FS Investment Corp. IV Extends Offering, Changes Compensation Structure

FS Investment Corporation IV, a publicly registered, non-traded business development company sponsored by FS Investment (formerly known as Franklin Square Capital Partners), has filed an amendment to its currently effective registration statement order to extend the offering of shares of its class T common stock. In addition, on December 15, 2016, the Company filed Post-Effective Amendment No. 6 (“Post-Effective Amendment No. 6”) to its Registration Statement, which revises certain terms of the Offering (collectively, the “Amendments”).

Previously, the company announced that it would close the offering if it did not receive a satisfactory exemptive order from the Securities and Exchange Commission permitting it to offer additional classes of common stock by January 6, 2017 (one year from the date upon which it satisfied its minimum offering requirement). Now, whether or not it receives the requested exemptive relief, the company has determined to amend it registration statement in order to continue the offering. Should the company receive the relief, it has indicated that it will amend its registration statement to offer additional classes of common stock.

In connection with the continuation of the offering, the company has also made changes to the compensation of the dealer manager for the Offering and selected broker-dealers, as disclosed in the recently filed the Post-Effective Amendment No. 6.

Except as otherwise described in the amended prospectus, the dealer manager will receive upfront selling commissions of up to 3 percent and dealer manager fees of up to 1.25 percent of the gross proceeds received on class T shares sold in the offering. The company expects that all of the upfront selling commissions and all or a portion of the dealer manager fees will be reallowed to selected broker-dealers and financial representatives.

For class T shares sold in the Offering after the date of the amended prospectus, the company expects that selected broker-dealers and financial representatives will receive, through the reallowance of upfront selling commissions, dealer manager fees and distribution fees up to approximately 7.25 percent of the gross proceeds received on such shares, as compared to 8.95 percent prior to the effectiveness of the amendments.

FSIC IV’s class T shares will be subject to an annual distribution fee of 1 percent of the estimated value of such shares, as compared to 1.4 percent prior to the effectiveness of the amendments, as determined in accordance with applicable FINRA rules.

Distribution fees will be paid pursuant to a distribution plan adopted by the company. Except for class T shares purchased through investment advisors whose contracts for investment advisory and related services include a fixed or “wrap” fee or other asset-based fee arrangement, all of the distribution fee is expected to be reallowed to selected broker-dealers and financial representatives. The distribution fee will compensate the company’s affiliated dealer manager and its affiliates, selected broker-dealers and financial representatives for services rendered and expenses incurred in connection with the ongoing marketing, sale and distribution of the company’s shares.

FSIC IV will stop paying the distribution fee with respect to any outstanding class T share when the total underwriting compensation from the upfront selling commissions, dealer manager fees and distribution fee attributable to such share equals 7.25 percent of gross offering proceeds. This amount is referred to as the sales charge cap. The sales charge cap applicable to certain shares, including shares sold prior to the date of the Amended Prospectus, will be reduced by the amount of any upfront sales load that is waived for such shares or to otherwise account for any lower upfront sales load paid by an investor with respect to such shares.

Provided the company offers a class of common stock with no sales loads or asset-based service or distribution fees in the future, upon a class T share reaching the applicable sales charge cap, such share will be converted into a share of such no-load share class and will no longer be subject to an ongoing distribution fee. If FSIC IV does not receive a satisfactory exemptive order to offer additional share classes and therefore does not offer a no-load share class, the distribution fee for all class T shares will terminate upon the earliest of: any class T share purchased after the date of the amended prospectus reaching the applicable sales charge cap, the company’s dealer manager advising the company that the aggregate underwriting compensation payable from all sources (determined in accordance with applicable FINRA rules) would be in excess of 10 percent of the gross proceeds of the offering and a liquidity event.

Under terms of the amended prospectus, Class T shares tendered pursuant to the company’s share repurchase program are no longer subject to a contingent deferred sales charge. Class T shares tendered pursuant to the company’s current quarterly repurchase offer that expires on December 29, 2016 will continue to be subject to a contingent deferred sales charge.

FS Investments was founded in 2007 and is headquartered in Philadelphia with offices in Orlando and Washington, DC. The firm currently manages six funds with more than $18 billion in assets under management as of September 30, 2016 and co-manages an operating company. Its affiliated broker-dealer, FS Investment Solutions distributes its offerings.

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