observation rights, and our debt agreements with such portfolio companies may contain certain restrictive covenants. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors. Due to the lack of liquidity for our investments in non-traded companies, we may not be able to dispose of our interests in our portfolio companies as readily as we would like or at an appropriate valuation. As a result, a portfolio company may make decisions that could decrease the value of our portfolio holdings.

Declines in market values or fair market values of our investments could result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value.

Under the 1940 Act, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our board of directors. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity) and impairments of the market values or fair market values of our investments, even if unrealized, must be reflected in our financial statements for the applicable period as unrealized depreciation, which could result in a significant reduction to our net asset value for a given period.

A significant portion of our investment portfolio is and will be recorded at fair value as determined in good faith by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value, as determined by our board of directors. There is not a public market for the securities of the privately held companies in which we invest. Most of our investments are not publicly traded or actively traded on a secondary market but are, instead, traded on a privately negotiated OTC secondary market for institutional investors or are not traded at all. As a result, we value these securities quarterly at fair value as determined in good faith by our board of directors.

Certain factors that may be considered in determining the fair value of our investments include dealer quotes for securities traded on the secondary market for institutional investors, the nature and realizable value of any collateral, the portfolio company’s earnings and its ability to make payments on its indebtedness, the markets in which the portfolio company does business, comparison to comparable publicly traded companies, discounted cash flows and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these non-traded securities existed. Due to this uncertainty, our fair value determinations may cause our net asset value on a given date to materially understate or overstate the value that we may ultimately realize upon the sale of one or more of our investments.

We are exposed to risks associated with changes in interest rates, including with respect to the phase out of LIBOR.

We are subject to financial market risks, including changes in interest rates. General interest rate fluctuations may have a substantial negative impact on our investments, investment opportunities and cost of capital and, accordingly, may have a material adverse effect on our investment objectives, our rate of return on invested capital and our ability to service our debt and make distributions to our stockholders. In addition, an increase in interest rates would make it more expensive to use debt for our financing needs, if any.

Our investment portfolio primarily consists of senior secured debt with maturities typically ranging from three to seven years. The longer the duration of these securities, generally, the more susceptible they are to changes in market interest rates. As market interest rates increase, those securities with a lower yield-at-cost can experience a mark-to-market unrealized loss. An impairment of the fair market value of our investments, even if unrealized, must be reflected in our financial statements for the applicable period and may therefore have a material adverse effect on our results of operations for that period.

Because we incur indebtedness to make investments, our net investment income is dependent, in part, upon the difference between the rate at which we borrow funds or pay interest on outstanding debt securities and the rate at which we invest these funds. An increase in interest rates would make it more expensive to use debt to finance our investments or to refinance our current financing arrangements. In addition, certain of our financing arrangements provide for adjustments in the loan interest rate along with changes in market interest rates. Therefore, in periods of rising interest rates, our cost of funds will increase, which

could materially reduce our net investment income. Any reduction in the level of interest rates on new investments relative to interest rates on our current investments could also adversely impact our net investment income.

We have and may continue to structure the majority of our debt investments with floating interest rates to position our portfolio for rate increases. However, there can be no assurance that this will successfully mitigate our exposure to interest rate risk. For example, in the event of a rising interest rate environment, payments under floating rate debt instruments generally would rise and there may be a significant number of issuers of such floating rate debt instruments that would be unable or unwilling to pay such increased interest costs and may otherwise be unable to repay their loans. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. Investments in floating rate debt instruments may also decline in value in response to rising interest rates if the interest rates of such investments do not rise as much, or as quickly, as market interest rates in general. Similarly, during periods of rising interest rates, our fixed rate investments may decline in value because the fixed rate of interest paid thereunder may be below market interest rates.

In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although the U.S. Federal Reserve, in connection with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar LIBOR with the Secured Overnight Financing Rate, SOFR. Given the inherent differences between LIBOR and SOFR, or any other alternative benchmark rate that may be established, there are many uncertainties regarding a transition from LIBOR, including, but not limited to, the need to amend all contracts with LIBOR as the referenced rate and how this will impact the cost of variable rate debt and certain derivative financial instruments. In addition, SOFR or other replacement rates may fail to gain market acceptance. Any failure of SOFR or alternative reference rates to gain market acceptance could adversely affect the return on, value of and market for securities linked to such rates.

The effect of the establishment of alternative reference rates or any other reforms to LIBOR or other reference rates (including whether LIBOR will continue to be an acceptable market benchmark) cannot be predicted at this time, and the transition away from LIBOR and other current reference rates to alternative reference rates is complex and could have a material adverse effect on our business, financial condition and results of operations. Factors such as the pace of the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rate, prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates could also have a material adverse effect on our business, financial condition and results of operations. We may also need to renegotiate any credit or similar agreements extending beyond 2021 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate and certain of our existing credit facilities to replace LIBOR with the new standard that is established. If the agreements with our portfolio companies are unable to be renegotiated, our investments may bear interest at a lower rate, which would decrease investment income and potentially the value of such investments.

In addition, the IRS has issued proposed regulations regarding the tax consequences of the transition from interbank offered rates to new reference rates in debt instruments and non-debt contracts. Under the proposed regulations, to avoid such alteration or modification of the terms of a debt instrument being treated as a taxable exchange, the fair market value of the modified instrument or contract must be substantially equivalent to its fair market value before the qualifying change was made. The IRS may withdraw, amend or finalize, in whole or part, these proposed regulations and/or provide additional guidance, with potential retroactive effect.

Furthermore, because a rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate in the investment advisory agreement and may result in a substantial increase of the amount of incentive fees payable to the Advisor with respect to pre-incentive fee net investment income.

A covenant breach by our portfolio companies may harm our operating results.

A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company.

Our portfolio companies may be highly leveraged.

Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies’ ability to finance their future operations and capital needs. As a result, these companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.

We may not realize gains from our equity investments.

Certain investments that we may make may include equity related securities, such as rights and warrants that may be converted into or exchanged for common stock or the cash value of the common stock. In addition, we may make direct equity investments in portfolio companies. The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We may also be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We may be unable to exercise any put rights we acquire, which grant us the right to sell our equity securities back to the portfolio company, for the consideration provided in our investment documents if the issuer is in financial distress.

An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.

Our investments are primarily in privately held companies. Investments in private companies pose significantly greater risks than investments in public companies. First, private companies have reduced access to the capital markets, resulting in diminished capital resources and the ability to withstand financial distress. As a result, these companies, which may present greater credit risk than public companies, may be unable to meet the obligations under their debt securities that we hold. Second, the investments themselves often may be illiquid. The securities of most of the companies in which we invest are not publicly traded or actively traded on the secondary market and are, instead, traded on a privately negotiated OTC secondary market for institutional investors. In addition, such securities may be subject to legal and other restrictions on resale. As such, we may have difficulty exiting an investment promptly or at a desired price prior to maturity or outside of a normal amortization schedule. In addition, in a restructuring, we may receive substantially different securities than our original investment in a portfolio company, including securities in a different part of the capital structure. These investments may also be difficult to value because little public information generally exists about private companies, requiring an experienced due diligence team to analyze and value the potential portfolio company. Finally, these companies often may not have third-party debt ratings or audited financial statements. We must therefore rely on the ability of the Advisor to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies. These companies and their financial information will generally not be subject to the Sarbanes-Oxley Act and other rules and regulations that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investments.

A lack of liquidity in certain of our investments may adversely affect our business.

We invest in certain companies whose securities are not publicly traded or actively traded on the secondary market and are, instead, traded on a privately negotiated OTC secondary market for institutional investors and whose securities are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. The illiquidity of certain of our investments may make it difficult for us to sell these investments when desired. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we had previously recorded these investments. The reduced liquidity of our investments may make it difficult for us to dispose of them at a favorable price or at all, and, as a result, we may suffer losses.

We may not have the funds or ability to make additional investments in our portfolio companies.

We may not have the funds or ability to make additional investments in our portfolio companies. After our initial investment in a portfolio company, we may be called upon from time to time to provide additional funds to such company or have the opportunity to increase our investment through the exercise of a warrant to purchase common stock. There is no assurance that we will make, or will have sufficient funds to make, follow-on investments. Any decisions not to make a follow-on investment or any inability on our part to make such an investment may have a negative impact on a portfolio company in need of such an investment, may result in a missed opportunity for us to increase our participation in a successful operation or may reduce the expected return on the investment.

Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.

We are subject to the risk that the investments we make in our portfolio companies may be repaid prior to maturity. When this occurs, we will generally reinvest these proceeds in temporary investments, pending their future investment in new portfolio companies. These temporary investments will typically have substantially lower yields than the debt being prepaid and we could experience significant delays in reinvesting these amounts. Any future investment in a new portfolio company may also be at lower yields than the debt that was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elect to prepay amounts owed to us. Additionally, prepayments, net of prepayment fees, could negatively impact our return on equity.

Our investments may include original issue discount and PIK instruments.

To the extent that we invest in original issue discount or PIK instruments and the accretion of original issue discount or PIK interest income constitutes a portion of our income, we will be exposed to risks associated with the requirement to include such non-cash income in taxable and accounting income prior to receipt of cash, including the following:

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The higher interest rates on PIK instruments reflect the payment deferral and increased credit risk associated with these instruments, and PIK instruments generally represent a significantly higher credit risk than coupon loans;

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Original issue discount and PIK instruments may have unreliable valuations because the accruals require judgments about collectability of the deferred payments and the value of any associated collateral;

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An election to defer PIK interest payments by adding them to the principal on such instruments increases our future investment income which increases our gross assets and, as such, increases the Advisor’s future base management fees which, thus, increases the Advisor’s future income incentive fees at a compounding rate;

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Market prices of PIK instruments and other zero coupon instruments are affected to a greater extent by interest rate changes, and may be more volatile than instruments that pay interest periodically in cash. While PIK instruments are usually less volatile than zero coupon debt instruments, PIK instruments are generally more volatile than cash pay securities;

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The deferral of PIK interest on an instrument increases the loan-to-value ratio, which is a measure of the riskiness of a loan, with respect to such instrument;

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Even if the conditions for income accrual under GAAP are satisfied, a borrower could still default when actual payment is due upon the maturity of such loan;

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For accounting purposes, cash distributions to investors representing original issue discount income are not derived from paid-in capital, although they may be paid from the offering proceeds. Thus, although a distribution of original issue discount income may come from the cash invested by investors, the 1940 Act does not require that investors be given notice of this fact;

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Tax legislation requires that income be recognized for tax purposes no later than when recognized for financial reporting purposes;

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The required recognition of PIK interest for U.S. federal income tax purposes may have a negative impact on liquidity, as it represents a non-cash component of our investment company taxable income that may require cash distributions to stockholders in order to maintain our ability to be subject to tax as a RIC; and

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Original issue discount may create a risk of non-refundable cash payments to the Advisor based on non-cash accruals that may never be realized.

We may from time to time enter into total return swaps, credit default swaps or other derivative transactions which expose us to certain risks, including credit risk, market risk, liquidity risk and other risks similar to those associated with the use of leverage.

We may from time to time enter into total return swaps, credit default swaps or other derivative transactions that seek to modify or replace the investment performance of a particular reference security or other asset. These transactions are typically individually negotiated, non-standardized agreements between two parties to exchange payments, with payments generally

calculated by reference to a notional amount or quantity. Swap contracts and similar derivative contracts are not traded on exchanges; rather, banks and dealers act as principals in these markets. These investments may present risks in excess of those resulting from the referenced security or other asset. Because these transactions are not an acquisition of the referenced security or other asset itself, the investor has no right directly to enforce compliance with the terms of the referenced security or other asset and has no voting or other consensual rights of ownership with respect to the referenced security or other asset. In the event of insolvency of a counterparty, we will be treated as a general creditor of the counterparty and will have no claim of title with respect to the referenced security or other asset.

A total return swap is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the referenced security or other assets underlying the total return swap during a specified period, in return for periodic payments based on a fixed or variable interest rate.

A total return swap is subject to market risk, liquidity risk and risk of imperfect correlation between the value of the total return swap and the debt obligations underlying the total return swap. In addition, we may incur certain costs in connection with a total return swap that could in the aggregate be significant.

A credit default swap is a contract in which one party buys or sells protection against a credit event with respect to an issuer, such as an issuer’s failure to make timely payments of interest or principal on its debt obligations, bankruptcy or restructuring during a specified period. Generally, if we sell credit protection using a credit default swap, we will receive fixed payments from the swap counterparty and if a credit event occurs with respect to the applicable issuer, we will pay the swap counterparty par for the issuer’s defaulted debt securities and the swap counterparty will deliver the defaulted debt securities to us. Generally, if we buy credit protection using a credit default swap, we will make fixed payments to the counterparty and if a credit event occurs with respect to the applicable issuer, we will deliver the issuer’s defaulted securities underlying the swap to the swap counterparty and the counterparty will pay us par for the defaulted securities. Alternatively, a credit default swap may be cash settled and the buyer of protection would receive the difference between the par value and the market value of the issuer’s defaulted debt securities from the seller of protection.

Credit default swaps are subject to the credit risk of the underlying issuer. If we are selling credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, a credit event will occur and we will have to pay the counterparty. If we are buying credit protection, there is a risk that we will not properly assess the risk of the underlying issuer, no credit event will occur and we will receive no benefit for the premium paid.

A derivative transaction is also subject to the risk that a counterparty will default on its payment obligations thereunder or that we will not be able to meet our obligations to the counterparty. In some cases, we may post collateral to secure our obligations to the counterparty, and we may be required to post additional collateral upon the occurrence of certain events such as a decrease in the value of the reference security or other asset. In some cases, the counterparty may not collateralize any of its obligations to us.

Derivative investments effectively add leverage to a portfolio by providing investment exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. In addition to the risks described above, such arrangements are subject to risks similar to those associated with the use of leverage.

We may invest through joint ventures, partnerships or other special purpose vehicles and our investments through these vehicles may entail greater risks, and investments in which we have a non-controlling interest may involve risks specific to third-party management of those investments.

We may co-invest with third parties through partnerships, joint ventures or other entities, such as SCJV, thereby acquiring jointly-controlled or non-controlling interests in certain investments in conjunction with participation by one or more third parties in such investment. We may have interests or objectives that are inconsistent with those of the third-party partners or co-venturers. Although we may not have full control over these investments and therefore, may have a limited ability to protect its position therein, we expect that we will negotiate appropriate rights to protect our interests. Nevertheless, such investments may involve risks not present in investments where a third party is not involved, including the possibility that a third-party partner or co-venturer may have financial difficulties, resulting in a negative impact on such investment, may have economic or business interests or goals which are inconsistent with ours, or may be in a position to take (or block) action in a manner contrary to the our investment objectives or the increased possibility of default by, diminished liquidity or insolvency of, the third party, due to a sustained or general economic downturn. Third-party partners or co-venturers may opt to liquidate an investment at a time during which such liquidation is not optimal for us. In addition, we may in certain circumstances be liable for the actions of its third-party partners or co-venturers. In those circumstances where such third parties involve a management group, such third parties may receive compensation arrangements relating to such investments, including incentive compensation arrangements

Risks Related to Debt Financing

We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common stock and may increase the risk of investing in our common stock.

The use of borrowings and other types of financing, also known as leverage, magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our common stock. When we use leverage to partially finance our investments, through borrowing from banks and other lenders or issuing debt securities, we, and therefore our stockholders, will experience increased risks of investing in our common stock. Any lenders and debt holders would have fixed dollar claims on our assets that are senior to the claims of our stockholders. If the value of our assets increases, then leverage would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not utilized leverage. Conversely, if the value of our assets decreases, leverage would cause net asset value to decline more sharply than it otherwise would have had we not utilized leverage. Similarly, any increase in our income in excess of interest payable on our indebtedness would cause our net investment income to increase more than it would without leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not utilized leverage. Such a decline could negatively affect our ability to make distributions to stockholders. Leverage is generally considered a speculative investment technique.

In addition, the decision to utilize leverage will increase our assets and, as a result, will increase the amount of base management fees payable to the Advisor. See “Risks Related to the Advisor and its Affiliates—The Advisor and its affiliates, including our officers and some of our directors, face conflicts of interest as a result of compensation arrangements between us and the Advisor, which could result in actions that are not in the best interests of our stockholders.”

Illustration. The following table illustrates the effect of leverage on returns from an investment in shares of our common stock assuming various annual returns, net of expenses. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation assumes (i) $8.8 billion in total assets, (ii) a weighted average cost of funds of 3.71%, (iii) $5.1 billion in debt outstanding and (iv) $3.1 billion in stockholders’ equity. In order to compute the “Corresponding return to stockholders,” the “Assumed Return on Our Portfolio (net of expenses)” is multiplied by the assumed total assets to obtain an assumed return to us. From this amount, the interest expense is calculated by multiplying the assumed weighted average cost of funds times the assumed debt outstanding, and the product is subtracted from the assumed return to us in order to determine the return available to stockholders. The return available to stockholders is then divided by our stockholders’ equity to determine the “Corresponding return to stockholders.” Actual interest payments may be different.


Assumed Return on Our Portfolio (net of expenses)	(10)%			(5)%			—%			5%			10%
Corresponding return to stockholders		(34.49	)%		(20.30	)%		(6.10	)%		8.09	%		22.28	%

Similarly, assuming (i) $8.8 billion in total assets, (ii) a weighted average cost of funds of 3.71% and (iii) $5.1 billion in debt outstanding, our assets would need to yield an annual return (net of expenses) of approximately 2.15% in order to cover the annual interest payments on our outstanding debt.

The agreements governing our debt financing arrangements contain, and agreements governing future debt financing arrangements may contain, various covenants which, if not complied with, could have a material adverse effect on our ability to meet our investment obligations and to pay distributions to our stockholders.

The agreements governing certain of our debt financing arrangements contain, and agreements governing future debt financing arrangements may contain, certain financial and operational covenants. These covenants require us and our subsidiaries to, among other things, maintain certain financial ratios, including asset coverage and minimum stockholders’ equity. Compliance with these covenants depends on many factors, some of which are beyond our and their control. In the event of deterioration in the capital markets and pricing levels subsequent to this period, net unrealized depreciation in our and our subsidiaries’ portfolios may increase in the future and could result in non-compliance with certain covenants, or our taking actions which could disrupt our business and impact our ability to meet our investment objectives.

There can be no assurance that we and our subsidiaries will continue to comply with the covenants under our financing arrangements. Failure to comply with these covenants could result in a default which, if we and our subsidiaries were unable to obtain a waiver, consent or amendment from the debt holders, could accelerate repayment under any or all of our and their debt instruments and thereby force us to liquidate investments at a disadvantageous time and/or at a price which could result in losses, or allow our lenders to sell assets pledged as collateral under our financing arrangements in order to satisfy amounts due thereunder. These occurrences could have a material adverse impact on our liquidity, financial condition, results of operations

and ability to pay distributions. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources” for a more detailed discussion of the terms of our debt financings.

Risks Related to an Investment in Our Common Stock

There is a risk that investors in our common stock may not receive distributions.

We cannot assure stockholders that we will achieve investment results that will allow us to make a specified level of cash distributions. All distributions will be paid at the discretion of our board of directors and will depend on our earnings, our net investment income, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time to time. Furthermore, we are permitted to issue senior securities, including multiple classes of debt and one class of stock senior to our shares of common stock. If any such senior securities are outstanding, we are prohibited from paying distributions to holders of shares of our common stock unless we meet the applicable asset coverage ratios at the time of distribution. As a result, we may be limited in our ability to make distributions.

Our distribution proceeds may exceed our earnings. Therefore, portions of the distributions that we make may represent a return of capital to stockholders, which will lower their tax basis in their shares of common stock.

The tax treatment and characterization of our distributions may vary significantly from time to time due to the nature of our investments. The ultimate tax characterization of our distributions made during a tax year may not finally be determined until after the end of that tax year. We may make distributions during a tax year that exceed our investment company taxable income and net capital gains for that tax year. In such a situation, the amount by which our total distributions exceed investment company taxable income and net capital gains generally would be treated as a return of capital up to the amount of a stockholder’s tax basis in the shares, with any amounts exceeding such tax basis treated as a gain from the sale or exchange of such shares. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Moreover, we may pay all or a substantial portion of our distributions from the proceeds of the sale of shares of our common stock or from borrowings in anticipation of future cash flow, which could constitute a return of stockholders’ capital and will lower such stockholders’ tax basis in our shares, which may result in increased tax liability to stockholders when they sell such shares.

Our shares of common stock may trade at a discount to net asset value, and such discount may be significant.

Shares of closed-end investment companies, including BDCs, may trade at a market price that is less than the net asset value that is attributable to those shares. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share may decline. It is not possible to predict whether shares of our common stock will trade at, above, or below net asset value. If our common stock is trading at a price below its net asset value per share, we will generally not be able to issue additional shares of our common stock at their market price without first obtaining approval for such issuance from our stockholders and our independent directors. In past years, we obtained the approval of our stockholders to issue shares of common stock at prices below the then-current net asset value of our common stock, subject to certain conditions, during the twelve-month periods beginning on the dates of such approvals. The current authorization expires on July 15, 2021. We may again seek the approval of our stockholders to issue shares of our common stock at prices below the then-current net asset value per share for a twelve-month period following stockholder approval. However, we may not obtain the necessary approvals to sell shares of common stock below net asset value after July 15, 2021.

We may pay distributions from offering proceeds, borrowings or the sale of assets to the extent our cash flows from operations, net investment income or earnings are not sufficient to fund declared distributions.

We may fund distributions from the uninvested proceeds of a securities offering and borrowings, and we have not established limits on the amount of funds we may use from such proceeds or borrowings to make any such distributions. We have paid and may continue to pay distributions from the sale of assets to the extent distributions exceed our earnings or cash flows from operations. Distributions from offering proceeds or from borrowings could reduce the amount of capital we ultimately invest in our portfolio companies.

A stockholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.

Our investors do not have preemptive rights to any shares we issue in the future. Our charter authorizes us to issue 750,000,000 shares of common stock. Pursuant to our charter, a majority of our entire board of directors may amend our charter

to increase the number of authorized shares of stock without stockholder approval. After an investor purchases shares, our board of directors may elect to sell additional shares in the future, issue equity interests in private offerings or issue share-based awards to our independent directors or employees of the Advisor. To the extent we issue additional equity interests after an investor purchases our shares, an investor’s percentage ownership interest in us will be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, an investor may also experience dilution in the book value and fair value of his or her shares.

Stockholders may experience dilution in their ownership percentage if they do not participate in our distribution reinvestment plan.

Stockholders who do not participate in our distribution reinvestment plan may experience accretion to the net asset value of their shares if our shares are trading at a premium to net asset value and dilution if our shares are trading at a discount to net asset value. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the distribution payable to a stockholder.

Certain provisions of our charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.

The Maryland General Corporation Law, or the MGCL, and our charter and bylaws contain certain provisions that may have the effect of discouraging, delaying or making difficult a change in control of our company or the removal of our incumbent directors. Under the Business Combination Act of the MGCL, certain business combinations between us and an “interested stockholder” (defined generally to include any person who beneficially owns 10% or more of the voting power of our outstanding shares) or an affiliate thereof is prohibited for five years and thereafter is subject to special stockholder voting requirements, to the extent that such statute is not superseded by applicable requirements of the 1940 Act. However, our board of directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any person to the extent that such business combination receives the prior approval of our board of directors, including a majority of our directors who are not “interested persons” as defined in the 1940 Act. Under the Control Share Acquisition Act of the MGCL, “control shares” acquired in a “control share acquisition” have no voting rights except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter, excluding shares owned by the acquirer, by officers or by directors who are employees of the corporation. Our bylaws contain a provision exempting from the Control Share Acquisition Act any and all acquisitions by any person of shares of our common stock, but such provision may be repealed at any time (before or after a control share acquisition). However, we will amend our bylaws to repeal such provision (so as to be subject to the Control Share Acquisition Act) only if our board of directors determines that it would be in our best interests and if the staff of the SEC does not object to our determination that our being subject to the Control Share Acquisition Act does not conflict with the 1940 Act. The Business Combination Act (if our board of directors should repeal the resolution) and the Control Share Acquisition Act (if we amend our bylaws to be subject to that Act) may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

We have also adopted measures that may make it difficult for a third party to obtain control of us, including provisions of our charter: (a) classifying our board of directors into three classes serving staggered three-year terms, (b) providing that a director may be removed only for cause and only by vote of at least two-thirds of the votes entitled to be cast, and (c) authorizing our board of directors to (i) classify or reclassify shares of our stock into one or more classes or series, (ii) cause the issuance of additional shares of our stock, and (iii) amend our charter from time to time, without stockholder approval, to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that we have authority to issue. These provisions, as well as other provisions of our charter and bylaws, may discourage, delay, defer, make more difficult or prevent a transaction or a change in control that might otherwise be in the best interest of our stockholders.

The net asset value of our common stock may fluctuate significantly.

The net asset value and liquidity, if any, of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include: (i) changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs; (ii) loss of RIC or BDC status; (iii) changes in earnings or variations in operating results; (iv) changes in the value of our portfolio of investments; (v) changes in accounting guidelines governing valuation of our investments; (vi) any shortfall in revenue or net income or any increase in losses from levels expected by investors; (vii) departure of our investment adviser or certain of its key personnel; (viii) general economic trends and other external factors; and (ix) loss of a major funding source.

The market price of our common stock may fluctuate significantly.

The market price and liquidity of the market for our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:

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significant volatility in the market price and trading volume of securities of publicly traded RICs, BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies;

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price and volume fluctuations in the overall stock market from time to time;

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changes in law, regulatory policies or tax guidelines, or interpretations thereof, particularly with respect to RICs or BDCs;

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loss of our BDC or RIC status;

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changes in our earnings or variations in our operating results;

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changes in the value of our portfolio of investments;

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any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;

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departure of the Advisor’s key personnel;

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operating performance of companies comparable to us;

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short-selling pressure with respect to shares of our common stock or BDCs generally;

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future sales of our securities convertible into or exchangeable or exercisable for our common stock or the conversion of such securities;

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uncertainty surrounding the strength of the economy;

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general economic trends and other external factors; and

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loss of a major funding source.

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. If the market price of our common stock fluctuates significantly, we may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from our business. See “Risks Related to Our Business and Structure—We and our Advisor could be the target of litigation.”

If we issue preferred stock, debt securities or convertible debt securities, the net asset value and market value of our common stock may become more volatile.

We also cannot assure you that the issuance of preferred stock, debt securities or convertible debt securities would result in a higher yield or return to the holders of our common stock. The issuance of preferred stock, debt securities or convertible debt securities would likely cause the net asset value and market value of our common stock to become more volatile. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of our common stock would be reduced. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to exceed the net rate of return on our portfolio, the use of leverage would result in a lower rate of return to the holders of common stock than if we had not issued the preferred stock or debt securities. Any decline in the net asset value of our investment would be borne entirely by the holders of our common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in net asset value to the holders of our common stock than if we were not leveraged through the issuance of preferred stock. This decline in net asset value would also tend to cause a greater decline in the market price for our common stock.

There is also a risk that, in the event of a sharp decline in the value of our net assets, we would be in danger of failing to maintain required asset coverage ratios which may be required by the preferred stock, debt securities, convertible debt or units or of a downgrade in the ratings of the preferred stock, debt securities, convertible debt or units or our current investment income might not be sufficient to meet the dividend requirements on the preferred stock or the interest payments on the debt securities. In

order to counteract such an event, we might need to liquidate investments in order to fund redemption of some or all of the preferred stock, debt securities or convertible debt. In addition, we would pay (and the holders of our common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, debt securities, convertible debt or any combination of these securities. Holders of preferred stock, debt securities or convertible debt may have different interests than holders of common stock and may at times have disproportionate influence over our affairs.

Holders of any preferred stock that we may issue will have the right to elect members of the board of directors and have class voting rights on certain matters.

The 1940 Act requires that holders of shares of preferred stock must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on such preferred stock are in arrears by two years or more, until such arrearage is eliminated. In addition, certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock, including changes in fundamental investment restrictions and conversion to open-end status and, accordingly, preferred stockholders could veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies, might impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes.

We have obtained the approval of our stockholders to issue shares of our common stock at prices below the then-current net asset value per share of our common stock, and any such issuance could materially dilute our stockholders’ interest in our common stock and reduce our net asset value per share.

We have obtained the approval of our stockholders to issue shares of our common stock at prices below the then-current net asset value of our common stock, subject to certain conditions, during the twelve-month period concluding on July 15, 2021. Any sale or other issuance of shares of our common stock at a price below net asset value per share would result in an immediate dilution to our common stock and a reduction of our net asset value per share. This dilution would occur as a result of a proportionately greater decrease in a stockholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Such dilutive effects may be material.

Risks Related to U.S. Federal Income Tax

We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy the RIC annual distribution requirements.

Besides maintaining our election to be treated as a BDC under the 1940 Act, in order for us to qualify as a RIC under Subchapter M of the Code, we must meet the following annual distribution, income source and asset diversification requirements. See “Item 1. Business—Taxation as a RIC.”

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The Annual Distribution Requirement will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and net short-term capital gain in excess of net long-term capital loss. if any. We will be subject to a 4% nondeductible U.S. federal excise tax, however, to the extent that we do not satisfy certain additional minimum distribution requirements on a calendar year basis. Because we use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and are currently, and may in the future become, subject to certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the Annual Distribution Requirement. If we are unable to obtain cash from other sources, we could fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.

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The 90% Income Test will be satisfied if we earn at least 90% of our gross income for each tax year from dividends, interest, gains from the sale of securities or similar sources.

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The Diversification Tests will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our tax year. To satisfy these requirements, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of such issuer; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly-traded partnerships.” Failure to meet these requirements may result in our

having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.

We must satisfy these tests on an ongoing basis in order to maintain RIC tax treatment, and may be required to make distributions to stockholders at times when it would be more advantageous to invest cash in our existing or other investments, or when we do not have funds readily available for distribution. Compliance with the RIC tax requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of our stockholders’ investments. Also, the rules applicable to our qualification as a RIC are complex, with many areas of uncertainty. If we fail to qualify for or maintain RIC tax treatment for any reason and are subject to corporate income tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions. Such a failure may have a material adverse effect on us and on any investment in us. The Code provides certain forms of relief from RIC disqualification due to failures of the 90% Income Test or any of the Diversification Tests, although there may be additional taxes due in such cases. We cannot assure you that we would qualify for any such relief should we fail either the 90% Income Test or any of the Diversification Tests.

Some of our investments may be subject to corporate-level income tax.

We may invest in certain debt and equity investments through taxable subsidiaries and the taxable income of these taxable subsidiaries will be subject to federal and state corporate income taxes. We may invest in certain foreign debt and equity investments which could be subject to foreign taxes (such as income tax, withholding and value added taxes).

We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, our investments may include debt instruments that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants). To the extent original issue discount or PIK interest constitutes a portion of our income, we must include in taxable income each tax year a portion of the original issue discount or PIK interest that accrues over the life of the instrument, regardless of whether cash representing such income is received by us in the same tax year. We may also have to include in income other amounts that we have not yet received in cash, such as deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. We anticipate that a portion of our income may constitute original issue discount or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discount and include such amounts in our taxable income in the current tax year, instead of upon disposition, as not making the election would limit our ability to deduct interest expenses for tax purposes.

Because any original issue discount or other amounts accrued will be included in our investment company taxable income for the tax year of the accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to qualify for and maintain RIC tax treatment under Subchapter M of the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for or maintain RIC tax treatment and thus become subject to corporate-level income tax.

Furthermore, we may invest in the equity securities of non-U.S. corporations (or other non-U.S. entities classified as corporations for U.S. federal income tax purposes) that could be treated under the Code and U.S. Treasury regulations as “passive foreign investment companies” and/or “controlled foreign corporations.” The rules relating to investment in these types of non-U.S. entities are designed to ensure that U.S. taxpayers are either, in effect, taxed currently (or on an accelerated basis with respect to corporate level events) or taxed at increased tax rates at distribution or disposition. In certain circumstances, these rules also could require us to recognize taxable income or gains where we do not receive a corresponding payment in cash and, unless the income and gains are related to our business of investing in stocks and securities, all or a portion of such taxable income and gains may not be considered qualifying income for purposes of the 90% Income Test.

Our portfolio investments may present special tax issues.

Investments in below-investment grade debt instruments and certain equity securities may present special tax issues for us. U.S. federal income tax rules are not entirely clear about issues such as when we may cease to accrue interest, original issue

discount or market discount, when and to what extent deductions may be taken for bad debts or worthless debt in equity securities, how payments received on obligations in default should be allocated between principal and interest income, as well as whether exchanges of debt instruments in a bankruptcy or workout context are taxable. Such matters could cause us to recognize taxable income for U.S. federal income tax purposes, even in the absence of cash or economic gain, and require us to make taxable distributions to our stockholders to maintain our RIC status or preclude the imposition of either U.S. federal corporate income or excise taxation. Additionally, because such taxable income may not be matched by corresponding cash received by us, we may be required to borrow money or dispose of other investments to be able to make distributions to our stockholders. These and other issues will be considered by us, to the extent determined necessary, in order that we minimize the level of any U.S. federal income or excise tax that we would otherwise incur. See “Item 1. Business—Taxation as a RIC.”

If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you will be taxed as though you received a distribution of some of our expenses.

A “publicly offered regulated investment company” is a RIC whose shares are either (i) continuously offered pursuant to a public offering, (ii) regularly traded on an established securities market or (iii) held by at least 500 persons at all times during the tax year. If we do not qualify as a publicly offered regulated investment company for any tax year, a noncorporate stockholder’s allocable portion of our affected expenses, including our management fees, will be treated as an additional distribution to the stockholder and will be deductible by such stockholder only to the extent permitted under the limitations described below. For noncorporate stockholders, including individuals, trusts, and estates, significant limitations generally apply to the deductibility of certain expenses of a non-publicly offered regulated investment company, including management fees. In particular, these expenses, referred to as miscellaneous itemized deductions, are deductible to an individual only to the extent they exceed 2% of such a stockholder’s adjusted gross income for the taxable years after 2025 and are entirely not deductible against gross income before 2026, are not deductible for alternative minimum tax purposes and are subject to the overall limitation on itemized deductions imposed by the Code. Although we believe that we are currently considered a publicly offered regulated investment company, as defined in the Code, there can be no assurance, however, that we will be considered a publicly offered regulated investment company in the future.

Legislative or regulatory tax changes could adversely affect investors.

At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or our stockholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments.

General Risks

Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of operations.

Periods of market volatility have occurred and could continue to occur in response to pandemics or other events outside of our control. These types of events have adversely affected, and could continue to adversely affect operating results for us and for our portfolio companies. For example, the COVID-19 pandemic has resulted in the following in many affected jurisdictions, including the United States: (i) restrictions on travel and the temporary closure of many corporate offices, retail stores, and manufacturing facilities and factories, resulting in significant disruption to the business of many companies, (ii) increased defaults by borrowers, (iii) volatility in credit markets and (iv) rapidly evolving action by government officials to address the economic and market problems. In addition to these developments having adverse consequences for us and our portfolio companies, the operations of the Advisor have been, and could continue to be, adversely impacted, including through quarantine measures and travel restrictions imposed on its personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers.

As the potential impact of COVID-19 is difficult to predict, the extent to which COVID-19 could negatively affect our and our portfolio companies’ operating results or the duration of any potential business or supply-chain disruption is uncertain. Any potential impact to our results of operations will depend to a large extent on future developments and new information that could emerge regarding the duration and severity of the COVID-19 pandemic and the actions taken by authorities and other entities to contain the spread of COVID-19 or treat its impact, all of which are beyond our control. These potential impacts, while uncertain, could adversely affect our and our portfolio companies’ operating results.

We are currently operating in a period of capital markets disruption and economic uncertainty.

The U.S. capital markets have experienced extreme volatility and disruption following the global outbreak of COVID-19 that began in December 2019. Some economists and major investment banks have expressed concern that the continued spread of the virus globally could lead to a world-wide economic downturn. Disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. These and future market disruptions and/or illiquidity would be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events have limited and could continue to limit our investment originations, limit our ability to grow and have a material negative impact on our operating results and the fair values of our debt and equity investments. In addition, while recent government stimulus measures worldwide have reduced volatility in the financial markets, volatility may return as such measures are phased out, and the long-term impacts of such stimulus on fiscal policy and inflation remain unknown.

If the current period of capital market disruption and instability continues for an extended period of time, there is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital.

Our ability to pay distributions consistent with our historical range or to continue to pay our distribution fully in cash rather than shares of common stock might be adversely affected by the impact of one or more of the risk factors described in this annual report on Form 10-K, including the COVID-19 pandemic. If we are unable to satisfy the asset coverage test applicable to us under the 1940 Act as a business development company or if we violate certain covenants under our existing or future credit facilities or other leverage, we may also be limited in our ability to make distributions. If we declare a distribution and if more stockholders opt to receive cash distributions rather than participate in our dividend reinvestment plan, we may be forced to sell some of our investments in order to make cash distribution payments. To the extent we make distributions to stockholders that include a return of capital, such portion of the distribution essentially constitutes a return of the stockholder’s investment. Although such return of capital may not be taxable, such distributions would generally decrease a stockholder’s basis in our common stock and may therefore increase such stockholder’s tax liability for capital gains upon the future sale of such stock. A return of capital distribution may cause a stockholder to recognize a capital gain from the sale of our common stock even if the stockholder sells its shares for less than the original purchase price.

Future disruptions or instability in capital markets could negatively impact the valuation of our investments and our ability to raise capital.

From time to time, the global capital markets may experience periods of disruption and instability, which could be prolonged and which could materially and adversely impact the broader financial and credit markets, have a negative impact on the valuations of our investments and reduce the availability to us of debt and equity capital. For example, between 2008 and 2009, instability in the global capital markets resulted in disruptions in liquidity in the debt capital markets, significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market and the failure of major domestic and international financial institutions. In particular, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. While market conditions have recovered from the events of 2008 and 2009, there have been continuing periods of volatility (e.g., the ongoing COVID-pandemic). For example, continued uncertainty surrounding the negotiation of trade deals between Britain and the European Union following the United Kingdom’s exit from the European Union and uncertainty between the United States and other countries with respect to trade policies, treaties, and tariffs, among other factors, have caused disruption in the global markets. There can be no assurance that market conditions will not worsen in the future.

While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity) and impairments of the market values or fair market values of our investments, even if unrealized, must be reflected in our financial statements for the applicable period, which could result in significant reductions to our net asset value for the period. With certain limited exceptions, we are only allowed to borrow amounts or issue debt securities if our asset coverage, as calculated pursuant to the 1940 Act, equals at least 150% immediately after such borrowing. Equity capital may also be difficult to raise during periods of adverse or volatile market conditions because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without first obtaining approval for such issuance from our stockholders and our independent directors. If we are unable to raise capital or refinance existing debt on acceptable terms, then we may be limited in our ability to make new commitments or to fund existing commitments to our portfolio companies. Significant changes in the capital markets may also affect the pace of our

investment activity and the potential for liquidity events involving our investments. Thus, the illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and as a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them for liquidity purposes.

Global economic, political and market conditions, including downgrades of the U.S. credit rating, may adversely affect our business, results of operations and financial condition.

The current global financial market situation, as well as various social and political tensions in the United States and around the world, may contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets and may cause economic uncertainties or deterioration in the U.S. and worldwide. The impact of downgrades by rating agencies to the U.S. government’s sovereign credit rating or its perceived creditworthiness as well as potential government shutdowns and uncertainty surrounding transfers of power could adversely affect the U.S. and global financial markets and economic conditions. Since 2010, several European Union countries have faced budget issues, some of which may have negative long-term effects for the economies of those countries and other European Union countries. There is concern about national-level support for the Euro and the accompanying coordination of fiscal and wage policy among European Economic and Monetary Union member countries. In addition, the fiscal policy of foreign nations, such as Russia and China, may have a severe impact on the worldwide and U.S. financial markets. The decision made in the United Kingdom referendum to leave the EU (the so-called “Brexit”) has led to volatility in global financial markets and may lead to weakening in consumer, corporate and financial confidence in the United Kingdom and Europe. While the United Kingdom commenced its withdrawal from the EU on January 31, 2020, the transition and its surrounding negotiations are ongoing, which creates uncertainty, which may lead to continued volatility. Additionally, trade wars and volatility in the U.S. repo market, the U.S. high yield bond markets, the Chinese stock markets and global markets for commodities may affect other financial markets worldwide. In addition, while recent government stimulus measures worldwide have reduced volatility in the financial markets, volatility may return as such measures are phased out, and the long-term impacts of such stimulus on fiscal policy and inflation remain unknown. We cannot predict the effects of these or similar events in the future on the U.S. and global economies and securities markets or on our investments. We monitor developments in economic, political and market conditions and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.

Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies.

There have been significant changes to United States trade policies, treaties and tariffs, and in the future there may be additional significant changes. These and any future developments, and continued uncertainty surrounding trade policies, treaties and tariffs, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers and could have material adverse effects on our business, financial condition and results of operations.

Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies.

Economic sanction laws in the United States and other jurisdictions may prohibit us or our affiliates from transacting with certain countries, individuals and companies. In the United States, the U.S. Department of the Treasury’s Office of Foreign Assets Control administers and enforces laws, executive orders and regulations establishing U.S. economic and trade sanctions, which prohibit, among other things, transactions with, and the provision of services to, certain non-U.S. countries, territories, entities and individuals. These types of sanctions may significantly restrict or completely prohibit investment activities in certain jurisdictions, and if we, our portfolio companies or other issuers in which we invest were to violate any such laws or regulations, we may face significant legal and monetary penalties.

The Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws and regulations, as well as anti-boycott regulations, may also apply to and restrict our activities, our portfolio companies and other issuers of our investments. If an issuer or we were to violate any such laws or regulations, such issuer or we may face significant legal and monetary penalties. The U.S. government has indicated that it is particularly focused on FCPA enforcement, which may increase the risk that an issuer or us becomes the subject of such actual or threatened enforcement. In addition, certain commentators have suggested that private investment firms and the funds that they manage may face increased scrutiny and/or liability with respect to the activities of their underlying portfolio companies. As such, a violation of the FCPA or other applicable regulations by us or an issuer of our portfolio investments could have a material adverse effect on us. We are committed to complying with the FCPA and other anti-corruption laws and regulations, as well as anti-boycott regulations, to which it is subject. As a result, we may be adversely affected because of its unwillingness to enter into transactions that violate any such laws or regulations.

Future economic recessions or downturns could impair our portfolio companies and harm our operating results.

Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our debt investments. A prolonged recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income and net asset value. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results. Economic downturns or recessions may also result in a portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders, which could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on its assets representing collateral for its obligations, which could trigger cross defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt that we hold and the value of any equity securities we own. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company.

A prolonged continuation of depressed oil and natural gas prices could negatively impact the energy and power industry and energy-related investments within our investment portfolio.

Prices for oil and natural gas, which historically have been volatile and may continue to be volatile, may be subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas. A prolonged continuation of depressed oil and natural gas prices would adversely affect the credit quality and performance of certain of our debt and equity investments in energy and power and related companies. A decrease in credit quality and performance would, in turn, negatively affect the fair value of these investments, which would consequently negatively affect our net asset value. Should a prolonged period of depressed oil and natural gas prices occur, the ability of certain of our portfolio companies in the energy and power and related industries to satisfy financial or operating covenants imposed by us or other lenders may be adversely affected, which could, in turn, negatively impact their financial condition and their ability to satisfy their debt service and other obligations. Likewise, should a prolonged period of depressed oil and natural gas prices occur, it is possible that the cash flow and profit generating capacity of these portfolio companies could also be adversely affected thereby negatively impacting their ability to pay us dividends or distributions on our investments.

Item 1B.

Unresolved Staff Comments.

None.

Item 2.

Properties.

We do not own any real estate or other physical properties materially important to our operation. Our headquarters are located at 201 Rouse Boulevard, Philadelphia, Pennsylvania, 19112. We believe that our office facilities are suitable and adequate for our business as it is presently conducted.

Item 3.

Legal Proceedings.

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

Item 4.

Mine Safety Disclosures.

Not applicable.

PART II

Many of the amounts and percentages presented in Part II have been rounded for convenience of presentation, and all dollar amounts, excluding share and per share amounts, are presented in millions unless otherwise noted.

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

Our common stock has been listed on the NYSE since April 16, 2014. Our common stock traded under the ticker symbol “FSIC” until December 19, 2018 and has traded under the ticker symbol “FSK” since December 20, 2018. Prior to April 16, 2014, there was no public market for our common stock. Our shares of common stock have historically traded at prices both above and below our net asset value per share. It is not possible to predict whether shares of our common stock will trade at, above or below our net asset value in the future. See “Risk Factors—Risks Related to an Investment in Our Common Stock—Our shares of common stock may trade at a discount to net asset value.”

As of February 22, 2021, we had 3,610 record holders of our common stock which does not include beneficial owners of shares of common stock held in “street name” by brokers and other institutions on behalf of stockholders.

Distributions

Subject to applicable legal restrictions and the sole discretion of our board of directors, we intend to declare and pay regular cash distributions on a quarterly basis. From time to time, we may also pay special interim distributions in the form of cash or shares of our common stock at the discretion of our board of directors. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of our board of directors.

The following table reflects the cash distributions per share that we have declared on our common stock during the years ended December 31, 2020, 2019 and 2018:


	Distribution
For the Year Ended December 31,	Per Share⁽¹⁾		Amount
2018⁽²⁾	$	3.40000	$	205
2019	$	3.04000	$	393
2020	$	2.56000	$	318

(1)	The amount of each per share distribution has been retroactively adjusted to reflect the Reverse Stock Split as discussed in Note 3 to our consolidated financial statements.

(2)	Includes a $0.36 per share special cash distribution that was paid on December 3, 2018.

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—RIC Status and Distributions” and Note 5 to our consolidated financial statements contained in this annual report on Form 10-K for additional information regarding our distributions and our distribution reinvestment plan.

