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FS Investment: Results Of Annual Meeting

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On June 14, FS Investment (FSIC) reported the initial results of its annual shareholder meeting and the two issues put to a vote. There were a couple of minor surprises worth noting:


Like most BDCs, the Investment Advisor has set up the corporate governance of the BDC to ensure its continued control and management. That includes a staggered Board, as we discussed when reviewing the Preliminary Proxy back on April 10th. Four of twelve Board members were up for election and all were approved.

The only surprise there is that three of the Board members had a fifth of total shares outstanding vote against them. We understand that shares not voted counted against the director involved, but one director did get almost all “ayes” (100mn vs 3 mn), while the others “only”  received 82 million or less.

We don’t understand what this means, if anything.


The filing indicated that the proposal to allow the BDC to sell shares below NAV was not completed and the meeting was extended till July to solicit more votes. We don’t know if this is a matter of not enough shareholders answering the phone or reading and responding to their Proxy materials (it’s hard to motivate investors when it feels like outcomes have been pre-determined), or whether the vote is going against the Investment Advisor’s wishes. No details are given.

What we do know is that FSIC shareholders will be a little poorer as all the cost of soliciting votes and holding meetings is expensed to the BDC.

The BDC Reporter guesses that FSIC will ultimately get the Yes vote requested. We also surmise the Investment Advisor – which has been more forthright than most about the frothy market conditions in the upper middle market which is its bailiwick and which has been shrinking its balance sheet accordingly – will not be drawing on the blank check being requested.

The BDC Reporter – always a penny pincher – continues to be frustrated by the waste involved in this public company process of communicating with shareholders which can be blamed on all the parties involved: the Investment Advisor for seeking an option which they are not prepared to invest in themselves and which is unlikely ever to b used; the shareholders for ignoring their Proxy responsibilities (if that’s what’s happening here) and the regulators for not using the advances in modern communications to streamline company to shareholder communications.


As the BDC Reporter is – like Sisyphus – doomed to read every BDC filing and press release daily, we will update readers on the final outcome scheduled for July 12th.

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