insidealts business development companies...bdc’s must distribute at least 90% of income and...

Business Development Companies

MODERATOR

Carl Delfeld Managing Partner Chartwell Partners

PANELISTS

Ira Wishe Managing Director BDCA

Brody Browe Executive Director, Fund Strategy Franklin Square Capital Partners

John Kneisley Managing Director Prospect Capital

#InsideAlts

A Core Income Alternative Institutional Communication – Not For Further Distribution

What is a Business Development Company?

2

Mutual Funds 1940 REITs 1960 BDCs 1980

History: !  Enacted by Congress in 1980 through the passage of the Small

Business Investment Act

!  Created to facilitate increased capital flows to small and mid-sized US businesses

Requirements: !  BDC’s must distribute at least 90% of income and capital gains

!  Restricted to investments in privately held or small publicly traded US companies

!  Quarterly net asset value disclosure

!  Currently restricted to no more than 50% leverage


$3.2 $7.0

$10.7

$16.2

$25.1

$19.7 $19.6

$25.1

$30.2

$36.5

$45.7

$60.0

$0

$10

$20

$30

$40

$50

$60

$70

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total Assets for Publicly Traded BDCs ($ in billions)

The Growth of the BDC Industry

Source: Company Filings


Common Equity

First Lien Secured Debt

Second Lien Secured Debt

Mezzanine Debt

Priority of Claim on

Assets and Cash Flows of the Company

Tranches of Credit


Middle Market Senior Secured Loans

5

!  Security – Typically Secured by a First Lien on Assets

!  Priority – First Priority of Payment in a Bankruptcy

!  Middle Market – Tighter Structures Lead to Stronger Lender Protection

!  Recovery – Historical Recovery Rate of 80.3% on Defaulted Loans*

!  Interest Rate Protection – Floating Rate

!  Stability – U.S Corporate Borrowers

*Moody’s Investor Service, Annual Default Study: Corporate Default and Recovery Rates, 1920-2013, February 2014

A Core Income Alterna.ve 6

Business Development Corporation of

America (“BDCA”) is a publicly

offered, non-traded business

development company. BDCA invests in

the debt and equity of private U.S.

middle market companies.

CLOSED TO NEW INVESTORS

Offering Details 250,000,000 shares of common stock

Current Offering Price $11.15 per share

Fund Type Publicly registered, non-traded

Business Development Company

Portfolio Investments Senior secured loans, second lien

loans, mezzanine loans and preferred equity in private U.S. middle market

companies

Business Development Corporation of

America II is a publicly offered, non-

traded business development company.

BDCA II invests predominately in first

lien, floating rate loans and, to a lesser

extent, second lien, floating rate loans of

U.S. companies with large principal

amounts that are broadly syndicated and

have, or will have an active secondary

trading market.

Offering Details 300,000,000 shares of common stock

Current Offering Price $10.00 per share

Fund Type Publicly registered, non-traded

Business Development Company

Portfolio Investments First lien, floating rate loans, and to a

lesser extent, second lien, floating rate loans of U.S. companies

The AR Capital BDC Income

Fund’s (“the Fund”) investment

objective is to provide a high level

of income, with the potential for

capital appreciation. The Fund will

invest substantially all (and under

normal market conditions, at least

80%), of its net assets in common

stocks and other equity securities

of business development

companies that are traded on one or

more nationally recognized

securities exchanges.


For More Information

!  This is not an offer or solicitation for the purchase or sale of any financial instrument. It is presented only informational purposes. Information and statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.

!  These slides are not intended to be used to make any specific recommendations or imply/guarantee any type of market performance for the asset categories discussed. The information contained in these slides was taken from third-party sources that we believe to be reliable, but cannot guarantee its accuracy or completeness.

!  Performance data quoted herein represents past performance, and past performance does not guarantee future results. The

investment return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.

!  Prospective investors should consider the investment objectives, risks, and charges and expenses of the AR Capital BDC Income Fund (the “Fund”) and BDCA II carefully before investing. The Fund’s prospectus contains information about these important issues as well as other information about the Fund. A prospectus for the Fund may be obtained by calling (877) 373 - 2522 or writing us in care of: AR Capital Real BDC Income Fund, 405 Park Avenue, New York, NY, 10022. You may also download a copy of the Fund’s prospectus by going to www.arcincomefunds.com. Please read the prospectus carefully before investing.