Stock Repurchase Programs

February 2018 Share Repurchase Program

In February 2018, our board of directors authorized a stock repurchase program. Under the program, we were permitted to repurchase up to $50 in the aggregate of our outstanding common stock in the open market at prices below the then current net asset value per share. During the year ended December 31, 2018, we repurchased 1,642,837 shares of common stock pursuant to the share repurchase program at an average price per share (inclusive of commissions paid) of $30.44 (totaling $50). The program has terminated since the aggregate repurchase amount that was approved by our board of directors has been expended.

December 2018 Share Repurchase Program

In December 2018, our board of directors authorized a stock repurchase program. Under the program, we are permitted to repurchase up to $200 in the aggregate of our outstanding common stock in the open market at prices below the then current net asset value per share.

December 31, 2019, the Company repurchased 6,287,919 shares of common stock pursuant to the share repurchase program at an average price per share (inclusive of commissions paid) of $24.30 (totaling $153). The program has concluded since the aggregate repurchase amount that was approved by the Company’s board of directors has been expended.

The number of shares repurchased and the average price per share amounts have been retroactively adjusted to reflect the Reverse Stock Split as discussed below.

As previously disclosed, certain affiliates of the owners of the Advisor committed $100 to a $350 investment vehicle that may invest from time to time in shares of the Company. In June 2020, that investment vehicle entered into a written trading plan with a third party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act, or the Affiliated Purchaser Program, to facilitate the purchase of shares of our common stock pursuant to the terms and conditions of such plan. The Affiliated Purchaser Program provides for the purchase of up to $100 worth of shares of our common stock, subject to the limitations provided therein.

During the year ended December 31, 2020, the Affiliated Purchaser Program purchased 3,921,610 shares of common stock at an average price per share (inclusive of commissions paid) of $15.51 (totaling $61).

The table below provides information concerning purchases of our shares of common stock by or on behalf of the Company or any “affiliated purchaser,” as defined by Rule 10b-18(a)(3) promulgated under the Exchange Act during the quarterly period ended December 31, 2020. Dollar amounts in the table below and the related notes are presented in millions, except for share and per share amounts. Share and per share amounts in the table below have been retroactively adjusted to reflect the Reverse Stock Split.


Period	Total Number of Shares Purchased		Average Price Paid per Share⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs⁽²⁾		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2020 through October 31, 2020		632,082		15.61		632,082		199
November 1, 2020 through November 30, 2020		423,393		16.01		423,393		193
December 1, 2020 through December 31, 2020		181,610		18.58		181,610		181

		1,237,085		16.18		1,237,085

(1)	Amount includes commissions paid.

(2)	Includes amounts pursuant to the Affiliated Purchaser Program.

Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of FS KKR Capital Corp. under the Securities Act.

The following graph shows a comparison from April 16, 2014 (the date our shares of common stock commenced trading on the NYSE) through December 31, 2020 of the cumulative total return for our common stock, the S&P 500 Index, the Russell 2000 Financial Services Index and the Wells Fargo^® BDC Index. The graph assumes that $100 was invested at the market close on April 16, 2014 in our common stock, the S&P 500 Index, the Russell 2000 Financial Services Index and the Wells Fargo^® BDC Index, is based on historical stock prices and assumes all dividends or distributions are reinvested on the respective dividend or distribution payment dates without commissions. The stock price performance reflected by the following graph is not necessarily indicative of future stock price performance.

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Item 6.

Selected Financial Data.

The following selected consolidated financial data for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 is derived from our consolidated financial statements. Our consolidated financial statements for the years ended December 31, 2020 and 2019 were audited by Deloitte & Touche LLP, our independent registered public accounting firm, while our consolidated financial statements for the years ended December 31, 2018, 2017, and 2016 were audited by RSM US LLP, our former independent registered public accounting firm. The data should be read in conjunction with our consolidated financial statements and related notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this annual report on Form 10-K.


	Year Ended December 31,
	2020			2019			2018			2017			2016
Statements of operations data:
Investment income	$	639		$	779		$	394		$	419		$	423
Operating expenses
Total expenses and excise taxes		308			369			192			218			216
Less: Management fee waiver		—			—			(3	)		(3	)		—

Net expenses and excise taxes		308			369			189			215			216

Net investment income (loss)		331			410			205			204			207
Total net realized and unrealized gain (loss)		(736	)		(164	)		364			(22	)		87

Net increase (decrease) in net assets resulting from operations	$	(405	)	$	246		$	569		$	182		$	294

Per share data:⁽¹⁾
Net investment income (loss)—basic and diluted	$	2.66		$	3.16		$	3.28		$	3.32		$	3.40

Net increase (decrease) in net assets resulting from operations—basic and diluted	$	(3.26	)	$	1.90		$	9.05		$	2.96		$	4.84

Distributions declared⁽²⁾	$	2.56		$	3.04		$	3.40		$	3.44		$	3.56

Balance sheet data:
Total assets	$	7,237		$	8,216		$	7,705		$	4,104		$	4,110

Credit facilities, notes, secured borrowing and repurchase agreement payable	$	3,997		$	4,173		$	3,391		$	1,712		$	1,694

Total net assets	$	3,096		$	3,866		$	4,166		$	2,285		$	2,297

Other data:
Total return based on net asset value⁽³⁾		(9.69	)%		7.14	%		(6.56	)%		7.97	%		13.19	%
Total return based on market value⁽⁴⁾		(19.73	)%		33.80	%		(20.15	)%		(21.39	)%		25.91	%
Number of portfolio company investments at period end		164			210			204			100			102
Total portfolio investments for the period⁽⁵⁾	$	2,336		$	2,907		$	5,189		$	1,284		$	1,158
Proceeds from sales and prepayments of investments	$	2,301		$	2,854		$	1,187		$	1,135		$	1,588

(1)	The per share data was derived by using the weighted average shares outstanding during the applicable period. The share information utilized to determine per share data has been retroactively adjusted to reflect the Reverse Stock Split.

(2)	The per share data for distributions reflect the actual amount of distributions paid per share during the applicable period.

(3)

The total return based on net asset value for each year presented was calculated by taking the net asset value per share as of the end of the applicable year, adding the cash distributions per share that were declared during the applicable calendar year and dividing the total by the net asset value per share at the beginning of the applicable year. Total return based on net asset value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of our common stock. The historical calculation of total return based on net asset value in the table should not be considered a representation of our future total return based on net asset value, which may be greater or less than the return shown in the table due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rates payable on the debt securities we acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any previous period should not be

relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total return on our investment portfolio during the applicable period and do not represent an actual return to stockholders.

(4)

The total return based on market value for each period presented was calculated based on the change in market price during the applicable period, including the impact of distributions reinvested in accordance with the Company’s distribution reinvestment plan. Total return based on market value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of our common stock. The historical calculation of total return based on market value in the table should not be considered a representation of our future total return based on market value, which may be greater or less than the return shown in the table due to a number of factors, including our ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities we acquire, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets, general economic conditions and fluctuations in per share market value. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.

(5)	Total portfolio investments for the year ended December 31, 2018 include investments acquired at fair value of $4,168 in connection with the 2018 Merger.

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information contained in this section should be read in conjunction with our consolidated financial statements and related notes thereto appearing elsewhere in this annual report on Form 10-K.

Forward-Looking Statements

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

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our future operating results;

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our business prospects and the prospects of the companies in which we may invest, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

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the impact of the investments that we expect to make;

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the ability of our portfolio companies to achieve their objectives;

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our current and expected financings and investments;

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

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

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

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our contractual arrangements and relationships with third parties;

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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;

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

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general economic and political trends and other external factors, including the current COVID-19 pandemic and related disruptions caused thereby;

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our use of financial leverage;

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

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

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

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

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

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

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the 2021 Merger, the likelihood the 2021 Merger is 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 annual report on Form 10-K involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including those factors set forth in “Item 1A. Risk Factors.” Factors that could cause actual results to differ materially include:

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changes in the economy;

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

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

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the price at which shares of our common stock may trade on the NYSE.

We have based the forward-looking statements included in this annual report on Form 10-K on information available to us on the date of this annual report on Form 10-K. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this annual report on Form 10-K 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 were incorporated under the general corporation laws of the State of Maryland on December 21, 2007 and formally commenced investment operations on January 2, 2009. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code.

We are externally managed by the Advisor pursuant to the investment advisory agreement and supervised by our board of directors, a majority of whom are independent. On April 9, 2018, GSO / Blackstone Debt Funds Management LLC, or GDFM, resigned as our investment sub-adviser and terminated its investment sub-advisory agreement effective April 9, 2018. In connection with GDFM’s resignation as our investment sub-adviser on April 9, 2018, we entered into an investment advisory agreement, dated as of April 9, 2018, with the Advisor, or the prior investment advisory agreement, which replaced an investment advisory agreement with our former investment adviser, FB Income Advisor, LLC, or FB Income Advisor. Following the consummation of the 2018 Merger, we entered into the investment advisory agreement with the Advisor, which replaced the prior investment advisory agreement.

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. We seek to meet our investment objectives by:

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utilizing the experience and expertise of the management team of the Advisor;

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employing a defensive investment approach focused on long-term credit performance and principal protection;

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focusing primarily on debt investments in a broad array of private U.S. companies, including middle-market companies, which we define as companies with annual EBITDA of $25 million to $100 million at the time of investment;

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investing primarily in established, stable enterprises with positive cash flows; and

•

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 Company’s investment adviser, sub-advsier or their affiliates had negotiated 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. These direct originations include investments originated by FB Income Advisor, GDFM or their affiliates.

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 and certain asset-based financing 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, including through a co-investment with a financial sponsor or possibly the restructuring of an investment. 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 structures of our portfolio companies 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. Such investment opportunities 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 three to four years. However, we may invest in loans and securities with any maturity or duration. 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 may invest without limit in debt or other securities of any rating, as well as debt or other securities that have not been rated by a NRSRO.

Corporate Capital Trust, Inc. Acquisition

On December 19, 2018, we completed the 2018 Merger. Pursuant to the 2018 Merger Agreement, CCT was first merged with and into Merger Sub, with CCT as the surviving corporation, and, immediately following such merger, CCT was then merged with and into the Company, with the Company as the surviving company. In accordance with the terms of the 2018 Merger Agreement, at the time of the transactions contemplated by the 2018 Merger Agreement, each outstanding share of CCT common stock was converted into the right to receive 2.3552 shares of our common stock. As a result, we issued an aggregate of approximately 292,324,670 shares of our common stock to former CCT stockholders. Following the consummation of the 2018 Merger, we entered into the investment advisory agreement, which replaced the prior investment advisory agreement. Share and exchange ratio amounts in the foregoing do not reflect the Reverse Stock Split.

Pending Merger with FSKR

On November 23, 2020, we entered into an Agreement and Plan of Merger, or the 2020 Merger Agreement with FS KKR Capital Corp II., a Maryland corporation, or FSKR, and together with FSK, the Funds, Rocky Merger Sub, Inc., a Maryland corporation and wholly-owned subsidiary of FSK, or Merger Sub and the Advisor.

The 2020 Merger Agreement provides that, subject to the conditions set forth in the 2020 Merger Agreement, Merger Sub will merge with and into FSKR, with FSKR continuing as the surviving company and as a wholly-owned subsidiary of FSK, or the First Merger, and, immediately thereafter, FSKR will merge with and into the Company, with the Company continuing as the surviving company, or together with the First Merger, the 2021 Merger. The board of directors of each Fund has approved the 2021 Merger, with the participation throughout by, and the unanimous support of, its respective independent directors. The parties to the 2020 Merger Agreement intend the 2021 Merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

In the 2021 Merger, each share of FSKR’s common stock issued and outstanding immediately prior to the effective time of the First Merger will be converted into a number of shares of the Company’s common stock equal to an exchange ratio to be determined in connection with the closing of the 2021 Merger, or the Exchange Ratio. The Exchange Ratio will equal the net asset value per share of FSKR’s common stock, respectively (determined no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the 2021 Merger), divided by the net asset value per share of the Company’s common stock (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the 2021 Merger). Holders of the FSKR’s common stock may receive fractional shares or cash in lieu of fractional shares, at the election of the Company.

The 2020 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 2021 Merger. 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 2020 Merger Agreement provides that the board of directors 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 their respective stockholders, terminate the 2020 Merger Agreement and enter into an agreement with respect to a superior alternative proposal if the board of directors 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 2020 Merger Agreement proposed by the other Fund).

Consummation of the 2021 Merger, which is currently anticipated to occur during the second or third quarter of 2021, is subject to certain closing conditions, including (1) requisite approvals of the Funds’ stockholders, (2) the absence of certain legal impediments to the consummation of the 2021 Merger, (3) effectiveness of the registration statement on Form N-14, which includes a joint proxy statement of the Funds and a prospectus of the Company, or the Proxy Statement, (4) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the 2020 Merger Agreement and (5) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended).

The 2020 Merger Agreement also contains certain termination rights in favor of each Fund including if the 2021 Merger is not completed on or before November 23, 2021 or if the requisite approvals of the applicable Fund’s stockholders are not obtained. The 2020 Merger Agreement also provides that, upon the termination of the 2020 Merger Agreement under certain circumstances, a third party may be required to pay FSKR a termination fee of approximately $90.8, or a third party may be required to pay FSK a termination fee of approximately $126.2.

In connection with the 2021 Merger, the Company is seeking stockholder approval to amend the Company’s investment advisory agreement to (a) reduce FSK’s income incentive fee rate from 20% to 17.5% and (b) remove the total return lookback provision applicable to the subordinated incentive fee on income. The Advisor has also agreed to waive income incentive fees in the amount of $15 per quarter for the first six full fiscal quarters of operations following the 2021 Merger for a total waiver of $90.

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 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 administration 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 administration 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 no less than quarterly for all costs and expenses incurred by the Advisor in performing its obligations and providing personnel and facilities under the administration agreement. 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 directors 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. Our board of directors then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party service providers known to be available. In addition, our board of directors considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of directors compares the total amount paid to the Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.

We bear all other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:

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corporate and organization expenses relating to offerings of our securities, subject to limitations included in the investment advisory agreement;

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the cost of calculating our net asset value, including the cost of any third-party pricing or valuation services;

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the cost of effecting sales and repurchases of shares of our common stock and other securities;

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investment advisory fees;

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fees payable to third parties relating to, or associated with, making investments and valuing investments, including fees and expenses associated with performing due diligence reviews of prospective investments;

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interest payments on our debt or related obligations;

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transfer agent and custodial fees;

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research and market data (including news and quotation equipment and services, and any computer hardware and connectivity hardware (e.g., telephone and fiber optic lines) incorporated into the cost of obtaining such research and market data);

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fees and expenses associated with marketing efforts;

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federal and state registration fees;

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federal, state and local taxes;

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fees and expenses of directors not also serving in an executive officer capacity for us or the Advisor;

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costs of proxy statements, stockholders’ reports, notices and other filings;

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fidelity bond, directors and officers/errors and omissions liability insurance and other insurance premiums;

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direct costs such as printing, mailing, long distance telephone and staff;

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fees and expenses associated with accounting, corporate governance, government and regulatory affairs activities, independent audits and outside legal costs;

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costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws, including compliance with the Sarbanes-Oxley Act;

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brokerage commissions for our investments; and

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all other expenses incurred by the Advisor or us in connection with administering our business, including expenses incurred by the Advisor in performing administrative services for us and administrative personnel paid by the Advisor, to the extent they are not controlling persons of the Advisor or any of its affiliates, subject to the limitations included in the investment advisory agreement and the administration agreement.

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.

COVID-19 Developments

The rapid spread of the COVID-19 pandemic, and associated impacts on the U.S. and global economies, has negatively impacted, and is likely to continue to negatively impact, the business operations of some of our portfolio companies. We cannot at this time fully predict the continued impact of COVID-19 on our business or the business of our portfolio companies, its duration or magnitude or the extent to which it will negatively impact our portfolio companies’ operating results or our own results of operations or financial condition. We expect that certain of our portfolio companies will continue to experience economic distress for the foreseeable future and may significantly limit business operations if subjected to prolonged economic distress. These developments could result in a decrease in the value of our investments.

COVID-19 has already had adverse effects on our investment income and we expect that such adverse effects will continue for some time. These adverse effects may require us to restructure certain of our investments, which could result in further reductions to our investment income or in impairments on our investments. In addition, disruptions in the capital markets have resulted in illiquidity in certain market areas. These market disruptions and illiquidity are likely to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions caused by COVID-19 can also be expected to increase our funding costs and limit our access to the capital markets. These events have limited our investment originations, which is likely to continue for the immediate future, and have also had a material negative impact on our operating results.

We will continue to carefully monitor the impact of the COVID-19 pandemic on our business and the business of our portfolio companies. Because the full effects of the COVID-19 pandemic are not capable of being known at this time, we cannot estimate the impacts of COVID-19 on our future financial condition, results of operations or cash flows. We do, however, expect that it will continue to have a negative impact on our business and the financial condition of certain of our portfolio companies.

Portfolio Investment Activity for the Years Ended December 31, 2020 and 2019

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the years ended December 31, 2020 and 2019:


	For the Year Ended
Net Investment Activity	December 31, 2020			December 31, 2019
Purchases⁽¹⁾	$	2,336		$	2,907
Sales and Repayments		(2,301	)		(2,854	)

Net Portfolio Activity	$	35		$	53


	For the Year Ended
	December 31, 2020					December 31, 2019
New Investment Activity by Asset Class	Purchases		Percentage			Purchases		Percentage
Senior Secured Loans—First Lien	$	1,464		62.7	%	$	1,872		64.4	%
Senior Secured Loans—Second Lien		99		4.2	%		326		11.2	%
Other Senior Secured Debt		3		0.1	%		34		1.2	%
Subordinated Debt		25		1.1	%		75		2.6	%
Asset Based Finance		426		18.2	%		361		12.4	%
Strategic Credit Opportunities Partners, LLC		319		13.7	%		197		6.8	%
Equity/Other		—		—			42		1.4	%

Total	$	2,336		100.0	%	$	2,907		100.0	%

The following table summarizes the composition of our investment portfolio at cost and fair value as of December 31, 2020 and 2019:


	December 31, 2020							December 31, 2019
	Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio			Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	3,597	$	3,449		50.9	%	$	3,868	$	3,724		50.6	%
Senior Secured Loans—Second Lien		1,035		880		13.0	%		1,273		1,196		16.3	%
Other Senior Secured Debt		127		86		1.3	%		299		239		3.2	%
Subordinated Debt		243		171		2.5	%		479		409		5.6	%
Asset Based Finance		1,025		951		14.0	%		761		737		10.0	%
Strategic Credit Opportunities Partners, LLC		810		713		10.5	%		491		479		6.5	%
Equity/Other		616		530		7.8	%		638		573		7.8	%

Total	$	7,453	$	6,780		100.0	%	$	7,809	$	7,357		100.0	%

(1)	Amortized costs represent 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 December 31, 2020 and 2019:


	December 31, 2020			December 31, 2019
Number of Portfolio Companies		164			210
% Variable Rate Debt Investments (based on fair value)⁽¹⁾⁽²⁾		63.5	%		64.8	%
% Fixed Rate Debt Investments (based on fair value)⁽¹⁾⁽²⁾		9.0	%		14.6	%
% Other Income Producing Investments (based on fair value)⁽³⁾		16.9	%		11.2	%
% Non-Income Producing Investments (based on fair value)⁽²⁾		8.1	%		6.6	%
% of Investments on Non-Accrual (based on fair value)		2.5	%		2.8	%
Weighted Average Annual Yield on Accruing Debt Investments⁽²⁾⁽⁴⁾		8.8	%		9.7	%
Weighted Average Annual Yield on All Debt Investments⁽⁵⁾		7.9	%		8.8	%

(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 year ended December 31, 2020, our total return based on net asset value was (9.69)% and our total return based on market value was (19.73)%. For the year ended December 31, 2019, our total return based on net asset value was 7.14% and our total return based on market value was 33.80%. See footnotes 7 and 8 to the table included in Note 12 to our audited consolidated financial statements included herein for information regarding the calculation of our total return based on net asset value and total return based on market value, respectively.

Direct Originations

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 Direct Originations 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. The following table presents certain selected information regarding our Direct Originations as of December 31, 2020 and 2019:


Characteristics of All Direct Originations held in Portfolio	December 31, 2020			December 31, 2019
Number of Portfolio Companies		135			133
% of Investments on Non-Accrual		2.6	%		3.1	%
Total Cost of Direct Originations	$	7,048.4		$	6,923.9
Total Fair Value of Direct Originations	$	6,447.3		$	6,491.5
% of Total Investments, at Fair Value		95.1	%		88.2	%
Weighted Average Annual Yield on Accruing Debt Investments⁽¹⁾		8.7	%		9.7	%
Weighted Average Annual Yield on All Debt Investments⁽²⁾		7.8	%		8.8	%

(1)

(2)

Portfolio Composition by Industry Classification

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 December 31, 2020 and 2019:


	December 31, 2020					December 31, 2019
Industry Classification	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
Automobiles & Components	$	104		1.5	%	$	247		3.4	%
Banks		14		0.2	%		15		0.2	%
Capital Goods		799		11.8	%		1,085		14.8	%
Commercial & Professional Services		564		8.3	%		557		7.6	%
Consumer Durables & Apparel		385		5.7	%		363		4.9	%
Consumer Services		145		2.1	%		294		4.0	%
Diversified Financials		467		6.9	%		575		7.8	%
Energy		107		1.6	%		208		2.8	%
Food & Staples Retailing		221		3.3	%		209		2.8	%
Food, Beverage & Tobacco		106		1.6	%		119		1.6	%
Health Care Equipment & Services		604		8.9	%		601		8.2	%
Household & Personal Products		190		2.8	%		120		1.6	%
Insurance		208		3.1	%		217		3.0	%
Materials		147		2.2	%		260		3.5	%
Media & Entertainment		36		0.5	%		94		1.3	%
Pharmaceuticals, Biotechnology & Life Sciences		34		0.5	%		30		0.4	%
Real Estate		555		8.2	%		236		3.2	%
Retailing		344		5.1	%		457		6.2	%
Semiconductors & Semiconductor Equipment		—		—			19		0.3	%
Software & Services		770		11.3	%		805		10.9	%
Strategic Credit Opportunities Partners, LLC		713		10.5	%		479		6.5	%
Technology Hardware & Equipment		15		0.2	%		94		1.3	%
Telecommunication Services		71		1.0	%		71		1.0	%
Transportation		181		2.7	%		202		2.7	%

Total	$	6,780		100.0	%	$	7,357		100.0	%

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 December 31, 2020 and 2019:


	December 31, 2020					December 31, 2019⁽¹⁾
Investment Rating	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
1	$	4,538		67	%	$	4,588		62	%
2		1,537		23	%		2,056		28	%
3		349		5	%		451		6	%
4		356		5	%		262		4	%

Total	$	6,780		100	%	$	7,357		100	%

(1)

Historically, the Adviser has rated its investment in SCJV as a 2 on the investment rating scale. As of December 31, 2020, the Advisor evaluates its investment in SCJV by rating each individual loan in SCJV’s portfolio on a look-through basis. The Advisor has re-evaluated its portfolio as of December 31, 2019 and has updated the investment rating scale in the table above in order to be in accordance with the current methodology.

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 Years Ended December 31, 2020, 2019 and 2018

Revenues

Our investment income for the years ended December 31, 2020, 2019 and 2018 was as follows:


	Year Ended December 31,
	2020					2019					2018
	Amount		Percentage of Total Income			Amount		Percentage of Total Income			Amount		Percentage of Total Income
Interest income	$	444		69.5	%	$	610		78.3	%	$	317		80.4	%
Paid-in-kind interest income		66		10.3	%		60		7.7	%		55		14.0	%
Fee income		33		5.2	%		42		5.4	%		13		3.3	%
Dividend income		96		15.0	%		67		8.6	%		9		2.3

Total investment income⁽¹⁾	$	639		100.0	%	$	779		100.0	%	$	394		100.0	%

(1)

Such revenues represent $563, $705 and $332 of cash income earned as well as $76, $74 and $62 in non-cash portions relating to accretion of discount and PIK interest for the years ended December 31, 2020, 2019 and 2018, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.

The 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 decrease in interest income during the year ended December 31, 2020 compared to the year ended December 31, 2019 can primarily be attributed to the repayment of higher yielding assets replaced by lower yielding assets, the impact of the decline in LIBOR on our floating rate investments and the increase in our investment in Strategic Credit Opportunities Partners, LLC during the year ended December 31, 2020. A portion of each of these factors was impacted by the current COVID-19 pandemic.

The increase in dividend income during the year ended December 31, 2020 compared to the year ended December 31, 2019 can be primarily attributed to the increase in dividends paid in respect to our investment in Strategic Credit Opportunities Partners, LLC during the year ended December 31, 2020, compared to the year ended December 31, 2019.

The increase in investment income during the year ended December 31, 2019 compared to the year ended December 31, 2018 can be primarily attributed to the increase in investments as a result of the 2018 Merger.

Expenses

Our operating expenses, together with excise taxes, for the years ended December 31, 2020, 2019 and 2018 were as follows:


	Year Ended December 31,
	2020		2019		2018
Management fees	$	106	$	115	$	63
Subordinated income incentive fees		—		57		26
Administrative services expenses		7		9		4
Accounting and administrative fees		2		2		1
Interest expense		170		170		84
Other expenses⁽¹⁾		13		9		7

Total operating expenses	$	298	$	362	$	185
Management fee waiver		—		—		(3	)

Net operating expenses before taxes		298		362		182
Excise taxes		10		7		7

Total net expenses, including excise taxes	$	308	$	369	$	189

(1)	Other expenses during the years ended December 31, 2020 and 2018 include $1 and $1, respectively, of breakage fees associated with the paydown of certain debt facilities during the period.

The following table reflects selected expense ratios as a percent of average net assets for the years ended December 31, 2020, 2019 and 2018:


	Year Ended December 31,
	2020			2019			2018
Ratio of operating expenses and excise taxes to average net assets		9.71	%		9.09	%		8.57	%
Ratio of management fee waiver to average net assets		—			—			(0.13	)%

Ratio of net operating expenses to average net assets		9.71	%		9.09	%		8.44	%
Ratio of incentive fees, interest expense and excise taxes to average net assets⁽¹⁾		5.67	%		5.77	%		5.23	%

Ratio of net operating expenses, excluding certain expenses, to average net assets		4.04	%		3.32	%		3.21	%

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

The increase in expense ratios during the year ended December 31, 2020 compared to the year ended December 31, 2019 can be primarily attributed to mark to market declines across the portfolio resulting in a lower asset base partially offset by the decrease in expenses during the year ended December 31, 2020.

The increase in expenses during the year ended December 31, 2019 compared to the year ended December 31, 2018 can primarily be attributed to the increased management fee as a result of the higher asset base from the 2018 Merger and increased interest expense resulting from the higher debt outstanding due to the 2018 Merger.

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 $331 ($2.66 per share), $410 ($3.16 per share) and $205 ($3.28 per share) for the years ended December 31, 2020, 2019 and 2018, respectively.

The decrease in net investment income during the year ended December 31, 2020 compared to the year ended December 31, 2019 can primarily be attributed to lower investment income during the year ended December 31, 2020 as discussed above, partially offset by lower expenses. The increase in net investment income for the year December 31, 2019 compared to December 31, 2018 can be attributed to higher income as discussed above.

Net Realized Gains or Losses

Our net realized gains (losses) on investments, financial instruments, secured borrowing and foreign currency for the years ended December 31, 2020, 2019 and 2018 were as follows:


	Year Ended December 31,
	2020			2019			2018
Net realized gain (loss) on investments⁽¹⁾	$	(490	)	$	(81	)	$	(125	)
Net realized gain (loss) on swap contracts		—			(11	)		0
Net realized gain (loss) on foreign currency forward contracts		—			12			—
Net realized gain (loss) on secured borrowing		—			—			—
Net realized gain (loss) on foreign currency		(6	)		2			6

Total net realized gain (loss)	$	(496	)	$	(78	)	$	(119	)

(1)	We sold investments and received principal repayments, respectively, of $1,232 and $1,069 during the year ended December 31, 2020, $1,252 and $1,602 during the year ended December, 31, 2019 and $553 and $634 during the year ended December 31, 2018.

Net Change in Unrealized Appreciation (Depreciation)

Our net change in unrealized appreciation (depreciation) on investments, financial instruments, secured borrowing and unrealized gain (loss) on foreign currency for the years ended December 31, 2020, 2019 and 2018 were as follows:


	Year Ended December 31,
	2020			2019			2018
Net change in unrealized appreciation (depreciation) on investments	$	(221	)	$	(83	)	$	(218	)
Net change in unrealized appreciation (depreciation) on swap contracts		—			16			(16	)
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts		(3	)		(2	)		3
Net change in unrealized gain (loss) on foreign currency		(16	)		(17	)		(3	)
Change in unrealized appreciation from merger accounting		—			—			717

Total net change in unrealized appreciation (depreciation)	$	(240	)	$	(86	)	$	483

During the year ended December 31, 2020, the net change in unrealized appreciation (depreciation) on our investments was driven primarily by mark to market declines across the portfolio resulting from uncertainty related to the current COVID-19 pandemic. During the year ended December 31, 2019, the net change in unrealized appreciation (depreciation) on our investments was primarily driven by mark to market declines in certain debt investments. During the year ended December 31, 2018, the net change in unrealized appreciation (depreciation) on our investments was primarily due to the decrease in valuation of certain of our equity/other investments, as well as the recognition of fair value of investments after the allocation of purchase price discount was applied to the fair value of CCT’s investments in connection with the 2018 Merger.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the years ended December 31, 2020, 2019 and 2018, the net increase (decrease) in net assets resulting from operations was $(405) ($(3.26) per share), $246 ($1.90 per share) and $569 ($9.05 per share), respectively.

This “Results of Operations” section should be read in conjunction with “COVID-19 Developments” above.

Financial Condition, Liquidity and Capital Resources

Overview

As of December 31, 2020, we had $191 in cash and foreign currency, which we or our wholly-owned financing subsidiaries held in custodial accounts, and $1,040 in borrowings available under our financing arrangements, subject to borrowing base and other limitations. As of December 31, 2020, we also had broadly syndicated investments and opportunistic investments that could be sold to create additional liquidity. As of December 31, 2020, we had unfunded debt investments with aggregate unfunded commitments of $228.4, unfunded equity/other commitments of $142.9 and unfunded commitments of $65.8 of Strategic Credit Opportunities Partners, LLC. We maintain sufficient cash on hand, available borrowings and liquid securities to fund such unfunded commitments should the need arise.

We currently generate cash primarily from cash flows from fees, interest and dividends earned from our investments, as well as principal repayments and proceeds from sales of our investments. To seek to enhance our returns, we also employ leverage as market conditions permit and at the discretion of the Advisor, but in no event will leverage employed exceed the maximum amount permitted by the 1940 Act. Prior to June 14, 2019, in accordance with the 1940 Act, we were allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, our asset coverage requirement applicable to senior securities was reduced from 200% to 150%. As of December 31, 2020, the aggregate amount outstanding of the senior securities issued by us was $4.0 billion. As of December 31, 2020, our asset coverage was 177%. See “—Financing Arrangements.”

Prior to investing in securities of portfolio companies, we invest the cash received from fees, interest and dividends earned from our investments and principal repayments and proceeds from sales of our investments primarily in cash, cash equivalents, including money market funds, U.S. government securities, repurchase agreements and high-quality debt instruments maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.

This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with “COVID-19 Developments” above.

Financing Arrangements

The following table presents summary information with respect to our outstanding financing arrangements as of December 31, 2020:


	As of December 31, 2020
Arrangement	Type of Arrangement	Rate	Amount Outstanding			Amount Available		Maturity Date
CCT Tokyo Funding Credit Facility⁽²⁾	Revolving Credit Facility	L+1.75% - 2.00%⁽¹⁾⁽³⁾	$	260		$	40	December 2, 2023
Senior Secured Revolving Credit Facility⁽²⁾	Revolving Credit Facility	L+1.75% -2.00%⁽¹⁾⁽⁴⁾		615	⁽⁵⁾		1,000	December 23, 2025
4.750% Notes due 2022⁽⁶⁾	Unsecured Notes	4.75%		450			—	May 15, 2022
5.000% Notes due 2022⁽⁶⁾	Unsecured Notes	5.00%		245			—	June 28, 2022
4.625% Notes due 2024⁽⁶⁾	Unsecured Notes	4.63%		400			—	July 15, 2024
4.125% Notes due 2025⁽⁶⁾	Unsecured Notes	4.13%		470			—	February 1, 2025
8.625% Notes due 2025⁽⁶⁾	Unsecured Notes	8.63%		250			—	May 15, 2025
3.400% Notes due 2026⁽⁶⁾	Unsecured Notes	3.40%		1000			—	January 15, 2026
2019-1 Notes⁽²⁾⁽⁷⁾	Collateralized Loan Obligation	L+1.85% -3.01%⁽¹⁾		352			—	January 15, 2031

Total			$	4,042		$	1,040

(1)	LIBOR is subject to a 0% floor.

(2)	The carrying amount outstanding under the facility approximates its fair value.

(3)	The spread over LIBOR is determined by reference to the amount outstanding under the facility.

(4)	The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company.

(5)

Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €164 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.22 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD $63 has been converted to U.S dollars at an exchange rate of CAD $1.00 to $0.78 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £111 has been converted to U.S. dollars at an exchange rate of £1.00 to $1.37 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of A$6 has been converted to U.S dollars at an exchange rate of A$1.00 to $0.77 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars.

(6)

As of December 31, 2020, the fair value of the 4.750% notes, the 5.000% notes, the 4.625% notes, the 4.125% notes, the 8.625% notes and the 3.400% notes was approximately $468, $245, $422, $490, $285 and $994 respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.

(7)	As of December 31, 2020, there were $281.4 of Class A-1R notes outstanding at L+1.85%, $20.5 of Class A-2R notes outstanding at L+2.25%, $32.4 of Class B-1R notes outstanding at L+2.60% and $17.4 of Class B-2R notes outstanding at 3.011%.

See Note 9 to our consolidated 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 stockholders 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 stockholders generally of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains in excess of capital losses, or “capital gain net income” (adjusted for certain ordinary losses), for the one-year period ending October 31 of that calendar year and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to stockholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our stockholders, on December 31 of the calendar year in which the distribution was declared. We can offer no assurance that we will achieve results that will permit us to pay any cash distributions. If we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.

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

During certain periods, our distributions may exceed our earnings. As a result, it is possible that a portion of the distributions we make may represent a return of capital. A return of capital generally is a return of a stockholder’s investment rather than a return of earnings or gains derived from our investment activities. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our stockholders. No portion of the distributions paid during the tax years ended December 31, 2020, 2019 or 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 stockholders who receive their distributions in the form of shares of our common stock under our distribution reinvestment plan. Any distributions reinvested under the plan will nevertheless remain taxable to a U.S. stockholder.

The following table reflects the cash distributions per share that we have declared on our common stock during the years ended December 31, 2020, 2019 and 2018:


	Distribution
For the Year Ended December 31,	Per Share⁽¹⁾		Amount
2018⁽²⁾	$	3.40000	$	205
2019	$	3.04000	$	393
2020	$	2.56000	$	318

(1)	The amount of each per share distribution has been retroactively adjusted to reflect the Reverse Stock Split as discussed in Note 3 to our unaudited consolidated financial statements included herein.

(2)	Includes a $0.36 per share special cash distribution that was paid on December 3, 2018.

See Note 5 to our consolidated financial statements contained in this annual report on Form 10-K for additional information regarding our distributions, including a reconciliation of our GAAP-basis net investment income to our tax-basis net investment income for the years ended December 31, 2020, 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. Management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming the 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. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in “Note 2. Summary of Significant Accounting Policies” in our consolidated financial statements. 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. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, valuation of portfolio investments, specifically the valuation of Level 3 investments, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.

Valuation of Portfolio Investments

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

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:

•

preliminary valuations are then discussed with the valuation committee;

•

following the completion of its review, our valuation committee recommends that our board of directors approves the fair valuations determined by the valuation committee; and

•

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

See Note 8 to our consolidated financial statements included herein for additional information regarding the fair value of our financial instruments.

Contractual Obligations

We have entered into agreements with the Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory agreement are equal to (a) an annual base management fee based on the average weekly value of our gross assets (excluding cash and cash equivalents) and (b) an incentive fee based on our performance. The Advisor is reimbursed for administrative expenses incurred on our behalf. See Note 4 to our consolidated financial statements included herein for a discussion of these agreements and for the amount of fees and expenses accrued under these agreements during the years ended December 31, 2020, 2019 and 2018.

A summary of our significant contractual payment obligations for the repayment of outstanding indebtedness at December 31, 2020 is as follows:


		Payments Due By Period
	Maturity Date⁽¹⁾	Total	Less than 1 year		1-3 years		3-5 years	More than 5 years
CCT Tokyo Funding Credit Facility⁽²⁾	December 2, 2023	$260		—	$	260	—	—
Senior Secured Revolving Credit Facility⁽³⁾	December 23, 2025	$615		—		—	$615	—
4.750% Notes due 2022	May 15, 2022	$450		—	$	450	—	—
5.000% Notes due 2022	June 28, 2022	$245		—	$	245	—	—
4.625% Notes due 2024	July 15, 2024	$400		—		—	$400	—
4.125% Notes due 2025	February 1, 2025	$470		—		—	$470	—
8.625% Notes due 2025	May 15, 2025	$250		—		—	$250	—
3.400% Notes due 2026	January 15, 2026	$1,000		—		—	—	$1,000
2019-1 Notes	January 15, 2031	$352		—		—	—	$352

(1)	Amounts outstanding under the financing arrangements will mature, and all accrued and unpaid interest thereunder will be due and payable, on the maturity date.

(2)	At December 31, 2020, $40 remained unused under the financing arrangement.

(3)

At December 31, 2020, $1,000 remained unused under the Senior Secured Revolving Credit Facility. Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €164 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.22 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD $63 has been converted to U.S dollars at an exchange rate of CAD $1.00 to $0.78 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £111 has been converted to U.S dollars at an exchange rate of £1.00 to $1.37 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of A$6 has been converted to U.S dollars at an exchange rate of A$1.00 to $0.77 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars.

Off-Balance Sheet Arrangements

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

Recently Issued Accounting Standards

In 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 implemented ASU 2018-13 during the year ended December 31, 2020, and it did not have a significant impact on the Company’s disclosure over fair value.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of adopting ASU 2020-04 on its consolidated financial statements.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

We are subject to financial market risks, including changes in interest rates. As of December 31, 2020, 63.5% of our portfolio investments (based on fair value) were debt investments paying variable interest rates and 9.0% were debt investments paying fixed interest rates while 16.9% were other income producing investments, 8.1% consisted of non-income producing

investments, and the remaining 2.5% consisted of investments on non-accrual status. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to the Advisor with respect to our increased pre-incentive fee net investment income. In 2020, the U.S. Federal Reserve and other central banks reduced certain interest rates in response to the COVID-19 pandemic and market conditions. A prolonged reduction in interest rates may reduce our net investment income.

Pursuant to the terms of the CCT Tokyo Funding Credit Facility, Senior Secured Revolving Credit Facility and the 2019-1 Notes, we borrow at a floating rate based on a benchmark interest rate. Under the indentures governing the 4.750% notes, the 5.000% notes, the 4.625% notes, the 4.125% notes, the 8.625% notes and the 3.400% notes we pay interest to the holders of such notes at a fixed rate. To the extent that any present or future credit facilities or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding, or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of December 31, 2020 (dollar amounts are presented in millions):


Basis Point Change in Interest Rates	Increase (Decrease) in Interest Income⁽¹⁾			Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income		Percentage Change in Net Interest Income
Down 24 basis points	$	(1	)	$	(3	)	$	2		0.6	%
No change		—			—			—		—
Up 100 basis points		15			13			2		0.8	%
Up 300 basis points		103			36			67		21.6	%
Up 500 basis points		193			62			131		42.6	%

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

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the years ended December 31, 2020, 2019 and 2018 we did not engage in interest rate hedging activities.

Foreign Currency Risk

From time to time, we may make investments that are denominated in a foreign currency that are subject to the effects of exchange rate movements between the foreign currency of each such investment and the U.S. dollar, which may affect future fair values and cash flows, as well as amounts translated into U.S. dollars for inclusion in our consolidated financial statements.

The table below presents the effect that a 10% immediate, unfavorable change in the foreign currency exchange rates (i.e. strengthening of the U.S. dollar) would have on the fair value of our investments denominated in foreign currencies as of December 31, 2020, by foreign currency, all other valuation assumptions remaining constant. In addition, the table below presents the par value of our investments denominated in foreign currencies and the notional amount of foreign currency forward contracts in local currency in place as of December 31, 2020 to hedge against foreign currency risks.


	Investments Denominated in Foreign Currencies As of December 31, 2020								Hedges As of December 31, 2020
	Cost in Local Currency		Cost in US$		Fair Value		Reduction in Fair Value as of December 31, 2020 if 10% Adverse Change in Exchange Rate⁽¹⁾		Net Foreign Currency Hedge Amount in Local Currency		Net Foreign Currency Hedge Amount in U.S. Dollars
Australian Dollars	A$	10.4	$	8.0	$	7.8	$	0.8	A$	3.0	$	2.3
British Pounds Sterling	£	114.3		156.2		164.3		16.4	£	18.6		18.6
Canadian Dollars	C$	58.8		46.1		49.2		4.9		—		—
Euros	€	342.0		418.2		278.4		27.8	€	12.5		15.2
Norwegian Krone	NOK	304.5		35.5		38.3		3.8	NOK	48.2		5.6
Swedish Krona	SEK	124.0		15.1		—		—	SEK	121.4		14.8

Total			$	679.1	$	538.0	$	53.7			$	56.5

(1)	Excludes effect, if any, of any foreign currency hedges.

As illustrated in the table above, we use derivative instruments from time to time, including foreign currency forward contracts and cross currency swaps, to manage the impact of fluctuations in foreign currency exchange rates. In addition, we have the ability to borrow in foreign currencies under our Senior Secured Revolving Credit Facility, which provides a natural hedge with regard to changes in exchange rates between the foreign currencies and U.S. dollar and reduces our exposure to foreign exchange rate differences. We are typically a net receiver of these foreign currencies as related for our international investment positions, and, as a result, our investments denominated in foreign currencies, to the extent not hedged, benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar.

As of December 31, 2020, the net contractual amount of our foreign currency forward contracts totaled $56.5, all of which related to hedging of our foreign currency denominated debt investments. As of December 31, 2020, we had outstanding borrowings denominated in foreign currencies of €164, CAD $63, £111 and A$6 under our Senior Secured Revolving Credit Facility.

In addition, we may have risk regarding portfolio valuation. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments.”

Item 8.

Financial Statements and Supplementary Data.

Index to Financial Statements


	Page
Management’s Report on Internal Control over Financial Reporting		71
Reports of Independent Registered Public Accounting Firms		72
Consolidated Balance Sheets as of December 31, 2020 and 2019		76
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018		77
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2020, 2019 and 2018		79
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018		80
Consolidated Schedules of Investments as of December 31, 2020 and 2019		81
Notes to Consolidated Financial Statements		112

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. In connection with the preparation of our annual financial statements, management has conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (“COSO”). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation, we have concluded that, as of December 31, 2020, our internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting as of December 31, 2020 has been audited by our independent registered public accounting firm.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of FS KKR Capital Corp.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of FS KKR Capital Corp. and subsidiaries (the “Company”) as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2020, of the Company and our report dated March 1, 2021, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

San Francisco, California

March 1, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of FS KKR Capital Corp.

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying consolidated balance sheets of FS KKR Capital Corp. and subsidiaries (the “Company”), including the consolidated schedules of investments, as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in net assets, and cash flows for the years then ended, the financial highlights for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations, changes in net assets, cash flows, and financial highlights for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The consolidated financial statements of the Company for the year ended December 31, 2018, before the effects of the adjustments to retrospectively apply the change in accounting related to the reverse stock split discussed in Note 1 to the financial statements, were audited by other auditors whose report, dated February 27, 2019, expressed an unqualified opinion on those statements. We have also audited the adjustments to the 2018 consolidated financial statements to retrospectively apply the change in accounting for the reverse stock split in 2020, as discussed in Note 1 to the financial statements. Our procedures included (1) comparing the amounts shown in the per share disclosures for 2018 to the Company’s underlying accounting analysis, (2) comparing the previously reported shares outstanding and the related balance sheet and income statement amounts per the Company’s accounting analysis to the previously issued consolidated financial statements, and (3) recalculating the reduction of shares to give effect to the reverse stock split and testing the mathematical accuracy of the underlying analysis. In our opinion, such retrospective adjustments are appropriate and have been properly applied. However, we were not engaged to audit, review, or apply any procedures to the 2018 consolidated financial statements of the Company other than with respect to the retrospective adjustments, and accordingly, we do not express an opinion or any other form of assurance on the 2018 consolidated financial statements taken as a whole.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2021 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2020 and 2019, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The

communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Fair Value — Level 3 Investments — Refer to Notes 2, 6, and 8 to the financial statements

Critical Audit Matter Description

The Company held investments classified as Level 3 investments under accounting principles generally accepted in the United States of America. These investments included illiquid corporate bonds and loans, unlisted equity securities, and derivatives that lack observable market prices. The valuation techniques used in estimating the fair value of these investments vary based on the specific characteristics of the investments and certain significant inputs used were unobservable. The fair value of the Company’s Level 3 investments was $5.8 billion as of December 31, 2020.

We identified the valuation of Level 3 investments as a critical audit matter because of the judgments necessary for management to select valuation techniques and to use significant unobservable inputs to estimate the fair value. This required a high degree of auditor judgment and extensive audit effort, including the need to involve fair value specialists who possess significant valuation experience, to evaluate the appropriateness of the valuation techniques and the significant unobservable inputs, when performing audit procedures to audit management’s estimate of fair value of Level 3 investments.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to valuation techniques and unobservable observable inputs used by management to estimate the fair value of Level 3 investments included the following, among others:

•

We tested the effectiveness of controls over management’s valuation of Level 3 investments, including those related to valuation techniques and significant unobservable inputs.

•

We evaluated the appropriateness of the valuation techniques used for Level 3 investments and tested the related significant unobservable inputs by comparing these inputs to external sources. We evaluated the reasonableness of any significant changes in valuation techniques or significant unobservable inputs, including the considerations of the impact of COVID 19. For a selected sample of Level 3 investments, we performed these procedures with the assistance of our fair value specialists.

•

In instances where the selection of valuation techniques or significant unobservable inputs were more subjective, with the assistance of our fair value specialists, we developed an independent estimate of the fair value and compared our estimates to management’s estimates.

•

We evaluated management’s ability to reasonably estimate fair value by comparing management’s historical estimates to subsequent transactions, taking into account changes in market or investment specific conditions, where applicable.

/s/ Deloitte & Touche LLP

San Francisco, California

March 1, 2021

We have served as the Company’s auditor since 2019.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

FS KKR Capital Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of operations, changes in net assets and cash flows of FS KKR Capital Corp. (the Company) for the year ended December 31, 2018, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, except for the effects of the adjustments, if any, as might have been determined to be necessary had we been engaged to audit the Company’s restatement of share and per-share information, as described below, the financial statements present fairly, in all material respects, the results of the Company’s operations and its cash flows for the year ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Reverse Stock Split

We were not engaged to audit the restatement of the Company’s disclosures about share and per-share information for the year ended December 31, 2018, as discussed in Note 3 to the financial statements.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

Except as discussed above, we conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the auditor of one or more FS Investments investment companies since 2007.

Blue Bell, Pennsylvania

February 27, 2019

Part I—FINANCIAL INFORMATION

FS KKR Capital Corp.

Consolidated Balance Sheets

(in millions, except share and per share amounts)


	December 31,
	2020			2019
Assets
Investments, at fair value
Non-controlled/unaffiliated investments (amortized cost—$5,314 and $6,006, respectively)	$	4,986		$	5,661
Non-controlled/affiliated investments (amortized cost—$629 and $686, respectively)		534			717
Controlled/affiliated investments (amortized cost—$1,510 and $1,117, respectively)		1,260			979

Total investments, at fair value (amortized cost—$7,453 and $7,809, respectively)		6,780			7,357
Cash		182			93
Foreign currency, at fair value (cost—$8 and $13, respectively)		9			13
Receivable for investments sold and repaid		173			657
Income receivable		72			82
Unrealized appreciation on foreign currency forward contracts		1			1
Deferred financing costs		15			10
Deferred merger costs		1			—
Prepaid expenses and other assets		4			3

Total assets	$	7,237		$	8,216

Liabilities
Payable for investments purchased	$	—		$	15
Debt (net of deferred financing costs of $23 and $9, respectively)⁽¹⁾		3,997			4,173
Unrealized depreciation on foreign currency forward contracts		3			0
Stockholder distributions payable		74			96
Management and investment adviser fees payable		25			30
Subordinated income incentive fees payable⁽²⁾		—			—
Administrative services expense payable		2			3
Interest payable		25			23
Other accrued expenses and liabilities		15			10

Total liabilities		4,141			4,350

Commitments and contingencies⁽³⁾
Stockholders’ equity
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.001 par value, 750,000,000 shares authorized, 123,755,965 and 126,581,766 shares issued and outstanding, respectively⁽⁴⁾		0			1
Capital in excess of par value		3,866			4,041
Retained earnings (accumulated deficit)⁽⁵⁾		(770	)		(176	)

Total stockholders’ equity		3,096			3,866

Total liabilities and stockholders’ equity	$	7,237		$	8,216

Net asset value per share of common stock at year end⁽⁴⁾	$	25.02		$	30.54

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

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

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

(4)	As discussed in Notes 1 and 3, the Company completed a Reverse Stock Split, effective as of June 15, 2020. The outstanding shares and net asset value per common share reflect the Reverse Stock Split on a retroactive basis.

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

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Statements of Operations

(in millions, except share and per share amounts)


	Year Ended December 31,
	2020		2019		2018
Investment income
From non-controlled/unaffiliated investments:
Interest income	$	427	$	571	$	305
Paid-in-kind interest income		43		40		34
Fee income		33		42		13
Dividend income		16		10		8
From non-controlled/affiliated investments:
Interest income		10		28		3
Paid-in-kind interest income		19		16		2
Fee income		0		—		—
Dividend income		0		—		—
From controlled/affiliated investments:
Interest income		7		11		9
Paid-in-kind interest income		4		4		19
Dividend income		80		57		1

Total investment income		639		779		394

Operating expenses
Management fees⁽¹⁾		106		115		63
Subordinated income incentive fees⁽²⁾		—		57		26
Administrative services expenses		7		9		4
Accounting and administrative fees		2		2		1
Interest expense⁽³⁾		170		170		84
Other general and administrative expenses		13		9		7

Total operating expenses		298		362		185
Management fee waiver⁽¹⁾		—		—		(3	)

Net expenses		298		362		182

Net investment income before taxes		341		417		212
Excise taxes		10		7		7

Net investment income		331		410		205

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Statements of Operations

(in millions, except share and per share amounts)


	Year Ended December 31,
	2020			2019			2018
Realized and unrealized gain/loss
Net realized gain (loss) on investments:
Non-controlled/unaffiliated investments	$	(323	)	$	(114	)	$	(116	)
Non-controlled/affiliated investments		(132	)		32			(9	)
Controlled/affiliated investments		(35	)		1			—
Net realized gain (loss) on swap contracts		—			(11	)		—
Net realized gain (loss) on foreign currency forward contracts		0			12			—
Net realized gain (loss) on foreign currency		(6	)		2			6
Net change in unrealized appreciation (depreciation) on investments:
Non-controlled/unaffiliated investments		17			(105	)		(48	)
Non-controlled/affiliated investments		(126	)		55			(57	)
Controlled/affiliated investments		(112	)		(33	)		(113	)
Net change in unrealized appreciation (depreciation) on swap contracts		—			16			(16	)
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts		(3	)		(2	)		3
Net change in unrealized gain (loss) on foreign currency		(16	)		(17	)		(3	)
Change in unrealized appreciation from merger accounting⁽⁴⁾		—			—			717

Total net realized and unrealized gain (loss)		(736	)		(164	)		364

Net increase (decrease) in net assets resulting from operations	$	(405	)	$	246		$	569

Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)⁽⁶⁾	$	(3.26	)	$	1.90		$	9.05	⁽⁵⁾

Weighted average shares outstanding⁽⁶⁾		124,290,607			129,736,685			62,844,356

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

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

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

(4)	See Note 13 for a discussion of the 2018 Merger.

(5)	Includes $717 change in unrealized appreciation from merger accounting. Without such amount, net increase (decrease) in net assets resulting from operations would have been $(2.36).

(6)	As discussed in Notes 1 and 3, the Company completed a Reverse Stock Split, effective as of June 15, 2020. The weighted average shares used in the per share computation of the net increase (decrease) in net assets resulting from operations reflect the Reverse Stock Split on a retroactive basis.

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Statements of Changes in Net Assets

(in millions)


	Year Ended December 31,
	2020			2019			2018
Operations
Net investment income	$	331		$	410		$	205
Net realized gain (loss) on investments, swap contracts, secured borrowing and foreign currency		(496	)		(78	)		(119	)
Net change in unrealized appreciation (depreciation) on investments, swap contracts, foreign currency forward contracts and secured borrowing⁽¹⁾		(224	)		(69	)		(231	)
Net change in unrealized gain (loss) on foreign currency		(16	)		(17	)		(3	)
Change in unrealized appreciation from merger accounting		—			—			717

Net increase (decrease) in net assets resulting from operations		(405	)		246			569

Stockholder distributions⁽²⁾
Distributions to stockholders		(318	)		(393	)		(205	)

Net decrease in net assets resulting from stockholder distributions		(318	)		(393	)		(205	)

Capital share transactions⁽³⁾
Issuance of common stock		—			—			1,567
Reinvestment of stockholder distributions		—			—			—
Repurchases of common stock		(47	)		(153	)		(50	)

Net increase (decrease) in net assets resulting from capital share transactions		(47	)		(153	)		1,517

Total increase (decrease) in net assets		(770	)		(300	)		1,881
Net assets at beginning of year		3,866			4,166			2,285

Net assets at end of year	$	3,096		$	3,866		$	4,166

(1)	See Note 7 for a discussion of the Company’s financial instruments.

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

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

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Statements of Cash Flows

(in millions)


	Year Ended December 31,
	2020			2019			2018
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations	$	(405	)	$	246		$	569
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments⁽¹⁾		(2,336	)		(2,907	)		(761	)
Paid-in-kind interest		(84	)		(60	)		(55	)
Proceeds from sales and repayments of investments		2,301			2,854			1,187
Net realized (gain) loss on investments		490			81			125
Net change in unrealized (appreciation) depreciation on investments⁽¹⁾		221			83			218
Net change in unrealized (appreciation) depreciation on swap contracts		—			(16	)		16
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts		3			2			(3	)
Change in unrealized appreciation from merger accounting		—			—			(717	)
Accretion of discount		(15	)		(21	)		(7	)
Amortization of deferred financing costs and discount		12			6			6
Unrealized (gain)/loss on borrowings in foreign currency		10			19			(3	)
(Increase) decrease in receivable for investments sold and repaid		484			(513	)		(141	)
(Increase) decrease in income receivable		10			(22	)		(29	)
(Increase) decrease in deferred merger costs		(1	)		—			—
(Increase) decrease in prepaid expenses and other assets		(1	)		(2	)		1
Increase (decrease) in payable for investments purchased		(15	)		9			4
Increase (decrease) in management fees payable		(5	)		10			5
Increase (decrease) in subordinated income incentive fees payable		—			(14	)		1
Increase (decrease) in administrative services expense payable		(1	)		2			1
Increase (decrease) in interest payable		2			(5	)		5
Increase (decrease) in other accrued expenses and liabilities		5			(8	)		11
Other liabilities acquired from merger net of other assets		—			—			(146	)
Merger costs capitalized into purchase price		—			—			(7	)

Net cash provided by (used in) operating activities		675			(256	)		280

Cash flows from financing activities
Cash purchased in merger		—			—			197
Reinvestment of stockholder distributions		—			—			—
Repurchases of common stock		(47	)		(153	)		(50	)
Stockholder distributions		(340	)		(342	)		(207	)
Borrowings under credit facilities⁽²⁾		3,379			3,749			482
Borrowings under unsecured notes⁽²⁾		—			1,045			—
Repayments of credit facilities⁽²⁾		(3,542	)		(3,210	)		(732	)
Repayments under unsecured notes⁽²⁾		—			(805	)		—
Deferred financing costs and discount paid		(40	)		(26	)		(5	)

Net cash provided by (used in) financing activities		(590	)		258			(315	)

Total increase (decrease) in cash		85			2			(35	)
Cash and foreign currency at beginning of year		106			104			139

Cash and foreign currency at end of year	$	191		$	106		$	104

Supplemental disclosure
Non-cash purchases of investments	$	(238	)	$	(138	)	$	—

Non-cash sales of investments	$	238		$	138		$	—

Local and excise taxes paid	$	7		$	9		$	6

(1)	For the year ended December 31, 2018, excludes $4,428 of cost of investments acquired from the 2018 Merger.

(2)

For the year ended December 31, 2018, excludes $1,928 of debt assumed from the 2018 Merger. See Note 9 for a discussion of the Company’s financing arrangements. During the years ended December 31, 2020, 2019 and 2018, the Company paid $156, $171 and $82, respectively, in interest expense on the credit facilities and unsecured notes.

Supplemental disclosure of non-cash operating and financing activities:

In connection with the 2018 Merger, the Company issued common stock of $1,574 and acquired investments at fair value of $4,168 ($4,428 at cost) and other assets of $64 and assumed debt of $1,928 and other liabilities of $210 during the year ended December 31, 2018.

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Senior Secured Loans—First Lien—111.4%
5 Arch Income Fund 2 LLC	(l)(n)(q)(w)	Diversified Financials	9.0%				11/18/23	$	28.8	$	28.8	$	25.5
5 Arch Income Fund 2 LLC	(l)(n)(q)(v)(w)	Diversified Financials	9.0%				11/18/23		4.5		4.5		4.0
A10 Capital LLC	(g)(h)	Diversified Financials	L+650		1.0	%	5/1/23		12.8		12.7		12.6
A10 Capital LLC	(v)	Diversified Financials	L+650		1.0	%	5/1/23		14.1		14.1		14.0
Abaco Systems, Inc	(g)(h)(i)	Capital Goods	L+600		1.0	%	12/7/21		60.6		60.0		60.6
ABB CONCISE Optical Group LLC	(g)(x)	Retailing	L+500		1.0	%	6/15/23		0.7		0.7		0.7
Accuride Corp	(g)(h)(i)(x)	Capital Goods	L+525		1.0	%	11/17/23		17.7		17.6		16.1
Acproducts Inc	(g)(h)(x)	Consumer Durables & Apparel	L+650		1.0	%	8/18/25		41.8		39.7		43.1
Advanced Lighting Technologies Inc	(g)(n)(w)(z)	Materials	L+750		1.0	%	10/4/22		19.8		16.4		12.0
All Systems Holding LLC	(f)(g)(h)	Commercial & Professional Services	L+625		1.0	%	10/31/23		112.2		112.3		112.6
All Systems Holding LLC	(v)	Commercial & Professional Services	L+625		1.0	%	10/31/23		7.2		7.2		7.2
American Tire Distributors Inc	(g)(x)	Automobiles & Components	L+750, 0.0% PIK (1.5% Max PIK)		1.0	%	9/2/24		23.0		21.7		22.0
Amtek Global Technology Pte Ltd	(j)(l)(z)	Automobiles & Components	E+500		0.0	%	4/4/24	€	54.4		66.3		59.7
Apex Group Limited	(g)(l)	Diversified Financials	L+700		1.3	%	6/15/23	$	0.6		0.6		0.6
Apex Group Limited	(l)(v)	Diversified Financials	L+700		1.3	%	6/15/23		1.3		1.2		1.3
Apex Group Limited	(g)(h)(l)	Diversified Financials	L+700		1.3	%	6/16/25		18.6		18.3		18.7
Apex Group Limited	(g)(l)	Diversified Financials	L+700		1.5	%	6/16/25	£	31.3		39.7		43.2
Ardonagh Group Ltd	(g)(l)	Insurance	L+750, 0.0% PIK (2.3% Max PIK)		0.8	%	7/14/26		0.1		0.2		0.2
Ardonagh Group Ltd	(l)(v)	Insurance	L+750, 0.0% PIK (2.3% Max PIK)		0.8	%	7/14/26		0.7		0.8		0.9
Aspect Software Inc	(g)	Software & Services	8.0% PIK (8.0% Max PIK)				1/15/21	$	0.0		0.0		0.0
Aspect Software Inc	(v)	Software & Services	L+500		1.0	%	7/15/23		0.7		0.7		0.7
Berner Food & Beverage LLC	(g)(h)(i)	Food & Staples Retailing	L+875		1.0	%	3/16/22		87.6		87.3		91.6
Borden (New Dairy Opco)	(g)(y)	Food, Beverage & Tobacco	L+250		1.0	%	7/20/25		7.6		7.6		7.6
Borden (New Dairy Opco)	(g)(y)	Food, Beverage & Tobacco	L+700, 0.0% PIK (1.0% Max PIK)		1.0	%	7/20/25		16.8		16.8		16.8
Borden Dairy Co	(g)(n)(w)(y)	Food, Beverage & Tobacco	L+825		1.0	%	7/6/23		26.0		24.1		—
Charles Taylor PLC	(g)(l)	Diversified Financials	L+575		0.0	%	1/24/27	£	33.6		42.9		43.3
CSafe Global	(g)	Capital Goods	L+625		1.0	%	12/23/27	$	0.1		0.1		0.1
CSafe Global	(v)	Capital Goods	L+625		1.0	%	12/23/27		1.5		1.5		1.5
CSafe Global	(g)(h)	Capital Goods	L+625		1.0	%	12/23/27		16.0		15.9		15.9
CSM Bakery Products	(g)(x)	Food, Beverage & Tobacco	L+625		1.0	%	1/4/22		1.1		1.1		1.1
CTI Foods Holding Co LLC	(g)	Food, Beverage & Tobacco	L+577, 3.0% PIK (3.0% Max PIK)		1.0	%	5/3/24		3.0		3.0		2.5
Distribution International Inc	(g)(h)(x)	Retailing	L+575		1.0	%	12/15/23		27.6		25.2		25.3
Eagle Family Foods Inc	(v)	Food, Beverage & Tobacco	L+650		1.0	%	6/14/23		7.1		7.1		7.1
Eagle Family Foods Inc	(g)(h)(i)	Food, Beverage & Tobacco	L+650		1.0%		6/14/24		45.6		45.3		45.6
Empire Today LLC	(g)(h)	Retailing	L+650		1.0%		11/17/22		75.6		75.6		76.4
Entertainment Benefits Group LLC	(g)	Media & Entertainment	L+575, 2.5% PIK (2.5% Max PIK)		1.0%		9/30/24		4.3		4.3		3.6
Entertainment Benefits Group LLC	(v)	Media & Entertainment	L+575, 2.5% PIK (2.5% Max PIK)		1.0%		9/30/24		0.5		0.5		0.4
Entertainment Benefits Group LLC	(g)(h)	Media & Entertainment	L+575, 2.5% PIK (2.5% Max PIK)		1.0%		9/30/25		30.1		29.8		25.3
FloWorks International LLC	(g)(h)	Capital Goods	L+600		1.0%		10/14/26		17.2		17.0		17.0
FloWorks International LLC	(g)	Capital Goods	L+600		1.0%		10/14/26		6.4		6.4		6.4
FloWorks International LLC	(v)	Capital Goods	L+600		1.0%		10/14/26		6.4		6.4		6.4
Frontline Technologies Group LLC	(g)	Software & Services	L+525		1.0%		9/18/23		22.3		22.3		22.3

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Frontline Technologies Group LLC	(g)(h)(i)	Software & Services	L+575	1.0%	9/18/23	$	51.9	$	51.6	$	52.0
Greystone & Co Inc	(g)(h)	Diversified Financials	L+800	1.0%	4/17/24		36.8		36.6		37.2
Greystone Equity Member Corp	(g)(l)	Diversified Financials	L+725	3.8%	4/1/26		60.8		60.8		60.3
Heniff Transportation Systems LLC	(g)	Transportation	L+575	1.0%	12/3/24		3.4		3.4		3.4
Heniff Transportation Systems LLC	(v)	Transportation	L+575	1.0%	12/3/24		4.8		4.8		4.7
Heniff Transportation Systems LLC	(g)(h)(i)	Transportation	L+575	1.0%	12/3/26		64.4		64.1		64.0
HM Dunn Co Inc	(g)(n)(w)(y)	Capital Goods	L+875 PIK (L+875 Max PIK)	1.0%	12/31/21		0.9		0.6		0.3
HM Dunn Co Inc	(g)(y)	Capital Goods	15.0% PIK (15.0% Max PIK)		12/31/21		0.3		0.3		0.2
Hudson Technologies Co	(g)(l)	Commercial & Professional Services	L+1,025	1.0%	10/10/23		32.4		32.2		26.8
ID Verde	(g)(l)	Commercial & Professional Services	E+500, 2.3% PIK (2.3% Max PIK)	0.0%	3/29/24	€	30.3		33.3		37.1
ID Verde	(g)(l)	Commercial & Professional Services	L+525, 2.3% PIK (2.3% Max PIK)	0.0%	3/29/24	£	4.3		5.1		5.9
Individual FoodService	(g)	Capital Goods	L+625	1.0%	11/22/24	$	0.1		0.1		0.1
Individual FoodService	(v)	Capital Goods	L+625	1.0%	11/22/24		0.4		0.4		0.4
Individual FoodService	(g)	Capital Goods	L+625	1.0%	11/22/25		6.8		6.8		6.8
Individual FoodService	(v)	Capital Goods	L+625	1.0%	11/22/25		0.5		0.5		0.5
Industria Chimica Emiliana Srl	(g)(l)	Pharmaceuticals, Biotechnology & Life Sciences	E+725	0.0%	6/30/26	€	19.3		20.7		23.9
Industria Chimica Emiliana Srl	(g)(l)	Pharmaceuticals, Biotechnology & Life Sciences	E+725	0.0%	9/27/26		8.1		9.3		10.1
Industry City TI Lessor LP	(g)	Consumer Services	10.8%, 1.0% PIK (1.0% Max PIK)		6/30/26	$	24.1		24.1		26.4
J S Held LLC	(g)(h)	Insurance	L+600	1.0%	7/1/25		65.5		65.1		66.1
J S Held LLC	(v)	Insurance	L+600	1.0%	7/1/25		1.4		1.4		1.4
J S Held LLC	(g)	Insurance	L+600	1.0%	7/1/25		1.1		1.1		1.1
J S Held LLC	(v)	Insurance	L+600	1.0%	7/1/25		5.1		5.1		5.1
Jarrow Formulas Inc	(g)(i)	Household & Personal Products	L+625	1.0%	11/30/26		57.3		56.6		56.6
Jo-Ann Stores Inc	(g)(h)(x)	Retailing	L+500	1.0%	10/20/23		8.7		8.7		8.5
Kellermeyer Bergensons Services LLC	(g)(h)(i)	Commercial & Professional Services	L+650	1.0%	11/7/26		117.7		117.0		118.9
Kellermeyer Bergensons Services LLC	(v)	Commercial & Professional Services	L+650	1.0%	11/7/26		28.3		28.3		28.6
Kodiak BP LLC	(h)	Capital Goods	L+725	1.0%	12/1/24		10.2		10.2		10.3
Kodiak BP LLC	(g)(h)	Capital Goods	L+725	1.0%	12/1/24		125.0		124.8		126.2
Koosharem LLC	(g)(x)	Commercial & Professional Services	L+450	1.0%	4/18/25		0.0		0.0		0.0
Lexitas Inc	(g)(h)(i)	Commercial & Professional Services	L+600	1.0%	11/14/25		34.7		34.4		34.6
Lexitas Inc	(v)	Commercial & Professional Services	L+600	1.0%	11/14/25		4.3		4.2		4.3
Lexitas Inc	(v)	Commercial & Professional Services	L+600	1.0%	11/14/25		2.5		2.5		2.5
Lipari Foods LLC	(g)(h)(i)	Food & Staples Retailing	L+588	1.0%	1/6/25		84.4		83.8		85.0
Lipari Foods LLC	(g)	Food & Staples Retailing	L+588	1.0%	1/6/25		19.2		19.2		19.3
Matchesfashion Ltd	(g)(h)(l)	Consumer Durables & Apparel	L+463, 1.0% PIK (1.0% Max PIK)	0.0%	10/11/24		12.7		12.1		9.8
Miami Beach Medical Group LLC	(v)	Health Care Equipment & Services	L+650	1.0%	12/14/26		1.4		1.4		1.4
Miami Beach Medical Group LLC	(g)	Health Care Equipment & Services	L+650	1.0%	12/14/26		7.8		7.8		7.8
Micronics Filtration Holdings Inc	(g)(n)(w)(y)	Capital Goods	7.5% PIK (7.5% Max PIK)		3/29/24		47.6		45.0		35.5
Motion Recruitment Partners LLC	(g)(h)	Commercial & Professional Services	L+650	1.0%	12/19/25		37.5		37.2		33.7
Motion Recruitment Partners LLC	(v)	Commercial & Professional Services	L+650	1.0%	12/19/25		29.8		29.8		29.8
NBG Home	(g)(h)(i)	Consumer Durables & Apparel	L+550	1.0%	4/26/24		69.3		69.0		55.4
NCI Inc	(g)(h)(i)	Software & Services	L+500, 2.5% PIK (2.5% Max PIK)	1.0%	8/15/24		83.5		82.9		59.0

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Omnimax International Inc	(g)(h)	Capital Goods	L+725	1.0%	10/8/26	$	44.7	$	44.0	$	44.0
Omnimax International Inc	(v)	Capital Goods	L+725	1.0%	10/8/26		7.7		7.7		7.7
One Call Care Management Inc	(g)(x)(y)	Health Care Equipment & Services	L+525	1.0%	11/27/22		4.9		4.3		4.7
P2 Energy Solutions Inc.	(g)	Software & Services	L+675	1.0%	1/31/25		2.3		2.3		2.2
P2 Energy Solutions Inc.	(v)	Software & Services	L+675	1.0%	1/31/25		4.7		4.7		4.5
P2 Energy Solutions Inc.	(g)(h)(i)	Software & Services	L+675	1.0%	2/2/26		116.5		115.2		111.0
Petroplex Acidizing Inc	(g)(n)(w)(y)	Energy	L+900 PIK (L+900 Max PIK)	1.0%	12/30/21		24.6		22.2		4.5
Polyconcept North America Inc	(g)(x)	Household & Personal Products	L+450 PIK (L+450 Max PIK)	1.0%	8/16/23		21.5		21.2		20.4
Premium Credit Ltd	(g)(l)	Diversified Financials	L+650	0.0%	1/16/26	£	40.0		51.2		53.9
Project Marron	(g)(l)	Consumer Services	B+575	0.0%	7/3/25	A$	1.5		1.0		1.0
PSKW LLC	(g)	Health Care Equipment & Services	L+625	1.0%	3/9/26	$	137.3		135.7		137.6
Qdoba Restaurant Corp	(g)(h)(x)	Consumer Services	L+700	1.0%	3/21/25		11.1		10.9		10.4
Reliant Rehab Hospital Cincinnati LLC	(g)(h)(i)	Health Care Equipment & Services	L+675	0.0%	9/2/24		64.8		64.5		62.4
Revere Superior Holdings Inc	(g)(h)	Software & Services	L+575	1.0%	9/30/26		12.9		12.9		13.0
Revere Superior Holdings Inc	(v)	Software & Services	L+575	1.0%	9/30/26		1.0		1.0		1.0
Roadrunner Intermediate Acquisition Co LLC	(h)	Health Care Equipment & Services	L+675	1.0%	3/15/23		10.7		10.7		10.7
RSC Insurance Brokerage Inc	(v)	Insurance	L+550	1.0%	9/30/26		3.2		3.1		3.2
RSC Insurance Brokerage Inc	(g)(h)(i)	Insurance	L+550	1.0%	10/30/26		98.4		97.8		98.3
RSC Insurance Brokerage Inc	(v)	Insurance	L+550	1.0%	10/30/26		6.3		6.3		6.3
Safe-Guard Products International LLC	(g)(i)	Diversified Financials	L+575	0.0%	1/27/27		40.0		39.6		39.9
Savers Inc	(g)(h)	Retailing	L+800, 0.8% PIK (0.8% Max PIK)	1.5%	3/28/24		44.9		44.6		44.4
Savers Inc	(g)(l)	Retailing	C+850, 0.8% PIK (0.8% Max PIK)	1.5%	3/28/24	C$	62.4		46.1		49.2
Sequa Corp	(h)(x)	Capital Goods	L+675, 0.0% PIK (1.0% Max PIK)	1.0%	11/28/23	$	11.4		10.8		11.4
Sequel Youth & Family Services LLC	(g)	Health Care Equipment & Services	L+700	1.0%	9/1/23		13.7		13.7		9.2
Sequel Youth & Family Services LLC	(g)(h)	Health Care Equipment & Services	L+800	1.0%	9/1/23		80.0		80.0		53.7
Sequential Brands Group Inc.	(g)(h)	Consumer Durables & Apparel	L+875	0.0%	2/7/24		59.0		57.8		50.9
Sorenson Communications LLC	(h)(x)	Telecommunication Services	L+650	0.0%	4/29/24		10.1		9.9		10.1
Sound United LLC	(g)(h)(z)	Consumer Durables & Apparel	L+700	1.0%	12/31/23		15.0		15.0		14.9
Sungard Availability Services Capital Inc	(g)	Software & Services	L+375, 3.8% PIK (3.8% Max PIK)	1.0%	7/1/24		0.6		0.7		0.7
Sungard Availability Services Capital Inc	(v)	Software & Services	L+375, 3.8% PIK (3.8% Max PIK)	1.0%	7/1/24		0.3		0.4		0.4
Sweeping Corp of America Inc	(g)	Commercial & Professional Services	L+575	1.0%	11/30/26		10.7		10.6		10.6
Sweeping Corp of America Inc	(v)	Commercial & Professional Services	L+575	1.0%	11/30/26		3.4		3.4		3.4
Sweeping Corp of America Inc	(v)	Commercial & Professional Services	L+575	1.0%	11/30/26		1.7		1.7		1.7
Sweet Harvest Foods Management Co	(g)(i)	Food & Staples Retailing	L+775, 1.0% PIK (1.0% Max PIK)	1.0%	6/23/23		24.4		24.3		24.4
Sweet Harvest Foods Management Co	(v)	Food & Staples Retailing	L+775, 1.0% PIK (1.0% Max PIK)	1.0%	6/23/23		0.8		0.8		0.8
Tangoe LLC	(g)(h)(i)	Software & Services	L+650	1.0%	11/28/25		89.2		88.5		82.5
ThermaSys Corp	(g)(y)	Capital Goods	L+1,100 PIK (L+1,100 Max PIK)	1.0%	1/1/24		7.5		7.9		3.9
ThreeSixty Group	(g)(h)(i)	Retailing	L+375, 3.8% PIK (3.8% Max PIK)	1.5%	3/1/23		51.6		51.3		46.6
ThreeSixty Group	(g)(h)(i)	Retailing	L+375, 3.8% PIK (3.8% Max PIK)	1.5%	3/1/23		51.3		50.9		46.3
Torrid Inc	(g)(h)	Retailing	L+675	1.0%	12/16/24		26.3		26.0		26.3
Trace3 Inc	(g)(h)	Software & Services	L+675	1.0%	8/3/24		89.0		89.0		89.0
Transaction Services Group Ltd	(g)(l)	Software & Services	B+600	0.0%	10/15/26	A$	7.6		5.0		5.5

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes		Industry	Rate^(b)		Floor		Maturity		Principal Amount^(c)		Amortized Cost			Fair Value^(d)
Transaction Services Group Ltd		(g)(h)(l)	Software & Services		L+600		0.0%		10/15/26	$	15.9	$	15.9		$	14.8
Transaction Services Group Ltd		(g)(l)	Software & Services		L+600		0.0%		10/15/26	£	6.1		7.8			7.8
Truck-Lite Co LLC		(g)	Capital Goods		L+625		1.0%		12/13/24	$	9.3		9.2			9.0
Truck-Lite Co LLC		(v)	Capital Goods		L+625		1.0%		12/13/24		2.5		2.5			2.5
Truck-Lite Co LLC		(g)(h)(i)	Capital Goods		L+625		1.0%		12/13/26		125.4		124.1			121.8
Utility One Source LP		(h)(x)	Capital Goods		L+425		0.0%		4/18/25		0.0		0.0			0.0
Virgin Pulse Inc		(g)(h)(i)	Software & Services		L+650		1.0%		5/22/25		115.6		114.9			115.6
Warren Resources Inc		(g)(h)	Energy		L+900, 1.0% PIK (1.0% Max PIK)		1.0%		5/21/21		0.7		0.7			0.7
Wheels Up Partners LLC		(g)	Transportation		L+855		1.0%		10/15/21		4.3		4.3			4.3
Wheels Up Partners LLC		(g)	Transportation		L+855		1.0%		7/15/22		4.6		4.6			4.6
Wheels Up Partners LLC		(g)	Transportation		L+710		1.0%		6/30/24		16.9		16.9			17.1
Wheels Up Partners LLC		(g)	Transportation		L+710		1.0%		11/1/24		7.0		7.0			7.1
Wheels Up Partners LLC		(g)	Transportation		L+710		1.0%		12/21/24		14.9		14.9			15.1
Wheels Up Partners LLC		(g)	Transportation		L+710		1.0%		12/21/24		11.7		11.6			11.8
Zeta Interactive Holdings Corp		(g)(h)	Software & Services		L+750		1.0%		7/29/22		15.8		15.8			15.8

Total Senior Secured Loans—First Lien													3,750.9			3,603.5
Unfunded Loan Commitments													(154.0	)		(154.0	)

Net Senior Secured Loans—First Lien													3,596.9			3,449.5

Senior Secured Loans—Second Lien—28.4%
Abaco Systems, Inc		(g)	Capital Goods		L+1,050		1.0%		6/7/22		63.4		63.0			63.4
Amtek Global Technology Pte Ltd		(g)(j)(l)(n)(w)(z)	Automobiles & Components		E+500 PIK (E+500 Max PIK)		0.0%		4/4/24	€	44.9		51.3			0.1
athenahealth Inc		(g)	Health Care Equipment & Services		L+850		0.0%		2/11/27	$	112.9		112.0			114.0
Belk Inc		(g)(n)(w)	Retailing		10.5%				6/12/23		19.5		14.0			2.7
Belk Inc		(g)(n)(w)	Retailing		10.5%				10/29/25		99.6		90.5			13.9
Byrider Finance LLC		(f)(g)	Automobiles & Components		L+1,000, 0.5% PIK (0.5% Max PIK)		1.3%		6/7/22		18.0		18.0			17.9
Culligan International Co		(g)(h)	Household & Personal Products		L+850		1.0%		12/13/24		85.0		84.4			85.0
Datatel Inc		(g)	Software & Services		L+800		1.0%		10/9/28		53.7		53.0			53.0
Gruden Acquisition Inc		(g)(x)	Transportation		L+850		1.0%		8/18/23		10.0		9.8			9.2
MedAssets Inc		(g)	Health Care Equipment & Services		L+975		1.0%		4/20/23		63.0		62.2			62.6
NBG Home		(g)(n)(w)	Consumer Durables & Apparel		L+1,275 PIK (L+1,275 Max PIK)		1.0%		9/30/24		27.6		24.7			17.0
NEP Broadcasting LLC		(g)(x)	Media & Entertainment		L+700		0.0%		10/19/26		1.0		1.0			0.9
OEConnection LLC		(g)	Software & Services		L+825		0.0%		9/25/27		34.1		33.7			33.8
Paradigm Acquisition Corp		(g)(x)	Health Care Equipment & Services		L+750		0.0%		10/26/26		1.9		1.9			1.7
Peak 10 Holding Corp		(g)(n)(w)(x)	Telecommunication Services		L+725		0.0%		8/1/25		0.2		0.2			0.1
Petrochoice Holdings Inc		(g)	Capital Goods		L+875		1.0%		8/21/23		65.0		64.1			54.9
Polyconcept North America Inc		(g)	Household & Personal Products		11.0% PIK (11.0% Max PIK)				2/16/24		8.7		8.6			7.5
Pretium Packaging LLC		(g)	Household & Personal Products		L+825		0.8%		11/6/28		18.6		18.3			18.3
Pure Fishing Inc		(g)	Consumer Durables & Apparel		L+838		1.0%		12/31/26		81.1		80.4			76.0
Rise Baking Company		(g)(h)	Food, Beverage & Tobacco		L+800		1.0%		8/9/26		31.1		30.9			29.1
Sequa Corp		(h)(x)	Capital Goods		L+1,075, 0.0% PIK (6.8% Max PIK)		1.0%		4/28/24		3.6		3.5			3.1

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes		Industry	Rate^(b)		Floor		Maturity		Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Sorenson Communications LLC		(f)(h)	Telecommunication Services		L+1,150 PIK (L+1,150 Max PIK)				4/30/25	$	18.4	$	18.0	$	18.4
Sound United LLC		(g)(z)	Consumer Durables & Apparel		13.5% PIK (13.5% Max PIK)				6/30/24		21.8		20.9		20.9
Sparta Systems Inc		(g)	Software & Services		L+825		1.0%		8/21/25		35.1		34.7		34.9
Sungard Availability Services Capital Inc		(g)	Software & Services		L+400, 2.8% PIK (2.8 % Max PIK)		1.0%		8/1/24		1.9		1.9		1.9
Vestcom International Inc		(g)(h)	Consumer Services		L+825		1.0%		12/19/24		70.5		70.1		70.5
WireCo WorldGroup Inc		(h)(x)	Capital Goods		L+900		1.0%		9/30/24		3.4		3.4		2.8
Wittur Holding GmbH		(g)(l)	Capital Goods		E+850, 0.5% PIK (0.5% Max PIK)		0.0%		9/23/27	€	56.7		60.6		66.3

Total Senior Secured Loans—Second Lien													1,035.1		879.9

Other Senior Secured Debt—2.8%
Advanced Lighting Technologies Inc		(g)(n)(w)(z)	Materials		L+1,700 PIK (L+1,700 Max PIK)		1.0%		10/4/23	$	38.3		23.6		—
Angelica Corp		(n)(t)(w)	Health Care Equipment & Services		10.0% PIK (10.0% Max PIK)				12/30/22		48.4		42.3		23.9
Black Swan Energy Ltd		(g)(l)	Energy		9.0%				1/20/24		6.0		6.0		5.9
JW Aluminum Co		(g)(x)(y)	Materials		10.3%				6/1/26		39.3		39.4		41.8
Lycra		(g)(l)(x)	Consumer Durables & Apparel		7.5%				5/1/25		5.4		5.4		4.8
TruckPro LLC		(g)(x)	Capital Goods		11.0%				10/15/24		2.8		2.6		3.0
Velvet Energy Ltd		(g)(l)	Energy		9.0%				10/5/23		7.5		7.5		6.2

Total Other Senior Secured Debt													126.8		85.6

Subordinated Debt—5.5%
All Systems Holding LLC		(g)	Commercial & Professional Services		10.0% PIK (10.0% Max PIK)				10/31/22		0.0		0.0		0.0
Ardonagh Group Ltd		(g)(l)(x)	Insurance		11.5%				1/15/27		0.8		0.8		0.8
athenahealth Inc		(g)	Health Care Equipment & Services		L+1,113 PIK (L+1,113 Max PIK)				2/11/27		71.2		71.2		71.5
ClubCorp Club Operations Inc		(g)(x)	Consumer Services		8.5				9/15/25		19.0		18.8		17.8
Cornerstone (Ply Gem Holdings Inc)		(g)(x)	Capital Goods		8.0%				4/15/26		0.2		0.2		0.2
Craftworks Rest & Breweries Group Inc		(g)(n)(w)	Consumer Services		14.0% PIK (14.0% Max PIK)				11/1/24		7.3		7.2		—
Hilding Anders		(g)(l)(n)(z)	Consumer Durables & Apparel							€	110.5		—		—
Hilding Anders		(g)(l)(n)(z)	Consumer Durables & Apparel								24.8		26.9		30.3
Hilding Anders		(g)(l)(n)(w)(z)	Consumer Durables & Apparel		13.0% PIK (13.0% Max PIK)				6/30/21		118.2		99.4		32.4
Legends Hospitality LLC		(g)	Consumer Services		L+1,000 PIK (L+1,000 Max PIK)		1.0%		5/6/26	$	18.2		17.9		17.9

Total Subordinated Debt													242.4		170.9

Unfunded Debt Commitments													—		—

Net Subordinated Debt													242.4		170.9

Portfolio Company^(a)

Footnotes

Industry

Rate^(b)

Floor

Maturity

Principal
Amount^(c)/
Shares

Amortized
Cost

Fair
Value^(d)

Asset Based Finance—30.8%

801 5th Ave, Seattle, Private Equity

(g)(l)(n)(z)

Real Estate

4,529,676

4.5

10.3

801 5th Ave, Seattle, Structure Mezzanine

(g)(l)(z)

Real Estate

8.0%, 3.0% PIK (3.0% Max PIK)

12/19/29

29.4

Abacus JV, Private Equity

(g)(l)

Insurance

29,115,242

29.1

31.0

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)/ Shares		Amortized Cost		Fair Value^(d)
Accelerator Investments Aggregator LP, Private Equity	(g)(l)(n)	Diversified Financials					4,285,347	$	5.0	$	3.8
Altavair AirFinance, Private Equity	(g)(l)	Capital Goods					46,599,209		46.6		46.6
AMPLIT JV LP, Limited Partnership Interest	(g)(l)(n)	Diversified Financials					N/A		3.8		—
Australis Maritime, Common Stock	(g)(l)	Transportation					19,792,141		19.8		19.6
Avida Holding AB, Common Stock	(g)(l)(n)(z)	Diversified Financials					328,271,754		35.5		38.3
Bank of Ireland, Class B Credit Linked Floating Rate Note	(j)(l)	Banks	L+1,185		12/4/27		14.7		14.7		14.5
Byrider Finance LLC, Structured Mezzanine	(g)	Automobiles & Components	L+1,050	0.3%	6/3/28		2.1		2.1		2.1
Byrider Finance LLC, Structured Mezzanine	(v)	Automobiles & Components	L+1,050	0.3%	6/3/28		5.5		5.5		5.5
Byrider Finance LLC, Sub Note	(g)(l)	Automobiles & Components	8.7%		2/17/25		2.1		2.0		2.2
Callodine Commercial Finance LLC, 2L Term Loan A	(g)	Diversified Financials	L+900	1.0%	11/3/25		37.5		37.5		37.5
Callodine Commercial Finance LLC, 2L Term Loan B	(v)	Diversified Financials	L+900	1.0%	11/3/25		12.1		12.1		12.1
Capital Automotive LP, Private Equity	(g)(l)(n)	Real Estate					10,001,344		10.0		10.0
Capital Automotive LP, Structured Mezzanine	(g)(l)	Real Estate	11.0% PIK (11.0% Max PIK)		12/22/28		20.0		20.0		20.0
Global Jet Capital LLC, Preferred Stock	(f)(g)(n)	Commercial & Professional Services					69,429,554		69.4		—
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/30/25		1.3		1.2		1.2
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		4/30/25		8.5		7.5		7.4
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/3/25		1.7		1.5		1.5
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		9/29/25		1.6		1.5		1.4
Global Jet Capital LLC, Structured Mezzanine	(f)(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		99.2		87.9		87.5
Global Jet Capital LLC, Structured Mezzanine	(f)(g)(l)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/4/25		22.1		19.6		19.5
Global Jet Capital LLC, Structured Mezzanine	(f)(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		2.3		2.0		2.0
Global Jet Capital LLC, Structured Mezzanine	(f)(g)(l)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/9/25		17.6		15.6		15.5
Global Jet Capital LLC, Structured Mezzanine	(f)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		8.5		7.5		7.5
Global Jet Capital LLC, Structured Mezzanine	(f)(l)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		1/29/26		1.9		1.7		1.7
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		4/14/26		21.2		18.8		18.7
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)		12/2/26		20.9		18.5		18.4
Global Lending Services LLC, Private Equity	(g)(l)	Diversified Financials					5,092,915		5.1		5.7
Global Lending Services LLC, Private Equity	(g)(l)	Diversified Financials					1,836,896		1.8		1.9
Home Partners JV, Common Stock	(g)(l)(n)(y)	Real Estate					16,886,437		16.9		21.5
Home Partners JV, Private Equity	(g)(l)(n)(x)(y)	Real Estate					585,960		0.6		0.0
Home Partners JV, Structured Mezzanine	(g)(l)(y)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		38.5		38.5		38.5
Home Partners JV, Structured Mezzanine	(l)(v)(y)	Real Estate	11.0% PIK (11.0% Max PIK)		3/25/29		9.7		9.7		9.7
Kilter Finance, Preferred Stock	(g)(l)(z)	Insurance	6.0%, 6.0% PIK (6.0% Max PIK)				228,173		0.2		0.2
Kilter Finance, Private Equity	(g)(l)(n)(z)	Insurance					247,441		0.2		0.2
KKR Central Park Leasing Aggregator L.P., Partnership Interest	(g)(l)	Capital Goods	16.0%		5/31/23		N/A		39.1		38.8
KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest	(g)(l)	Capital Goods					18,232,157		18.2		20.2

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)/ Shares		Amortized Cost			Fair Value^(d)
Lenovo Group Ltd, Structured Mezzanine	(g)(l)	Technology Hardware & Equipment	8.0%		6/22/22	€	7.4	$	8.4		$	9.0
Lenovo Group Ltd, Structured Mezzanine	(g)(l)	Technology Hardware & Equipment	12.0%		6/22/22	$	4.7		5.3			5.7
Opendoor Labs Inc, 2L Term Loan	(g)(l)	Real Estate	10.0		1/23/26	$	23.6		23.6			23.6
Opendoor Labs Inc, 2L Term Loan	(l)(v)	Real Estate	10.0		1/23/26	$	47.1		47.1			47.1
Orchard Marine Limited, Class B Common Stock	(g)(l)(n)(y)	Transportation					1,964		3.1			—
Orchard Marine Limited, Series A Preferred Stock	(g)(l)(n)(y)	Transportation					62,976		62.0			24.6
Prime ST LLC, Private Equity	(g)(l)(n)(z)	Real Estate					3,058,733		3.1			3.9
Prime ST LLC, Structured Mezzanine	(g)(l)(z)	Real Estate	5.0%, 6.0% PIK (6.0% Max PIK)		3/12/30	$	22.8		22.8			22.8
Rampart CLO 2007 1A Class Subord.	(g)(l)(n)	Diversified Financials			10/25/21	$	10.0		—			—
Sofi Lending Corp, Purchase Facility	(g)(l)	Diversified Financials					32,231,687		32.2			32.6
Star Mountain Diversified Credit Income Fund III, LP, Private Equity	(l)(p)	Diversified Financials					12,500,000		12.5			12.1
Toorak Capital Funding LLC, Membership Interest	(g)(l)(z)	Real Estate					N/A		5.5			6.6
Toorak Capital Partners LLC, Private Equity	(g)(z)	Real Estate					N/A		195.8			235.9
Wind River CLO Ltd. 2012 1A Class Subord. B	(g)(l)(n)	Diversified Financials			1/15/26	$	42.5		17.5			—