MODERATOR


PANELISTS




#InsideAlts

MARKET LEADING DIRECT LENDER

• 3rd largest externally managed business development company (BDC) by total assets1 • $2.5 billion market capitalization1 • Focus on direct lending and opportunistic investments

MANAGED BY FRANKLIN SQUARE CAPITAL PARTNERS & GSO / BLACKSTONE

DISCIPLINED STRATEGY WITHIN ATTRACTIVE MIDDLE MARKET SECTOR

• Franklin Square Capital Partners: Largest manager of BDCs with $14.5 billion in BDC AUM1

• GSO: Credit platform of The Blackstone Group with $75.0 billion in AUM2

• Platform delivers scale, access, pricing power and other competitive advantages

1  As of March 31, 2015. Franklin Square Holdings, L.P. does business as Franklin Square Capital Partners (Franklin Square). FB Income Advisor, LLC (FB Advisor), an affiliate of Franklin Square, is the investment adviser to FS Investment Corporation (FSIC). Assets under management (AUM) include assets of FSIC, FS Investment Corporation II (FSIC II), FS Investment Corporation III (FSIC III) and FS Energy and Power Fund (FSEP).

2  As of March 31, 2015. GSO / Blackstone Debt Funds Management LLC (GSO / Blackstone), a subsidiary of GSO Capital Partners LP, is the sub-adviser to FSIC.

• Focus on long-term credit performance and principal protection • Traditional bank lenders exiting the middle market due to regulatory

and capital pressures • Able to offer value to borrowers including certainty of execution,

financing customization, reputation and access to the Blackstone Group Purchasing Organization (GPO)

FS Investment Corporation Overview

FS Investment Corporation (NYSE:FSIC)

FS Investment Corporation II (FSIC II)

FS Investment Corporation III (FSIC III)

FS Energy and Power Fund (FSEP)

FS Global Credit Opportunities Fund

LAUNCH January 2, 2009 June 18, 2012 April 2, 2014 July 18, 2011 December 12, 2013

INVESTMENT OBJECTIVE Income Income Income Income and growth Total return

FUND TYPE BDC BDC BDC BDC Closed-end fund

ASSETS UNDER MANAGEMENT as of 3/31/2015

$4.4 billion $5.0 billion $1.4 billion $3.8 billion $1.2 billion

FUND FOCUS Senior secured loans of private U.S. companies

Senior secured loans of private U.S. companies

Senior secured loans of private U.S. companies

Senior secured debt and equity of private U.S. energy and power companies

Global credit

Introduction to Franklin Square Capital Partners

$125 Million Sponsor Commitment1

1  As of March 31, 2015. "Sponsor Commitment" means proceeds from investors affiliated with the investment advisers of FSIC II, FSIC III, FSEP and FS Global Credit Opportunities Fund and GSO / Blackstone, including certain members of the board of directors (or trustees) of such funds.

$110 million $782 million

$2.3 billion

$5.9 billion

$10.3 billion

$13.8 billion

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14

Franklin Square BDC Assets Under Management

Franklin Square’s Fundraising Model

WE BELIEVE UNLISTED FUNDS ARE AN EFFICIENT STRUCTURE TO RAISE EQUITY

11

•  FSIC does not need to be a serial equity issuer for Franklin Square to generate growth

•  Continuously offered funds enable Franklin Square to raise and deploy capital during all market conditions

1

1  Includes assets of FSIC, FSIC II, FSIC III and FSEP.

LEADING MANAGER OF ALTERNATIVE INVESTMENTS

LEADING FRANCHISES in credit, private equity, real estate, hedge fund solutions and financial advisory

BRAND AND SCALE provides exceptional access

BLACKSTONE’S GROUP PURCHASING ORGANIZATION available to FSIC portfolio companies

LEADING MANAGER OF ALTERNATIVE CREDIT focused on non-investment grade corporate debt

GLOBAL PRESENCE with 260+ employees1

INVESTMENTS IN ~1,100 issuers3

$25.6 BILLION in directly originated transactions1

LARGEST MANAGER OF BDCs

OVER 250 employees1

SCALE allows for one-stop financing solutions and low cost structure

308 PORTFOLIO COMPANIES across entire BDC platform2

FSIC’s Competitive Advantages

SCALE ACCESS INVESTMENT EXPERTISE

COMPETITIVE ADVANTAGES

1  As of March 31, 2015. 2  Includes portfolio companies of FSIC, FSIC II, FSIC III and FSEP as of March 31, 2015. 3  As of March 31, 2015. Includes all issuers covered by GSO’s Customized Credit Strategies team, including, but not limited to, broadly syndicated assets, middle market assets, high yield bonds,

mezzanine transactions, CLO or other structured products, and originated transactions.