Total Asset Based Finance									1,099.5			1,025.8
Unfunded Asset Based Finance Commitments									(74.4	)		(74.4	)

Net Asset Based Finance									1,025.1			951.4

Strategic Credit Opportunities, LLC—23.0%
Strategic Credit Opportunities Partners, LLC	(g)(l)(z)	Diversified Financials				$	810.3		810.3			712.5

Total Strategic Credit Opportunities Partners									810.3			712.5


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Number of Shares		Amortized Cost		Fair Value^(d)
Equity/Other—17.1%^(m)
Advanced Lighting Technologies Inc, Common Stock	(g)(n)(z)	Materials					587,637	$	16.5	$	—
Advanced Lighting Technologies Inc, Warrant	(g)(n)(z)	Materials			10/4/27		9,262		0.1		—
Alion Science & Technology Corp, Class A Membership Interest	(g)(n)	Capital Goods					7,350,267		7.3		12.4
All Systems Holding LLC, Common Stock	(g)(n)	Commercial & Professional Services					586,763		0.6		0.9
Amtek Global Technology Pte Ltd, Ordinary Shares	(j)(l)(n)(z)	Automobiles & Components					5,735,804,056		30.7		—
Amtek Global Technology Pte Ltd, Private Equity	(j)(l)(n)(z)	Automobiles & Components					4,097		—		—
Amtek Global Technology Pte Ltd, Trade Claim	(j)(l)(n)(z)	Automobiles & Components					1,190,759		1.0		—
Angelica Corp, Limited Partnership Interest	(n)(t)	Health Care Equipment & Services					877,044		47.6		—
Ap Plasman Inc, Warrant	(g)(l)(n)	Capital Goods			5/25/26		6,985		2.5		—
Ardonagh Ltd, Ordinary Shares	(g)(l)(n)	Insurance					16,450		—		—
Ardonagh Ltd, Ordinary Shares	(g)(l)(n)	Insurance					116,814		0.2		0.2
Ardonagh Ltd, Preferred Stock	(g)(l)(n)	Insurance					6,113,719		9.1		9.7
Arena Energy LP, Warrants	(g)(n)	Energy					9,740,932		0.0		0.0

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Number of Shares		Amortized Cost		Fair Value^(d)
Ascent Resources Utica Holdings LLC / ARU Finance Corp, Common Stock	(n)(o)	Energy					10,193	$	9.7	$	2.3
Ascent Resources Utica Holdings LLC / ARU Finance Corp, Trade Claim	(o)	Energy					86,607,143		19.4		19.3
ASG Technologies, Common Stock	(g)(n)(y)	Software & Services					1,149,421		23.4		42.7
ASG Technologies, Warrant	(g)(n)(y)	Software & Services			6/27/22		229,541		6.5		3.5
Aspect Software Inc, Common Stock	(g)(n)	Software & Services					161,261		0.3		0.3
Aspect Software Inc, Warrant	(g)(n)	Software & Services			1/15/24		161,008		—		0.2
AVF Parent LLC, Trade Claim	(g)(n)	Retailing					56,969		—		—
Belk Inc, Units	(g)(n)	Retailing					1,642		7.8		—
Borden (New Dairy Opco), Common Stock	(n)(t)(y)	Food, Beverage & Tobacco					4,466,800		3.9		3.2
Cengage Learning, Inc, Common Stock	(g)(n)	Media & Entertainment					227,802		7.5		3.3
Charlotte Russe Inc, Common Stock	(g)(n)(y)	Retailing					22,575		12.5		—
Chisholm Oil & Gas Operating LLC, Series A Units	(n)(p)	Energy					75,000		0.1		—
CTI Foods Holding Co LLC, Common Stock	(g)(n)	Food, Beverage & Tobacco					5,836		0.7		0.0
Directed LLC, Warrant	(g)(n)	Consumer Durables & Apparel			12/31/25		649,538		—		—
Empire Today LLC, Common Stock	(g)(n)	Retailing					375		1.1		3.3
Fronton BV, Common Stock	(n)(p)(y)	Consumer Services					14,943		—		1.2
Genesys Telecommunications Laboratories Inc, Class A Shares	(g)(n)	Technology Hardware & Equipment					40,529		—		—
Genesys Telecommunications Laboratories Inc, Ordinary Shares	(g)(n)	Technology Hardware & Equipment					41,339		—		—
Genesys Telecommunications Laboratories Inc, Preferred Stock	(g)(n)	Technology Hardware & Equipment					1,050,465		—		—
Harvey Industries Inc, Common Stock	(g)(n)	Capital Goods					2,333,333		—		1.9
Hilding Anders, Class A Common Stock	(g)(l)(n)(z)	Consumer Durables & Apparel					4,503,411		0.1		—
Hilding Anders, Class B Common Stock	(g)(l)(n)(z)	Consumer Durables & Apparel					574,791		—		—
Hilding Anders, Class C Common Stock	(g)(l)(n)(z)	Consumer Durables & Apparel					213,201		—		—
Hilding Anders, Equity Options	(g)(l)(n)(z)	Consumer Durables & Apparel			11/30/25		236,160,807		15.0		—
HM Dunn Co Inc, Preferred Stock, Series A	(g)(n)(y)	Capital Goods					214		0.0		—
HM Dunn Co Inc, Preferred Stock, Series B	(g)(n)(y)	Capital Goods					214		—		—
Home Partners of America Inc, Common Stock	(g)(n)(y)	Real Estate					81,625		83.6		130.5
Home Partners of America Inc, Warrant	(g)(n)(y)	Real Estate			8/7/24		2,675		0.3		2.1
Imagine Communications Corp, Common Stock	(g)(n)	Media & Entertainment					33,034		3.8		2.9
Jones Apparel Holdings, Inc., Common Stock	(g)(n)	Consumer Durables & Apparel					5,451		0.9		—
JW Aluminum Co, Common Stock	(f)(g)(n)(y)	Materials					1,474		—		—
JW Aluminum Co, Preferred Stock	(f)(g)(y)	Materials	12.5% PIK (12.5% Max PIK)		2/15/28		8,404		107.3		93.7
Maverick Natural Resources, Common Stock	(n)	Energy					160,101		44.0		48.6
MB Precision Holdings LLC, Class A—2 Units	(n)(p)	Capital Goods					1,426,110		0.5		—
Miami Beach Medical Group LLC, Common Stock	(g)(n)	Health Care Equipment & Services					269,107		0.3		0.3
Micronics Filtration Holdings Inc, Common Stock	(g)(n)(y)	Capital Goods					53,073		0.6		—
Micronics Filtration Holdings Inc, Preferred Stock, Series A	(g)(n)(y)	Capital Goods					55		0.6		—

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes		Industry	Rate^(b)		Floor	Maturity		Number of Shares		Amortized Cost		Fair Value^(d)
Micronics Filtration Holdings Inc, Preferred Stock, Series B		(g)(n)(y)	Capital Goods							23	$	0.2	$	—
Micronics Filtration Holdings Inc, Preferred Stock, Series B PIK		(g)(y)	Capital Goods		3.0% PIK (3.0% Max PIK)			3/31/24		112,780		—		—
Micronics Filtration Holdings Inc, Preferred Stock, Series C PIK		(g)(y)	Capital Goods		7.5% PIK (7.5% Max PIK)			3/31/24		54,000		—		—
NBG Home, Common Stock		(g)(n)	Consumer Durables & Apparel							1,903		2.6		—
Nine West Holdings Inc, Common Stock		(g)(n)	Consumer Durables & Apparel							5,451		6.5		—
One Call Care Management Inc, Common Stock		(g)(n)(y)	Health Care Equipment & Services							4,370,566,806		3.0		2.4
One Call Care Management Inc, Preferred Stock A		(g)(n)(y)	Health Care Equipment & Services							466,194		32.3		25.5
One Call Care Management Inc, Preferred Stock B		(g)(y)	Health Care Equipment & Services		9.0% PIK (9.0% Max PIK)			10/25/29		9,615,247		9.8		10.6
Petroplex Acidizing Inc, Preferred Stock A		(g)(y)	Energy		2.0% PIK (2.0% Max PIK)					24,642,082		4.5		—
Petroplex Acidizing Inc, Warrant		(g)(n)(y)	Energy					12/15/26		8		—		—
Polyconcept North America Inc, Class A—1 Units		(g)(n)	Household & Personal Products							29,376		2.9		2.1
Proserv Acquisition LLC, Class A Common Units		(g)(l)(n)(y)	Energy							2,635,005		33.5		9.0
Proserv Acquisition LLC, Class A Preferred Units		(g)(l)(n)(y)	Energy							837,780		5.4		9.5
Quorum Health Corp, Common Stock		(g)(n)	Health Care Equipment & Services							32,622		0.3		0.3
Quorum Health Corp, Trade Claim		(g)(n)	Health Care Equipment & Services							3,334,000		0.3		0.3
Quorum Health Corp, Trust Initial Funding Units		(g)(n)	Health Care Equipment & Services							57,595		0.1		0.1
Ridgeback Resources Inc, Common Stock		(f)(l)(n)	Energy							324,954		2.0		1.3
Sequential Brands Group Inc., Common Stock		(g)(x)	Consumer Durables & Apparel							5,167		2.8		0.1
Sorenson Communications LLC, Common Stock		(f)(n)	Telecommunication Services							46,163		—		42.3
Sound United LLC, Class A Units		(g)(n)(z)	Consumer Durables & Apparel							649,538		1.1		—
Sound United LLC, Common Stock		(g)(n)(z)	Consumer Durables & Apparel							12,857,143		17.3		29.3
Sound United LLC, Series I Units		(g)(n)(z)	Consumer Durables & Apparel							308,948		0.5		—
Sound United LLC, Series II Units		(n)(p)(z)	Consumer Durables & Apparel							316,770		0.5		—
SSC (Lux) Limited S.a r.l., Common Stock		(g)(l)(n)	Health Care Equipment & Services							113,636		2.3		4.9
Stuart Weitzman Inc, Common Stock		(g)(n)	Consumer Durables & Apparel							5,451		—		—
Sungard Availability Services Capital Inc, Common Stock		(f)(g)(n)	Software & Services							44,857		3.1		1.5
Sweet Harvest Foods Management Co, Warrant		(g)(i)(n)	Food & Staples Retailing					6/30/30		2,883,007		—		1.1
ThermaSys Corp, Common Stock		(f)(g)(n)(y)	Capital Goods							17,383,026		10.2		—
ThermaSys Corp, Preferred Stock		(g)(n)(y)	Capital Goods							1,529		1.7		—
Trace3 Inc, Common Stock		(g)(n)	Software & Services							19,312		0.2		1.4
Versatile Processing Group Inc, Class A—2 Units		(f)(n)	Materials							3,637,500		3.6		—
Warren Resources Inc, Common Stock		(g)(n)	Energy							113,515		0.5		0.1
Zeta Interactive Holdings Corp, Preferred Stock, Series E—1		(g)(n)	Software & Services							215,662		1.7		2.2
Zeta Interactive Holdings Corp, Preferred Stock, Series F		(g)(n)	Software & Services							196,151		1.7		3.4
Zeta Interactive Holdings Corp, Warrant		(g)(n)	Software & Services					4/20/27		29,422		—		0.1

Total Equity/Other												616.1		530.0
TOTAL INVESTMENTS—219.0%											$	7,452.7		6,779.8

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)

Portfolio Company^(a)

Footnotes

Industry

Rate^(b)

Floor

Maturity

Number of
Shares

Amortized
Cost

Fair
Value^(d)

LIABILITIES IN EXCESS OF OTHER ASSETS—(119.0%)

(3,683.8

)

NET ASSETS—100%

3,096.0

Foreign currency forward contracts


Foreign Currency	Settlement Date		Counterparty	Amount and Transaction		US$ Value at Settlement Date			US$ Value at December 31, 2020			Unrealized Appreciation (Depreciation)
AUD		10/17/2022	JP Morgan Chase Bank	A$	3.0 Sold	$	2.1		$	2.3		$	(0.2	)
EUR		5/6/2022	JP Morgan Chase Bank	€	6.1 Sold		7.5			7.5			—
EUR		7/17/2023	JP Morgan Chase Bank	€	1.3 Sold		1.7			1.6			0.1
EUR		8/8/2025	JP Morgan Chase Bank	€	4.8 Sold		5.7			6.1			(0.4	)
GBP		10/13/2021	JP Morgan Chase Bank	£	0.6 Sold		0.9			0.8			0.1
GBP		10/13/2021	JP Morgan Chase Bank	£	0.6 Bought		(0.8	)		(0.8	)		—
GBP		1/11/2023	JP Morgan Chase Bank	£	2.0 Bought		(2.7	)		(2.7	)		—
GBP		1/11/2023	JP Morgan Chase Bank	£	7.0 Sold		9.4			9.6			(0.2	)
GBP		1/11/2023	JP Morgan Chase Bank	£	1.9 Sold		2.9			2.7			0.2
GBP		1/11/2023	JP Morgan Chase Bank	£	1.7 Sold		2.6			2.4			0.2
GBP		1/11/2023	JP Morgan Chase Bank	£	3.4 Sold		4.8			4.7			0.1
GBP		1/11/2023	JP Morgan Chase Bank	£	1.4 Sold		1.9			1.9			—
NOK		8/8/2025	JP Morgan Chase Bank	NOK	49.1 Sold		5.2			5.6			(0.4	)
SEK		8/8/2025	JP Morgan Chase Bank	SEK	119.3 Sold		13.3			14.8			(1.5	)

Total						$	54.5		$	56.5		$	(2.0	)

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

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2020, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 0.24%, the Euro Interbank Offered Rate, or EURIBOR, was (0.55)%, Canadian Dollar Offer Rate, or CDOR, was 0.48% and the U.S. Prime Lending Rate, or Prime, was 3.25%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

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

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

(e)

Not used.

(f)	Security or portion thereof held within Race Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 9).

(g)	Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)

(h)	Security or portion thereof held within FS KKR MM CLO 1 LLC (see Note 9).

(i)	Security or portion thereof was held within CCT Tokyo Funding LLC and was pledged as collateral supporting the amounts outstanding under the revolving credit facility with Sumitomo Mitsui Banking Corporation (see Note 9).

(j)	Security or portion thereof was held within CCT Dublin Funding Limited

(k)

Not used.

(l)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2020, 73.4% of the Company’s total assets represented qualifying assets.

(m)	Listed investments may be treated as debt for GAAP or tax purposes.

(n)	Security is non-income producing.

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

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

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

(r)

Not used.

(s)

Not used.

(t)	Security held within CCT Holdings II, LLC, a wholly-owned subsidiary of the Company.

(u)

Not used.

(v)	Security is an unfunded commitment. Reflects the stated spread at the time of commitment, but may not be the actual rate received upon funding.

(w)	Asset is on non-accrual status.

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

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)

(y)

Under the Investment Company Act of 1940, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2020, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the year ended December 31, 2020:


Portfolio Company	Fair Value at December 31, 2019		Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2020		Interest Income⁽³⁾		PIK Income⁽³⁾		Fee Income⁽³⁾		Dividend Income⁽³⁾
Senior Secured Loans—First Lien
AltEn, LLC	$	1.5	$	—	$	—		$	(2.7	)	$	1.2		$	—	$	—	$	—		—		—
Borden (New Dairy Opco)		—		7.6		—			—			—			7.6		0.1		—		—		—
Borden (New Dairy Opco)		—		16.8		—			—			—			16.8		0.6		—		—		—
Borden Dairy Co⁽⁴⁾		—		70.7		(11.6	)		(35.0	)		(24.1	)		—		—		—		—		—
HM Dunn Co Inc		0.4		—		—			—			(0.1	)		0.3		—		—		—		—
HM Dunn Co Inc		0.1		0.2		—			—			(0.1	)		0.2		—		—		—		—
MB Precision Holdings LLC		4.6		0.2		(3.9	)		(0.8	)		(0.1	)		—		0.3		—		—		—
Micronics Filtration Holdings Inc⁽⁴⁾		—		61.6		—			(16.6	)		(9.5	)		35.5		—		—		—		—
One Call Care Management Inc		4.6		0.1		—			—			—			4.7		0.5		—		—		—
Petroplex Acidizing Inc		22.2		—		—			—			(17.7	)		4.5		—		—		—		—
Safariland LLC		2.6		—		(2.5	)		(0.3	)		0.2			—		—		—		—		—
Safariland LLC		116.2		8.8		(117.4	)		(14.7	)		7.1			—		1.3		—		—		—
ThermaSys Corp		6.4		0.8		—			—			(3.3	)		3.9		0.2		0.6		—		—
Z Gallerie LLC		—		0.9		(1.5	)		0.6			—			—		—		—		—		—
Senior Secured Loans—Second Lien
Z Gallerie LLC		2.8		—		(2.0	)		(0.9	)		0.1			—		0.1		—		0.1		—
Other Senior Secured Debt
JW Aluminum Co		38.3		2.9		—			—			0.6			41.8		3.9		—		—		—
Mood Media Corp		36.4		3.6		—			(40.5	)		0.5			—		0.4		—		—		—
Z Gallerie LLC		—		—		—			—			—			—		—		—		—		—
Z Gallerie LLC		1.4		—		—			(1.5	)		0.1			—		—		—		0.1		—
Asset Based Finance
Home Partners JV, Common Stock		13.2		4.4		—			—			3.9			21.5		—		—		—		—
Home Partners JV, Private Equity		—		—		—			—			—			—		—		—		—		—
Home Partners JV, Structured Mezzanine		25.0		14.0		(0.5	)		—			—			38.5		—		3.3		—		—
Orchard Marine Limited, Class B Common Stock		—		—		��			—			—			—		—		—		—		—
Orchard Marine Limited, Series A Preferred Stock		22.7		—		—			—			1.9			24.6		—		—		—		—
Equity/Other
AltEn, LLC, Membership Units		—		—		—			(3.0	)		3.0			—		—		—		—		—
ASG Technologies, Common Stock		56.5		—		—			—			(13.8	)		42.7		—		—		—		—
ASG Technologies, Warrants		6.3		—		—			—			(2.8	)		3.5		—		—		—		—
Borden (New Dairy Opco), Common Stock		—		3.9		—			—			(0.7	)		3.2		—				—		—
Charlotte Russe Inc, Common Stock		—		—		—			—			—			—		—		—		—		—
Fronton BV, Common Stock		1.4		—		—			—			(0.2	)		1.2		—		—		—		—
HM Dunn Co Inc, Preferred Stock, Series A		—		—		—			—			—			—		—		—		—		—

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company	Fair Value at December 31, 2019		Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2020		Interest Income⁽³⁾		PIK Income⁽³⁾		Fee Income⁽³⁾		Dividend Income⁽³⁾
HM Dunn Co Inc, Preferred Stock, Series B	$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	—	$	—	$	—
Home Partners of America Inc, Common Stock		134.1		—		—			—			(3.6	)		130.5		—		—		—		—
Home Partners of America Inc, Warrant		2.0		—		—			—			0.1			2.1		—		—		—		—
JW Aluminum Co, Common Stock		—		—		—			—			—			—		—		—		—		—
JW Aluminum Co, Preferred Stock		127.2		16.9		—			—			(50.4	)		93.7		2.4		14.6		—		—
MB Precision Holdings LLC, Class A—2 Units		—		—		(0.5	)		—			0.5			—		—		—		—		—
MB Precision Holdings LLC, Preferred Stock		1.2		—		—			(1.9	)		0.7			—		—		—		—		—
Micronics Filtration Holdings Inc, Common Stock⁽⁴⁾		—		0.6		—			—			(0.6	)		—		—		—		—		—
Micronics Filtration Holdings Inc, Preferred Stock, Series A⁽⁴⁾		—		0.6		—			—			(0.6	)		—		—		—		—		—
Micronics Filtration Holdings Inc, Preferred Stock, Series B⁽⁴⁾		—		0.2		—			—			(0.2	)		—		—		—		—		—
Micronics Filtration Holdings Inc, Preferred Stock, Series B PIK⁽⁴⁾		—		—		—			—			—			—		—		—		—		—
Micronics Filtration Holdings Inc, Preferred Stock, Series C PIK⁽⁴⁾		—		—		—			—			—			—		—		—		—		—
Mood Media Corp, Common Stock		0.9		—		—			(11.8	)		10.9			—		—		—		—		—
Mood Media LLC, Class A Warrants		—		—		—			—			—			—		—		—		—		—
Mood Media LLC, Class B Warrants		—		—		—			—			—			—		—		—		—		—
Mood Media LLC, Class C Warrants		—		—		—			—			—			—		—		—		—		—
One Call Care Management Inc, Common Stock		3.0		—		—			—			(0.6	)		2.4		—		—		—		—
One Call Care Management Inc, Preferred Stock A		32.3		—		—			—			(6.8	)		25.5		—		—		—		—
One Call Care Management Inc, Preferred Stock B		9.8		—		—			—			0.8			10.6		—		0.9		—		—
Petroplex Acidizing Inc, Preferred Stock A		4.2		0.3		—			—			(4.5	)		—		—		—		—		0.4
Petroplex Acidizing Inc, Warrant		—		—		—			—			—			—		—		—		—		—
Proserv Acquisition LLC, Class A Common Units		14.4		—		—			—			(5.4	)		9.0		—		—		—		—
Proserv Acquisition LLC, Class A Preferred Units		9.5		—		—			—			—			9.5		—		—		—		—
Safariland LLC, Common Equity		6.4		—		(1.0	)		(2.0	)		(3.4	)		—		—		—		—		—
ThermaSys Corp, Common Stock		6.9		—		—			—			(6.9	)		—		—		—		—		—
ThermaSys Corp, Preferred Stock		1.5		—		—			—			(1.5	)		—		—		—		—		—
Z Gallerie LLC, Common Stock		0.7		—		—			(0.7	)		—			—		—		—		—		—

Total	$	716.7	$	215.1	$	(140.9	)	$	(131.8	)	$	(125.3	)	$	533.8	$	9.8	$	19.4	$	0.2	$	0.4

(1)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, PIK interest, the amortization of unearned income, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.

(2)

Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.

(3)	Interest, PIK, fee and dividend income presented for the full year ended December 31, 2020.

(4)	The Company held this investment as of December 31, 2019 but it was not deemed to be an “affiliated person” of the portfolio company as of December 31, 2019. Transfers in or out have been presented at amortized cost.

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)

(z)

Under the Investment Company Act of 1940, as amended, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2020, the Company held investments in one portfolio company of which it is deemed to be an “affiliated person” and deemed to “control”. During the year ended December 31, 2020, the Company disposed of investments in one portfolio of which it was deemed to be an “affiliated person” and deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person and deemed to control for the year ended December 31, 2020:


Portfolio Company	Fair Value at December 31, 2019		Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2020		Interest Income⁽³⁾		PIK Income⁽³⁾		Fee Income⁽³⁾		Dividend Income⁽³⁾
Senior Secured Loans—First Lien
Advanced Lighting Technologies Inc	$	13.1	$	—	$	(1.5	)	$	—		$	0.4		$	12.0	$	—	$	—	$	—	$	—
Amtek Global Technology Pte Ltd		55.3		5.8		—			—			(1.4	)		59.7		3.0		—		—		—
Sound United LLC		—		27.4		(12.5	)		—			—			14.9		0.3		—		—		—
Senior Secured Loans—Second Lien
Amtek Global Technology Pte Ltd		36.3		6.5		(0.1	)		—			(42.6	)		0.1		—		—		—		—
Sound United LLC		—		22.8		(1.9	)		—			—			20.9		—		0.7		—		—
Other Senior Secured Debt
Advanced Lighting Technologies Inc		—		—		—			—			—			—		—		—		—		—
Subordinated Debt
Hilding Anders		76.8		—		(26.9	)		(3.0	)		(14.5	)		32.4		—		—		—		—
Hilding Anders		0.2		—		—			(0.5	)		0.3			—		—		—		—		—
Hilding Anders		—		—		—			(0.9	)		0.9			—		—		—		—		—
Hilding Anders		3.6		—		—			(12.9	)		9.3			—		—		—		—		—
Hilding Anders		—		—		—			—			—			—		—		—		—		—
Hilding Anders		—		26.9		—			—			3.4			30.3		—		—		—		—
Asset Based Finance
801 5th Ave, Seattle, Structure Mezzanine		52.9		0.9		(24.4	)		—			—			29.4		3.2		1.4		—		—
801 5th Ave, Seattle, Private Equity		8.8		—		(6.3	)		2.0			5.8			10.3		—		—		—		—
Avida Holding AB, Common Stock		—		35.5		—			—			2.8			38.3		—		—		—		—
Kilter Finance, Preferred Stock		—		0.2		—			—			—			0.2		—		—		—		—
Kilter Finance, Private Equity		—		0.2		—			—			—			0.2		—		—		—		—
Prime ST LLC, Private Equity		—		5.7		(0.3	)		(2.3	)		0.8			3.9		—		—		—		—
Prime ST LLC, Structured Mezzanine		—		41.4		(18.6	)		—			—			22.8		0.6		1.7		—		—
Toorak Capital Funding LLC, Membership Interest		5.3		3.8		(2.5	)		—			—			6.6		—		—		—		—
Toorak Capital Partners LLC, Private Equity		240.5		11.5		(4.4	)		—			(11.7	)		235.9		—		—		—		9.6
Strategic Credit Opportunities Partners, LLC
Strategic Credit Opportunities Partners, LLC		479.0		319.4		—			—			(85.9	)		712.5		—		—		—		70.4
Equity/Other
Advanced Lighting Technologies Inc, Common Stock⁽⁴⁾		—		—		—			—			—			—		—		—		—		—
Advanced Lighting Technologies Inc, Warrant⁽⁴⁾		—		—		—			—			—			—		—		—		—		—
Amtek Global Technology Pte Ltd, Ordinary Shares		5.2		—		—			—			(5.2	)		—		—		—		—		—
Amtek Global Technology Pte Ltd, Trade Claim		0.6		—		—			—			(0.6	)		—		—		—		—		—
Amtek Global Technology Pte Ltd, Private Equity		—		—		—			—			—			—		—		—		—		—
Hilding Anders, ARLE PIK Interest		—		—		—			—			—			—		—		—		—		—
Hilding Anders, Class A Common Stock		—		—		—			—			—			—		—		—		—		—

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2020

(in millions, except share amounts)


Portfolio Company	Fair Value at December 31, 2019		Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2020		Interest Income⁽³⁾		PIK Income⁽³⁾		Fee Income⁽³⁾		Dividend Income⁽³⁾
Hilding Anders, Class B Common Stock	$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	—	$	—	$	—
Hilding Anders, Class C Common Stock		—		—		—			—			—			—		—		—		—		—
Hilding Anders, Equity Options		1.3		—		—			—			(1.3	)		—		—		—		—		—
KKR BPT Holdings Aggregator LLC, Membership Interest		—		—		(0.4	)		(17.2	)		17.6			—		—		—		—		—
Sound United LLC, Class A Units		—		1.1		—			—			(1.1	)		—		—		—		—		—
Sound United LLC, Common Stock		—		17.3		—			—			12.0			29.3		—		—		—		—
Sound United LLC, Series I Units		—		0.5		—			—			(0.5	)		—		—		—		—		—
Sound United LLC, Series II Units		—		0.5		—			—			(0.5	)		—		—		—		—		—

Total	$	978.9	$	527.4	$	(99.8	)	$	(34.8	)	$	(112.0	)	$	1,259.7	$	7.1	$	3.8	$	—	$	80.0

(1)

(2)

(3)	Interest, PIK and dividend income presented for the full year ended December 31, 2020.

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Senior Secured Loans—First Lien—96.3%
5 Arch Income Fund 2, LLC	(l)(q)	Diversified Financials	10.5%		11/18/23	$	32.1	$	32.1	$	31.0
5 Arch Income Fund 2, LLC	(l)(q)(v)	Diversified Financials	10.5%		11/18/23		45.5		45.5		44.0
A10 Capital LLC	(g)(h)	Diversified Financials	L+650	1.0%	5/1/23		30.3		30.0		29.9
A10 Capital LLC	(v)	Diversified Financials	L+650	1.0%	5/1/23		14.1		14.0		13.9
Abaco Systems, Inc	(e)(g)(h)(i)	Capital Goods	L+600	1.0%	12/7/21		61.2		60.1		61.2
ABB CONCISE Optical Group LLC	(g)(h)(x)	Retailing	L+500	1.0%	6/15/23		12.9		13.0		12.3
Accuride Corp	(g)(h)(i)(x)	Capital Goods	L+525	1.0%	11/17/23		17.9		17.7		14.3
Advanced Lighting Technologies Inc	(g)(z)	Materials	L+750	1.0%	10/4/22		20.0		17.9		13.1
Advantage Sales & Marketing Inc	(g)(h)(x)	Commercial & Professional Services	L+325	1.0%	7/23/21		12.3		11.9		11.9
Alion Science & Technology Corp	(h)(x)	Capital Goods	L+450	1.0%	8/19/21		2.7		2.7		2.7
All Systems Holding LLC	(e)(f)(g)(h)	Commercial & Professional Services	L+625	1.0%	10/31/23		86.4		86.4		87.3
All Systems Holding LLC	(g)	Commercial & Professional Services	L+625	1.0%	10/31/23		10.6		10.6		10.7
All Systems Holding LLC	(v)	Commercial & Professional Services	L+625	1.0%	10/31/23		24.8		24.8		25.0
AltEn, LLC	(g)(n)(w)(y)	Energy	L+400 PIK (L+400 Max PIK)	0.0%	9/12/21		35.8		2.7		1.5
AM General LLC	(e)(g)(h)(i)	Capital Goods	L+725	1.0%	12/28/21		147.6		147.1		148.9
American Tire Distributors Inc	(g)(k)(x)	Automobiles & Components	L+750	1.0%	9/2/24		23.2		21.9		20.8
Ammeraal Beltech Holding BV	(g)(l)(x)	Capital Goods	E+375	0.0%	7/30/25	€	2.0		2.3		2.2
Amtek Global Technology Pte Ltd	(j)(l)(z)	Automobiles & Components	E+500	0.0%	4/4/24		49.2		60.5		55.3
Apex Group Limited	(l)(v)	Diversified Financials	L+700	1.3%	6/15/23	$	1.9		1.8		1.9
Apex Group Limited	(g)(h)(l)	Diversified Financials	L+700	1.3%	6/15/25		18.7		18.4		18.8
Apex Group Limited	(g)(l)	Diversified Financials	L+700	1.5%	6/15/25	£	31.6		40.2		42.1
Aspect Software Inc	(v)	Software & Services	L+500	1.0%	7/15/23	$	0.7		0.7		0.7
Aspect Software Inc	(g)	Software & Services	L+500	1.0%	1/15/24		3.0		2.7		2.7
athenahealth Inc	(g)(x)	Health Care Equipment & Services	L+450	0.0%	2/11/26		24.8		25.0		25.0
AVF Parent LLC	(g)(n)(w)	Retailing	L+925 PIK (L+925 Max PIK)	1.3%	3/1/24		56.0		54.3		17.6
Bellatrix Exploration Ltd	(g)(l)	Energy	10.0%		3/31/20		0.7		0.7		0.7
Bellatrix Exploration Ltd	(l)(v)	Energy	10.0%		3/31/20		0.3		0.3		0.3
Berner Food & Beverage LLC	(g)(i)	Food & Staples Retailing	L+875	1.0%	2/2/23		75.8		75.4		76.4
Borden Dairy Co	(g)(n)(w)	Food, Beverage & Tobacco	L+750	1.0%	7/6/23		70.0		67.5		36.2
Brand Energy & Infrastructure Services Inc	(g)(h)(x)	Capital Goods	L+425	1.0%	6/21/24		7.5		7.3		7.5
Camping World Good Sam	(g)(k)(x)	Consumer Durables & Apparel	L+275	0.8%	11/8/23		1.0		0.9		0.9
CEPSA Holdco (Matador Bidco)	(g)(l)(x)	Energy	L+475	0.0%	10/15/26		2.0		2.0		2.0
CHS/Community Health Systems, Inc.	(g)(l)(x)	Health Care Equipment & Services	8.0%		3/15/26		2.6		2.6		2.7
Commercial Barge Line Co	(g)(x)	Transportation	L+875	1.0%	11/12/20		4.4		4.2		2.3
Compassus LLC	(g)(k)(x)	Health Care Equipment & Services	L+500	1.0%	12/31/26		3.5		3.4		3.4
CSafe Global	(g)	Capital Goods	L+650	1.0%	11/1/21		3.8		3.8		3.8
CSafe Global	(v)	Capital Goods	L+650	1.0%	11/1/21		2.1		2.1		2.0
CSafe Global	(g)(h)	Capital Goods	L+650	1.0%	10/31/23		55.5		55.5		55.1
CSafe Global	(v)	Capital Goods	L+650	1.0%	10/31/23		11.7		11.7		11.7
CSM Bakery Products	(g)(h)(x)	Food, Beverage & Tobacco	L+400	1.0%	7/3/20		2.4		2.4		2.4
CTI Foods Holding Co LLC	(g)	Food, Beverage & Tobacco	L+700	1.0%	5/3/24		3.0		3.0		2.9
Distribution International Inc	(g)(h)(x)	Retailing	L+575	1.0%	12/15/23		27.9		24.8		26.9
Eagle Family Foods Inc	(g)	Food, Beverage & Tobacco	L+650	1.0%	6/14/23		1.3		1.3		1.2
Eagle Family Foods Inc	(v)	Food, Beverage & Tobacco	L+650	1.0%	6/14/23		5.9		5.8		5.7
Eagle Family Foods Inc	(g)(h)(i)	Food, Beverage & Tobacco	L+650	1.0%	6/14/24		46.9		46.5		45.5

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Electronics For Imaging Inc	(g)(x)	Technology Hardware & Equipment	L+500	0.0%	7/23/26	$	24.7	$	23.5	$	23.1
Empire Today LLC	(e)(g)(h)	Retailing	L+650	1.0%	11/17/22		79.5		79.5		79.4
Entertainment Benefits Group LLC	(g)	Media & Entertainment	L+575	1.0%	9/30/24		1.0		1.0		1.0
Entertainment Benefits Group LLC	(v)	Media & Entertainment	L+575	1.0%	9/30/24		4.1		4.1		4.0
Entertainment Benefits Group LLC	(g)	Media & Entertainment	L+575	1.0%	9/30/25		30.3		30.0		30.0
Frontline Technologies Group LLC	(g)(h)(i)	Software & Services	L+575	1.0%	9/18/23		95.1		94.4		95.4
Greystone & Co Inc	(e)(g)(h)	Diversified Financials	L+800	1.0%	4/17/24		37.2		36.9		37.8
Greystone Equity Member Corp	(g)(l)	Diversified Financials	L+725	3.8%	4/1/26		58.6		58.6		57.1
Greystone Equity Member Corp	(l)(v)	Diversified Financials	L+725	3.8%	4/1/26		2.2		2.2		2.1
Heniff Transportation Systems LLC	(g)	Transportation	L+575	1.0%	12/3/24		0.7		0.7		0.7
Heniff Transportation Systems LLC	(v)	Transportation	L+575	1.0%	12/3/24		7.6		7.6		7.6
Heniff Transportation Systems LLC	(i)	Transportation	L+575	1.0%	12/3/26		26.0		25.7		25.7
Heniff Transportation Systems LLC	(g)	Transportation	L+575	1.0%	12/3/26		38.9		38.9		38.9
HM Dunn Co Inc	(g)(n)(w)(y)	Capital Goods	L+875 PIK (L+875 Max PIK)	1.0%	6/30/21		0.8		0.6		0.4
HM Dunn Co Inc	(g)(y)	Capital Goods	15.0% PIK (15.0% Max PIK)		6/30/21		0.1		0.1		0.1
Hudson Technologies Co	(g)(l)	Commercial & Professional Services	L+1,025	1.0%	10/10/23		33.5		33.3		19.1
Hunt Mortgage	(e)(g)(h)	Diversified Financials	L+600	1.0%	2/14/23		79.2		78.6		80.7
Icynene Group Ltd	(e)(g)(h)	Materials	L+700	1.0%	11/30/24		29.4		29.4		29.7
ID Verde	(l)(v)	Commercial & Professional Services	L+700	0.0%	3/29/24	€	30.0		32.9		33.7
ID Verde	(g)(l)	Commercial & Professional Services	L+725	0.0%	3/29/25	£	4.2		5.0		5.6
Imagine Communications Corp	(g)(h)	Media & Entertainment	L+750	1.0%	4/29/20	$	14.0		14.0		14.0
Imagine Communications Corp	(g)(l)	Media & Entertainment	L+750	1.0%	4/29/20		2.1		2.1		2.1
Industria Chimica Emiliana Srl	(g)(l)	Pharmaceuticals, Biotechnology & Life Sciences	L+650	0.0%	6/30/26	€	19.3		20.6		21.2
Industria Chimica Emiliana Srl	(l)(v)	Pharmaceuticals, Biotechnology & Life Sciences	E+650	0.0%	6/30/26		11.6		12.7		12.7
Industry City TI Lessor LP	(g)	Consumer Services	10.8%, 1.0% PIK (1.0% Max PIK)		6/30/26	$	26.6		26.6		28.9
J S Held LLC	(g)(h)	Insurance	L+600	1.0%	7/1/25		54.6		54.0		54.6
J S Held LLC	(v)	Insurance	L+600	1.0%	7/1/25		13.0		13.0		13.0
J S Held LLC	(g)	Insurance	L+600	1.0%	7/1/25		1.1		1.1		1.1
J S Held LLC	(v)	Insurance	L+600	1.0%	7/1/25		5.1		5.1		5.1
JHT Holdings Inc	(e)(h)(i)	Capital Goods	L+850	1.0%	5/4/22		18.9		18.8		19.5
Jo-Ann Stores Inc	(h)(x)	Retailing	L+500	1.0%	10/20/23		8.8		8.7		6.2
Jostens Inc	(g)(x)	Consumer Services	L+550	0.0%	12/19/25		7.8		7.8		7.8
Kellermeyer Bergensons Services LLC	(v)	Commercial & Professional Services	L+650	1.0%	2/5/20		26.8		26.8		26.6
Kellermeyer Bergensons Services LLC	(g)(i)	Commercial & Professional Services	L+650	1.0%	11/7/26		116.7		115.5		115.5
Kellermeyer Bergensons Services LLC	(v)	Commercial & Professional Services	L+650	1.0%	11/7/26		35.0		35.0		34.6
Kodiak BP LLC	(g)(h)	Capital Goods	L+725	1.0%	12/1/24		57.5		57.3		57.5
Kodiak BP LLC	(v)	Capital Goods	L+725	1.0%	12/1/24		28.1		28.0		28.1
Koosharem LLC	(g)(k)(x)	Commercial & Professional Services	L+450	1.0%	4/18/25		—		—		—
Laird PLC	(g)(l)(x)	Technology Hardware & Equipment	L+450	0.0%	7/9/25		1.9		1.8		1.9
Lexitas Inc	(i)	Commercial & Professional Services	L+575	1.0%	11/14/25		19.0		18.8		18.8
Lexitas Inc	(v)	Commercial & Professional Services	L+575	1.0%	11/14/25		8.0		8.0		7.9
Lexitas Inc	(v)	Commercial & Professional Services	L+575	1.0%	11/14/25		2.5		2.5		2.5
Lionbridge Technologies Inc	(g)(i)	Consumer Services	L+625	1.0%	12/27/25		99.4		98.9		98.9

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Lipari Foods LLC	(g)	Food & Staples Retailing	L+588	1.0%	1/6/25	$	19.4	$	19.4	$	19.4
Lipari Foods LLC	(v)	Food & Staples Retailing	L+588	1.0%	1/6/25		21.8		21.8		21.8
Lipari Foods LLC	(e)(i)	Food & Staples Retailing	L+588	1.0%	1/6/25		85.3		84.5		85.2
Matchesfashion Ltd	(h)(l)	Consumer Durables & Apparel	L+463	0.0%	10/16/24		12.7		12.0		11.5
MB Precision Holdings LLC	(g)(y)	Capital Goods	L+725, 2.3% PIK (2.3% Max PIK)	1.3%	1/23/21		4.6		4.5		4.6
MI Windows & Doors Inc	(g)(x)	Capital Goods	L+550	1.0%	11/6/26		9.0		8.5		9.0
Micronics Filtration Holdings Inc	(e)(g)(n)(w)	Capital Goods	L+800, 0.5% PIK (0.5% Max PIK)	1.3%	12/11/20		61.7		61.6		38.2
Motion Recruitment Partners LLC	(g)	Commercial & Professional Services	L+600	1.0%	12/20/25		37.9		37.5		37.5
Motion Recruitment Partners LLC	(v)	Commercial & Professional Services	L+600	1.0%	12/20/25		6.8		6.8		6.8
Motion Recruitment Partners LLC	(v)	Commercial & Professional Services	L+600	1.0%	12/20/25		29.8		29.8		29.8
Multi-Color Corp	(g)(l)(x)	Commercial & Professional Services	6.8%		7/15/26		4.3		4.3		4.5
NBG Home	(g)(h)(i)(x)	Consumer Durables & Apparel	L+550	1.0%	4/26/24		58.6		58.3		45.5
NCI Inc	(g)(h)(i)	Software & Services	L+750	1.0%	8/15/24		81.9		81.2		79.2
North Haven Cadence Buyer Inc	(v)	Consumer Services	L+500	1.0%	9/2/21		0.9		0.9		0.9
North Haven Cadence Buyer Inc	(g)	Consumer Services	L+650	1.0%	9/2/22		12.4		12.4		12.4
North Haven Cadence Buyer Inc	(v)	Consumer Services	L+650	1.0%	9/2/22		2.8		2.8		2.8
North Haven Cadence Buyer Inc	(e)(g)(h)	Consumer Services	L+793	1.0%	9/2/22		18.3		18.3		18.3
One Call Care Management Inc	(g)(x)(y)	Insurance	L+525	1.0%	11/27/22		4.9		4.2		4.6
Ontic Engineering & Manufacturing Inc	(g)(x)	Capital Goods	L+475	0.0%	10/30/26		1.6		1.6		1.6
Ontic Engineering & Manufacturing Inc	(v)(x)	Capital Goods	L+238	0.0%	10/31/26		0.3		0.3		0.3
Onvoy LLC	(g)(x)	Telecommunication Services	L+450	1.0%	2/10/24		1.1		1.1		1.0
PAE Holding Corp	(g)(x)	Capital Goods	L+550	1.0%	10/20/22		2.9		2.9		2.9
Peak 10 Holding Corp	(g)(x)	Telecommunication Services	L+350	0.0%	8/1/24		4.6		4.3		3.8
Petroplex Acidizing Inc	(g)(y)	Energy	L+725, 1.8% PIK (1.8% Max PIK)	1.0%	12/30/21		22.2		22.2		22.2
Power Distribution Inc	(g)(h)	Capital Goods	L+725	1.3%	1/25/23		27.9		27.9		26.0
Project Marron	(g)(l)	Consumer Services	B+625	0.0%	7/3/25	A$	1.5		1.0		1.0
PSKW LLC	(e)(g)(h)	Health Care Equipment & Services	L+768	1.0%	11/25/21	$	36.2		36.2		36.2
PSKW LLC	(e)	Health Care Equipment & Services	L+768	1.0%	11/25/21		8.8		8.8		8.8
PSKW LLC	(e)	Health Care Equipment & Services	L+768	1.0%	11/25/21		4.4		4.4		4.4
Qdoba Restaurant Corp	(g)(h)(x)	Consumer Services	L+700	1.0%	3/21/25		12.8		12.6		12.9
Quorum Health Corp	(g)(x)	Health Care Equipment & Services	L+675	1.0%	4/29/22		—		—		—
Reliant Rehab Hospital Cincinnati LLC	(e)(g)(h)(i)	Health Care Equipment & Services	L+675	1.0%	9/2/24		103.1		102.3		101.1
Roadrunner Intermediate Acquisition Co LLC	(e)(g)(h)	Health Care Equipment & Services	L+675	1.0%	3/15/23		31.6		31.6		31.0
RSC Insurance Brokerage Inc	(g)(i)	Insurance	L+550	1.0%	11/1/26		77.7		76.9		76.9
RSC Insurance Brokerage Inc	(v)	Insurance	L+550	1.0%	11/1/26		19.6		19.4		19.4
RSC Insurance Brokerage Inc	(v)	Insurance	L+550	1.0%	11/1/26		3.2		3.1		3.1
Safariland LLC	(g)(y)	Capital Goods	L+775	1.1%	11/18/23		2.8		2.8		2.6
Safariland LLC	(g)(h)(y)	Capital Goods	L+775	1.1%	11/18/23		123.3		123.3		116.2
Savers Inc	(e)(g)(h)	Retailing	L+650, 0.8% PIK (0.8% Max PIK)	1.5%	3/28/24		43.7		43.2		43.3

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity		Principal Amount^(c)		Amortized Cost			Fair Value^(d)
Savers Inc	(g)	Retailing	L+700, 0.8% PIK (0.8% Max PIK)		1.5	%		3/28/24	C$	60.6	$	44.7		$	47.6
Sequa Corp	(g)(h)(k)(x)	Materials	L+500		1.0	%		11/28/21	$	24.2		24.1			24.2
Sequel Youth & Family Services LLC	(g)	Health Care Equipment & Services	L+700		1.0	%		9/1/23		13.8		13.8			13.9
Sequel Youth & Family Services LLC	(e)(g)(h)	Health Care Equipment & Services	L+800		0.0	%		9/1/23		80.0		80.0			80.1
Sequential Brands Group Inc.	(g)(h)	Consumer Durables & Apparel	L+875		0.0	%		2/7/24		59.4		58.5			58.4
Smart Foodservice	(g)(x)	Food & Staples Retailing	L+475		0.0	%		6/20/26		2.7		2.6			2.7
SMART Global Holdings Inc	(g)(h)(l)	Semiconductors & Semiconductor Equipment	L+625		1.0	%		8/9/22		19.2		19.2			19.2
Sorenson Communications LLC	(g)(h)(x)	Telecommunication Services	L+650		0.0	%		4/29/24		14.2		13.7			14.1
Staples Canada	(g)(l)	Retailing	L+700		1.0	%		9/12/24	C$	9.8		7.6			7.7
Sungard Availability Services Capital Inc	(g)	Software & Services	L+750		1.0	%		2/3/22	$	0.5		0.5			0.5
Sungard Availability Services Capital Inc	(v)	Software & Services	L+750		1.0	%		2/3/22		0.5		0.5			0.5
Sutherland Global Services Inc	(h)(l)(x)	Software & Services	L+538		1.0	%		4/23/21		4.5		4.5			4.5
Sweet Harvest Foods Management Co	(g)(i)	Food & Staples Retailing	L+775, 1.0% PIK (1.0% Max PIK)		1.0	%		5/30/23		26.6		26.5			25.1
Syncsort Inc	(g)(x)	Software & Services	L+600		1.0	%		8/16/24		4.8		4.4			4.6
Tangoe LLC	(e)(g)(h)	Software & Services	L+650		1.0	%		11/28/25		89.7		88.9			89.8
Team Health Inc	(g)(h)(x)	Health Care Equipment & Services	L+275		1.0	%		2/6/24		12.5		12.2			10.2
ThermaSys Corp	(g)(y)	Capital Goods	L+600		1.0	%		12/28/23		6.7		7.1			6.4
ThreeSixty Group	(g)(h)(i)	Retailing	L+700		1.0	%		3/1/23		50.2		49.8			45.5
ThreeSixty Group	(e)(g)(h)(i)	Retailing	L+700		1.0	%		3/1/23		49.9		49.4			45.2
Torrid Inc	(g)(h)	Retailing	L+675		1.0	%		12/14/24		31.7		31.4			31.9
Total Safety US Inc	(g)(x)	Capital Goods	L+600		1.0	%		8/16/25		4.1		3.7			3.9
Trace3 Inc	(e)(g)(h)	Software & Services	L+675		1.0	%		8/3/24		92.8		92.8			92.0
Transaction Services Group Ltd	(l)(v)	Consumer Services	L+600		0.0	%		10/15/26		21.1		21.1			20.7
Transaction Services Group Ltd	(g)(l)	Consumer Services	L+600		0.0	%		10/15/26	£	6.1		7.8			8.0
Truck-Lite Co LLC	(v)	Automobiles & Components	L+625		1.0	%		12/13/24	$	11.8		11.7			11.7
Truck-Lite Co LLC	(g)(i)	Automobiles & Components	L+625		1.0	%		12/13/26		110.3		109.2			109.2
Truck-Lite Co LLC	(v)	Automobiles & Components	L+625		1.0	%		12/13/26		16.2		16.1			16.1
Utility One Source LP	(h)(x)	Capital Goods	L+550		1.0	%		4/18/23		—		—			—
Vertiv Group Corp	(g)(h)(x)	Technology Hardware & Equipment	L+400		1.0	%		11/30/23		15.6		15.0			15.6
Virgin Pulse Inc	(e)(g)(h)(i)	Software & Services	L+650		1.0	%		5/22/25		136.9		136.0			137.0
Vivint Inc	(g)(h)(x)	Commercial & Professional Services	L+500		0.0	%		4/1/24		23.6		23.4			23.6
Warren Resources Inc	(h)	Energy	L+1,000, 1.0% PIK (1.0% Max PIK)		1.0	%		5/22/20		0.7		0.7			0.7
Wheels Up Partners LLC	(g)	Transportation	L+855		1.0	%		1/26/21		10.5		10.5			10.5
Wheels Up Partners LLC	(g)	Transportation	L+855		1.0	%		8/26/21		5.7		5.7			5.7
Wheels Up Partners LLC	(g)	Transportation	L+710		1.0	%		6/30/24		19.5		19.5			19.5
Wheels Up Partners LLC	(g)	Transportation	L+710		1.0	%		11/1/24		8.1		8.1			8.1
Wheels Up Partners LLC	(g)	Transportation	L+710		1.0	%		12/21/24		30.2		30.1			30.2
Yak Access LLC	(g)(k)(x)	Capital Goods	L+500		0.0	%		7/11/25		0.9		0.8			0.9
Zeta Interactive Holdings Corp	(e)(g)(h)	Software & Services	L+750		1.0	%		7/29/22		15.8		15.8			15.8
Zeta Interactive Holdings Corp	(v)	Software & Services	L+750		1.0	%		7/29/22		0.6		0.6			0.6

Total Senior Secured Loans—First Lien												4,288.2			4,143.6
Unfunded Loan Commitments												(419.5	)		(419.5	)

Net Senior Secured Loans—First Lien												3,868.7			3,724.1

See notes to consolidated financial statements.

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity		Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Senior Secured Loans—Second Lien—30.9%
Abaco Systems, Inc	(e)(g)	Capital Goods	L+1,050		1.0	%		6/7/22	$	63.4	$	62.7	$	63.4
Access CIG LLC	(g)(x)	Software & Services	L+775		0.0	%		2/27/26		0.6		0.6		0.6
Advantage Sales & Marketing Inc	(g)(x)	Commercial & Professional Services	L+650		1.0	%		7/25/22		3.9		3.5		3.5
Agro Merchants Global LP	(g)	Transportation	L+800		1.0	%		11/30/25		13.4		13.1		13.5
Albany Molecular Research Inc	(g)(x)	Pharmaceuticals, Biotechnology & Life Sciences	L+700		1.0	%		8/30/25		8.3		8.3		8.3
Amtek Global Technology Pte Ltd	(j)(l)(z)	Automobiles & Components	E+500		0.0	%		4/4/24	€	32.8		40.3		32.2
Amtek Global Technology Pte Ltd	(g)(j)(l)(z)	Automobiles & Components	E+500		0.0	%		4/4/24		4.2		4.6		4.1
Arena Energy LP	(g)	Energy	L+900, 4.0% PIK (4.0% Max PIK)		1.0	%		1/24/21	$	9.0		9.0		8.7
athenahealth Inc	(g)	Health Care Equipment & Services	L+850					2/11/27		112.9		111.9		115.2
Belk Inc	(g)	Retailing	10.5%					6/12/23		19.5		15.5		15.5
Belk Inc	(g)	Retailing	10.5%					6/12/25		99.6		98.5		67.7
Bellatrix Exploration Ltd	(g)(l)	Energy	8.5%					9/11/23		1.9		1.9		1.9
Bellatrix Exploration Ltd	(g)(l)(n)(w)	Energy	8.5%					9/11/23		4.5		4.1		1.4
Byrider Finance LLC	(f)(g)	Automobiles & Components	L+1,000, 0.5% PIK (4.0% Max PIK)		1.3	%		6/7/22		17.9		17.9		17.9
Chisholm Oil & Gas Operating LLC	(g)	Energy	L+550, 3.0% PIK (3.0% Max PIK)		1.3	%		3/21/24		16.1		16.0		12.2
CommerceHub Inc	(g)(h)	Software & Services	L+775		0.0	%		5/21/26		69.3		67.5		69.0
Culligan International Co	(g)(h)	Household & Personal Products	L+850		1.0	%		12/13/24		85.0		84.4		84.3
EaglePicher Technologies LLC	(g)(x)	Capital Goods	L+725		0.0	%		3/8/26		3.0		3.0		2.9
Electronics For Imaging Inc	(g)(x)	Technology Hardware & Equipment	L+900		0.0	%		7/23/27		6.2		5.9		5.9
Emerald Performance Materials LLC	(g)(x)	Materials	L+775		1.0	%		8/1/22		3.0		3.0		2.9
Excelitas Technologies Corp	(g)(x)	Technology Hardware & Equipment	L+750		1.0	%		12/1/25		8.4		8.6		8.2
Gruden Acquisition Inc	(g)(x)	Transportation	L+850		1.0	%		8/18/23		10.0		9.8		9.9
Invictus	(g)(x)	Materials	L+675		0.0	%		3/30/26		0.6		0.6		0.5
LBM Borrower LLC	(g)(x)	Capital Goods	L+925		1.0	%		8/20/23		21.3		21.2		21.0
MedAssets Inc	(e)(g)	Health Care Equipment & Services	L+975		1.0	%		4/20/23		63.0		61.9		53.1
Misys Ltd	(g)(l)(x)	Software & Services	L+725		1.0	%		6/13/25		6.2		6.2		6.1
NBG Home	(g)	Consumer Durables & Apparel	L+975		1.0	%		9/30/24		34.2		33.8		20.5
NEP Broadcasting LLC	(g)(x)	Media & Entertainment	L+700		0.0	%		10/19/26		1.0		1.0		0.9
OEConnection LLC	(g)	Software & Services	L+825		0.0	%		9/25/27		34.1		33.7		33.8
Ontic Engineering & Manufacturing Inc	(g)	Capital Goods	L+850		0.0	%		10/29/27		23.2		22.7		22.7
P2 Energy Solutions, Inc.	(g)(x)	Software & Services	L+800		1.0	%		4/30/21		71.3		70.8		69.6
Paradigm Acquisition Corp	(g)(x)	Health Care Equipment & Services	L+750		0.0	%		10/26/26		2.4		2.4		2.4
Peak 10 Holding Corp	(g)(x)	Telecommunication Services	L+725		1.0	%		8/1/25		0.2		0.2		0.1
Petrochoice Holdings Inc	(e)(g)	Capital Goods	L+875		1.0	%		8/21/23		65.0		63.9		64.2
Polyconcept North America Inc	(g)	Household & Personal Products	L+1,000		1.0	%		2/16/24		29.4		28.9		29.7
Pure Fishing Inc	(g)	Consumer Durables & Apparel	L+838		1.0	%		12/31/26		81.1		80.3		69.9
Rise Baking Company	(g)(h)	Food, Beverage & Tobacco	L+800		1.0	%		8/9/26		31.1		30.9		30.6
Sequa Corp	(g)(h)(x)	Materials	L+900		1.0	%		4/28/22		22.0		21.9		21.7
SIRVA Worldwide Inc	(g)(x)	Commercial & Professional Services	L+950		0.0	%		8/3/26		3.8		3.5		3.7
Sorenson Communications LLC	(f)	Telecommunication Services	11.5% PIK (11.5% Max PIK)					4/30/25		16.2		15.7		16.2
Sparta Systems Inc	(g)	Software & Services	L+825		1.0	%		7/27/25		35.1		34.6		30.9
Sungard Availability Services Capital Inc	(g)	Software & Services	L+400, 2.5% PIK (2.5% Max PIK)		1.0	%		11/3/22		2.0		2.0		2.0

See notes to consolidated financial statements.

100

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity		Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Vestcom International Inc	(g)(h)	Consumer Services	L+800		1.0	%		12/19/24	$	70.5	$	70.0	$	70.5
WireCo WorldGroup Inc	(g)(h)(x)	Capital Goods	L+900		1.0	%		9/30/24		13.7		13.7		12.5
Wittur Holding GmbH	(g)(l)	Capital Goods	E+850, 0.5% PIK (0.5% Max PIK)		0.0	%		9/23/27	€	56.3		59.9		61.3
Z Gallerie LLC	(g)(y)	Retailing	12.0%					6/20/21	$	2.9		2.9		2.8

Total Senior Secured Loans—Second Lien												1,272.8		1,195.9

Other Senior Secured Debt—6.2%
Advanced Lighting Technologies Inc	(g)(n)(w)(z)	Materials	L+1,700 PIK (L+1,700 Max PIK)		1.0	%		10/4/23		31.9		23.6		—
Angelica Corp	(n)(t)(w)	Health Care Equipment & Services	10.0% PIK (10.0% Max PIK)					12/30/22		43.8		42.3		29.8
Black Swan Energy Ltd	(e)(l)	Energy	9.0%					1/20/24		6.0		6.0		6.1
Cleaver-Brooks Inc	(g)(x)	Capital Goods	7.9%					3/1/23		9.4		9.5		9.4
Enterprise Development Authority	(g)(x)	Consumer Services	12.0%					7/15/24		3.6		3.7		4.1
FourPoint Energy LLC	(e)(f)(g)	Energy	9.0%					12/31/21		74.8		73.8		71.1
JW Aluminum Co	(e)(g)(y)	Materials	10.3%					6/1/26		36.5		36.5		38.3
Lycra	(g)(l)(x)	Consumer Durables & Apparel	7.5%					5/1/25		5.4		5.4		4.4
Maxim Crane Works LP / Maxim Finance Corp	(g)(x)	Capital Goods	10.1%					8/1/24		0.1		0.1		0.1
Mood Media Corp	(f)(g)(y)	Media & Entertainment	L+1,400 PIK (L+1,400 Max PIK)		0.0	%		12/31/23		37.9		36.9		36.4
MultiPlan Inc	(g)(x)	Health Care Equipment & Services	7.1%					6/1/24		1.7		1.8		1.7
Pattonair Holdings Ltd	(g)(l)(x)	Capital Goods	9.0%					11/1/22		8.3		8.4		8.7
Rockport (Relay)	(g)(n)(w)	Consumer Durables & Apparel	15.0% PIK (15.0% Max PIK)					7/31/22		25.8		22.0		0.1
TruckPro LLC	(g)(x)	Capital Goods	11.0%					10/15/24		3.5		3.3		3.6
Velvet Energy Ltd	(g)(l)	Energy	9.0%					10/5/23		7.5		7.5		7.7
Vivint Inc	(g)(x)	Commercial & Professional Services	7.9%					12/1/22		4.2		4.0		4.2
Vivint Inc	(g)(x)	Commercial & Professional Services	7.6%					9/1/23		12.6		12.9		11.9
Z Gallerie LLC	(g)(y)	Retailing	L+650		1.0	%		6/20/22		1.8		1.5		1.4

Total Other Senior Secured Debt												299.2		239.0

Subordinated Debt—10.6%
Alion Science & Technology Corp	(e)(g)	Capital Goods	11.0%					8/1/22		68.6		68.1		68.6
Alion Science & Technology Corp	(g)	Capital Goods	11.0%					8/31/22		22.2		21.9		22.2
All Systems Holding LLC	(g)	Commercial & Professional Services	10.0% PIK (10.0% Max PIK)					10/31/22		0.1		0.1		0.1
athenahealth Inc	(g)	Health Care Equipment & Services	L+1,125 PIK (L+1,125 Max PIK)		0.0	%		2/11/27		63.4		63.4		63.9
Byrider Finance LLC	(g)	Automobiles & Components	20.0% PIK (20.0% Max PIK)					3/31/22		1.2		1.2		1.2
ClubCorp Club Operations Inc	(g)(x)	Consumer Services	8.5%					9/15/25		23.4		23.1		20.5
Craftworks Rest & Breweries Group Inc	(g)	Consumer Services	12.0% PIK (12.0% Max PIK)					11/1/24		7.3		7.2		5.5
DEI Sales Inc	(e)(g)	Consumer Durables & Apparel	13.0% PIK (13.0% Max PIK)					2/28/23		77.1		76.6		69.6
Diamond Resorts International Inc	(g)(x)	Consumer Services	10.8%					9/1/24		1.7		1.7		1.8
GFL Environmental Inc	(g)(l)(x)	Commercial & Professional Services	8.5%					5/1/27		6.1		6.2		6.7
Hilding Anders	(g)(l)(n)(w)(z)	Consumer Durables & Apparel	13.0% PIK (13.0% Max PIK)					6/30/21	€	128.8		129.3		76.8
Hilding Anders	(g)(l)(n)(w)(z)	Consumer Durables & Apparel	12.0% PIK (12.0% Max PIK)					12/31/22		3.8		0.5		0.2
Hilding Anders	(g)(l)(n)(w)(z)	Consumer Durables & Apparel	12.0% PIK (12.0% Max PIK)					12/31/23		44.3		0.9		—
Hilding Anders	(g)(l)(n)(w)(z)	Consumer Durables & Apparel	18.0% PIK (18.0% Max PIK)					12/31/24		57.6		12.9		3.6
Imagine Communications Corp	(g)	Media & Entertainment	12.5% PIK (12.5% Max PIK)					10/29/20	$	0.8		0.8		0.8

See notes to consolidated financial statements.

101

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity		Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Kenan Advantage Group Inc	(g)(x)	Transportation	7.9%			7/31/23	$	5.1	$	5.1	$	5.0
LifePoint Hospitals Inc	(g)(x)	Health Care Equipment & Services	9.8%			12/1/26		8.4		8.4		9.6
Nouryon (fka Akzo Nobel Specialty Chemicals)	(g)(l)(x)	Materials	8.0%			10/1/26		1.5		1.5		1.6
PAREXEL International Corp	(g)(x)	Pharmaceuticals, Biotechnology & Life Sciences	6.4%			9/1/25		0.1		0.1		0.1
Plastipak Holdings Inc	(g)(x)	Materials	6.3%			10/15/25		1.0		1.0		0.9
Ply Gem Holdings Inc	(g)(x)	Capital Goods	8.0%			4/15/26		7.7		7.6		8.1
Quorum Health Corp	(g)(x)	Health Care Equipment & Services	11.6%			4/15/23		4.0		4.0		3.4
SRS Distribution Inc	(g)(x)	Capital Goods	8.3%			7/1/26		7.0		6.9		7.2
Team Health Inc	(g)(x)	Health Care Equipment & Services	6.4%			2/1/25		2.8		2.6		1.9
Vertiv Group Corp	(g)(x)	Technology Hardware & Equipment	9.3%			10/15/24		22.8		22.9		24.5
Vivint Inc	(g)(x)	Commercial & Professional Services	8.8%			12/1/20		4.9		4.9		4.9

Total Subordinated Debt										478.9		408.7


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity		Principal Amount^(c)/ Shares		Amortized Cost		Fair Value^(d)
Asset Based Finance—19.1%
801 5th Ave, Seattle, Structure Mezzanine	(g)(l)(z)	Real Estate	8.0%, 0.0% PIK (3.0% Max PIK)			12/19/29	$	52.9	$	52.9	$	52.9
801 5th Ave, Seattle, Private Equity	(g)(l)(n)(z)	Real Estate						8,799,177		8.8		8.8
Abacus JV, Private Equity	(g)(l)	Insurance						24,826,951		24.8		24.8
Accelerator Investments Aggregator LP, Private Equity	(g)(l)(n)	Diversified Financials						3,303,010		3.8		3.7
Altavair AirFinance, Private Equity	(g)(l)	Capital Goods						9,582,223		9.6		9.8
AMPLIT JV LP, Limited Partnership Interest	(g)(l)(n)	Diversified Financials						N/A		4.4		0.9
Australis Maritime, Common Stock	(g)(l)(n)	Transportation						9,430,576		9.4		9.4
Bank of Ireland, Class B Credit Linked Floating Rate Note	(j)(l)	Banks	L+1,185			12/4/27	$	15.1		15.1		15.4
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			1/30/25	$	1.1		1.1		1.1
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			4/30/25	$	7.3		6.8		7.3
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			9/3/25	$	1.5		1.4		1.5
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			9/29/25	$	1.4		1.3		1.4
Global Jet Capital LLC, Structured Mezzanine	(f)(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			12/4/25	$	85.4		79.6		85.4
Global Jet Capital LLC, Structured Mezzanine	(f)(g)(l)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			12/4/25	$	19.0		17.7		19.0
Global Jet Capital LLC, Structured Mezzanine	(f)(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			12/9/25	$	2.0		1.8		2.0
Global Jet Capital LLC, Structured Mezzanine	(f)(g)(l)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			12/9/25	$	15.1		14.1		15.1
Global Jet Capital LLC, Structured Mezzanine	(f)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			1/29/26	$	7.3		6.8		7.3
Global Jet Capital LLC, Structured Mezzanine	(f)(l)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			1/29/26	$	1.6		1.5		1.6
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			4/14/26	$	18.3		17.0		18.3
Global Jet Capital LLC, Structured Mezzanine	(g)	Commercial & Professional Services	15.0% PIK (15.0% Max PIK)			12/2/26	$	18.0		16.7		18.0
Global Jet Capital LLC, Preferred Stock	(f)(g)(n)	Commercial & Professional Services						66,297,064		66.3		8.3
Home Partners JV, Structured Mezzanine	(g)(l)(y)	Real Estate	11.0% PIK (11.0% Max PIK)			3/25/29	$	25.0		25.0		25.0
Home Partners JV, Structured Mezzanine	(l)(v)(y)	Real Estate	11.0% PIK (11.0% Max PIK)			3/25/29	$	18.5		18.5		18.5

See notes to consolidated financial statements.

102

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity		Principal Amount^(c)/ Shares		Amortized Cost			Fair Value^(d)
Home Partners JV, Common Stock	(g)(l)(n)(y)	Real Estate						12,488,362	$	12.5		$	13.2
Home Partners JV, Private Equity	(g)(l)(n)(x)(y)	Real Estate						585,960		0.6			—
KKR Central Park Leasing Aggregator L.P., Partnership Interest	(g)(l)	Capital Goods	29.9%			5/31/23		N/A		42.9			54.8
KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest	(g)(l)	Capital Goods						18,232,157		18.2			21.5
Lenovo Group Ltd, Structured Mezzanine	(g)(l)	Technology Hardware & Equipment	8.0%			6/22/22	€	7.4		8.4			8.3
Lenovo Group Ltd, Structured Mezzanine	(g)(l)	Technology Hardware & Equipment	12.0%			6/22/22	€	4.7		5.3			5.3
Orchard Marine Limited, Class B Common Stock	(g)(l)(n)(y)	Transportation						1,964		3.1			—
Orchard Marine Limited, Series A Preferred Stock	(g)(l)(n)(y)	Transportation						62,976		62.0			22.7
Rampart CLO 2007 1A Class Subord.	(g)(l)(n)	Diversified Financials				10/25/21	$	10.0		—			0.1
Sofi Lending Corp, 2019-C R1	(g)(l)	Diversified Financials				11/16/48	$	21.2		12.0			12.1
Star Mountain Diversified Credit Income Fund III, LP, Private Equity	(l)(p)	Diversified Financials						5,000,000		5.0			8.1
Toorak Capital Funding LLC, Membership Interest	(g)(l)(z)	Diversified Financials						N/A		4.2			5.3
Toorak Capital LLC, Membership Interest	(g)(z)	Diversified Financials						N/A		188.7			240.5
Wind River CLO Ltd. 2012 1A Class Subord. B	(g)(l)(n)	Diversified Financials				1/15/26	$	42.5		12.0			8.1

Total Asset Based Finance										779.3			755.5
Unfunded Asset Based Finance Commitments										(18.5	)		(18.5	)

Net Asset Based Finance										760.8			737.0

Strategic Credit Opportunities, LLC—12.4%
Strategic Credit Opportunities Partners, LLC	(g)(l)(z)	Diversified Financials					$	490.9		490.9			479.0

Total Strategic Credit Opportunities Partners										490.9			479.0


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity		Number of Shares		Amortized Cost		Fair Value^(d)
Equity/Other—14.8%^(m)
Advanced Lighting Technologies Inc, Common Stock	(g)(n)(z)	Materials						587,637	$	16.5	$	—
Advanced Lighting Technologies Inc, Warrant	(g)(n)(z)	Materials				10/4/27		9,262		0.1		—
Alion Science & Technology Corp, Class A Membership Interest	(g)(n)	Capital Goods						N/A		7.4		10.7
All Systems Holding LLC, Common Stock	(g)(n)	Commercial & Professional Services						586,763		0.6		0.8
AltEn, LLC, Membership Units	(n)(s)(y)	Energy						2,384		3.0		—
Amtek Global Technology Pte Ltd, Ordinary Shares	(j)(l)(n)(z)	Automobiles & Components						5,735,799,959		30.7		5.2
Amtek Global Technology Pte Ltd, Trade Claim	(j)(l)(n)(z)	Automobiles & Components						1,190,759		1.0		0.6
Angelica Corp, Limited Partnership Interest	(n)(t)	Health Care Equipment & Services						877,044		47.6		—
Ap Plasman Inc, Warrant	(g)(l)(n)	Capital Goods				5/25/26		6,985		2.5		1.5
Ascent Resources Utica Holdings LLC / ARU Finance Corp, Common Stock	(n)(o)	Energy						10,193		9.7		2.7

See notes to consolidated financial statements.

103

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity		Number of Shares		Amortized Cost		Fair Value^(d)
Ascent Resources Utica Holdings LLC / ARU Finance Corp, Trade Claim	(o)	Energy						86,607,143	$	19.4	$	23.0
ASG Technologies, Common Stock	(g)(n)(y)	Software & Services						1,149,421		23.4		56.5
ASG Technologies, Warrant	(g)(n)(y)	Software & Services				6/27/22		229,541		6.5		6.3
Aspect Software Inc, Common Stock	(g)(n)	Software & Services						161,261		0.3		0.3
Aspect Software Inc, Warrant	(g)(n)	Software & Services				1/15/24		161,008		—		—
Belk Inc, Units	(g)(n)	Retailing						1,642		7.8		3.1
Bellatrix Exploration Ltd, Warrant	(g)(l)(n)	Energy				9/11/23		127,489		—		—
Byrider Finance LLC, Common Stock	(g)(n)	Automobiles & Components						833		—		—
Cengage Learning, Inc, Common Stock	(g)(n)	Media & Entertainment						227,802		7.5		4.2
Charlotte Russe Inc, Common Stock	(g)(n)(y)	Retailing						22,575		12.5		—
Chisholm Oil & Gas Operating LLC, Series A Units	(n)(p)	Energy						75,000		0.1		—
CSafe Global, Common Stock	(g)(n)	Capital Goods						391,300		0.4		0.6
CTI Foods Holding Co LLC, Common Stock	(g)(n)	Food, Beverage & Tobacco						5,836		0.7		0.5
DEI Sales Inc, Class A Units	(g)(n)	Consumer Durables & Apparel						649,538		1.1		0.1
DEI Sales Inc, Series I Units	(g)(n)	Consumer Durables & Apparel						308,948		0.5		0.1
DEI Sales Inc, Series II Units	(n)(p)	Consumer Durables & Apparel						316,770		0.5		0.1
Directed LLC, Warrant	(g)(n)	Consumer Durables & Apparel				12/31/25		649,538		—		—
Empire Today LLC, Common Stock	(g)(n)	Retailing						375		1.1		2.1
FourPoint Energy LLC, Common Stock, Class C—II—A Units	(n)(p)	Energy						21,000		21.0		2.2
FourPoint Energy LLC, Common Stock, Class D Units	(n)(p)	Energy						3,937		2.6		0.4
FourPoint Energy LLC, Common Stock, Class E—II Units	(n)(p)	Energy						48,025		12.0		5.0
FourPoint Energy LLC, Common Stock, Class E—III Units	(n)(p)	Energy						70,875		17.7		7.4
Fronton BV, Common Stock	(n)(p)(y)	Consumer Services						14,943		—		1.4
Genesys Telecommunications Laboratories Inc, Class A Shares	(g)(n)	Technology Hardware & Equipment						40,529		—		—
Genesys Telecommunications Laboratories Inc, Class A1—A5 Shares	(g)(n)	Technology Hardware & Equipment						3,463,150		0.1		1.0
Genesys Telecommunications Laboratories Inc, Ordinary Shares	(g)(n)	Technology Hardware & Equipment						41,339		—		—
Genesys Telecommunications Laboratories Inc, Ordinary Shares	(g)(n)	Technology Hardware & Equipment						2,768,806		—		—
Genesys Telecommunications Laboratories Inc, Preferred Stock	(g)(n)	Technology Hardware & Equipment						1,050,465		—		—
Harvey Industries Inc, Common Stock	(g)(n)	Capital Goods						2,333,333		2.3		5.8
Hilding Anders, ARLE PIK Interest	(g)(l)(n)(w)(z)	Consumer Durables & Apparel	12.0% PIK (12.0% Max PIK)			12/31/22		4,826,149		—		—
Hilding Anders, Class A Common Stock	(g)(l)(n)(z)	Consumer Durables & Apparel						4,503,411		0.1		—

See notes to consolidated financial statements.

104

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity		Number of Shares		Amortized Cost		Fair Value^(d)
Hilding Anders, Class B Common Stock	(g)(l)(n)(z)	Consumer Durables & Apparel						574,791	$	—	$	—
Hilding Anders, Class C Common Stock	(g)(l)(n)(z)	Consumer Durables & Apparel						213,201		—		—
Hilding Anders, Equity Options	(g)(l)(n)(z)	Consumer Durables & Apparel				12/31/20		236,160,807		15.0		1.3
HM Dunn Co Inc, Preferred Stock, Series A	(g)(n)(y)	Capital Goods						214		—		—
HM Dunn Co Inc, Preferred Stock, Series B	(g)(n)(y)	Capital Goods						214		—		—
Home Partners of America Inc, Common Stock	(g)(n)(y)	Real Estate						81,625		83.6		134.1
Home Partners of America Inc, Warrant	(g)(n)(y)	Real Estate				8/7/24		2,675		0.3		2.0
Imagine Communications Corp, Common Stock	(g)(n)	Media & Entertainment						33,034		3.8		4.1
JHC Acquisition LLC, Common Stock	(g)(n)	Capital Goods						483		0.5		0.8
Jones Apparel Holdings, Inc., Common Stock	(g)(n)	Consumer Durables & Apparel						5,451		0.9		—
JSS Holdings Ltd, Net Profits Interest	(g)(n)	Capital Goods						40		—		1.2
JW Aluminum Co, Common Stock	(f)(g)(n)(y)	Materials						1,474		—		—
JW Aluminum Co, Preferred Stock	(f)(g)(y)	Materials	12.5% PIK			2/15/28		8,404		90.4		127.2
Keystone Australia Holdings Pty Limited, Residual Claim	(g)(l)(n)	Consumer Services						N/A		6.5		0.1
KKR BPT Holdings Aggregator LLC, Membership Interest	(g)(l)(n)(z)	Diversified Financials						N/A		17.6		—
MB Precision Holdings LLC, Preferred Stock	(n)(p)(y)	Capital Goods						8,952,623		1.9		1.2
MB Precision Holdings LLC, Class A—2 Units	(n)(p)(y)	Capital Goods						1,426,110		0.5		—
Micronics Filtration Holdings Inc, Common Stock	(g)(n)	Capital Goods						53,073		0.6		—
Micronics Filtration Holdings Inc, Preferred Stock, Series A	(g)(n)	Capital Goods						55		0.6		—
Micronics Filtration Holdings Inc, Preferred Stock, Series B	(g)(n)	Capital Goods						23		0.2		—
Mood Media Corp, Common Stock	(g)(n)(y)	Media & Entertainment						16,243,967		11.8		0.9
NBG Home, Common Stock	(g)(n)	Consumer Durables & Apparel						1,903		2.6		—
Nine West Holdings Inc, Common Stock	(g)(n)	Consumer Durables & Apparel						5,451		6.5		—
North Haven Cadence Buyer Inc, Common Stock	(g)(n)	Consumer Services						1,041,667		1.0		2.3
One Call Care Management Inc, Common Stock	(g)(n)(y)	Insurance						4,370,566,806		3.0		3.0
One Call Care Management Inc, Preferred Stock A	(g)(n)(y)	Insurance						466,194		32.3		32.3
One Call Care Management Inc, Preferred Stock B	(g)(y)	Insurance	9.0% PIK (9.0% Max PIK)			10/25/29		9,615,247		9.8		9.8
Petroplex Acidizing Inc, Preferred Stock A	(g)(y)	Energy	2.0%, 0.0% PIK (2.0% Max PIK)					24,258,500		4.2		4.2
Petroplex Acidizing Inc, Warrant	(g)(n)(y)	Energy				12/15/26		8		—		—
Polyconcept North America Inc, Class A—1 Units	(g)(n)	Household & Personal Products						29,376		2.9		5.9
Power Distribution Inc, Common Stock	(g)(n)	Capital Goods						1,941,431		1.7		0.8
Proserv Acquisition LLC, Class A Common Units	(g)(l)(n)(y)	Energy						2,635,005		33.5		14.4
Proserv Acquisition LLC, Class A Preferred Units	(g)(l)(n)(y)	Energy						837,780		5.4		9.5
Ridgeback Resources Inc, Common Stock	(f)(l)(n)	Energy						324,954		2.0		1.7
Rockport (Relay), Warrant	(g)(n)	Consumer Durables & Apparel				8/2/28		1,215,682		—		—
Safariland LLC, Common Equity	(f)(n)(y)	Capital Goods						29,536		3.0		6.4
Sequential Brands Group Inc., Common Stock	(g)(x)	Consumer Durables & Apparel						206,664		2.8		0.1
Sorenson Communications LLC, Common Stock	(f)(n)	Telecommunication Services						46,163		—		35.5

See notes to consolidated financial statements.

105

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company^(a)	Footnotes		Industry	Rate^(b)	Floor	Maturity		Number of Shares		Amortized Cost		Fair Value^(d)
SSC (Lux) Limited S.a r.l., Common Stock		(g)(l)(n)	Health Care Equipment & Services						113,636	$	2.3	$	3.5
Stuart Weitzman Inc, Common Stock		(g)(n)	Consumer Durables & Apparel						5,451		—		—
Sungard Availability Services Capital Inc, Common Stock		(f)(g)(n)	Software & Services						44,857		3.1		2.9
Sunnova Energy International Inc, Common Stock		(g)(n)(x)	Energy						97,515		1.1		1.1
ThermaSys Corp, Common Stock		(e)(f)(g)(n)(y)	Capital Goods						17,383,026		10.2		6.9
ThermaSys Corp, Preferred Stock		(g)(n)(y)	Capital Goods						1,529		1.7		1.5
Towergate, Preferred Stock		(g)(l)(n)	Insurance						6,113,719		9.1		9.6
Towergate, Ordinary Shares		(g)(l)(n)	Insurance						16,450		—		—
Towergate, Ordinary Shares		(g)(l)(n)	Insurance						116,814		0.2		0.2
Trace3 Inc, Common Stock		(g)(n)	Software & Services						19,312		0.2		0.7
Versatile Processing Group Inc, Class A—2 Units		(f)(n)	Materials						3,637,500		3.6		0.3
Warren Resources Inc, Common Stock		(g)(n)	Energy						113,515		0.5		0.3
Z Gallerie LLC, Common Stock		(g)(n)(y)	Retailing						1,862,460		0.7		0.7
Zeta Interactive Holdings Corp, Preferred Stock, Series E—1		(g)(n)	Software & Services						215,662		1.7		2.5
Zeta Interactive Holdings Corp, Preferred Stock, Series F		(g)(n)	Software & Services						196,151		1.7		2.2
Zeta Interactive Holdings Corp, Warrant		(g)(n)	Software & Services				4/20/27		29,422		—		0.1

Total Equity/Other											637.7		572.9
TOTAL INVESTMENTS—190.3%										$	7,809.0		7,356.6

LIABILITIES IN EXCESS OF OTHER ASSETS—(90.3%)													(3,490.6	)

NET ASSETS—100%												$	3,866.0

Foreign currency forward contracts


Foreign Currency	Settlement Date		Counterparty	Amount and Transaction		US$ Value at Settlement Date		US$ Value at December 31, 2019		Unrealized Appreciation (Depreciation)
GBP		1/11/2023	JP Morgan Chase Bank	£	7.0 Sold	$	9.4	$	9.5	$	(0.1	)
GBP		1/11/2023	JP Morgan Chase Bank	£	1.9 Sold		2.9		2.6		0.3
GBP		1/11/2023	JP Morgan Chase Bank	£	1.7 Sold		2.6		2.3		0.3
GBP		1/11/2023	JP Morgan Chase Bank	£	3.4 Sold		4.8		4.6		0.2
GBP		1/11/2023	JP Morgan Chase Bank	£	1.4 Sold		1.9		1.9		—
GBP		10/13/2021	JP Morgan Chase Bank	£	3.4 Sold		4.6		4.6		—
EUR		7/17/2023	JP Morgan Chase Bank	€	1.3 Sold		1.7		1.6		0.1

Total						$	27.9	$	27.1	$	0.8

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

See notes to consolidated financial statements.

106

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2019, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 1.91%, the Euro Interbank Offered Rate, or EURIBOR, was (0.38)% and the U.S. Prime Lending Rate, or Prime, was 4.75%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

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

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

(e)	Security or portion thereof held within Locust Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the term loan facility with JPMorgan Chase Bank, N.A. (see Note 9).

(f)	Security or portion thereof held within Race Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with ING Capital LLC (see Note 9).

(g)	Security or portion thereof is pledged as collateral supporting the amounts outstanding under the Senior Secured Revolving Credit Facility (see Note 9).

(h)	Security or portion thereof held within FS KKR MM CLO 1 LLC (see Note 9).

(i)	Security or portion thereof was held within CCT Tokyo Funding LLC and was pledged as collateral supporting the amounts outstanding under the revolving credit facility with Sumitomo Mitsui Banking Corporation (see Note 9).

(j)	Security or portion thereof was held within CCT Dublin Funding Limited

(k)	Position or portion thereof unsettled as of December 31, 2019.

(l)

The investment is not a qualifying asset under the Investment Company Act of 1940, as amended. A business development company may not acquire any asset other than qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. As of December 31, 2019, 82.8% of the Company’s total assets represented qualifying assets.

(m)	Listed investments may be treated as debt for GAAP or tax purposes.

(n)	Security is non-income producing.

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

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

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

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

(s)	Security held within CCT Holdings, LLC, a wholly-owned subsidiary of the Company.

(t)	Security held within CCT Holdings II, LLC, a wholly-owned subsidiary of the Company.

(u)	Security held within FCF, LLC, a wholly-owned subsidiary of the Company.

(v)	Security is an unfunded commitment. Reflects the stated spread at the time of commitment, but may not be the actual rate received upon funding.

(w)	Asset is on non-accrual status.

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

See notes to consolidated financial statements.

107

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)

(y)

Under the Investment Company Act of 1940, as amended, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2019, the Company held investments in portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person for the year ended December 31, 2019:


Portfolio Company	Fair Value at December 31, 2018		Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2019		Interest Income⁽³⁾		PIK Income⁽³⁾
Senior Secured Loans—First Lien
AltEn, LLC	$	2.9	$	—	$	—		$	—		$	(1.4	)	$	1.5	$	—	$	—
Aspect Software Inc⁽⁴⁾		2.7		—		(3.7	)		—			1.0			—		—		—
Aspect Software Inc⁽⁴⁾		0.5		—		(0.7	)		—			0.2			—		—		—
Charlotte Russe Inc		3.5		—		(1.2	)		(8.2	)		5.9			—		—		—
HM Dunn Co Inc		0.1		—		—			—			0.3			0.4		—		—
HM Dunn Co Inc		—		0.1		—			—			—			0.1		—		—
MB Precision Holdings LLC		4.6		0.3		(0.1	)		—			(0.2	)		4.6		0.6		0.1
One Call Care Management Inc		—		12.1		(19.6	)		11.7			0.4			4.6		0.7		—
Petroplex Acidizing Inc		—		23.1		(0.9	)		—			—			22.2		2.2		0.4
Safariland LLC⁽⁶⁾		—		2.8		—			—			(0.2	)		2.6		0.2		—
Safariland LLC⁽⁶⁾		—		123.3		—			—			(7.1	)		116.2		12.6		—
ThermaSys Corp		6.7		0.5		(0.1	)		—			(0.7	)		6.4		0.5		—
Senior Secured Loans—Second Lien
Z Gallerie LLC		—		2.9		—			—			(0.1	)		2.8		0.2		—
Other Senior Secured Debt
JW Aluminum Co⁽⁵⁾		—		36.5		—			—			1.8			38.3		3.7		—
Mood Media Corp		26.6		44.3		(33.9	)		—			(0.6	)		36.4		4.1		1.1
Rockport (Relay)⁽⁴⁾		9.9		—		(30.9	)		—			21.0			—		—		—
Z Gallerie LLC		—		1.5		—			—			(0.1	)		1.4		0.1		—
Asset Based Finance
Home Partners JV, Structured Mezzanine		—		25.0		—			—			—			25.0		1.9		—
Home Partners JV, Common Stock		—		12.5		—			—			0.7			13.2		—		—
Home Partners JV, Private Equity		—		0.6		—			—			(0.6	)		—		—		—
Orchard Marine Limited, Class B Common Stock		—		—		—			—			—			—		—		—
Orchard Marine Limited, Series A Preferred Stock		32.1		4.0		—			—			(13.4	)		22.7		—		—
Equity/Other
AltEn, LLC, Membership Units		—		—		—			—			—			—		—		—
ASG Technologies, Common Stock		85.8		—		(30.0	)		17.0			(16.3	)		56.5		—		—
ASG Technologies, Warrants		6.7		—		—			—			(0.4	)		6.3		—		—
Aspect Software Inc, Common Stock⁽⁴⁾		—		—		(10.5	)		—			10.5			—		—
Charlotte Russe Inc, Common Stock		—		—		—			—			—			—		—		—
Fronton BV, Common Stock		—		—		—			—			1.4			1.4		—		—

See notes to consolidated financial statements.

108

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company	Fair Value at December 31, 2018		Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2019		Interest Income⁽³⁾		PIK Income⁽³⁾
HM Dunn Co Inc, Preferred Stock, Series A	$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	—
HM Dunn Co Inc, Preferred Stock, Series B		—		—		—			—	��		—			—		—		—
Home Partners of America Inc, Common Stock		129.8		—		(30.0	)		11.7			22.6			134.1		—		—
Home Partners of America Inc, Warrant		1.1		—		—			—			0.9			2.0		—		—
JW Aluminum Co, Common Stock⁽⁵⁾		—		—		—			—			—			—		—		—
JW Aluminum Co, Preferred Stock⁽⁵⁾		—		90.4		—			—			36.8			127.2		0.9		14.0
MB Precision Holdings LLC, Class A—2 Units		—		—		—			—			—			—		—		—
MB Precision Holdings LLC, Preferred Stock		1.2		0.1		—			—			(0.1	)		1.2		—		—
Mood Media Corp, Common Stock		14.8		—		—			—			(13.9	)		0.9		—		—
One Call Care Management Inc, Common Stock		—		3.0		—			—			—			3.0		—		—
One Call Care Management Inc, Preferred Stock A		—		32.3		—			—			—			32.3		—		—
One Call Care Management Inc, Preferred Stock B		—		9.8		—			—			—			9.8		0.2		—
Petroplex Acidizing Inc, Preferred Stock A		—		4.2		—			—			—			4.2		—		—
Petroplex Acidizing Inc, Warrant		—		—		—			—			—			—		—		—
Proserv Acquisition LLC, Class A Common Units		8.8		—		—			—			5.6			14.4		—		—
Proserv Acquisition LLC, Class A Preferred Units		9.5		—		—			—			—			9.5		—		—
Rockport (Relay), Class A Units⁽⁴⁾		—		—		—			—			—			—		—		—
Safariland LLC, Common Equity⁽⁶⁾		—		3.0		—			—			3.4			6.4		—		—
ThermaSys Corp, Common Stock		9.4		0.8		—			—			(3.3	)		6.9		—		—
ThermaSys Corp, Preferred Stock		1.5		0.2		—			—			(0.2	)		1.5		—		—
Z Gallerie LLC, Common Stock		—		0.7		—			—			—			0.7		—		—

Total	$	358.2	$	434.0	$	(161.6	)	$	32.2		$	53.9		$	716.7	$	27.9	$	15.6

(1)

(2)

(3)	Interest and PIK income presented for the full year ended December 31, 2019.

(4)	The Company held this investment as of December 31, 2019 but it was not deemed to be an “affiliated person” of the portfolio company or deemed to “control” the portfolio company as of December 31, 2019. Transfers in or out have been presented at amortized cost.

(5)	The Company held this investment as of December 31, 2018 but it was deemed to “control” the portfolio company as of December 31, 2018. Transfers in or out have been presented at amortized cost.

(6)	The Company held this investment as of December 31, 2018 but it was not deemed to be an “affiliated person” of the portfolio company or deemed to “control” the portfolio company as of December 31, 2018. Transfers in or out have been presented at amortized cost.

See notes to consolidated financial statements.

109

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)

(z)

Under the Investment Company Act of 1940, as amended, the Company generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2019, the Company held investments in one portfolio company of which it is deemed to be an “affiliated person” and deemed to “control”. During the year ended December 31, 2019, the Company disposed of investments in one portfolio of which it was deemed to be an “affiliated person” and deemed to “control”. The following table presents certain information with respect to investments in portfolio companies of which the Company was deemed to be an affiliated person and deemed to control for the year ended December 31, 2019:


Portfolio Company	Fair Value at December 31, 2018		Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)			Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2019		Interest Income⁽³⁾		PIK Income⁽³⁾		Dividend Income⁽³⁾
Senior Secured Loans—First Lien
Advanced Lighting Technologies Inc	$	20.2	$	0.6	$	(0.2	)	$	—		$	(7.5	)	$	13.1	$	2.5	$	—	$	—
Amtek Global Technology Pte Ltd		56.4		—		—			—			(1.1	)		55.3		2.8		—		—
Senior Secured Loans—Second Lien
Amtek Global Technology Pte Ltd		37.6		—		—			—			(5.4	)		32.2		1.9		—		—
Amtek Global Technology Pte Ltd		—		4.6		—			—			(0.5	)		4.1		—		—		—
Other Senior Secured Debt
Advanced Lighting Technologies Inc		8.0		—		—			—			(8.0	)		—		—		—		—
JW Aluminum Co⁽⁴⁾		36.4		—		(36.5	)		—			0.1			—		—		—		—
Subordinated Debt
Hilding Anders		81.0		4.3		—			—			(8.5	)		76.8		—		4.2		—
Hilding Anders		0.5		—		—			—			(0.3	)		0.2		—		—		—
Hilding Anders		—		—		—			—			—			—		—		—		—
Hilding Anders		7.2		—		—			—			(3.6	)		3.6		—		—		—
Asset Based Finance
801 5th Ave, Seattle, Structure Mezzanine		—		52.9		—			—			—			52.9		0.2		—		—
801 5th Ave, Seattle, Private Equity		—		8.8		—			—			—			8.8		—		—		—
Comet Aircraft S.a.r.l., Common Stock		32.4		—		(36.0	)		1.5			2.1			—		3.3		—		—
Toorak Capital LLC, Membership Interest		—		4.2		—			—			1.1			5.3		—		—		—
Toorak Capital LLC, Membership Interest		127.4		103.5		(28.6	)		—			38.2			240.5		—		—		11.8
Strategic Credit Opportunities Partners, LLC
Strategic Credit Opportunities Partners, LLC		299.3		196.9		—			—			(17.2	)		479.0		—		—		45.4
Equity/Other
Advanced Lighting Technologies Inc, Common Stock⁽⁴⁾		—		—		—			—			—			—		—		—		—
Advanced Lighting Technologies Inc, Warrant⁽⁴⁾		—		—		—			—			—			—		—		—		—
Amtek Global Technology Pte Ltd, Ordinary Shares		26.4		—		—			—			(21.2	)		5.2		—		—		—
Amtek Global Technology Pte Ltd, Trade Claim		2.6		—		(1.8	)		(0.2	)		—			0.6		—		—		—
Hilding Anders, ARLE PIK Interest		—		—		—			—			—			—		—		—		—
Hilding Anders, Class A Common Stock		—		—		—			—			—			—		—		—		—
Hilding Anders, Class B Common Stock		—		—		—			—			—			—		—		—		—
Hilding Anders, Class C Common Stock		—		—		—			—			—			—		—		—		—
Hilding Anders, Equity Options		2.6		—		—			—			(1.3	)		1.3		—		—		—
JW Aluminum Co, Common Stock⁽⁴⁾		—		—		—			—			—			—		—		—		—

See notes to consolidated financial statements.