Strong Historical Returns

FSIC OUTPERFORMED LOANS AND HY INDICES IN 1, 3 AND 5-YEAR PERIODS1

7.2%

11.1% 11.1%

2.5%

8.4% 8.9%

2.1%

5.8% 5.8%

0.0%

4.0%

8.0%

12.0%

FSIC BaML U.S. High Yield Index CS Leveraged Loan Index

1-Year 3-Year 5-Year

1  1, 3 and 5-year returns as of December 31, 2014. 2  FSIC’s average annual returns equal the NAV per share as of the applicable period end, plus any distributions declared during such period, divided by the NAV per share as of the beginning of the period,

compounded quarterly. These total return figures do not represent an actual return to stockholders. 3  Represents the average annual return of the Bank of America Merrill Lynch High Yield Index, compounded quarterly. 4  Represents the average annual return of the Credit Suisse Leverage Loan Index, compounded quarterly.

2

3

4

Blackstone GPO Program Can Create Value

5.4% AVERAGE EBITDA SAVINGS FOR COMPANIES IN GPO PROGRAM • The first Franklin Square BDC

portfolio company joined the GPO program in August 2012

• Since that time, 14 more Franklin Square BDC portfolio companies have implementations underway

• Several portfolio companies in process to join

• Program available to all direct originations in FSIC’s portfolio

• GSO recently hired an employee to help manage the GPO program for Franklin Square portfolio companies

Company Implementation Start

Base EBITDA1

Annual Savings1, 2

% of EBITDA

Enterprise Value Impact1, 2

Company 1 Q3 2012 $13.5 $4.4 32.3% $34.9

Company 2 Q1 2013 23.3 0.4 1.7 2.8

Company 3 Q2 2013 34.0 0.4 1.2 2.6

Company 4 Q2 2013 23.0 0.1 0.4 0.5

Company 5 Q3 2013 8.0 1.2 15.5 7.7

Company 6 Q3 2013 7.0 0.5 7.1 2.4

Company 7 Q4 2013 24.0 2.1 8.6 12.8

Company 8 Q1 2014 19.5 0.4 2.1 2.4

Company 9 Q1 2014 143.0 3.8 2.6 22.5

Company 10 Q1 2014 11.2 0.2 1.6 1.2

Company 11 Q2 2014 34.1 0.7 1.9 5.2

Company 12 Q2 2014 59.6 0.7 1.1 5.4

Company 13 Q3 2014 144.7 2.3 1.6 14.9

Company 14 Q4 2014 177.6 3.0 1.7 19.5

Company 15 Q1 2015 18.9 0.2 1.1 1.4

Total / Average $20.2 5.4% $136.3

1  Dollar amounts in millions. 2  Average of estimated values based on GSO projections.


MODERATOR


PANELISTS




#InsideAlts

PROSPECT CAPITAL CORPORATION NASDAQ: PSEC

#InsideAlts

MIDDLE MARKET FINANCE AND PRIVATE EQUITY

PSEC IS THE LARGEST MULTI-LINE BDC

#InsideAlts

SIGNIFICANT DISTRIBUTIONS ► Attractive double-digit dividend yield, paid monthly – 13.6% as of 6/30/2015

CREDIT QUALITY / DISCIPLINE

► Non-accruals are 0.52% of total assets as of 3/31/2015 ► 3,000+ opportunities originated per annum ► Only ~2% of the opportunities reviewed per annum survive the due diligence process to result in closing

EMPHASIS ON SECURED LENDING

► Continued focus on secured lending, with approximately 75% of the balance sheet as of 3/31/2015 comprised of secured loans

NUMEROUS INVESTMENTS ► Portfolio has 132 investment counterparties with the average exposure at 0.76% of the portfolio

NO INDUSTRY CONCENTRATION ► Portfolio is invested across 29 industries with deep centers of industry expertise within the Prospect team

ORIGINATION MIX DIVERSIFICATION

► Nine yield-oriented origination strategies: (1) private equity sponsor finance, (2) direct non-sponsor lending, (3) one-stop operating buyouts, (4) one-stop finance buyouts, (5) structured credit, (6) real estate, (7) online lending, (8) aircraft leasing, and (9) syndicated debt investing

► Flexibility to vary our origination mix profile in accordance with relative attractiveness, providing discipline from a multi-line model

Source: Company filings, investor presentations and management.