110

FS KKR Capital Corp.

Consolidated Schedule of Investments (continued)

As of December 31, 2019

(in millions, except share amounts)


Portfolio Company	Fair Value at December 31, 2018			Gross Additions⁽¹⁾		Gross Reductions⁽²⁾			Net Realized Gain (Loss)		Net Change in Unrealized Appreciation (Depreciation)			Fair Value at December 31, 2019		Interest Income⁽³⁾		PIK Income⁽³⁾		Dividend Income⁽³⁾
JW Aluminum Co, Preferred Stock⁽⁴⁾	$	75.8		$	—	$	(75.7	)	$	—	$	(0.1	)	$	—	$	—	$	—	$	—
KKR BPT Holdings Aggregator LLC, Membership Interest		(1.4	)		1.4		—			—		—			—		—		—		—

Total	$	812.4		$	377.2	$	(178.8	)	$	1.3	$	(33.2	)	$	978.9	$	10.7	$	4.2	$	57.2

(1)

(2)

(3)	Interest, PIK and dividend income presented for the full year ended December 31, 2019.

(4)	The Company held this investment as of December 31, 2019 but it was not deemed to “control” the portfolio company as of December 31, 2019. Transfers in or out have been presented at amortized cost.

See notes to consolidated financial statements.

111

FS KKR Capital Corp.

Notes to Consolidated Financial Statements

(in millions, except share and per share amounts)

Note 1. Principal Business and Organization

FS KKR Capital Corp. (NYSE: FSK), or the Company, was incorporated under the general corporation laws of the State of Maryland on December 21, 2007 and formally commenced investment operations on January 2, 2009. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. In addition, the Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of December 31, 2020, the Company had various wholly-owned subsidiaries, including special-purpose financing subsidiaries and subsidiaries through which it holds interests in portfolio companies. The consolidated financial statements include both the Company’s accounts and the accounts of its wholly-owned subsidiaries as of December 31, 2020. All intercompany transactions have been eliminated in consolidation. Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes.

The Company’s investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation. 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 and certain asset-based financing 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 December 20, 2018, or the investment advisory agreement. On April 9, 2018, GSO / Blackstone Debt Funds Management LLC, or GDFM, resigned as the investment sub-adviser to the Company and terminated the investment sub-advisory agreement, or the investment sub-advisory agreement, between FB Income Advisor, LLC, or FB Advisor, and GDFM, effective April 9, 2018. In connection with GDFM’s resignation as the investment sub-adviser to the Company, on April 9, 2018, the Company entered into an investment advisory agreement, or the prior investment advisory agreement, with the Advisor. The prior investment advisory agreement replaced the amended and restated investment advisory agreement, dated July 17, 2014, or the FB Advisor investment advisory agreement, by and between the Company and FB Advisor.

On December 19, 2018, the Company completed its acquisition, or the 2018 Merger, of Corporate Capital Trust, Inc., or CCT, pursuant to that certain Agreement and Plan of Merger, or the 2018 Merger Agreement, dated as of July 22, 2018, by and among the Company, CCT, IC Acquisition, Inc., a former wholly-owned subsidiary of the Company, or Merger Sub, and the Advisor. See Note 13 for a discussion of the 2018 Merger.

112

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 1. Principal Business and Organization (continued)

The Reverse Stock Split affected all shareholders uniformly and did not alter any shareholder’s percentage interest in the Company’s equity, except to the extent that the Reverse Stock Split resulted in some shareholders owning a fractional share. In that regard, no fractional shares were issued in connection with the Reverse Stock Split. Shareholders of record who would have otherwise been entitled to receive a fractional share instead received a cash payment based on the closing price of the Company’s common stock as reported on the NYSE as of June 15, 2020. A summary of the Company’s weighted average number of shares of common stock outstanding and earnings per share after adjusting for the Reverse Stock Split is as follows:


	Year Ended December 31, 2019		Year Ended December 31, 2018
Weighted average number of shares of common stock outstanding (as previously reported)		518,946,741		251,377,426
Weighted average number of shares of common stock outstanding (as adjusted)		129,736,685		62,844,356
Net investment income per share (as previously reported)	$	0.79	$	0.82
Net investment income per share (as adjusted)	$	3.16	$	3.26
Earnings per share (as previously reported)	$	0.47	$	2.26
Earnings per share (as adjusted)	$	1.90	$	9.05

On November 23, 2020, the Company entered into an Agreement and Plan of Merger, or the 2020 Merger Agreement, with FS KKR Capital Corp II., a Maryland corporation, or FSKR and, together with the Company, the Funds, Rocky Merger Sub, Inc., a Maryland corporation and wholly-owned subsidiary of the Company, or Merger Sub, and the Advisor. The 2020 Merger Agreement provides that, subject to the conditions set forth in the 2020 Merger Agreement, Merger Sub will merge with and into FSKR, with FSKR continuing as the surviving company and as a wholly-owned subsidiary of the Company, or the First Merger, and, immediately thereafter, FSKR will merge with and into the Company, with the Company continuing as the surviving company or, together with the First Merger, the 2021 Merger. See Note 14 for additional information.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying audited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies under Financial Accounting Standards Board, or the FASB, Accounting Standards Codification Topic 946, Financial Services—Investment Companies. The Company has evaluated the impact of subsequent events through the date the consolidated financial statements were issued and filed with the U.S. Securities and Exchange Commission, or the SEC.

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

Cash and Cash Equivalents: The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. All cash balances are maintained with high credit quality financial institutions, which are members of the Federal Deposit Insurance Corporation.

Valuation of Portfolio Investments: The Company determines the net asset value of its investment portfolio each quarter. Securities are valued at fair value as determined in good faith by the Company’s board of directors. In connection with that determination, the Advisor provides the Company’s board of directors with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by independent third-party valuation services.

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the 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

113

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

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, the Company undertakes a multi-step valuation process each quarter, as described below:

•

the Company’s quarterly fair valuation process begins by the Advisor providing financial and operating information with respect to each portfolio company or investment to the Company’s independent third-party valuation service providers;

•

the Company’s independent third-party valuation service providers review this information, along with other public and private information, and provide the Advisor with a valuation range for each portfolio company or investment;

•

preliminary valuations are then discussed with the valuation committee;

•

the Company’s valuation committee reviews the preliminary valuations and the Advisor, together with the Company’s independent third-party valuation service providers and, if applicable, supplements the preliminary valuations to reflect any comments provided by the valuation committee;

•

following the completion of its review, the Company’s valuation committee recommends that the Company’s board of directors approves the fair valuations determined by the valuation committee; and

•

the Company’s board of directors discusses the valuations and determines the fair value of each such investment in the Company’s portfolio in good faith based on various statistical and other factors, including the input and recommendation of the Advisor, the valuation committee and the Company’s independent third-party valuation service providers.

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

114

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

The Company’s equity interests in portfolio companies for which there is no liquid public market are valued at fair value. The Company’s board of directors, in its determination of fair value, may consider various factors, such as 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. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or the Company’s 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 the Company’s board of directors may also consider private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. The Advisor, any approved independent third-party valuation services and the Company’s board of directors may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the smaller size of portfolio companies relative to comparable firms, as well as such other factors as the Company’s board of directors, in consultation with the Advisor and any approved independent third-party valuation services, if applicable, may consider relevant in assessing fair value. Generally, the value of the Company’s equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.

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

The Company values certain investments at their net asset value in accordance with practical expedient under ASC Topic 820.

The fair values of the Company’s investments are determined in good faith by the Company’s board of directors. The Company’s board of directors is responsible for the valuation of the Company’s portfolio investments at fair value as determined in good faith pursuant to the Company’s valuation policy and consistently applied valuation process. The Company’s board of directors has delegated day-to-day responsibility for implementing its valuation policy to the Advisor, and has authorized the Advisor to utilize independent third-party valuation and pricing services that have been approved by the Company’s board of directors. The valuation committee is responsible for overseeing the Advisor’s implementation of the valuation process.

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 accrued interest 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.

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FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

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. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.

For the years ended December 31, 2020 and 2019, the Company recognized $16 and $20, respectively, in structuring fee revenue and included such revenue in the fee income line item on its consolidated statement of operations.

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

Capital Gains Incentive Fee: Pursuant to the terms of the investment advisory agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory agreement). This fee equals 20.0% of the Company’s incentive fee capital gains, which shall equal both CCT’s and the Company’s realized capital gains (without duplication) on a cumulative basis from inception, calculated as of the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation (without duplication) on a cumulative basis, less the aggregate amount of any capital gain incentive fees previously paid by CCT and the Company. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

The Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to the Advisor if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though the Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

Subordinated Income Incentive Fee: Pursuant to the terms of the investment advisory agreement, the Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income under the investment advisory agreement, which is calculated and payable quarterly in arrears, equals 20.0% of the Company’s “pre-incentive fee net investment income” for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on the value of the Company’s net assets, equal to 1.75% per quarter, or an annualized hurdle rate of 7.0%. As a result, the Advisor will not earn this incentive fee for any quarter until the Company’s pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.75%. Once the Company’s pre-incentive fee net investment income in any quarter exceeds the hurdle rate, the Advisor will be entitled to a “catch-up” fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until the Company’s pre-incentive fee net investment income for such quarter equals 2.1875%, or 8.75% annually, of net assets. Thereafter, the Advisor will be entitled to receive 20.0% of pre-incentive fee net investment income.

The subordinated incentive fee on income is subject to a cap equal to (i) 20.0% of the “per share pre-incentive fee return” for the then-current and eleven preceding calendar quarters minus the cumulative “per share incentive fees” accrued and/or payable for the eleven preceding calendar quarters multiplied by (ii) the weighted average number of shares outstanding during the calendar quarter (or any portion thereof) for which the subordinated incentive fee on income is being calculated. The definitions of “per share pre-incentive fee return” and “per share incentive fees” under the investment advisory agreement take into account the historic per share pre-incentive fee return of both the Company and CCT, together with the historic per share incentive fees paid by both the Company and CCT. For the purpose of calculating the “per share pre-incentive fee return,” any unrealized appreciation or depreciation recognized as a result of the purchase accounting for the 2018 Merger is excluded.

116

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

Income Taxes: The Company 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. To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements, as well as distribute to its stockholders, for each tax year, at least 90% of its “investment company taxable income,” which is generally the Company’s net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses, determined without regard to any deduction for distributions paid. As a RIC, the Company will not have to pay corporate-level U.S. federal income taxes on any income that it distributes to its stockholders. The Company intends to make distributions in an amount sufficient to qualify for and maintain its RIC tax status each tax year and to not pay any U.S. federal income taxes on income so distributed. The Company is also subject to nondeductible federal excise taxes if it does not distribute in respect of each calendar year an amount at least equal to the sum of 98% of net ordinary income, 98.2% of any capital gain net income, if any, and any recognized and undistributed income from prior years for which it paid no U.S. federal income taxes. The Company accrued $10, $7 and $7 in estimated excise taxes payable in respect of income received during the years ended December 31, 2020, 2019 and 2018, respectively. During the years ended December 31, 2020, 2019, and 2018, the Company paid $7, $9 and $6, respectively, in excise and other taxes.

The Company evaluates its tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in the Company’s consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is “more likely than not” to be sustained assuming examination by taxing authorities. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. During the years ended December 31, 2020, 2019 and 2018, the Company did not incur any interest or penalties.

The Company has analyzed the tax positions taken on federal and state income tax returns for all open tax years, and has concluded that no provision for income tax for uncertain tax positions is required in the Company’s financial statements. The Company’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Distributions: Distributions to the Company’s stockholders are recorded as of the record date. Subject to the discretion of the Company’s board of directors and applicable legal restrictions, the Company intends to declare and pay such distributions on a quarterly basis. Net realized capital gains, if any, are distributed or deemed distributed at least annually.

Reclassifications: Certain amounts in the consolidated financial statements as of and for the years ended December 31, 2019 and 2018 have been reclassified to conform to the classifications used to prepare the consolidated financial statements for the year ended December 31, 2020.

Recent Accounting Pronouncements: In August 2018, the FASB issued Accounting Standards Update 2018-13, Fair Value Measurement—Disclosures Framework—Changes to Disclosure Requirements of Fair Value Measurement (Topic 820), 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 implemented ASU 2018-13 during the year ended December 31, 2020, and it did not have a significant impact on the Company’s disclosure over fair value.

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FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (continued)

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

Note 3. Share Transactions

Below is a summary of transactions with respect to shares of the Company’s common stock during the years ended December 31, 2020, 2019 and 2018:


	Year Ended December 31,
	2020						2019						2018
	Shares			Amount			Shares⁽¹⁾			Amount			Shares⁽¹⁾			Amount
Reinvestment of Distributions		—		$	—			—		$	—			—		$	—
Share Repurchase Program		(2,823,750	)		(47	)		(6,287,919	)		(153	)		(1,642,837	)		(50	)
Fractional Share Repurchase		(2,051	)		—			—			—			—			—
Issuance of Common Stock		—			—			—			—			73,081,168			1,567

Net Proceeds from Share Transactions		(2,825,801	)	$	(47	)		(6,287,919	)	$	(153	)		71,438,331		$	1,517

(1)	The number of shares repurchased has been adjusted to reflect the Reverse Stock Split as discussed below.

During the year ended December 31, 2020, the administrator for the Company’s distribution reinvestment plan, or DRP, purchased 1,504,389 shares of common stock in the open market at an average price per share of $15.84 (totaling $24) pursuant to the DRP, and distributed such shares to participants in the DRP. During the year ended December 31, 2019, the administrator for the DRP purchased 1,069,720 shares of common stock in the open market at an average price per share of $23.90 (totaling $26) pursuant to the DRP, and distributed such shares to participants in the DRP. During the period from January 1, 2021 to February 26, 2021, the administrator for the DRP purchased 275,642 shares of common stock in the open market at an average price per share of $17.21 (totaling $5) pursuant to the DRP, and distributed such shares to participants in the DRP. For additional information regarding the terms of the DRP, see Note 5.

2018 Merger

In accordance with the terms of the 2018 Merger Agreement, at the time of the transactions contemplated by the 2018 Merger Agreement, each outstanding share of CCT common stock was converted into the right to receive 2.3552 shares of the Company’s common stock (with CCT stockholders receiving cash in lieu of fractional shares of the Company’s common stock). As a result, the Company issued an aggregate of 292,324,670 shares of its common stock to former CCT stockholders. Share and exchange ratio amounts in the foregoing do not reflect the Reverse Stock Split as discussed below.

February 2018 Share Repurchase Program

In February 2018, the Company’s board of directors authorized a stock repurchase program. Under the program, the Company was permitted to repurchase up to $50 in the aggregate of its outstanding common stock in the open market at prices below the then-current net asset value per share. During the year ended December 31, 2018, the Company repurchased 1,642,837 shares of common stock pursuant to the share repurchase program at an average price per share (inclusive of commissions paid) of $30.44 (totaling $50). The program has concluded since the aggregate repurchase amount that was approved by the Company’s board of directors has been expended.

118

FS Investment Corporation

Notes to Consolidated Financial Statements (continued)

(in thousands, except share and per share amounts)

Note 3. Share Transactions (continued)

December 2018 Share Repurchase Program

In December 2018, the Company’s board of directors authorized a stock repurchase program. Under the program, the Company was permitted to repurchase up to $200 in the aggregate of its outstanding common stock in the open market at prices below the then-current net asset value per share.

During the year ended December 31, 2020, the Company repurchased 2,823,750 shares of common stock pursuant to the share repurchase program at an average price per share (inclusive of commissions paid) of $16.71 (totaling $47). During the year ended December 31, 2019, the Company repurchased 6,287,919 shares of common stock pursuant to the share repurchase program at an average price per share (inclusive of commissions paid) of $24.30 (totaling $153). The program has concluded since the aggregate repurchase amount that was approved by the Company’s board of directors has been expended.

Reverse Stock Split and Fractional Shares

As a result of the Reverse Stock Split, which was effective on June 15, 2020, every four shares of the Company’s common stock issued and outstanding were automatically combined into one share of the Company’s common stock, and the number of outstanding shares of the Company’s common stock was reduced from approximately 495.0 million to approximately 123.75 million as of June 15, 2020. The Reverse Stock Split did not modify the rights or preferences of the Company’s common stock. The Company also filed a separate Articles of Amendment to Articles of Incorporation with the State Department of Assessments and Taxation of the State of Maryland to provide that there would be no change in the par value of $0.001 per share as a result of the Reverse Stock Split.

Note 4. Related Party Transactions

Compensation of the Investment Adviser

Pursuant to the investment advisory agreement, the Advisor is entitled to a base management fee calculated at an annual rate of 1.50% of the average weekly value of the Company’s gross assets excluding cash and cash equivalents (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. Effective June 15, 2019, in connection with stockholder approval of the modification of the asset coverage requirement applicable to senior securities from 200% to 150%, the Advisor reduced (by permanent waiver) the annual base management fee payable under the investment advisory agreement from 1.5% to 1.0% on all assets financed using leverage over 1.0x debt-to-equity. The base management fee is payable quarterly in arrears. All or any part of the base management fee not taken as to any quarter will be deferred without interest and may be taken in such other quarter as the Advisor determines. The prior investment advisory agreement had substantially similar terms, except that cash and cash equivalents were not excluded from gross assets. 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.

Pursuant to the FB Advisor investment advisory agreement, which was in effect until April 9, 2018, FB Advisor was entitled to an annual base management fee equal to 1.75% of the average value of the Company’s gross assets (gross assets equal the total assets of the Company as set forth on the Company’s consolidated balance sheets) and an incentive fee based on the Company’s performance. FB Advisor had agreed, effective October 1, 2017, to (a) waive a portion of the base management fee to which it was entitled under the FB Advisor investment advisory agreement so that the fee received equaled 1.50% of the average value of the Company’s gross assets and (b) continue to calculate the subordinated incentive fee on income to which it was entitled under the FB Advisor investment advisory agreement as if the base management fee was 1.75% of the average value of the Company’s gross

119

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 4. Related Party Transactions (continued)

assets. Pursuant to the investment sub-advisory agreement, GDFM was entitled to receive 50% of all management and incentive fees payable to FB Advisor under the FB Advisor investment advisory agreement with respect to each year.

On April 9, 2018, the Company entered into an administration agreement with the Advisor, or the administration agreement, which replaced an administration agreement with FB Advisor, or the FB Advisor administration agreement. Pursuant to the administration agreement, the Advisor oversees the Company’s day-to-day operations, including the provision of general ledger accounting, fund accounting, legal services, investor relations, certain government and regulatory affairs activities, and other administrative services. The Advisor also performs, or oversees the performance of, the Company’s corporate operations and required administrative services, which includes being responsible for the financial records that the Company is required to maintain and preparing reports for the Company’s stockholders and reports filed with the SEC. In addition, the Advisor assists the Company in calculating its net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others.

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

The following table describes the fees and expenses accrued under the investment advisory agreement, the prior investment advisory agreement, the FB Advisor investment advisory agreement, the administration agreement and the FB Advisor administration agreement, as applicable, during the years ended December 31, 2020, 2019 and 2018:


			Year Ended December 31,
Related Party	Source Agreement	Description	2020	2019	2018
FB Advisor and the Advisor	Investment advisory agreement, prior investment advisory agreement and FB Advisor investment advisory agreement	Base Management Fee⁽¹⁾	$106	$115	$60
FB Advisor and the Advisor	Investment advisory agreement, prior investment advisory agreement and FB Advisor investment advisory agreement	Subordinated Incentive Fee on Income⁽²⁾	$—	$57	$26
FB Advisor and the Advisor	Administration agreement and FB Advisor administration agreement	Administrative Services Expenses⁽³⁾	$7	$9	$4

(1)

For the year ended December 31, 2018 , the amount shown is net of waivers of $3. During the years ended December 31, 2020, 2019 and 2018, $111, $105, and $59, respectively, in base management fees were paid to the Advisor and/or FB Advisor. As of December 31, 2020, $25 in base management fees were payable to the Advisor.

(2)	During the year ended December 31, 2020 and 2019, $0 and $71, respectively, of subordinated incentive fees on income were paid to the Advisor.

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FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 4. Related Party Transactions (continued)

(3)

During the years ended December 31, 2020, 2019 and 2018, $6, $6 and $3, respectively, of administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FB Advisor and the Advisor and the remainder related to other reimbursable expenses, including reimbursement of fees related to transactional expenses for prospective investments, including 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 $0.8 for the year ended December 31, 2020. The Company paid $8, $7 and $3, respectively, in administrative services expenses to the Advisor and/or FB Advisor during the years ended December 31, 2020, 2019 and 2018.

Potential Conflicts of Interest

Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term.

In an order dated June 4, 2013, or the FS Order, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FB Advisor, including FS Energy and Power Fund, FSKR and any future BDCs that are advised by FB Advisor or its affiliated investment advisers. However, in connection with the investment advisory relationship with the Advisor, and in an effort to mitigate potential future conflicts of interest, the Company’s board of directors authorized and directed that the Company (i) withdraw from the FS Order, except with respect to any transaction in which the Company participated in reliance on the FS Order prior to April 9, 2018, and (ii) rely on an exemptive relief order, dated January 5, 2021, that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions, including investments originated and directly negotiated by the Advisor or KKR Credit, with certain affiliates of the Advisor.

Affiliated Purchaser Program

As previously disclosed, certain affiliates of the owners of the Advisor committed $100 to a $350 investment vehicle that may invest from time to time in shares of the Company. In June 2020, that investment vehicle entered into a written trading plan with a third party broker in accordance with Rule 10b5-1 and Rule 10b-18 promulgated under the Exchange Act to facilitate the purchase of shares of the Company’s common stock pursuant to the terms and conditions of such plan. The Company is not a party to the plan or any transaction with the investment vehicle.

Note 5. Distributions

The following table reflects the cash distributions per share that the Company has declared on its common stock during the years ended December 31, 2020, 2019 and 2018:


	Distribution
For the Year Ended December 31,	Per Share⁽¹⁾		Amount
2018⁽²⁾	$	3.40000	$	205
2019	$	3.04000	$	393
2020	$	2.56000	$	318

(1)	The amount of each per share distribution has been retroactively adjusted to reflect the Reverse Stock Split as discussed above in Note 3.

121

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 5. Distributions (continued)

(2)	Includes a $0.36 per share special cash distribution that was paid on December 3, 2018.

On February 18, 2021, the Company’s board of directors declared a regular quarterly cash distribution of $0.60 per share, which will be paid on or about April 2, 2021 to stockholders of record as of the close of business on March 17, 2021. The timing and amount of any future distributions to stockholders are subject to applicable legal restrictions and the sole discretion of the Company’s board of directors.

Pursuant to the DRP, the Company will reinvest all cash dividends or distributions declared by the Company’s board of directors on behalf of stockholders who do not elect to receive their distributions in cash. As a result, if the Company’s board of directors declares a distribution, then stockholders who have not elected to “opt out” of the DRP will have their distributions automatically reinvested in additional shares of the Company’s common stock.

With respect to each distribution pursuant to the DRP, the Company reserves the right to either issue new shares of common stock or purchase shares of common stock in the open market in connection with implementation of the DRP. Unless the Company, in its sole discretion, otherwise directs the plan administrator, (A) if the per share market price (as defined in the DRP) is equal to or greater than the estimated net asset value per share (rounded up to the nearest whole cent) of the Company’s common stock on the payment date for the distribution, then the Company will issue shares of common stock at the greater of (i) net asset value per share of common stock or (ii) 95% of the market price; or (B) if the market price is less than the net asset value per share, then, in the sole discretion of the Company, (i) shares of common stock will be purchased in open market transactions for the accounts of participants to the extent practicable, or (ii) the Company will issue shares of common stock at net asset value per share. Pursuant to the terms of the DRP, the number of shares of common stock to be issued to a participant will be determined by dividing the total dollar amount of the distribution payable to a participant by the price per share at which the Company issues such shares; provided, however, that shares purchased in open market transactions by the plan administrator will be allocated to a participant based on the average purchase price, excluding any brokerage charges or other charges, of all shares of common stock purchased in the open market.

If a stockholder receives distributions in the form of common stock pursuant to the DRP, such stockholder generally will be subject to the same federal, state and local tax consequences as if it elected to receive distributions in cash. If the Company’s common stock is trading at or below net asset value, a stockholder receiving distributions in the form of additional common stock will be treated as receiving a distribution in the amount of cash that they would have received if they had elected to receive the distribution in cash. If the Company’s common stock is trading above net asset value, a stockholder receiving distributions in the form of additional common stock will be treated as receiving a distribution in the amount of the fair market value of the Company’s common stock. The stockholder’s basis for determining gain or loss upon the sale of common stock received in a distribution will be equal to the total dollar amount of the distribution payable to the stockholder. Any stock received in a distribution will have a holding period for tax purposes commencing on the day following the day on which the shares of common stock are credited to the stockholder’s account.

The Company may fund its cash distributions to stockholders 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 stockholders. There can be no assurance that the Company will be able to pay distributions at a specific rate or at all.

122

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 5. Distributions (continued)

The following table reflects the sources of the cash distributions on a tax basis that the Company has declared on its common stock during the years ended December 31, 2020, 2019 and 2018:


	Year Ended December 31,
	2020					2019					2018
Source of Distribution	Distribution Amount		Percentage			Distribution Amount		Percentage			Distribution Amount		Percentage
Offering proceeds	$	—		—		$	—		—		$	—		—
Borrowings		—		—			—		—			—		—
Net investment income⁽¹⁾		318		100	%		393		100	%		205		100	%
Short-term capital gains proceeds from the sale of assets		—		—			—		—			—		—
Long-term capital gains proceeds from the sale of assets		—		—			—		—			—		—
Non-capital gains proceeds from the sale of assets		—		—			—		—			—		—
Distributions on account of preferred and common equity		—		—			—		—			—		—

Total	$	318		100	%	$	393		100	%	$	205		100	%

(1)

During the years ended December 31, 2020, 2019 and 2018, 88.1%, 90.5% and 84.3%, respectively, of the Company’s gross investment income was attributable to cash income earned, 1.6%, 1.8% and 1.8%, respectively, was attributable to non-cash accretion of discount and 10.3%, 7.7% and 13.9%, respectively, was attributable to paid-in-kind, or PIK, interest.

The Company’s net investment income on a tax basis for the years ended December 31, 2020, 2019 and 2018 was $357, $422 and $244, respectively. As of December 31, 2020, 2019 and 2018, the Company had $244, $220 and $191, respectively, of undistributed net investment income and $855, $480 and $421, respectively, of accumulated capital losses on a tax basis.

The Company’s undistributed net investment income on a tax basis may be adjusted following the filing of the Company’s tax returns. The adjustment is in general due to tax-basis income received by the Company differing from GAAP-basis income on account of certain collateralized securities and interests in partnerships, and the reclassification of realized gains and losses upon the sale of certain collateralized securities held in its investment portfolio during such period.

The difference between the Company’s GAAP-basis net investment income and its tax-basis net investment income is primarily due to the reclassification of unamortized original issue discount and prepayment fees recognized upon prepayment of loans from income for GAAP purposes to realized gains or deferred to future periods for tax purposes, the impact of consolidating certain subsidiaries for purposes of computing GAAP-basis net investment income but not for purposes of computing tax-basis net investment income, the reversal of non-deductible excise taxes and income recognized for tax purposes on certain transactions but not recognized for GAAP purposes.

The following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the years ended December 31, 2020, 2019 and 2018:


	Year Ended December 31,
	2020			2019			2018
GAAP-basis net investment income	$	331		$	410		$	205
Income subject to tax not recorded for GAAP		29			17			30
Excise taxes		10			7			7
GAAP versus tax-basis impact of consolidation of certain subsidiaries		11			4			12
Reclassification of unamortized original issue discount and prepayment fees		(14	)		(22	)		(5	)
Other miscellaneous differences		(10	)		6			(5	)

Tax-basis net investment income	$	357		$	422		$	244

123

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 5. Distributions (continued)

The Company may make certain adjustments to the classification of stockholders’ equity as a result of permanent book-to-tax differences. During the year ended December 31, 2020, the Company increased accumulated undistributed (distributions in excess of) net investment income and accumulated undistributed net realized gain (loss) on investments and gain (loss) on foreign currency by $10 and $119, respectively, and decreased capital in excess of par value by $129. During the year ended December 31, 2019, the Company increased accumulated undistributed (distributions in excess of) net investment income and accumulated undistributed net realized gain (loss) on investments and gain (loss) on foreign currency by $15 and $26, respectively, and decreased capital in excess of par value by $41.

The determination of the tax attributes of the Company’s distributions is made annually as of the end of the Company’s fiscal year based upon the Company’s taxable income for the full year and distributions paid for the full year. The actual tax characteristics of distributions to stockholders are reported to stockholders annually on Form 1099-DIV.

As of December 31, 2020 and 2019, the components of accumulated earnings on a tax basis were as follows:


	Year Ended December 31,
	2020			2019
Distributable ordinary income	$	244		$	220
Distributable realized gains (accumulated capital losses)⁽¹⁾		(855	)		(480	)
Other temporary differences		0			(1	)
Net unrealized appreciation (depreciation)⁽²⁾		(159	)		85

Total	$	(770	)	$	(176	)

(1)

Net capital losses may be carried forward indefinitely, and their character is retained as short-term or long-term losses. As of December 31, 2020, the Company had short-term and long-term capital loss carryforwards available to offset future realized capital gains of $34 and $821, respectively. $85 of such losses were carried over from CCT due to the 2018 Merger, and $177 of such losses were carried over from losses generated by the Company prior to the 2018 Merger. Because of the loss limitation rules of the Code, some of the tax basis losses may be limited in their use. Any unused balances resulting from such limitations may be carried forward into future years indefinitely.

(2)	As of December 31, 2020 and 2019, the gross unrealized appreciation was $1,121 and $1,087, respectively. As of December 31, 2020 and 2019, the gross unrealized depreciation was $1,280 and $1,002, respectively.

The aggregate cost of the Company’s investments for U.S. federal income tax purposes totaled $7,622 and $7,973 as of December 31, 2020 and 2019, respectively. The aggregate net unrealized appreciation (depreciation) on a tax basis was $(842) and $(616) as of December 31, 2020 and 2019, respectively. The aggregate net unrealized appreciation (depreciation) on investments on a tax basis excludes net unrealized appreciation (depreciation) from merger accounting, cross currency swaps, foreign currency forward contracts and foreign currency transactions.

As of December 31, 2020, the Company had a deferred tax liability of $5 resulting from unrealized appreciation on investments held by the Company’s wholly-owned taxable subsidiaries and a deferred tax asset of $56 resulting from a combination of unrealized depreciation on investments held by and net operating losses and other tax attributes of the Company’s wholly-owned taxable subsidiaries. As of December 31, 2020, certain wholly-owned taxable subsidiaries anticipated that they would be unable to fully utilize their generated net operating losses, therefore the deferred tax asset was offset by a valuation allowance of $51. For the year ended December 31, 2020, the Company did not record a provision for taxes related to wholly-owned taxable subsidiaries.

124

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of December 31, 2020 and 2019:


	December 31, 2020							December 31, 2019
	Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio			Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	3,597	$	3,449		50.9	%	$	3,868	$	3,724		50.6	%
Senior Secured Loans—Second Lien		1,035		880		13.0	%		1,273		1,196		16.3	%
Other Senior Secured Debt		127		86		1.3	%		299		239		3.2	%
Subordinated Debt		243		171		2.5	%		479		409		5.6	%
Asset Based Finance		1,025		951		14.0	%		761		737		10.0	%
Strategic Credit Opportunities Partners, LLC		810		713		10.5	%		491		479		6.5	%
Equity/Other		616		530		7.8	%		638		573		7.8	%

Total	$	7,453	$	6,780		100.0	%	$	7,809	$	7,357		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 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 December 31, 2020, the Company held investments in ten portfolio companies of which it is deemed to “control.” As of December 31, 2020, the Company held investments in thirteen portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnotes (y) and (z) to the consolidated schedule of investments as of December 31, 2020.

As of December 31, 2019, the Company held investments in seven portfolio companies of which it is deemed to “control.” As of December 31, 2019, the Company held investments in sixteen portfolio companies of which it is deemed to be an “affiliated person” but is not deemed to “control.” For additional information with respect to such portfolio companies, see footnotes (y) and (z) to the consolidated schedule of investments as of December 31, 2019.

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 December 31, 2020, the Company had unfunded debt investments with aggregate unfunded commitments of $228.4, unfunded equity/other commitments of $142.9 and unfunded commitments of $65.8 of Strategic Credit Opportunities Partners, LLC. As of December 31, 2019, the Company had unfunded debt investments with aggregate unfunded commitments of $438.0, unfunded equity/other commitments of $240.1 and unfunded commitments of $385.2 of Strategic Credit Opportunities Partners, LLC. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise. For additional details regarding the Company’s unfunded debt investments, see the Company’s consolidated schedule of investments as of December 31, 2020 and 2019.

125

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of December 31, 2020 and 2019:


	December 31, 2020					December 31, 2019
Industry Classification	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
Automobiles & Components	$	104		1.5	%	$	247		3.4	%
Banks		14		0.2	%		15		0.2	%
Capital Goods		799		11.8	%		1,085		14.8	%
Commercial & Professional Services		564		8.3	%		557		7.6	%
Consumer Durables & Apparel		385		5.7	%		363		4.9	%
Consumer Services		145		2.1	%		294		4.0	%
Diversified Financials		467		6.9	%		575		7.8	%
Energy		107		1.6	%		208		2.8	%
Food & Staples Retailing		221		3.3	%		209		2.8	%
Food, Beverage & Tobacco		106		1.6	%		119		1.6	%
Health Care Equipment & Services		604		8.9	%		601		8.2	%
Household & Personal Products		190		2.8	%		120		1.6	%
Insurance		208		3.1	%		217		3.0	%
Materials		147		2.2	%		260		3.5	%
Media & Entertainment		36		0.5	%		94		1.3	%
Pharmaceuticals, Biotechnology & Life Sciences		34		0.5	%		30		0.4	%
Real Estate		555		8.2	%		236		3.2	%
Retailing		344		5.1	%		457		6.2	%
Semiconductors & Semiconductor Equipment		—		—			19		0.3	%
Software & Services		770		11.3	%		805		10.9	%
Strategic Credit Opportunities Partners, LLC		713		10.5	%		479		6.5	%
Technology Hardware & Equipment		15		0.2	%		94		1.3	%
Telecommunication Services		71		1.0	%		71		1.0	%
Transportation		181		2.7	%		202		2.7	%

Total	$	6,780		100.0	%	$	7,357		100.0	%

Strategic Credit Opportunities Partners, LLC

Strategic Credit Opportunities Partners, LLC, or SCJV, is a joint venture between the Company and South Carolina Retirement Systems Group Trust, or SCRS. SCRS purchased its interests in SCJV from Conway Capital, LLC, an affiliate of Guggenheim Life and Annuity Company and Delaware Life Insurance Company, in June 2019, which had no impact on the significant terms governing SCJV other than an increase in the aggregate capital commitment (but not the percentage of the aggregate capital committed by each member) to SCJV. SCJV’s amended and restated limited liability company agreement, or the SCJV Agreement, requires the Company and SCRS to provide capital to SCJV of up to $1,000 in the aggregate where the Company and SCRS would provide 87.5% and 12.5%, respectively, of the committed capital. Pursuant to the terms of the SCJV Agreement, the Company and SCRS each have 50% voting control of SCJV and are required to agree on all investment decisions as well as certain other significant actions for SCJV. SCJV invests its capital in a range of investments, including senior secured loans (both first lien and second lien) to middle market companies, broadly syndicated loans, equity, warrants and other investments. As administrative agent of SCJV, the Company performs certain day-to-day management responsibilities on behalf of SCJV and is entitled to a fee of 0.25% of SCJV’s assets under administration, calculated and payable quarterly in arrears. As of December 31, 2020, the Company and SCRS have funded approximately $924.8 to SCJV, of which $809.2 was from the Company.

Jersey City Funding LLC, or Jersey City Funding, a wholly-owned subsidiary of SCJV, has a revolving credit facility with Goldman Sachs Bank, or as amended, the Jersey City Funding Credit Facility, which provides for up to $350 of borrowings as of

126

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)

December 31, 2020. The Jersey City Funding Credit Facility provides loans in U.S. dollars, Australian dollars, Euros, pounds sterling and Canadian dollars. U.S. dollar loans bear interest at the rate of LIBOR plus 2.25%. Foreign currency loans bear interest at the floating rate plus the spread applicable to the specified currency. Jersey City Funding also pays a commitment fee of up to 0.50% on undrawn commitments. The Jersey City Funding Credit Facility matures on September 29, 2021. As of December 31, 2020, total outstanding borrowings under the Jersey City Funding Credit Facility were $341.9. Borrowings under the Jersey City Funding Credit Facility are secured by substantially all of the assets of Jersey City Funding.

Chestnut Street Funding LLC, or Chestnut Street Funding, a wholly-owned subsidiary of SCJV, has a revolving credit facility with Citibank, N.A., or as amended, the Chestnut Street Funding Credit Facility, which provides for up to $400 of borrowings as of December 31, 2020. The Chestnut Street Funding Credit Facility provides loans in U.S. dollars, Australian dollars, Canadian dollars, Euros and pounds sterling. U.S. dollar loans bear interest at the rate of three-month LIBOR plus 2.25%. Foreign currency loans bear interest at the applicable floating rate plus 2.25%. Chestnut Street Funding also pays a commitment fee of up to 0.50% on undrawn commitments. The Chestnut Street Funding Credit Facility matures on September 18, 2024. As of December 31, 2020, total outstanding borrowings under the Chestnut Street Funding Credit Facility were $294.2. Borrowings under the Chestnut Street Funding Credit Facility are secured by substantially all of the assets of Chestnut Street Funding.

Boxwood Drive Funding LLC, or Boxwood Drive Funding, a wholly-owned subsidiary of SCJV, has a revolving credit facility with BNP Paribas, or the Boxwood Drive Funding Credit Facility, which provides for up to $300 of borrowings as of December 31, 2020. The Boxwood Drive Funding Credit Facility provides for loans in U.S. dollars, Australian dollars, Canadian dollars, New Zealand dollars, Euros and pounds sterling. U.S. dollar loans bear interest at the rate of LIBOR plus a spread of 2.05% to 3.15% during the reinvestment period and 2.50% to 3.25% thereafter. Foreign currency of loans bear interest at the applicable floating rate plus the applicable spread. Boxwood Drive Funding also pays a commitment fee of up to 1.00% on undrawn commitments. The Boxwood Drive Funding Credit Facility matures on April 15, 2025. As of December 31, 2020, total outstanding borrowings under the Boxwood Drive Funding Credit Facility were $85.9. Borrowings under the Boxwood Drive Funding Credit Facility are secured by substantially all of the assets of Boxwood Drive Funding.

SCOP was in compliance with all covenants required by its financing arrangements as of December 31, 2020 and December 31, 2019.

During the year ended December 31, 2020, the Company sold investments with a cost of $450.7 for proceeds of $416.4 to SCJV and recognized a net realized gain (loss) of $(34.3) in connection with the transactions. As of December 31, 2020, $163.2 of these sales to SCJV are included in receivable for investments sold in the consolidated statements of assets and liabilities.

As of December 31, 2020, SCJV had total investments with a fair value of $1,544.3. As of December 31, 2020, SCJV had two investments on non-accrual status.

Below is a summary of SCJV’s portfolio, followed by a listing of the individual loans in SCJV’s portfolio as of December 31, 2020 and 2019:


	As of
	December 31, 2020			December 31, 2019
Total debt investments⁽¹⁾	$	1,436.3		$	1,346.3
Weighted average current interest rate on debt investments⁽²⁾		8.6	%		9.4	%
Number of portfolio companies in SCJV		66			59
Largest investment in a single portfolio company⁽¹⁾	$	72.6		$	72.5
Unfunded commitments⁽¹⁾	$	21.6		$	45.2

(1)

At cost.

(2)	Computed as the (a) annual stated interest rate on accruing debt, divided by (b) total debt at par amount.

127

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)

Strategic Credit Opportunities Partners, LLC Portfolio

As of December 31, 2020 (in millions)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost		Fair Value
Senior Secured Loans—First Lien—124.6%
A10 Capital LLC	(e)(h)(i)	Diversified Financials	L+650	1.0%	5/1/2023	$	17.5	$	17.3	$	17.3
ABB CONCISE Optical Group LLC	(i)	Retailing	L+500	1.0%	6/15/2023		12.1		10.0		11.0
Apex Group Limited	(e)(h)	Diversified Financials	L+700	1.3%	6/15/2023		0.7		0.6		0.7
Apex Group Limited	(e)(f)	Diversified Financials	L+700	1.3%	6/15/2023		1.4		1.3		1.4
Apex Group Limited	(e)(h)(i)	Diversified Financials	L+700	1.3%	6/16/2025		67.4		67.2		68.1
Ardonagh Group Ltd	(e)(k)	Insurance	E+750, 0.0% PIK (2.3% Max PIK)	1.0%	7/14/2026	€	0.5		0.5		0.6
Ardonagh Group Ltd	(e)(k)	Insurance	L+750, 0.0% PIK (2.3% Max PIK)	0.8%	7/14/2026	£	3.7		4.6		5.2
Arrotex Australia Group Pty Ltd	(e)(h)(i)	Pharmaceuticals, Biotechnology & Life Sciences	B+525	1.0%	7/10/2024	A$	68.9		46.0		53.6
Arrotex Australia Group Pty Ltd	(e)(f)	Pharmaceuticals, Biotechnology & Life Sciences	B+525	1.0%	7/10/2024		4.9		3.8		3.8
BearCom Acquisition Corp	(e)(f)	Technology Hardware & Equipment	C+550	1.0%	1/5/2024	C$	1.3		1.0		1.0
BearCom Acquisition Corp	(e)(i)	Technology Hardware & Equipment	L+550	1.0%	7/5/2024	$	2.2		2.2		2.2
BearCom Acquisition Corp	(e)(i)	Technology Hardware & Equipment	C+550	1.0%	7/5/2024	C$	14.5		10.5		11.1
Belk Inc	(g)(l)	Retailing	L+675	1.0%	7/31/2025	$	3.8		3.4		1.4
Big Bus Tours Ltd	(e)(i)	Consumer Services	E+850 PIK (E+850 Max PIK)	1.0%	3/18/2024	€	10.5		11.7		8.7
Big Bus Tours Ltd	(e)(i)	Consumer Services	L+850 PIK (L+850 Max PIK)	1.0%	3/18/2024	$	14.9		14.9		10.1
Bugaboo International BV	(e)(h)	Consumer Durables & Apparel	E+775 PIK (E+775 Max PIK)	0.0%	3/20/2025	€	35.0		40.6		42.7
Cambium Learning Group Inc	(i)(k)	Consumer Services	L+450	0.0%	12/18/2025	$	45.1		43.4		44.9
Catapult Learning LLC	(e)(i)	Consumer Services	L+475	1.0%	4/24/2023		2.1		2.1		2.1

128

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date		No. Shares/ Principal Amount^(c)		Cost		Fair Value
Catapult Learning LLC	(e)(f)	Consumer Services	L+475	1.0%		4/24/2023	$	2.3	$	2.4	$	2.3
Catapult Learning LLC	(e)(i)(k)	Consumer Services	L+635	1.0%		4/24/2023		39.1		38.7		38.7
Catapult Learning LLC	(e)(f)	Consumer Services	L+635	1.0%		4/24/2023		1.2		1.2		1.1
Catapult Learning LLC	(e)(h)(i)	Consumer Services	L+635	1.0%		4/24/2023		14.9		14.7		14.7
Catapult Learning LLC	(e)(f)	Consumer Services	L+635	1.0%		4/24/2023		0.4		0.4		0.4
Child Development Schools Inc	(e)(i)	Consumer Services	L+425	1.0%		5/21/2023		9.3		9.3		9.2
Child Development Schools Inc	(e)(f)	Consumer Services	L+425			5/21/2023		2.5		2.5		2.5
CSM Bakery Products	(h)	Food, Beverage & Tobacco	L+625	1.0%		1/4/2022		1.3	$	1.2		1.3
Diamond Resorts International Inc	(h)	Consumer Services	L+375	1.0%		9/2/2023		5.7		5.6		5.5
Eacom Timber Corp	(e)(h)(i)(k)	Materials	L+650	1.0%		11/20/2023		59.2		59.2		59.2
Frontline Technologies Group LLC	(e)	Software & Services	L+575	1.0%		9/18/2023		19.9		20.0		20.0
HealthChannels LLC	(i)	Health Care Equipment & Services	L+450	0.0%		4/3/2025		24.3		24.1		23.3
Huws Gray Ltd	(e)(h)	Materials	L+525	0.5%		4/11/2025	£	21.7		28.7		29.3
Huws Gray Ltd	(e)(f)	Materials	L+525	0.5%		4/11/2025		6.7		8.9		8.9
ID Verde	(e)(h)	Commercial & Professional Services	E+500, 2.3% PIK (2.3% Max PIK)	0.0%		3/29/2024	€	3.1		3.7		3.8
ID Verde	(e)(h)	Commercial & Professional Services	L+525, 2.3% PIK (2.3% Max PIK)	0.0%		3/29/2024	£	1.3		1.7		1.8
ID Verde	(e)(h)	Commercial & Professional Services	E+500, 2.3% PIK (2.3% Max PIK)	0.0%		3/29/2025	€	16.3		19.1		19.9
ID Verde	(e)(h)	Commercial & Professional Services	L+525, 2.3% PIK (2.3% Max PIK)	0.0%		3/29/2025	£	6.0		7.9		8.1
Industria Chimica Emiliana Srl	(e)(h)(i)	Pharmaceuticals, Biotechnology & Life Sciences	E+725	0.0%		6/30/2026	€	62.5		68.6		77.3
Kellermeyer Bergensons Services LLC	(e)(i)(k)	Commercial & Professional Services	L+650	1.0%		11/7/2026	$	29.8		28.2		30.1

129

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date		No. Shares/ Principal Amount^(c)		Cost		Fair Value
Kettle Cuisine LLC	(i)	Food, Beverage & Tobacco	L+375	1.0%		8/25/2025	$	16.6	$	16.5	$	14.2
Koosharem LLC	(k)	Commercial & Professional Services	L+450	1.0%		4/18/2025		17.1		17.0		16.8
Lionbridge Technologies Inc	(e)(i)(k)	Consumer Services	L+625	1.0%		12/29/2025		29.8		29.0		29.8
MedAssets Inc	(h)	Health Care Equipment & Services	L+450	1.0%		10/20/2022		6.8		6.8		6.8
Parts Town LLC	(e)(h)	Retailing	L+550	1.0%		10/15/2025		24.8		24.6		23.8
Precision Global Corp	(e)(i)	Materials	L+475	1.0%		8/3/2024		9.1		8.7		8.3
Premium Credit Ltd	(e)(k)	Diversified Financials	L+650	0.0%		1/16/2026	£	10.6		13.0		14.3
Project Marron	(e)(i)	Consumer Services	C+575	0.0%		7/2/2025	C$	23.8		18.0		17.5
Project Marron	(e)(i)	Consumer Services	B+575	0.0%		7/3/2025	A$	28.8		19.5		20.5
Qdoba Restaurant Corp	(h)	Consumer Services	L+700	1.0%		3/21/2025	$	1.6		1.4		1.5
Reliant Rehab Hospital Cincinnati LLC	(e)	Health Care Equipment & Services	L+675	0.0%		9/2/2024		19.9		19.2		19.2
Roadrunner Intermediate Acquisition Co LLC	(e)(i)(k)	Health Care Equipment & Services	L+675	1.0%		3/15/2023		19.9		19.7		19.9
Safe-Guard Products International LLC	(e)(i)	Diversified Financials	L+575	0.0%		1/27/2027		20.5		20.4		20.4
Sequa Corp	(i)	Capital Goods	L+675, 0.0% PIK (1.0% Max PIK)	1.0%		11/28/2023		12.2		11.6		12.3
Smart & Final Stores LLC	(k)	Food & Staples Retailing	L+675	0.0%		6/20/2025		18.5		17.1		18.7
Staples Canada	(e)(h)	Retailing	C+700	1.0%		9/12/2024	C$	43.6		32.9		34.6
Technimark LLC	(i)	Materials	L+375	0.0%		8/8/2025	$	18.4		18.3		18.2
Total Safety US Inc	(k)	Capital Goods	L+600	1.0%		8/16/2025		3.9		3.2		3.7
Transaction Services Group Ltd	(e)(h)(i)	Software & Services	B+600	0.0%		10/15/2026	A$	99.5		68.6		71.2
Virgin Pulse Inc	(e)	Software & Services	L+650	1.0%		5/22/2025	$	19.9		19.9		19.9
Yak Access LLC	(h)	Capital Goods	L+500	0.0%		7/11/2025		0.8		0.6		0.7

Total Senior Secured Loans—First Lien										1,013.2		1,035.6

130

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes		Industry	Interest Rate^(b)		Base Rate Floor		Maturity Date		No. Shares/ Principal Amount^(c)		Cost			Fair Value
Unfunded Loan Commitments												$	(21.6	)	$	(21.6	)

Net Senior Secured Loans—First Lien													991.6			1,014.0

Senior Secured Loans—Second Lien—28.9%
Access CIG LLC		(k)	Commercial & Professional Services		L+775		0.0%		2/27/2026	$	0.6		0.5			0.6
Ammeraal Beltech Holding BV		(e)(h)	Capital Goods		L+800		1.0%		9/12/2026		40.7		40.0			39.2
BCA Marketplace PLC		(e)(h)	Retailing		L+825		0.0%		11/22/2027	£	47.7		62.4			64.0
Excelitas Technologies Corp		(k)	Technology Hardware & Equipment		L+750		1.0%		12/1/2025	$	8.4		6.6			8.5
Misys Ltd		(k)	Software & Services		L+725		1.0%		6/13/2025		6.2		4.9			6.2
Resource Label Group LLC		(e)(i)	Materials		L+850		1.0%		11/26/2023		15.0		13.4			14.9
Sequa Corp		(h)	Capital Goods		L+1,075, 0.0% PIK (6.8% Max PIK)		1.0%		4/28/2024		19.4		15.3			16.9
SIRVA Worldwide Inc		(i)	Commercial & Professional Services		L+950		0.0%		8/3/2026		3.8		3.0			3.2
Watchfire Enterprises Inc		(e)(i)	Technology Hardware & Equipment		L+800		1.0%		10/2/2021	€	9.3		7.6			9.1
WireCo WorldGroup Inc		(h)	Capital Goods		L+900		1.0%		9/30/2024		10.3		8.4			8.4
Wittur Holding GmbH		(e)(h)(i)	Capital Goods		E+850, 0.5% PIK (0.5% Max PIK)		0.0%		9/23/2027	€	55.3		60.3			64.6

Total Senior Secured Loans—Second Lien													222.4			235.6

Other Senior Secured Debt—1.0%
Cleaver-Brooks Inc		(h)	Capital Goods		7.9%				3/1/2023	$	8.4		7.1			8.3

Total Other Senior Secured Debt													7.1			8.3

Subordinated Debt—5.3%
Home Partners of America Inc		(e)(h)	Real Estate		L+625		1.0%		10/8/2022		42.9		42.6			42.8

Total Subordinated Debt													42.6			42.8

131

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost		Fair Value
Asset Based Finance—23.8%
Comet Aircraft S.a.r.l., Common Stock	(e)(g)(h)(l)	Capital Goods	12.4%		2/28/2022	$	21.5		21.5		4.8
GA Capital Specialty Lending Fund, Limited Partnership Interest	(e)(h)	Diversified Financials					N/A		—		8.9
Global Lending Services LLC, Private Equity	(e)(h)(l)	Diversified Financials					6,981,478		7.0		7.8
KKR Zeno Aggregator LP (K2 Aviation), Partnership Interest	(e)(h)	Capital Goods					19,642,734		24.4		21.8
Lenovo Group Ltd, Structured Mezzanine	(e)(h)	Technology Hardware & Equipment	8.0%		6/22/2022	$	15.5		15.5		15.5
Lenovo Group Ltd, Structured Mezzanine	(e)(h)	Technology Hardware & Equipment	12.0%		6/22/2022	$	9.8		9.8		9.8
Luxembourg Life Fund—Absolute Return Fund I, 1L Term Loan	(e)(h)	Insurance	L+750	1.5%	2/27/2025	$	30.6		30.7		30.7
Luxembourg Life Fund—Long Term Growth Fund, 1L Term Loan	(e)(h)	Insurance	9.0%		7/23/2021	$	32.5		32.0		32.5
MP4 2013-2A Class Subord. B	(e)(h)(l)	Diversified Financials			7/25/2029	$	21.0		4.2		3.1
NewStar Clarendon 2014-1A Class D	(e)(h)(l)	Diversified Financials			1/25/2027	$	17.9		6.5		5.6
Pretium Partners LLC P1, Structured Mezzanine	(e)(k)	Real Estate	2.8%, 5.3% PIK (5.3% Max PIK)		10/22/2026	$	12.0		11.7		12.0
Pretium Partners LLC P2, Structured Mezzanine	(e)(k)	Real Estate	2.0%, 7.5% PIK (7.5% Max PIK)		5/29/2025	$	25.3		23.8		25.5

132

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date		No. Shares/ Principal Amount^(c)		Cost		Fair Value
Sealane Trade Finance	(e)(j)	Banks	L+375	0.0%	5/8/2023		$	5.0		5.0		5.0
Sealane Trade Finance	(e)(j)	Banks	L+963	0.0%	5/8/2023		$	12.0		12.0		11.1

Total Asset Based Finance						��				204.1		194.1

Equity/Other—6.1%
ASG Technologies, Common Stock	(e)(i)(l)	Software & Services						540,346		30.0		20.1
Home Partners of America Inc, Common Stock	(e)(i)(l)	Real Estate						18,419		30.0		29.4

Total Equity/Other										60.0		49.5

TOTAL INVESTMENTS—189.7%									$	1,527.8	$	1,544.3

Derivative Instruments—(1.4)%

Foreign currency forward contracts											$	(11.4	)

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

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2020, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 0.24% and the Euro Interbank Offered Rate, or EURIBOR, was (0.55)%, Canadian Dollar Offer Rate, or CDOR, was 0.48% and the Australian Interbank Rate, or BBSY or “B”, was 0.06%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

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

(d)	Fair value determined by the Company’s board of directors.

(e)	Investments classified as Level 3.

(f)	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.

(g)	Asset is on non-accrual status.

(h)	Security or portion thereof held within Jersey City Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs.

(i)	Security or portion thereof held within Chestnut Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A.

133

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)

(j)	Security or portion thereof held within JCF Cayman Ltd and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs.

(k)	Security or portion thereof held within Boxwood Drive Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with BNP Paribas.

(l)	Security is non-income producing.

Strategic Credit Opportunities Partners, LLC Portfolio

As of December 31, 2019 (in millions)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost		Fair Value
Senior Secured Loans—First Lien—175.6%
1a Smart Start LLC	(e)(i)	Technology Hardware & Equipment	L+450	1.0%	2/21/2022	$	26.8	$	26.7	$	26.7
1a Smart Start LLC	(e)(f)	Technology Hardware & Equipment	L+450	1.0%	2/21/2022		1.7		1.7		1.6
Apex Group Limited	(e)(f)	Diversified Financials	L+700	1.3%	6/15/2023		2.1		1.9		2.1
Apex Group Limited	(e)(h)(i)	Diversified Financials	L+700	1.3%	6/15/2025		68.1		67.9		68.2
Arrotex Australia Group Pty Ltd	(e)(h)(i)	Pharmaceuticals, Biotechnology & Life Sciences	B+525	1.0%	7/10/2024	A$	75.4	$	50.2	$	52.0
BearCom Acquisition Corp	(e)(i)	Technology Hardware & Equipment	L+450	1.0%	7/5/2024	C$	1.3		0.9		1.0
BearCom Acquisition Corp	(e)(f)	Technology Hardware & Equipment	L+450	1.0%	7/5/2024		—		—		—
BearCom Acquisition Corp	(e)(i)	Technology Hardware & Equipment	L+450	1.0%	7/5/2024		17.0		12.8		13.6
BearCom Acquisition Corp	(e)(f)	Technology Hardware & Equipment	L+450	1.0%	7/5/2024		7.2		5.3		5.4
Belk Inc	(h)	Retailing	L+675	1.0%	7/31/2025	$	4.0	$	3.6	$	2.8
Big Bus Tours Ltd	(e)(i)	Consumer Services	E+700		3/18/2024	€	9.8		10.9		11.0
Big Bus Tours Ltd	(e)(i)	Consumer Services	L+700		3/18/2024	$	13.9		13.9		13.8
Brand Energy & Infrastructure Services Inc	(h)	Capital Goods	L+425	1.0%	6/21/2024		7.3		7.3		7.3
Bugaboo International BV	(e)(h)	Consumer Durables & Apparel	7.8% PIK (7.8% Max PIK)		3/20/2025	€	32.4		37.5		36.0
Casual Dining Group Ltd	(e)(h)	Consumer Services	L+725, 0.8% PIK (0.8% Max PIK)		12/10/2022	£	22.3		24.0		29.6

134

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost		Fair Value
Casual Dining Group Ltd	(e)(h)	Consumer Services	L+1,200 PIK (L+1,200 Max PIK)		12/10/2022	£	1.3	$	1.7	$	1.7
Casual Dining Group Ltd	(e)(f)	Consumer Services	L+1,200 PIK (L+1,200 Max PIK)		12/10/2022		9.1		12.0		12.2
Catapult Learning LLC	(e)(i)	Consumer Services	L+475	1.0%	4/24/2023	$	3.2		3.2		3.2
Catapult Learning LLC	(e)(f)	Consumer Services	L+475	1.0%	4/24/2023		1.2		1.2		1.2
Catapult Learning LLC	(e)(i)	Consumer Services	L+635	1.0%	4/24/2023		15.8		15.8		15.7
Catapult Learning LLC	(e)(f)	Consumer Services	L+635	1.0%	4/24/2023		1.5		1.5		1.5
Catapult Learning LLC	(e)(i)	Consumer Services	L+635	1.0%	4/24/2023		5.2		5.2		5.1
Catapult Learning LLC	(e)(f)	Consumer Services	L+635	1.0%	4/24/2023		0.5		0.5		0.5
Child Development Schools Inc	(e)(i)	Consumer Services	L+425		5/21/2023		9.9		9.9		9.9
Child Development Schools Inc	(e)(f)	Consumer Services	L+425		5/21/2023		2.5		2.5		2.5
CommerceHub Inc	(h)	Software & Services	L+350		5/21/2025		2.1		2.1		2.1
Commercial Barge Line Co	(h)	Transportation	L+875	1.0%	11/12/2020		4.1		4.0		2.1
DB Datacenter Holdings Inc	(i)	Software & Services	L+425	1.0%	10/3/2024		25.5		25.2		25.1
Dentix	(e)(h)	Health Care Equipment & Services	E+825, 1.8% PIK (1.8% Max PIK)		4/7/2020	€	3.0		3.4		3.0
Dentix	(e)(h)	Health Care Equipment & Services	E+825, 1.8% PIK (1.8% Max PIK)		12/1/2022		21.0		24.8		20.9
Diamond Resorts International Inc	(h)	Consumer Services	L+375	1.0%	9/2/2023	$	6.8		6.6		6.6
Eacom Timber Corp	(e)(h)	Materials	L+650	1.0%	11/30/2023		65.9		65.9		62.3
HealthChannels LLC	(i)	Health Care Equipment & Services	L+450		4/3/2025		24.6		24.3		24.2
Highline Aftermarket Acquisition LLC	(e)(f)	Automobiles & Components	L+350	1.0%	4/26/2023		2.8		2.6		2.6
Huws Gray Ltd	(e)(h)	Materials	L+525	0.5%	4/11/2025	£	20.2		26.7		26.7
Huws Gray Ltd	(e)(h)	Materials	L+525	0.5%	4/11/2025		0.7		1.0		1.0

135

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost		Fair Value
Huws Gray Ltd	(e)(f)	Materials	L+525	0.5%	4/11/2025	£	7.4	$	9.7	$	9.8
ID Verde	(e)(h)	Commercial & Professional Services	E+700		3/29/2024	€	3.1		3.6		3.5
ID Verde	(e)(h)	Commercial & Professional Services	E+700		3/29/2024	£	1.3		1.7		1.7
ID Verde	(e)(h)	Commercial & Professional Services	E+700		3/29/2025	€	15.9		18.5		17.8
ID Verde	(e)(h)	Commercial & Professional Services	L+725		3/29/2025	£	5.8		7.7		7.7
Imagine Communications Corp	(e)(i)	Media & Entertainment	L+750	1.0%	4/29/2020	$	11.6		11.6		11.6
Imagine Communications Corp	(e)(i)	Media & Entertainment	L+750	1.0%	4/29/2020		19.5		19.5		19.5
Imagine! Print Solutions Inc	(i)	Media & Entertainment	L+475	1.0%	6/21/2022		13.6		10.9		5.1
Industria Chimica Emiliana Srl	(e)(h)(i)	Pharmaceuticals, Biotechnology & Life Sciences	L+650		6/30/2026	€	62.5		68.4		68.4
Kettle Cuisine LLC	(i)	Food, Beverage & Tobacco	L+375	1.0%	8/25/2025	$	16.8		16.7		16.6
Koosharem LLC	(h)	Commercial & Professional Services	L+450	1.0%	4/18/2025		17.7		17.6		17.4
MedAssets Inc	(h)	Health Care Equipment & Services	L+450	1.0%	10/20/2022		6.9		6.9		5.7
P2 Energy Solutions, Inc.	(h)	Software & Services	L+375	1.0%	10/30/2020		2.9		2.9		2.9
Parts Authority Inc	(e)(i)	Automobiles & Components	L+425		1/5/2024		2.1		2.1		2.1
Parts Authority Inc	(e)(f)	Automobiles & Components	L+425		1/5/2024		4.0		4.0		4.0
Parts Authority Inc	(e)(i)	Automobiles & Components	L+425		1/5/2025		17.3		17.1		17.2
Parts Town LLC	(e)(h)	Retailing	L+550	1.0%	10/15/2025		25.0		24.9		24.9
Precision Global Corp	(e)(i)	Materials	L+475	1.0%	8/3/2024		9.2		8.7		8.8
Precision Global Corp	(e)(f)	Materials	L+475	1.0%	8/3/2024		1.2		1.2		1.2
Project Marron	(e)(i)	Consumer Services	B+625		7/3/2025	A$	28.8		19.5		20.3
Project Marron	(e)(i)	Consumer Services	L+625		7/2/2025	C$	23.8		18.0		18.5
Quirch Foods Co	(i)	Food & Staples Retailing	L+600		12/19/2025	$	14.8		14.9		14.8
Sentry Data Systems Inc	(e)(i)	Health Care Equipment & Services	L+675	1.0%	5/7/2021		0.2		0.2		0.2

136

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost			Fair Value
Sentry Data Systems Inc	(e)(f)	Health Care Equipment & Services	L+675	1.0%	5/7/2021	$	0.5	$	0.5		$	0.5
Sentry Data Systems Inc	(e)(i)	Health Care Equipment & Services	L+675	1.0%	5/7/2021		9.6		9.5			9.5
Smart & Final Stores LLC	(h)	Food & Staples Retailing	L+675		6/20/2025		18.8		17.2			18.2
SMART Global Holdings Inc	(e)(f)	Semiconductors & Semiconductor Equipment	L+400		2/9/2021		0.6		0.6			0.6
SMART Global Holdings Inc	(e)(h)	Semiconductors & Semiconductor Equipment	L+625	1.0%	8/9/2022		37.7		38.0			37.8
Staples Canada	(e)(h)	Retailing	L+700	1.0%	9/12/2024	C$	38.9		29.4			30.6
Technimark LLC	(i)	Materials	L+375		8/8/2025	$	18.5		18.4			18.2
Transaction Services Group Ltd	(e)(h)(i)	Consumer Services	L+600		10/15/2026	A$	99.5		68.4			68.4
Weld North Education LLC	(i)	Software & Services	L+425		2/15/2025	$	14.8		14.8			14.8

Total Senior Secured Loans—First Lien									1,007.8			999.5
Unfunded Loan Commitments									(46.1	)		(46.1	)

Net Senior Secured Loans—First Lien									961.7			953.4

Senior Secured Loans—Second Lien—37.5%
Ammeraal Beltech Holding BV	(e)(h)	Capital Goods	L+800		7/27/2026		40.7		39.9			39.3
BCA Marketplace PLC	(e)(h)(i)	Retailing	L+825		9/24/2027	£	47.7		62.7			62.3
Casual Dining Group Ltd	(e)(h)	Consumer Services	11.5% PIK (11.5% Max PIK)		12/10/2022		15.3		19.8			20.2
Resource Label Group LLC	(e)(i)	Materials	L+850	1.0%	11/26/2023	$	15.0		12.9			13.0
Watchfire Enterprises Inc	(e)(i)	Technology Hardware & Equipment	L+800	1.0%	10/2/2021		9.3		6.3			9.3
Wittur Holding GmbH	(e)(h)(i)	Capital Goods	E+850, 0.5% PIK (0.5% Max PIK)		9/23/2027	€	55.0		59.8			59.8

137

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost		Fair Value
Total Senior Secured Loans—Second Lien									201.4		203.9

Subordinated Debt—10.6%
Home Partners of America Inc	(e)(i)	Real Estate	L+625	1.0%	10/8/2022	$	42.9	$	42.5	$	42.9
Kenan Advantage Group Inc	(h)	Transportation	7.9%		7/31/2023		7.7		7.6		7.5
Solera LLC	(h)	Software & Services	10.5%		3/1/2024		6.8		7.2		7.2

Total Subordinated Debt									57.3		57.6

Asset Based Finance—30.2%
Comet Aircraft S.a.r.l., Common Stock	(e)(h)	Capital Goods	14.0%		2/28/2022		29,557,191		33.8		32.2
GA Capital Specialty Lending Fund, Limited Partnership Interest	(e)(h)	Diversified Financials					N/A		—		11.0
Global Lending Services LLC, Private Equity	(e)(h)	Diversified Financials					6,981,478		7.0		7.0
KKR Zeno Aggregator LP (K2 Aviation)	(e)(h)	Capital Goods					19,642,734		24.4		23.2
Lenovo Group Ltd, Structured Mezzanine	(e)(h)	Technology Hardware & Equipment	8.0%		6/22/2022	$	15.5		15.5		15.5
Lenovo Group Ltd, Structured Mezzanine	(e)(h)	Technology Hardware & Equipment	12.0%		6/22/2022	$	9.8		9.8		9.8
MP4 2013-2A Class Subord. B	(e)(h)	Diversified Financials			7/25/2029	$	21.0		5.5		6.5
NewStar Clarendon 2014-1A Class D	(e)(h)	Diversified Financials			1/25/2027	$	17.9		7.9		7.0
Pretium Partners LLC P1, Structured Mezzanine	(e)(h)	Real Estate	2.8%, 5.3% PIK (5.3% Max PIK)		10/22/2026	$	11.7		11.7		11.7
Pretium Partners LLC P2, Structured Mezzanine	(e)(h)	Real Estate	2.0%, 7.5% PIK (7.5% Max PIK)		5/29/2025	$	23.5		23.8		23.8
Sealane Trade Finance	(e)	Banks	L+375	1.0%	5/8/2023	$	5.0		5.0		5.0

138

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)


Company^(a)	Footnotes	Industry	Interest Rate^(b)	Base Rate Floor	Maturity Date	No. Shares/ Principal Amount^(c)		Cost		Fair Value
Sealane Trade Finance	(e)	Banks	L+963	1.0%	5/8/2023	$	12.0		12.0		11.8

Total Asset Based Finance									156.4		164.5

Equity/Other—10.9%
ASG Technologies, Common Stock	(e)(i)	Software & Services					540,346		30.0		26.6
Casual Dining Group Ltd, Common Stock	(e)(h)	Consumer Services					12,670,634		15.9		2.2
Home Partners of America Inc, Common Stock	(e)(i)	Real Estate					18,419		30.0		30.3

Total Equity/Other									75.9		59.1

TOTAL INVESTMENTS—264.8%								$	1,452.7	$	1,438.5

Derivative Instruments—0.0%

Foreign currency forward contracts										$	0.9

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

(b)

Certain variable rate securities in the Company’s portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2019, the three-month London Interbank Offered Rate, or LIBOR or “L”, was 1.91% and the Euro Interbank Offered Rate, or EURIBOR, was (0.38)% and the Australian Interbank Rate, or BBSY or “B”, was 0.92%. PIK means paid-in-kind. PIK income accruals may be adjusted based on the fair value of the underlying investment.

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

(d)	Fair value determined by the Company’s board of directors.

(e)	Investments classified as Level 3.

(f)	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.

(g)

Not used.

(h)	Security or portion thereof held within Jersey City Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Goldman Sachs.

(i)	Security or portion thereof held within Chestnut Street Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A.

139

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 6. Investment Portfolio (continued)

Below is selected balance sheet information for SCJV as of December 31, 2020 and 2019:


	As of
	December 31, 2020		December 31, 2019
Selected Balance Sheet Information
Total investments, at fair value	$	1,544.3	$	1,438.5
Cash and other assets		188.6		220.9

Total assets		1,732.9		1,659.4

Debt		722.0		466.1
Other liabilities		196.8		645.9

Total liabilities		918.8		1,112.0

Member’s equity	$	814.1	$	547.4

Below is selected statement of operations information for SCJV for the years ended December 31, 2020 and 2019:


	As of
	December 31, 2020			December 31, 2019
Selected Statement of Operation Information
Total investment income	$	115.7		$	66.0
Expenses
Interest expense		21.6			17.3
Custodian and accounting fees		1.0			0.5
Administrative services		4.2			1.7
Professional services		0.6			0.6
Other		0.1			0.0

Total expenses		27.5			20.1

Net investment income		88.2			45.9
Net realized and unrealized losses		(106.4	)		(13.6	)

Net increase in net assets resulting from operations	$	(18.2	)	$	32.3

Note 7. Financial Instruments

The following is a summary of the fair value and location of the Company’s derivative instruments in the consolidated balance sheets held as of December 31, 2020 and 2019:


		Fair Value
Derivative Instrument	Statement Location	December 31, 2020			December 31, 2019
Foreign currency forward contracts	Unrealized appreciation on foreign currency forward contracts	$	1		$	1
Foreign currency forward contracts	Unrealized depreciation on foreign currency forward contracts		(3	)		0

Total		$	(2	)	$	1

140

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 7. Financial Instruments (continued)

Net realized and unrealized gains and losses on derivative instruments recorded by the Company for the years ended December 31, 2020 and 2019 are in the following locations in the consolidated statements of operations:


		Net Realized Gains (Losses)
Derivative Instrument	Statement Location	December 31, 2020		December 31, 2019
Cross currency swaps	Net realized gain (loss) on swap contracts	$	—	$	(11	)
Foreign currency forward contracts	Net realized gain (loss) on foreign currency forward contracts		0		12

Total		$	0	$	1


		Net Unrealized Gains (Losses)
Derivative Instrument	Statement Location	December 31, 2020			December 31, 2019
Cross currency swaps	Net change in unrealized appreciation (depreciation) on swap contracts	$	—		$	16
Foreign currency forward contracts	Net change in unrealized appreciation (depreciation) on foreign currency forward contracts		(3	)		(2	)

Total		$	(3	)	$	14

Offsetting of Derivative Instruments

The Company has derivative instruments that are subject to master netting agreements. These agreements include provisions to offset positions with the same counterparty in the event of default by one of the parties. The Company’s unrealized appreciation and depreciation on derivative instruments are reported as gross assets and liabilities, respectively, in the condensed consolidated statements of assets and liabilities. The following tables present the Company’s assets and liabilities related to derivatives by counterparty, net of amounts available for offset under a master netting arrangement and net of any collateral received or pledged by the Company for such assets and liabilities as of December 31, 2020 and 2019:


	December 31, 2020
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	$	1		$	(1	)	$	—	$	—	$	—

Total	$	1		$	(1	)	$	—	$	—	$	—


Counterparty	Derivative Liabilities Subject to Master Netting Agreement			Derivatives Available for Offset			Non-cash Collateral Received⁽¹⁾		Cash Collateral Received⁽¹⁾		Net Amount of Derivative Liabilities⁽³⁾
JP Morgan Chase Bank	$	(3	)	$	1		$	—	$	—	$	(2	)

Total	$	(3	)	$	1		$	—	$	—	$	(2	)

141

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 7. Financial Instruments (continued)


	December 31, 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	$	1	$	—	$	—	$	—	$	1

Total	$	1	$	—	$	—	$	—	$	1


Counterparty	Derivative Liabilities Subject to Master Netting Agreement		Derivatives Available for Offset		Non-cash Collateral Received⁽¹⁾		Cash Collateral Received⁽¹⁾		Net Amount of Derivative Liabilities⁽³⁾
JP Morgan Chase Bank	$	0	$	1	$	—	$	—	$	1

Total	$	0	$	1	$	—	$	—	$	1

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

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

(3)	Net amount of derivative liabilities represents the net amount due from the Company to the counterparty.

Foreign Currency Forward Contracts and Cross Currency Swaps:

The Company may enter into foreign currency forward contracts and cross currency swaps 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.

Cross currency swaps are interest rate swaps in which interest cash flows are exchanged between two parties based on the notional amounts of two different currencies. These swaps are marked-to-market by recognizing the difference between the present value of cash flows of each leg of the swaps as unrealized appreciation or depreciation. Realized gain or loss is recognized when periodic payments are received or paid and the swaps are terminated. The entire notional value of a cross currency swap is subject to the risk that the counterparty to the swap will default on its contractual delivery obligations. The Company attempts to limit counterparty risk by only dealing with well-known counterparties. The Company utilizes cross currency swaps from time to time in order to hedge a portion of its investments in foreign currency.

The average notional balance for cross currency swaps during the year ended December 31, 2019 was $103.6. The average notional balance for foreign currency forward contracts during the year ended December 31, 2020 and 2019 was $41.2 and $198.6, respectively. See consolidated schedule of investments for the Company’s open foreign currency forward contracts.

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

142

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

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.

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 December 31, 2020 and 2019, the Company’s investments and secured borrowing were categorized as follows in the fair value hierarchy:


Valuation Inputs	December 31, 2020		December 31, 2019
Level 1—Price quotations in active markets	$	—	$	1
Level 2—Significant other observable inputs		260		730
Level 3—Significant unobservable inputs		5,807		6,147
Investments measured at net asset value⁽¹⁾		713		479

	$	6,780	$	7,357

(1)

Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

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

143

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

The following is a reconciliation for the years ended December 31, 2020 and 2019 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:


	For the Year Ended December 31, 2020
	Senior Secured Loans—First Lien			Senior Secured Loans—Second Lien			Other Senior Secured Debt			Subordinated Debt			Asset Based Finance			Equity/ Other			Total
Fair value at beginning of period	$	3,358		$	1,015		$	152		$	313		$	737		$	572		$	6,147
Accretion of discount (amortization of premium)		7			4			—			1			—			1			13
Net realized gain (loss)		(131	)		(33	)		(94	)		(85	)		(7	)		(85	)		(435	)
Net change in unrealized appreciation (depreciation)		(24	)		(79	)		17			(1	)		(50	)		(21	)		(158	)
Purchases		1,397			100			—			48			426			65			2,036
Paid-in-kind interest		18			6			3			13			26			16			82
Sales and repayments		(1,407	)		(151	)		(42	)		(137	)		(181	)		(18	)		(1,936	)
Net transfers in or out of Level 3		58			—			—			—			—			—			58

Fair value at end of period	$	3,276		$	862		$	36		$	152		$	951		$	530		$	5,807

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	$	(49	)	$	(85	)	$	(6	)	$	(11	)	$	(3	)	$	(92	)	$	(246	)


	For the Year Ended December 31, 2019
	Senior Secured Loans—First Lien			Senior Secured Loans—Second Lien			Other Senior Secured Debt			Subordinated Debt			Asset Based Finance			Equity/ Other			Total
Fair value at beginning of period	$	3,689		$	884		$	165		$	300		$	667		$	537		$	6,242
Accretion of discount (amortization of premium)		8			3			1			—			4			1			17
Net realized gain (loss)		(47	)		(18	)		—			—			9			12			(44	)
Net change in unrealized appreciation (depreciation)		(35	)		(50	)		(21	)		(17	)		(4	)		18			(109	)
Purchases		1,544			341			45			56			359			57			2,402
Paid-in-kind interest		3			3			6			19			15			14			60
Sales and repayments		(1,804	)		(148	)		(44	)		(45	)		(313	)		(67	)		(2,421	)
Net transfers in or out of Level 3		—			—			—			—			—			—			—

Fair value at end of period	$	3,358		$	1,015		$	152		$	313		$	737		$	572		$	6,147

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	$	(73	)	$	(51	)	$	(20	)	$	(19	)	$	3		$	13		$	(147	)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of December 31, 2020 and 2019 were as follows:

Type of Investment

Fair Value at
December 31, 2020

Valuation

Technique⁽¹⁾

Unobservable

Input

Range

Impact to
Valuation from
an Increase in
Input⁽²⁾

Senior Debt

3,519

Discounted Cash Flow

Discount Rate

5.7% - 18.6% (9.0%)

Decrease

418

Waterfall

EBITDA Multiple

0.1x - 12.7x (7.2x)

Increase

237

Cost

Subordinated Debt

Discounted Cash Flow

Discount Rate

12.3% - 12.3% (12.3%)

Decrease

Waterfall

EBITDA Multiple

7.8x - 11.5x (7.8x)

Increase

Cost

144

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 8. Fair Value of Financial Instruments (continued)

Type of Investment

Fair Value at
December 31, 2020

Valuation

Technique⁽¹⁾

Unobservable

Input

Range

Impact to
Valuation from
an Increase in
Input⁽²⁾

Asset Based Finance

535

Waterfall

EBITDA Multiple

1.0x - 12.0x (3.6x)

Increase

287

Discounted Cash Flow

Discount Rate

4.2% - 15.2% (9.9%)

Decrease

Other⁽³⁾

Cost

Equity/Other

346

Waterfall

EBITDA Multiple

0.1x - 12.5x (7.4x)

Increase

135

Option Pricing Model

Equity Illiquidity Discount

11.0% - 50.0% (11.9%)

Decrease

Other⁽³⁾

Total

5,807

Type of Investment

Fair Value at
December 31, 2019

Valuation

Technique⁽¹⁾

Unobservable

Input

Range

Impact to
Valuation from
an Increase in
Input⁽²⁾

Senior Debt

3,802

Discounted Cash Flow

Discount Rate

6.30% - 19.10% (9.79%)

Decrease

380

Waterfall

EBITDA Multiple

2.05x - 21.05x (6.98x)

Increase

311

Cost

Other⁽³⁾

Subordinated Debt

232

Discounted Cash Flow

Discount Rate

11.20% - 20.80% (14.80%)

Decrease

Waterfall

EBITDA Multiple

8.15x - 10.40x (8.89x)

Increase

Option Pricing Model

Equity Illiquidity Discount

25.00% - 25.00% (25.00%)

Decrease

Asset Based Finance

455

Waterfall

EBITDA Multiple

1.00x - 13.00x (4.37x)

Increase

128

Discounted Cash Flow

Discount Rate

7.80% - 16.00% (12.16%)

Decrease

100

Cost

Other⁽³⁾

Indicative Dealer Quotes

4.73% - 32.70% (32.36%)

Increase

Equity/Other

408

Waterfall

EBITDA Multiple

0.18x - 15.60x (7.77x)

Increase

139

Option Pricing Model

Equity Illiquidity Discount

20.00% - 30.00% (20.13%)

Decrease

Other⁽³⁾

Total

6,147

(1)

Investments using a market quotes valuation technique were primarily valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. Investments valued using an EBITDA multiple or a revenue multiple pursuant to the market comparables valuation technique may be conducted using an enterprise valuation waterfall analysis.

(2)

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.

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

Note 9. Financing Arrangements

Prior to June 14, 2019, in accordance with the 1940 Act, the Company was allowed to borrow amounts such that its asset coverage, calculated pursuant to the 1940 Act, was at least 200% after such borrowing. Effective June 15, 2019, the Company’s asset coverage requirement applicable to senior securities was reduced from 200% to 150%. As of December 31, 2020, the aggregate amount outstanding of senior securities issued by the Company was $4,042. As of December 31, 2020, the Company’s asset coverage was 177%.

145

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 9. Financing Arrangements (continued)

The following tables present summary information with respect to the Company’s outstanding financing arrangements as of December 31, 2020 and 2019:


	As of December 31, 2020
Arrangement	Type of Arrangement	Rate	Amount Outstanding			Amount Available		Maturity Date
CCT Tokyo Funding Credit Facility⁽²⁾	Revolving Credit Facility	L+1.75% - 2.00%⁽¹⁾⁽³⁾	$	260		$	40		December 2, 2023
Senior Secured Revolving Credit Facility⁽²⁾	Revolving Credit Facility	L+1.75% - 2.00%⁽¹⁾⁽⁴⁾		615	⁽⁵⁾		1,000		December 23, 2025
4.750% Notes due 2022⁽⁶⁾	Unsecured Notes	4.75%		450			—		May 15, 2022
5.000% Notes due 2022⁽⁶⁾	Unsecured Notes	5.00%		245			—		June 28, 2022
4.625% Notes due 2024⁽⁶⁾	Unsecured Notes	4.63%		400			—		July 15, 2024
4.125% Notes due 2025⁽⁶⁾	Unsecured Notes	4.13%		470			—		February 1, 2025
8.625% Notes due 2025⁽⁶⁾	Unsecured Notes	8.63%		250			—		May 15, 2025
3.400% Notes due 2026⁽⁶⁾	Unsecured Notes	3.40%		1,000			—		January 15, 2026
CLO-1 Notes⁽²⁾⁽⁷⁾	Collateralized Loan Obligation	L+1.85% - 3.01%⁽¹⁾		352			—		January 15, 2031

Total			$	4,042		$	1,040

(1)	LIBOR is subject to a 0% floor.

(2)	The carrying amount outstanding under the facility approximates its fair value.

(3)	The spread over LIBOR is determined by reference to the amount outstanding under the facility.

(4)	The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company.

(5)

Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €164 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.22 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD $63 has been converted to U.S dollars at an exchange rate of CAD $1.00 to $0.78 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £111 has been converted to U.S dollars at an exchange rate of £1.00 to $1.37 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of A$6 has been converted to U.S dollars at an exchange rate of A$1.00 to $0.77 as of December 31, 2020 to reflect total amount outstanding in U.S. dollars.

(6)

(7)	As of December 31, 2020, there were $281.4 of Class A-1R notes outstanding at L+1.85%, $20.5 of Class A-2R notes outstanding at L+2.25%, $32.4 of Class B-1R notes outstanding at L+2.60% and $17.4 of Class B-2R notes outstanding at 3.011%.


	As of December 31, 2019
Arrangement	Type of Arrangement	Rate	Amount Outstanding			Amount Available		Maturity Date
CCT Tokyo Funding Credit Facility⁽²⁾	Revolving Credit Facility	L+1.75% - 2.00%⁽¹⁾⁽³⁾	$	265		$	35		June 2, 2023
Locust Street Credit Facility⁽²⁾	Revolving Credit Facility	L+2.50%⁽¹⁾		400			—		September 28, 2022
Senior Secured Revolving Credit Facility⁽²⁾	Revolving Credit Facility	L+1.75% - 2.00%⁽¹⁾⁽⁴⁾		1,613	⁽⁵⁾		602		November 7, 2024
4.750% Notes due 2022⁽⁶⁾	Unsecured Notes	4.75%		450			—		May 15, 2022
5.000% Notes due 2022⁽⁶⁾	Unsecured Notes	5.00%		245			—		June 28, 2022
4.625% Notes due 2024⁽⁶⁾	Unsecured Notes	4.63%		400			—		July 15, 2024
4.125% Notes due 2025⁽⁶⁾	Unsecured Notes	4.13%		470			—		February 1, 2025
CLO-1 Notes⁽²⁾⁽⁷⁾	Collateralized Loan Obligation	L+1.70% - 2.50%⁽¹⁾		352			—		July 15, 2030

Total			$	4,195		$	637

(1)	LIBOR is subject to a 0% floor.

(2)	The carrying amount outstanding under the facility approximates its fair value.

146

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 9. Financing Arrangements (continued)

(3)	The spread over LIBOR is determined by reference to the amount outstanding under the facility.

(4)	The spread over LIBOR is determined by reference to the ratio of the value of the borrowing base to the aggregate amount of certain outstanding indebtedness of the Company.

(5)

Amount includes borrowing in Euros, Canadian dollars, pounds sterling and Australian dollars. Euro balance outstanding of €291 has been converted to U.S. dollars at an exchange rate of €1.00 to $1.12 as of December 31, 2019 to reflect total amount outstanding in U.S. dollars. Canadian dollar balance outstanding of CAD $69 has been converted to U.S dollars at an exchange rate of CAD $1.00 to $0.77 as of December 31, 2019 to reflect total amount outstanding in U.S. dollars. Pounds sterling balance outstanding of £100 has been converted to U.S dollars at an exchange rate of £1.00 to $1.33 as of December 31, 2019 to reflect total amount outstanding in U.S. dollars. Australian dollar balance outstanding of A$173 has been converted to U.S dollars at an exchange rate of A$1.00 to $0.70 as of December 31, 2019 to reflect total amount outstanding in U.S. dollars.

(6)	As of December 31, 2019, the fair value of the 4.750% notes, the 5.000% notes, the 4.625% notes and the 4.125% notes was approximately $467, $250, $416 and $478, respectively. These valuations are considered Level 2 valuations within the fair value hierarchy.

(7)	As of December 31, 2019, there were $299.4 of Class A-1 notes outstanding at L+1.70% and $52.3 of Class A-2 notes outstanding at L+2.50%.

For the years ended December 31, 2020, 2019 and 2018, the components of total interest expense for the Company’s financing arrangements were as follows:


	Year Ended December 31,
	2020						2019						2018
Arrangement⁽¹⁾	Direct Interest Expense		Amortization of Deferred Financing Costs and Discount		Total Interest Expense		Direct Interest Expense		Amortization of Deferred Financing Costs and Discount		Total Interest Expense		Direct Interest Expense		Amortization of Deferred Financing Costs and Discount		Total Interest Expense
CCT New York Funding Credit Facility⁽²⁾	$	—	$	—	$	—	$	2	$	—	$	2	$	1	$	—	$	1
CCT Tokyo Funding Credit Facility⁽²⁾		6		1		7		8		—		8		0		—		0
Hamilton Street Funding Credit Facility⁽²⁾		—		—		—		—		—		—		3		1		4
ING Credit Facility⁽²⁾		—		—		—		—		—		—		3		—		3
Locust Street Funding Credit Facility⁽²⁾		13		3		16		26		2		28		21		1		22
Senior Secured Revolving Credit Facility⁽²⁾		41		3		44		57		1		58		4		1		5
4.000% Notes due 2019		—		—		—		8		1		9		16		1		17
4.250% Notes due 2020		—		—		—		16		1		17		17		1		18
4.750% Notes due 2022		21		0		21		17		0		17		13		1		14
5.000% Notes due 2022		12		—		12		12		—		12		—		—		—
4.625% Notes due 2024		19		1		20		8		1		9		—		—		—
4.125% Notes due 2025		19		3		22		2		0		2		—		—		—
8.625% Notes due 2025		15		1		16		—		—		—		—		—		—
3.400% Notes due 2026		2		0		2		—		—		—		—		—		—
2019-1 Notes		10		0		10		8		0		8		—		—		—

Total	$	158	$	12	$	170	$	164	$	6	$	170	$	78	$	6	$	84

(1)	Borrowings of each of the Company’s wholly-owned, special-purpose financing subsidiaries are considered borrowings of the Company for purposes of complying with the asset coverage requirements applicable to BDCs under the 1940 Act.

(2)	Direct interest expense includes the effect of non-usage fees.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the year ended December 31, 2020 were $4,240 and 3.71%, respectively. As of December 31, 2020, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 3.88%.

The Company’s average borrowings and weighted average interest rate, including the effect of non-usage fees, for the year ended December 31, 2019 were $3,642 and 4.49%, respectively. As of December 31, 2019, the Company’s weighted average effective interest rate on borrowings, including the effect of non-usage fees, was 4.01%.

147

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 9. Financing Arrangements (continued)

Under its financing arrangements, the Company has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar financing arrangements. The Company was in compliance with all covenants required by its financing arrangements as of December 31, 2020 and December 31, 2019.

CCT New York Funding Credit Facility

On November 29, 2016, CCT New York Funding LLC, or CCT New York Funding, a wholly owned special purpose financing subsidiary of the Company, entered into a revolving credit facility, or the CCT New York Funding Credit Facility, pursuant to a loan and security agreement, or the CCT New York Funding Loan Agreement, with JPMorgan Chase Bank, National Association, or JPMorgan, as administrative agent and lender, any additional lenders from time to time party thereto, the collateral administrator, collateral agent and securities intermediary party thereto, and the Company, which succeeded CCT as the portfolio manager.

The CCT New York Funding Credit Facility provided for borrowings in an aggregate principal amount up to $300.

In connection with amending and restating the Locust Street Loan Agreement, the Company repaid and terminated the CCT New York Funding Credit Facility.

CCT Tokyo Funding Credit Facility

On December 2, 2015, CCT Tokyo Funding LLC, or CCT Tokyo Funding, a wholly owned special purpose financing subsidiary of the Company, entered into a revolving credit facility, or as amended the CCT Tokyo Funding Credit Facility, pursuant to a loan and servicing agreement with Sumitomo Mitsui Banking Corporation, or SMBC, as the administrative agent, collateral agent, and lender, and the Company, which succeeded CCT as the servicer and transferor.