LARGER BORROWER SIZE

► As our scale and average deal size each have grown, so has the size of our average borrower (weighted average portfolio company EBITDA $40+ million)

► Larger borrowers better equipped to withstand a downturn

#InsideAlts

PSEC HAS GENERATED SUPERIOR OPERATING RETURNS COMPARED WITH PUBLICLY-TRADED BDC MEDIAN OVER THE PAST 5 YEARS

+59%

+79%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2009 2010 2011 2012 2013 2014

Cum

ulat

ive

Ret

urns

Dividends Plus Change in NAV Per Share

Publicly-Traded BDC Median PSEC

Note: Dividends plus change in net asset value compounded on a calendar year basis. Investors purchase and sell shares of PSEC common stock at prevailing market prices, which may be higher or lower than NAV. Information related to past performance, while potentially helpful as an evaluative tool, is not necessarily indicative of future results. PSEC and BDC median net asset values may have declined for periods since 12/31/14. Source: PSEC analysis of Capital IQ data on 24 constituents of WF BDC Index as of 5/29/2015 that have been active from 2009 trough 2014.

#InsideAlts

PSEC HAS OUTPERFORMED PUBLICLY-TRADED BDC MEDIAN OPERATING RETURNS IN EACH OF THE PAST 5 YEARS

10.6%

7.4%

11.2% 11.0%

7.9% 9.6%

12.9%

16.1%

12.6% 11.4%

8.9%

12.4%

2010 2011 2012 2013 2014 5 Year Average

Dividends Plus Change in NAV Per Share

Publicly-Traded BDC Median PSEC

5 Year Average

Note: Dividends plus change in net asset value per share compounded on a calendar year basis. Investors purchase and sell shares of PSEC common stock at prevailing market prices, which may be higher or lower than NAV. Information related to past performance, while potentially helpful as an evaluative tool, is not necessarily indicative of future results. PSEC and BDC median net asset values may have declined for periods since 12/31/14. PSEC and BDC median net asset values may have declined for periods since 12/31/14. Source: PSEC analysis of Capital IQ data on constituents of WF BDC Index as of 5/29/2015 for which there is data for each period (24 in 2010, 27 in 2011, 33 in 2012, 38 in 2013, and 40 in 2014).

PSEC is one of only 4 BDCs to have outperformed the publicly-traded BDC median in each of the past 5 years (83rd percentile)

#InsideAlts

HISTORICAL RETURNS OF PSEC SHARES AT CERTAIN DISCOUNTS TO NAV

Note: Internal rate of return defined as the annualized effective discount rate at which the present value of all future cash flows is equal to the initial investment. Information related to past performance, while potentially helpful as an evaluative tool, is not necessarily indicative of future results. As share price fluctuate in relation to net asset value, investments at other dates would have resulted in lower or negative internal rates of return. Source: PSEC analysis of Capital IQ data trough 5/29/2015.

57% 60%

94% 110%

Internal Rate of Return Including Dividends After One Year

Discount to NAV 20% 25% 30% 35%

Last 3me PSEC stock traded at approx. this discount to NAV 10/4/2011 8/10/2011 3/17/2009 3/11/2009

Share price on this date $8.25 $7.71 $7.61 $7.13

Share price aIer one year $11.62 $10.94 $12.39 $12.52

#InsideAlts

SENIOR MANAGEMENT HAS MADE SIGNIFICANT INVESTMENTS IN PSEC

$43.6M

$14.8M $12.2M

$8.0M

$2.0M $4.9M

PSEC FSC ARCC FSIC AINV BDC Median

5 Largest Publicly-Traded BDCs by Book Equity

Form 4 Purchases (January 2010 to May 2015)

Source: PSEC analysis of Capital IQ data on 24 constituents of WF BDC Index as of 5/29/2015 that have been active during this period. PSEC senior management has not sold any of such investments.

PSEC

insidealts business development companies...bdc’s must distribute at least 90% of income and...

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