The CCT Tokyo Funding Credit Facility provides for borrowings in an aggregate principal amount up to $300. The end of the reinvestment period and the maturity date for the CCT Tokyo Funding Credit Facility are June 2, 2021 and December 2, 2023, respectively. CCT Tokyo Funding may elect to extend both the reinvestment period and maturity date by an additional six months to December 2, 2021 and June 2, 2024, respectively, subject to satisfaction of certain conditions. Advances under the CCT Tokyo Funding Credit Facility are subject to a borrowing base test.

Advances outstanding under the CCT Tokyo Funding Credit Facility bear interest at a rate equal to (i) for loans for which CCT Tokyo Funding elects the base rate option, the higher of (A) the “Prime Rate” (as defined in the CCT Tokyo Funding loan and servicing agreement) or (B) the federal funds effective rate plus 0.50%, plus a spread of 0.75% per annum, or (ii) for loans for which CCT Tokyo Funding elects the LIBOR rate option, three-month LIBOR plus a spread of 1.75% per annum. In each case, the spread increases by 0.25% per annum if the average daily amount of advances outstanding during the relevant remittance period does not exceed $150. Effective June 2, 2016, CCT Tokyo Funding began paying a quarterly non-usage fee of 0.35% per annum on any unborrowed amounts up to a threshold amount equal to the lesser of (i) 50% of the borrowing base during the relevant remittance period and (ii) $150, and 0.875% per annum on any unborrowed amounts above such threshold amount.

In connection with the CCT Tokyo Funding Credit Facility, CCT Tokyo Funding has made certain representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. The CCT Tokyo Funding Credit Facility contains customary events of default for similar financing transactions. Upon the occurrence and during the continuance of an event of default, the administrative agent may declare the outstanding advances and all other obligations under the CCT Tokyo Funding Credit Facility immediately due and payable.

CCT Tokyo Funding’s obligations to SMBC under the CCT Tokyo Funding Credit Facility are secured by a first priority security interest in substantially all of the assets of CCT Tokyo Funding, including its portfolio of assets. The obligations of CCT Tokyo Funding under the CCT Tokyo Credit Facility are non-recourse to the Company.

148

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 9. Financing Arrangements (continued)

Locust Street Credit Facility

On November 1, 2016, Locust Street Funding, LLC, or Locust Street, a wholly owned special purpose financing subsidiary of the Company, entered into a loan agreement, or the Locust Street Loan Agreement and, together with the related transaction documents as subsequently amended and restated, the Locust Street Credit Facility, with JPMorgan, as lender and administrative agent, Citibank, N.A., as collateral agent and securities intermediary, and Virtus Group, LP, as collateral administrator, pursuant to which JPMorgan advanced a $625 term loan to Locust Street. Borrowings outstanding under the Locust Street Credit Facility equally beared interest at a rate equal to three-month LIBOR plus a spread of 2.6833% per annum. Interest was payable quarterly in arrears. Under the Locust Street Loan Agreement, Locust Street agreed to repay $200 of the aggregate principal amount of the advances on or before January 31, 2017, which repayment was satisfied in full in December 2016. All remaining outstanding advances under the Locust Street Loan Agreement were scheduled to mature, and all accrued and unpaid interest thereunder, was due and payable, on November 1, 2020.

On March 4, 2019, CCT New York Funding merged with and into Locust Street, and concurrently, Locust Street entered into an Amended and Restated Loan and Security Agreement, or the Locust Street Amended and Restated Loan Agreement, with JPMorgan, as administrative agent, each of the lenders party thereto, and Wells Fargo Bank, National Association, as collateral agent, securities intermediary, and collateral administrator, amending and restating the Locust Street Loan Agreement. Locust Street used a portion of the proceeds of additional borrowings under the Locust Street Amended and Restated Loan Agreement to repay and terminate the CCT New York Funding Credit Facility.

The Locust Street Credit Facility provided for revolving borrowings in U.S. dollars and certain agreed upon foreign currencies in an aggregate principal amount up to $400.

On December 18, 2020, Locust Street repaid and terminated the Locust Street Credit Facility. $1 of remaining unamortized deferred financing costs for the Locust Street Credit Facility were charged to interest expense.

Senior Secured Revolving Credit Facility

On August 9, 2018, the Company entered into a senior secured revolving credit facility, or as subsequently amended and restated the Senior Secured Revolving Credit Facility, with FS KKR Capital Corp. II (formerly known as FS Investment Corporation II, as a borrower in its own right and as successor by merger to FS Investment Corporation III), or FSK II, (and prior to the 2018 Merger, CCT), as borrowers, JPMorgan, as administrative agent, ING Capital LLC, or ING, as collateral agent and the lenders party thereto. The Senior Secured Revolving Credit Facility provides for the Company to succeed to all of the rights and obligations thereunder as the sole borrower upon the consummation of the 2021 Merger.

The Senior Secured Revolving Credit Facility provides for borrowings in U.S. dollars and certain agreed upon foreign currencies in an aggregate amount of up to $4,025 with an option for the Company to request, at one or more times, that existing and/or new lenders, at their election, provide up to $2,012.5 of additional commitments. The Senior Secured Revolving Credit Facility provides for a sublimit available for the Company to borrow up to $1,615 of the total facility amount, subject to increase or reduction from time to time pursuant to the terms of the Senior Secured Revolving Credit Facility and the oversight and approval of the Company’s board of directors. A sublimit of the total facility amount also is available to FSK II as an additional borrower, and the obligations of the borrowers under the Senior Secured Revolving Credit Facility are several (and not joint) in all respects. The Senior Secured Revolving Credit Facility provides for the issuance of letters of credit in an initial aggregate face amount of up to $400, with a sublimit available for the Company to request the issuance of letters of credit in an aggregate face amount of up to $99.6, subject to increase or reduction from time to time pursuant to the terms of the Senior Secured Revolving Credit Facility.

Availability under the Senior Secured Revolving Credit Facility will terminate on December 23, 2024, or the Revolver Termination Date, and the outstanding loans under the Senior Secured Revolving Credit Facility will mature on December 23, 2025. The Senior Secured 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 and at certain other times when the Company’s adjusted asset coverage ratio is less than 185%.

149

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 9. Financing Arrangements (continued)

Borrowings under the Senior Secured Revolving Credit Facility are subject to compliance with a borrowing base test. Interest under the Senior Secured Revolving Credit Facility for (i) loans for which the Company elects the base rate option, (A) if the value of the borrowing base is equal to or greater than 1.85 times the aggregate amount of certain outstanding indebtedness of the Company, or the Combined Debt Amount, is payable at an “alternate base rate” (which is the greatest of (a) the prime rate as publicly announced by JPMorgan, (b) the sum of (x) the greater of (I) the federal funds effective rate and (II) the overnight bank funding rate plus (y) 0.5%, and (c) the one month LIBOR plus 1% per annum) plus 0.75% and, (B) if the value of the borrowing base is less than 1.85 times the Combined Debt Amount, the alternate base rate plus 1.00%; and (ii) loans for which the Company elects the Eurocurrency option (A) if the value of the borrowing base is equal to or greater than 1.85 times the Combined Debt Amount, is payable at a rate equal to LIBOR plus 1.75% and (B) if the value of the borrowing base is less than 1.85 times the Combined Debt Amount, is payable at a rate equal to LIBOR plus 2.00%. The Company will pay a commitment fee of at least 0.375% and up to 0.50% per annum (based on the immediately preceding quarter’s average usage) on the unused portion of its sublimit under the Senior Secured Revolving Credit Facility during the revolving period. The Company also will be required to pay letter of credit participation fees and a fronting fee on the average daily amount of any lender’s exposure with respect to any letters of credit issued at the request of the Company under the Senior Secured Revolving Credit Facility.

In connection with the Senior Secured Revolving Credit Facility, the Company has made certain representations and warranties and must comply with various covenants and reporting requirements customary for facilities of this type. In addition, the Company must comply with the following financial covenants: (a) the Company must maintain a minimum shareholders’ equity, measured as of each fiscal quarter end; and (b) the Company must maintain at all times a 150% asset coverage ratio (or, if greater, the statutory requirement then applicable to the Company).

The Senior Secured Revolving Credit Facility contains events of default customary for facilities of this type. Upon the occurrence of an event of default, JPMorgan, at the instruction of the lenders, may terminate the commitments and declare the outstanding advances and all other obligations under the Senior Secured Revolving Credit Facility immediately due and payable.

The Company’s obligations under the Senior Secured Revolving Credit Facility are guaranteed by certain of the Company’s subsidiaries. The Company’s obligations under the Senior Secured Revolving Credit Facility are secured by a first priority security interest in substantially all of the assets of the Company and the subsidiary guarantors thereunder.

Hamilton Street Credit Facility

On December 15, 2016, Hamilton Street Funding LLC, or Hamilton Street, a wholly owned, special purpose financing subsidiary of the Company, entered into the Hamilton Street Credit Facility, which provided for a five-year maturity with a four-year revolving period during which Hamilton Street was permitted to borrow, repay and reborrow advances in U.S. dollars and certain agreed foreign currencies in an aggregate amount of up to $150. In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated the Hamilton Street Credit Facility. The $1 of remaining unamortized deferred financing costs for the Hamilton Street Credit Facility were charged to interest expense.

ING Credit Facility

On April 3, 2014, the Company entered into the ING Credit Facility, which, as amended, provided for a maturity date of March 16, 2021 with a revolving period through March 16, 2020 during which the Company was permitted to borrow, repay and reborrow advances in U.S. dollars and certain agreed foreign currencies in an aggregate amount of up to $328. In connection with entering into the Senior Secured Revolving Credit Facility, the Company repaid and terminated the ING Credit Facility. The Company incurred costs in connection with obtaining the ING Credit Facility, which the Company had recorded as deferred financing costs on its consolidated balance sheets and amortized to interest expense over the life of the facility. As of August 9, 2018, $2 of such deferred financing costs had yet to be amortized to interest expense. Pursuant to the terms of the Senior Secured Revolving Credit Facility, the remaining unamortized deferred financing costs of $2 will be amortized over the contractual term of the Senior Secured Revolving Credit Facility.

150

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 9. Financing Arrangements (continued)

Unsecured Notes

4.000% Notes due 2019

On July 14, 2014, the Company issued $400 aggregate principal amount of 4.000% notes due 2019. During the year ended December 31, 2019, the notes matured and were fully repaid.

4.250% Notes due 2020

On December 3, 2014, the Company issued $325 aggregate principal amount of 4.250% notes due 2020, or the 4.250% notes. On December 8, 2016, the Company issued an additional $80 aggregate principal amount of the 4.250% notes. On November 20, 2019, the Company repurchased and retired $214 aggregate principal amount of the 4.250% notes for total consideration of $218, including accrued and unpaid interest, pursuant to a cash tender offer. On December 16, 2019, the Company redeemed the remaining $191 aggregate principal amount of the 4.250% notes for 100% of the aggregate principal amount.

4.750% Notes due 2022

On April 30, 2015, the Company issued $275 aggregate principal amount of 4.750% notes due 2022, or the 4.750% notes. On July 26, 2019, the Company issued an additional $175 aggregate principal amount of the 4.750% notes due 2022 for gross proceeds of $177. The 4.750% notes will mature on May 15, 2022 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the applicable redemption price set forth in the indenture governing the 4.750% notes. The 4.750% notes bear interest at a rate of 4.750% per year, payable semi-annually.

5.000% Notes due 2022

As part of the 2018 Merger, the Company assumed $245 aggregate principal amount of 5.000% notes due 2022, or the 5.000% notes. The 5.000% notes will mature on June 28, 2022 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the applicable redemption price set forth in the indenture governing the 5.000% notes. The 5.000% notes bear interest at a rate of 5.000% per year, payable semi-annually. The interest rate on the 5.000% notes is subject to adjustment in certain instances set forth in the indenture governing the 5.000% notes (up to a maximum interest rate of 5.50%), based on the corporate ratings of the Company by Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc. and Standard & Poor’s Rating Services.

4.625% Notes due 2024

On July 15, 2019, the Company issued $400 aggregate principal amount of 4.625% notes due 2024, or the 4.625% notes. The 4.625% notes will mature on July 15, 2024 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the indenture governing the 4.625% notes. The 4.625% notes bear interest at a rate of 4.625% per year, payable semi-annually.

4.125% Notes due 2025

On November 20, 2019, the Company issued $425 aggregate principal amount of 4.125% notes due 2025, or the 4.125% notes. On December 17, 2019, the Company issued an additional $45 aggregate principal amount of the 4.125% notes due 2025 for gross proceeds of $44.2. The 4.125% notes will mature on February 1, 2025 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the indenture governing the 4.125% notes. The 4.125% notes bear interest at a rate of 4.125% per year, payable semi-annually.

8.625% Notes due 2025

On April 30, 2020, the Company issued $250 aggregate principal amount of 8.625% notes due 2025, or the 8.625% notes. The 8.625% notes will mature on May 15, 2025 and may be redeemed in whole or in part at the Company’s option at any time or

151

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 9. Financing Arrangements (continued)

from time to time at the redemption prices set forth in the indenture governing the 8.625% notes. The 8.625% notes bear interest at a rate of 8.625% per year, payable semi-annually.

3.400% Notes due 2026

On December 10, 2020, the Company issued $1,000 aggregate principal amount of 3.400% notes due 2026, or the 3.40% notes, and together with the 4.750% notes, the 5.000% notes, the 4.625% notes, the 4.125% notes and the 8.625% notes, the Unsecured Notes. The 3.40% notes will mature on January 15, 2026 and may be redeemed in whole or in part at the Company’s option at any time or from time to time at the redemption prices set forth in the indenture governing the 3.40% notes. The 3.40% notes bear interest at a rate of 3.400% per year, payable semi-annually.

The Unsecured Notes are general unsecured obligations of the Company that rank senior in right of payment to all of the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Unsecured Notes, rank pari passu with all existing and future unsecured unsubordinated indebtedness issued by the Company, rank effectively junior to any of the Company’s secured indebtedness (including unsecured indebtedness that the Company later secures) to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries, financing vehicles or similar facilities.

The Unsecured Notes contains certain covenants, including covenants requiring the Company to comply with the asset coverage requirements of Section 18(a)(1)(A) as modified by Section 61(a)(1) and (2) of the Investment Company Act of 1940, as amended, whether or not it is subject to those requirements, and to provide financial information to the holders of the Unsecured Notes if the Company is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended. These covenants are subject to important limitations and exceptions that are described in the indenture governing the Unsecured Notes.

In addition, on the occurrence of a “change of control repurchase event,” as defined in the indenture governing the Unsecured Notes, the Company will generally be required to make an offer to purchase the outstanding Unsecured Notes at a price equal to 100% of the principal amount of such Unsecured Notes plus accrued and unpaid interest to the repurchase date.

CLO-1 Notes

On June 25, 2019, FS KKR MM CLO 1 LLC, a Delaware limited liability company and a wholly owned and consolidated special purpose financing subsidiary of the Company, or the Issuer, completed a $378.7 term debt securitization, or the CLO Transaction. The notes offered by the Issuer in the CLO Transaction, originally and then as refinanced with the CLO Reset Notes (as described below), or the CLO-1 Notes, are secured by a diversified portfolio of the Issuer consisting primarily of middle market loans and participation interests in middle market loans and may also include some broadly syndicated loans.

On December 22, 2020, the Issuer refinanced the CLO Transaction through a private placement of $383.7 of senior secured notes consisting of: (i) $281.4 of Class A-1R Senior Secured Floating Rate Notes, which bear interest at three-month LIBOR plus 1.85% per annum; (ii) $20.5 of Class A-2R Senior Secured Floating Rate Notes, which bear interest at three-month LIBOR plus 2.25% per annum; (iii) $32.4 of Class B-1R Senior Secured Floating Rate Notes, which bear interest at three-month LIBOR plus 2.60% per annum; (iv) $17.4 of Class B-2R Senior Secured Fixed Rate Notes, which bear interest at 3.011% per annum; and (v) $32.0 of Class C-R Secured Deferrable Floating Rate Notes (the “Class C Notes”), which bear interest at three-month LIBOR plus 3.10% per annum (collectively, the “CLO Reset Notes”). The Company holds 100% of the Class C Notes. The CLO Reset Notes are scheduled to mature on January 15, 2031 and the reinvestment period ends January 15, 2023. On the original closing date of the CLO Transaction, in consideration of the Company’s transfer to the Issuer of the initial closing date loan portfolio, which included loans distributed to the Company by certain of the Company’s wholly owned subsidiaries, the Issuer transferred to the Company a portion of the net cash proceeds received from the original sale of the CLO-1 Notes. To the extent that the fair market value of the initial closing date loan portfolio sold to the Issuer exceeds the cash purchase price paid by the Issuer in consideration of such loan portfolio, such excess will be deemed a capital contribution made by the Company to the Issuer in respect of the Membership Interests that the Company holds in the Issuer. The obligations of the Issuer under the CLO Transaction are non-recourse to the Company.

152

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, 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.

Unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s consolidated statements of assets and liabilities. 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 December 31, 2020, the Company’s unfunded commitments consisted of the following:


Category / Company⁽¹⁾	Commitment Amount
Senior Secured Loans—First Lien
5 Arch Income Fund 2 LLC	$	4.5
A10 Capital LLC		14.1
All Systems Holding LLC		7.2
Apex Group Limited		1.2
Ardonagh Group Ltd		0.8
Aspect Software Inc		0.7
CSafe Global		1.5
Eagle Family Foods Inc		7.1
Entertainment Benefits Group LLC		0.5
FloWorks International LLC		6.4
Heniff Transportation Systems LLC		4.8
Individual FoodService		0.4
Individual FoodService		0.5
J S Held LLC		1.4
J S Held LLC		5.1
Kellermeyer Bergensons Services LLC		28.3
Lexitas Inc		4.2
Lexitas Inc		2.5
Miami Beach Medical Group LLC		1.4
Motion Recruitment Partners LLC		29.8
Omnimax International Inc		7.7
P2 Energy Solutions Inc.		4.7
Revere Superior Holdings Inc		1.0
RSC Insurance Brokerage Inc		3.1
RSC Insurance Brokerage Inc		6.3
Sungard Availability Services Capital Inc		0.4
Sweeping Corp of America Inc		3.4
Sweeping Corp of America Inc		1.7
Sweet Harvest Foods Management Co		0.8
Truck-Lite Co LLC		2.5

153

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 10. Commitments and Contingencies (continued)


Category / Company⁽¹⁾	Commitment Amount
Asset Based Finance
Byrider Finance LLC, Structured Mezzanine		5.5
Callodine Commercial Finance LLC		12.1
Home Partners JV, Structured Mezzanine		9.7
Opendoor Labs Inc, 2L Term Loan		47.1

Total	$	228.4

Unfunded equity/other commitments	$	142.9

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

As of December 31, 2020, the Company’s debt commitments are comprised of $46.8 revolving credit facilities and $181.6 delayed draw term loans, which generally are used for acquisitions or capital expenditures and are subject to certain performance tests. Such unfunded debt commitments have a fair value representing unrealized appreciation (depreciation) of $(0.3). The Company’s unfunded Asset Based Finance/Other commitments generally require certain conditions to be met or actual approval from the Advisor prior to funding.

As of December 31, 2020, the Company also has an unfunded commitment to provide $65.8 of capital to SCJV. The capital commitment can be satisfied with contributions of cash and/or investments. The capital commitments cannot be drawn without an affirmative vote by both the Company’s and SCRS’s representatives on SCJV’s board of managers.

While the Company does not expect to fund all of its unfunded commitments, there can be no assurance that it will not be required to do so.

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 has no such guarantees outstanding at December 31, 2020 and December 31, 2019.

Note 11. Senior Securities Asset Coverage

Information about the Company’s senior securities is shown in the table below for the years ended December 31, 2020, 2019, 2018, 2017 and 2016:


Year Ended December 31,	Total Amount Outstanding Exclusive of Treasury Securities		Asset Coverage per Unit⁽¹⁾		Involuntary Liquidation Preference per Unit⁽²⁾		Average Market Value per Unit⁽³⁾ (Exclude Bank Loans)
2016	$	1,703		2.35		—		N/A
2017	$	1,722		2.33		—		N/A
2018	$	3,397		2.23		—		N/A
2019	$	4,195		1.92		—		N/A
2020	$	4.042		1.77		—		N/A

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

(2)

The amount to which such class of senior security would be entitled upon the voluntary liquidation of the Company in preference to any security junior to it. The “—” in this column indicates that the SEC expressly does not require this information to be disclosed for certain types of senior securities.

(3)	Not applicable because senior securities are not registered for public trading on an exchange.

154

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 12. Financial Highlights

The following is a schedule of financial highlights of the Company for the years ended December 31, 2020, 2019, 2018, 2017 and 2016:


	Year Ended December 31,
	2020			2019			2018			2017			2016
Per Share Data:⁽¹⁾
Net asset value, beginning of period	$	30.54		$	31.35		$	37.20		$	37.65		$	36.39
Results of operations⁽²⁾
Net investment income (loss)		2.66			3.16			3.28			3.32			3.40
Net realized gain (loss) and unrealized appreciation (depreciation)		(5.85	)		(1.27	)		(5.73	)		(0.33	)		1.42

Net increase (decrease) in net assets resulting from operations		(3.19	)		1.89			(2.45	)		2.99			4.82

Stockholder distributions⁽³⁾
Distributions from net investment income		(2.56	)		(3.04	)		(3.40	)		(3.44	)		(3.56	)
Distributions from net realized gain on investments		—			—			—			—			—

Net decrease in net assets resulting from stockholder distributions		(2.56	)		(3.04	)		(3.40	)		(3.44	)		(3.56	)

Capital share transactions
Issuance of common stock⁽⁴⁾		—			—			0.00			0.00			0.00
Repurchases of common stock⁽⁵⁾		0.23			0.34			0.16			—			—
Deduction of deferred costs⁽⁶⁾		—			—			(0.16	)		—			—

Net increase (decrease) in net assets resulting from capital share transactions		0.23			0.34			—			—			—

Net asset value, end of period	$	25.02		$	30.54		$	31.35		$	37.20		$	37.65

Per share market value, end of period	$	16.56		$	24.52		$	20.72		$	29.40		$	41.20

Shares outstanding, end of period		123,755,965			126,581,766			132,869,685			61,431,354			61,015,839

Total return based on net asset value⁽⁷⁾		(9.69	)%		7.14	%		(6.56	)%		7.97	%		13.19	%

Total return based on market value⁽⁸⁾		(19.73	)%		33.80	%		(20.15	)%		(21.39	)%		25.91	%

Ratio/Supplemental Data:
Net assets, end of period	$	3,096		$	3,866		$	4,166		$	2,285		$	2,297
Ratio of net investment income to average net assets⁽⁹⁾		10.44	%		10.09	%		9.15	%		8.86	%		9.32	%
Ratio of total operating expenses to average net assets⁽⁹⁾		9.71	%		9.09	%		8.57	%		9.48	%		9.69	%
Ratio of net operating expenses to average net assets⁽⁹⁾		9.71	%		9.09	%		8.44	%		9.37	%		9.69	%
Portfolio turnover		32.95	%		38.49	%		19.92	%		29.17	%		29.65	%
Total amount of senior securities outstanding, exclusive of treasury securities	$	4,042		$	4,195		$	3,397		$	1,722		$	1,703
Asset coverage per unit⁽¹⁰⁾		1.77			1.92			2.23			2.33			2.35

(1)	The share information utilized to determine per share data has been retroactively adjusted to reflect the Reverse Stock Split discussed in Note 3. 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.

155

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 12. Financial Highlights (continued)

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

(4)

The issuance of common stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of shares of common stock pursuant to the Company’s distribution reinvestment plan. The issuance of common stock at a price that is greater than the net asset value per share results in an increase in net asset value per share. The per share impact of the Company’s distribution reinvestment plan is an increase to the net asset value of less than $0.01 per share during the years ended December 31, 2018, 2017 and 2016.

(5)	Represents the incremental impact of the Company’s share repurchase program by buying shares in the open market at a price lower than net asset value per share for the years ended December 31, 2020, 2019 and 2018.

(6)	As a result of the purchase price allocation for the 2018 Merger, the Company permanently wrote off approximately $22 of deferred costs and prepaid assets from CCT’s balance sheet. Refer to Note 13 for a discussion of the 2018 Merger.

(7)

The total return based on net asset value for each year presented was calculated by taking the net asset value per share as of the end of the applicable year, adding the cash distributions per share that were declared during the applicable calendar year and dividing the total by the net asset value per share at the beginning of the applicable year. Total return based on net asset value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The historical calculation of total return based on net asset value in the table should not be considered a representation of the Company’s future total return based on net asset value, which may be greater or less than the return shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total return on the Company’s investment portfolio during the applicable period and do not represent an actual return to stockholders.

(8)

The total return based on market value for each period presented was calculated based on the change in market price during the applicable period, including the impact of distributions reinvested in accordance with the Company’s DRP. Total return based on market value does not consider the effect of any sales commissions or charges that may be incurred in connection with the sale of shares of the Company’s common stock. The historical calculation of total return based on market value in the table should not be considered a representation of the Company’s future total return based on market value, which may be greater or less than the return shown in the table due to a number of factors, including the Company’s ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company’s expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets, general economic conditions and fluctuations in per share market value. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods.

(9)	Weighted average net assets during the applicable period are used for this calculation. The following is a schedule of supplemental ratios for the years ended December 31, 2020, 2019, 2018, 2017 and 2016:


	Year Ended December 31,
	2020			2019			2018			2017			2016
Ratio of accrued capital gains incentive fees to average net assets		—			—			—			—			—
Ratio of subordinated income incentive fees to average net assets		—			1.40	%		1.16	%		2.19	%		2.33	%
Ratio of interest expense to average net assets		5.36	%		4.19	%		3.75	%		3.44	%		3.33	%
Ratio of excise taxes to average net assets		0.32	%		0.17	%		0.31	%		0.23	%		0.25	%

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

Note 13. CCT Acquisition

On December 19, 2018, the Company completed its previously announced acquisition of CCT pursuant to the 2018 Merger Agreement. Pursuant to the 2018 Merger Agreement, CCT was first merged with and into Merger Sub, with CCT as the surviving corporation, and, immediately following such merger, CCT was then merged with and into the Company, with the Company as the surviving company.

156

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 13. CCT Acquisition (continued)

In accordance with the terms of the 2018 Merger Agreement, each outstanding share of CCT common stock was converted into the right to receive 2.3552 shares of the Company’s common stock (with CCT stockholders receiving cash in lieu of fractional shares of the Company’s common stock). As a result, the Company issued an aggregate of approximately 292,324,670 shares of its common stock to former CCT stockholders. Share and exchange ratio amounts in the foregoing do not reflect the Reverse Stock Split as discussed in Note 3.

The 2018 Merger was accounted for in accordance with the asset acquisition method of accounting as detailed in Accounting Standards Codification 805-50, Business Combinations—Related Issues. The fair value of the 2018 Merger consideration paid by the Company was allocated to the assets acquired and liabilities assumed based on their relative fair values as of the date of acquisition and did not give rise to goodwill.

In applying the asset acquisition method of accounting, the Company used a cost approach to allocate the cost of the consideration given against the assets being acquired. The cost of the acquisition was determined to be the fair value of the consideration given as the Company determined that the fair value of the shares of its Common Stock issued pursuant to the 2018 Merger Agreement based on its most recent traded price on the NYSE to be the most evident. Since the fair value of the consideration given was less than the fair value of the assets received, the Company utilized the relative fair value method to reduce the recorded value of deferred costs and prepaid assets by $22 and CCT’s investments by $717. Immediately upon consummation of the 2018 Merger, CCT’s investments that were written down as a result of the purchase price allocation were written back up to their respective fair values under ASC Topic 820. This is reflected as change in unrealized appreciation from merger accounting on the consolidated statement of operations.

The 2018 Merger was considered a tax-free reorganization. The Company has elected to carry forward the historical cost basis of the CCT investments, resulting in an additional $260 of unrealized depreciation on its investments from CCT.

The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed as a result of the 2018 Merger:


Common stock issued	$	1,574

Total purchase price	$	1,574


Assets acquired:
Investments, at fair value	$	3,451
Cash and cash equivalents		197
Other assets		64

Total other assets acquired	$	3,712
Debt		1,928
Other liabilities assumed	$	210

Total purchase price	$	1,574

The Company incurred $7 of professional fees and other costs associated with the 2018 Merger. Such costs were capitalized by the Company and included in the purchase price of the 2018 Merger. Subsequent to the 2018 Merger, the investments were marked up to their fair value, while the deferred costs and prepaid assets ($0.16 per share) were permanently written off.

157

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 13. CCT Acquisition (continued)

The following table summarizes the balance sheet of CCT on the 2018 Merger date subsequent to the mark up of CCT investments to their fair value:


Cash	$	197
Investments ($4,428 at cost)		4,168
Other assets		64

Total assets	$	4,429
Debt		1,928
Other liabilities		210

Total liabilities	$	2,138

Net assets	$	2,291

Note 14. Pending Merger with FSKR

On November 23, 2020, the Company entered into the 2020 Merger Agreement with FSKR, Merger Sub, Inc., and the Advisor. The 2020 Merger Agreement provides that, subject to the conditions set forth in the 2020 Merger Agreement, Merger Sub will merge with and into FSKR, with FSKR continuing as the surviving company and as a wholly-owned subsidiary of FSK, or the First Merger, and, immediately thereafter, FSKR will merge with and into FSK, with FSK continuing as the surviving company, or together with the First Merger, the 2021 Merger. The board of directors of each Fund has approved the 2021 Merger, with the participation throughout by, and the unanimous support of, its respective independent directors. The parties to the 2020 Merger Agreement intend the 2021 Merger to be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.

In the 2021 Merger, each share of FSKR common stock issued and outstanding immediately prior to the effective time of the First Merger will be converted into a number of shares of FSK common stock equal to an exchange ratio to be determined in connection with the closing of the 2021 Merger, or the Exchange Ratio. The Exchange Ratio will equal the net asset value per share of FSKR common stock, respectively (determined no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the 2021 Merger), divided by the net asset value per share of FSK common stock (determined, in each case, no earlier than 48 hours (excluding Sundays and holidays) prior to the closing date of the 2021 Merger). Holders of FSKR common stock may receive fractional shares or cash in lieu of fractional shares, at the election of FSK.

The 2020 Merger Agreement contains representations, warranties and covenants, including, among others, covenants relating to the operation of each of the Funds and FS/KKR Advisor’s businesses during the period prior to the closing of the 2021 Merger. 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.

158

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 14. Pending Merger with FSKR (continued)

includes a joint proxy statement of the Funds and a prospectus of FSK, or the Proxy Statement, (4) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the 2020 Merger Agreement and (5) required regulatory approvals (including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended).

Note 15. Selected Quarterly Financial Data (Unaudited)

The following is the quarterly results of operations for the years ended December 31, 2020 and 2019. The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.


	Quarter Ended
	December 31, 2020		September 30, 2020		June 30, 2020			March 31, 2020
Investment income	$	163	$	147	$	150		$	179
Operating expenses
Net expenses and excise taxes		85		69		73			81

Net investment income		78		78		77			98
Realized and unrealized gain (loss)		65		132		(132	)		(801	)

Net increase (decrease) in net assets resulting from operations	$	143	$	210	$	(55	)	$	(703	)

Per share information-basic and diluted
Net investment income	$	0.63	$	0.63	$	0.62		$	0.78

Net increase (decrease) in net assets resulting from operations	$	1.16	$	1.70	$	(0.44	)	$	(5.59	)

Weighted average shares outstanding		123,755,965		123,755,965		123,806,337			125,855,913

159

FS KKR Capital Corp.

Notes to Consolidated Financial Statements (continued)

(in millions, except share and per share amounts)

Note 15. Selected Quarterly Financial Data (Unaudited) (continued)


	Quarter Ended
	December 31, 2019			September 30, 2019			June 30, 2019		March 31, 2019
Investment income	$	186		$	199		$	199	$	195
Operating expenses
Net expenses and excise taxes		86			84			98		100

Net investment income		100			115			101		95
Realized and unrealized gain (loss)		(127	)		(44	)		—		6

Net increase (decrease) in net assets resulting from operations	$	(27	)	$	71		$	101	$	101

Per share information-basic and diluted
Net investment income	$	0.79		$	0.89		$	0.77	$	0.72

Net increase (decrease) in net assets resulting from operations	$	(0.21	)	$	0.55		$	0.77	$	0.77

Weighted average shares outstanding⁽¹⁾		127,189,576			129,385,824			130,549,922		131,876,783

(1)	The weighted average shares used in the per share computation of the net increase (decrease) in net assets resulting from operations reflect the Reverse Stock Split on a retroactive basis.

The sum of quarterly per share amounts does not necessarily equal per share amounts reported for the years ended December 31, 2020 and 2019. This is due to changes in the number of weighted-average shares outstanding and the effects of rounding for each period.

For the year ended December 31, 2020, 78.9% of net investment income distributions qualified as interest related dividends for FSK stockholders which are exempt from U.S. withholding tax applicable to non U.S. shareholders.

160

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Exchange Act Rule 13(a)-15(b), we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were (a) designed to ensure that the information we are required to disclose in our reports under the Exchange Act is recorded, processed and reported in an accurate manner and on a timely basis and the information that we are required to disclose in our Exchange Act reports is accumulated and communicated to management to permit timely decisions with respect to required disclosure and (b) operating in an effective manner.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rules 13a-15(f) and 15d-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Our internal control over financial reporting includes those policies and procedures that:

1. Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the Company’s transactions and the dispositions of assets of the Company;

2. Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and board of directors; and

3. Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s report on internal control over financial reporting is set forth above under the heading “Management’s Report on Internal Control over Financial Reporting” in Item 8 of this annual report on Form 10-K.

Attestation Report of the Registered Public Accounting Firm

Our registered public accounting firm has issued an attestation report on our internal control over financial reporting. This report appears on page 72.

161

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2020, there was no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) or 15d-15(f)) that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.

Other Information.

None.

162

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

The information required by Item 10 is hereby incorporated by reference from an amendment to this Annual Report on Form 10-K, to be filed with the SEC within 120 days following the end of our fiscal year.

Item 11.

Executive Compensation.

The information required by Item 11 is hereby incorporated by reference from an amendment to this Annual Report on Form 10-K, to be filed with the SEC within 120 days following the end of our fiscal year.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by Item 12 is hereby incorporated by reference from an amendment to this Annual Report on Form 10-K, to be filed with the SEC within 120 days following the end of our fiscal year.

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 13 is hereby incorporated by reference from an amendment to this Annual Report on Form 10-K, to be filed with the SEC within 120 days following the end of our fiscal year.

Item 14.

Principal Accountant Fees and Services.

The information required by Item 14 is hereby incorporated by reference from an amendment to this Annual Report on Form 10-K, to be filed with the SEC within 120 days following the end of our fiscal year.

163

PART IV

Item 15.

Exhibits, Financial Statement Schedules.

a. Documents Filed as Part of this Report

The following financial statements are set forth in Item 8:


	Page
Management’s Report on Internal Control over Financial Reporting		71
Report of Independent Registered Public Accounting Firm		72
Report of Independent Registered Public Accounting Firm		75
Consolidated Balance Sheets as of December 31, 2020 and 2019		76
Consolidated Statements of Operations for the years ended December 31, 2020, 2019 and 2018		77
Consolidated Statements of Changes in Net Assets for the years ended December 31, 2020, 2019 and 2018		79
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018		80
Consolidated Schedules of Investments as of December 31, 2020 and 2019		81
Notes to Consolidated Financial Statements		112

b. Exhibits

Please note that the agreements included as exhibits to this annual report on Form 10-K are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement that have been made solely for the benefit of the other parties to the applicable agreement and may not describe the actual state of affairs as of the date they were made or at any other time.

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


2.1		Agreement and Plan of Merger, by and among FS Investment Corporation, IC Acquisition, Inc., Corporate Capital Trust, Inc. and FS/KKR Advisor, LLC, dated as of July 22, 2018. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on July 23, 2018.)

2.2		Agreement and Plan of Merger, dated as of November 23, 2020, by and among FS KKR Capital Corp., FS KKR Capital Corp. II, Rocky Merger Sub, Inc. and FS/KKR Advisor, LLC. (Incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 24, 2020.)

3.1		Second Articles of Amendment and Restatement of FS Investment Corporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 16, 2014.)

3.2		Articles of Amendment of FS Investment Corporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 3, 2018.)

3.3		Articles of Amendment of FS Investment Corporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 19, 2018.)

3.4		Articles of Amendment of FS KKR Capital Corp. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 15, 2020.)

3.5		Articles of Amendment of FS KKR Capital Corp. (Incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on June 15, 2020.)

3.6		Third Amended and Restated Bylaws of FS KKR Capital Corp. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 24, 2020.)

3.7		Amendment No. 1 to the Second Amended and Restated Bylaws of FS Investment Corporation. (Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 23, 2018.)

4.1		Distribution Reinvestment Plan, effective as of June 2, 2014. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 23, 2014.)

4.2		Indenture, dated as of July 14, 2014, by and between the Company and U.S. Bank National Association, as trustee. (Incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 filed on August 14, 2014.)

164



4.3		Third Supplemental Indenture, dated as of April 30, 2015, relating to the 4.750% Notes due 2022, by and between the Company and U.S. Bank National Association, as trustee. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 30, 2015.)

4.4		Form of 4.750% Notes due 2022. (Included as Exhibit A to the Third Supplemental Indenture in Exhibit 4.3) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on April 30, 2015.)

4.5		Fourth Supplemental Indenture, dated as of July 15, 2019, relating to the 4.625% Notes due 2024, by and between the Company and U.S. Bank National Association, as trustee. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 15, 2019.)

4.6		Form of 4.625% Notes due 2024. (Included as Exhibit A to the Fourth Supplemental Indenture in Exhibit 4.5) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 15, 2019.)

4.7		Fifth Supplemental Indenture, dated as of November 20, 2019, relating to the 4.125% Notes due 2025, by and between the Company and U.S. Bank National Association, as trustee. (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 20, 2019.)

4.8		Form of 4.125% Notes due 2025. (Included as Exhibit A to the Fifth Supplemental Indenture in Exhibit 4.7) (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on November 20, 2019.)

4.9		Sixth Supplemental Indenture, dated as of April 30, 2020 relating to the 8.625% Notes due 2025, by and between the Company and U.S. Bank National Association, as trustee. (Incorporated by reference to Exhibit 4.9 filed with the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed on May 6, 2020.)

4.10		Form of 8.625% Notes due 2025. (Included as Exhibit A to the Sixth Supplemental Indenture in Exhibit 4.9) (Incorporated by reference to Exhibit 4.9 filed with the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed on May 6, 2020.)

4.11		Seventh Supplemental Indenture, dated as of December 10, 2020 relating to the 3.400% Notes due 2026, by and between the Company and U.S. Bank National Association, as trustee. (Incorporated by reference to Exhibit 4.1 filed with the Company’s Current Report on Form 8-K for filed on December 10, 2020.)

4.12		Form of 3.400% Notes due 2026. (Included as Exhibit A to the Seventh Supplemental Indenture in Exhibit 4.11) (Incorporated by reference to Exhibit 4.1 filed with the Company’s Current Report on Form 8-K for filed on December 10, 2020.)

4.13		Indenture, dated June 28, 2017, by and between The Bank of New York Mellon Trust Company, N.A. and Corporate Capital Trust, Inc. (Incorporated by reference to Exhibit 4.1 to Corporate Capital Trust Inc.’s Current Report on Form 8-K filed on July 5, 2017.)

4.14		Form of 5.00% Notes due 2022. (Included as Exhibit A to the Indenture in Exhibit 4.9) (Incorporated by reference to Exhibit 4.1 to Corporate Capital Trust Inc.’s Current Report on Form 8-K filed on July 5, 2017.)

4.15*		Description of Securities

10.1		Investment Advisory Agreement, dated as of December 20, 2018, by and between FS KKR Capital Corp. and FS/KKR Advisor, LLC. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 28, 2018.)

10.2		Administration Agreement, dated as of April 9, 2018, by and between FS Investment Corporation and FS/KKR Advisor, LLC. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on April 9, 2018.)

10.3		Custodian Agreement, dated as of November 14, 2011, by and between the Company and State Street Bank and Trust Company. (Incorporated by reference to Exhibit 10.9 filed with the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 filed on November 14, 2011.)

10.4		Amended and Restated Loan and Security Agreement, dated as of March 4, 2019, by and between Locust Street Funding LLC, JPMorgan Chase Bank, N.A., the lenders party thereto, and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 8, 2019.)

10.5		Amended and Restated Senior Secured Revolving Credit Agreement, dated as of November 7, 2019, by and among the Company, FS Investment Corporation II, and FS Investment Corporation III, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, ING Capital LLC, as collateral agent, and the lenders, documentation agents, joint bookrunners, and joint lead arrangers party thereto. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on November 13, 2019.)

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10.6		Commitment Increase Letter, dated as of March 3, 2020, among BNP Paribas, ING Capital LLC, the Company, FS KKR Capital Corp. II and JPMorgan Chase Bank, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.6 filed with the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed on May 6, 2020.)

10.7†		Amendment No. 1 to Amended and Restated Senior Secured Revolving Credit Agreement, dated as of May 5, 2020, by and among the Company, FS KKR Capital Corp. II, JPMorgan Chase Bank, N.A., as administrative agent, ING Capital LLC, as collateral agent, and the lenders party thereto. (Incorporated by reference to Exhibit 10.7 filed with the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 filed on May 6, 2020.)

10.8		Second Amended and Restated Senior Secured Revolving Credit Agreement, dated as of December 23, 2020, by and among the Company and FS KKR Capital Corp. II, as borrowers, JPMorgan Chase Bank, N.A., as administrative agent, ING Capital LLC, as collateral agent, and the lenders, documentation agents, joint bookrunners, and joint lead arrangers party thereto. (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on December 30, 2020.)

109		Loan and Servicing Agreement, dated as of December 2, 2015, among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc. and Sumitomo Mitsui Banking Corporation. (Incorporated by reference to Exhibit 10.42 to Corporate Capital Trust, Inc.’s Annual Report on Form 10-K filed on March 21, 2016.)

10.10		First Amendment to Loan and Servicing Agreement, dated September 20, 2017, by an among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc. and Sumitomo Mitsui Banking Corporation. (Incorporated by reference to Exhibit 10.3 to Corporate Capital Trust, Inc.’s Quarterly Report on Form 10-Q filed on November 9, 2017.)

10.11		Second Amendment to Loan and Servicing Agreement, dated as of November 28, 2017, by and among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc. and Sumitomo Mitsui Banking Corporation. (Incorporated by reference to Exhibit 10.1 to Corporate Capital Trust Inc.’s Current Report on Form 8-K filed on November 28, 2017.)

10.12		Fourth Amendment to Loan and Servicing Agreement, dated as of November 30, 2018, by and among CCT Tokyo Funding LLC, Corporate Capital Trust, Inc., and Sumitomo Mitsui Banking Corporation. (Incorporated by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on February 28, 2019.)

10.13		Fifth Amendment to Loan and Servicing Agreement, dated as of December 2, 2019, by and among CCT Tokyo Funding LLC, the Company, and Sumitomo Mitsui Banking Corporation. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 5, 2019.)

10.14		Sixth Amendment to Loan and Servicing Agreement, dated December 1, 2020, by and among CCT Tokyo Funding LLC, FS KKR Capital Corp., and Sumitomo Mitsui Banking Corporation. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 2, 2020.)

10.15		Indenture, dated June 25, 2019, by and between FS KKR MM CLO 1 LLC and US Bank National Association. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 1, 2019.)

10.16		Amended and Restated Indenture, dated December 22, 2020, by and between FS KKR MM CLO 1 LLC and U.S. Bank National Association. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 30, 2020.)

21.1*		Subsidiaries of the Company.

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.

32.1*		Certification of Chief Executive Officer a pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of Chief Financial Officer a pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed herewith.

†	Pursuant to Item 601(a)(5) of Regulation S-K, certain exhibits and schedules have been omitted. The registrant hereby agrees to furnish supplementally a copy of any omitted attachment to the SEC upon request.

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c. Financial statement schedules

No financial statement schedules are filed herewith because (1) such schedules are not required or (2) the information has been presented in the aforementioned financial statements.

Item 16. Form 10-K Summary.

None

167

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.


				FS KKR CAPITAL CORP.

Date: March 1, 2021				/s/ MICHAEL C. FORMAN
				Michael C. Forman Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.


Date: March 1, 2021				/s/ MICHAEL C. FORMAN
				Michael C. Forman Chief Executive Officer and Director (Principal Executive Officer)

Date: March 1, 2021				/s/ STEVEN LILLY
				Steven Lilly Chief Financial Officer (Principal Financial Officer)

Date: March 1, 2021				/s/ WILLIAM GOEBEL
				William Goebel Chief Accounting Officer (Principal Accounting Officer)

Date: March 1, 2021				/s/ BARBARA ADAMS
				Barbara Adams Director

Date: March 1, 2021				/s/ TODD BUILIONE
				Todd Builione Director

Date: March 1, 2021				/s/ BRIAN R. FORD
				Brian R. Ford Director

Date: March 1, 2021				/s/ RICHARD GOLDSTEIN
				Richard Goldstein Director

Date: March 1, 2021				/s/ MICHAEL J. HAGAN
				Michael J. Hagan Director

Date: March 1, 2021				/s/ JEFFREY K. HARROW
				Jeffrey K. Harrow Director

Date: March 1, 2021				/s/ JEREL A. HOPKINS
				Jerel A. Hopkins Director

Date: March 1, 2020				/s/ OSAGIE IMOSAGIE
				Osagie Imosagie Director

Date: March 1, 2021				/s/ JAMES H. KROPP
				James H. Kropp Director

Date: March 1, 2021				/s/ ELIZABETH SANDLER
				Elizabeth Sandler Director

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Litigous
Readability	H.S. junior Avg

FS KKR Capital (FSK) 10-K2020 FY Annual report

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