INTERNAL CONTROL RPT

REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders and Board of Trustees of FS Multi-
Alternative Income Fund
In planning and performing our audit of the financial
statements of FS Multi-Alternative Income Fund (the Fund) as
of and for the year ended October 31, 2020, in accordance
with the standards of the Public Company Accounting
Oversight Board (United States), we considered the Fund's
internal control over financial reporting, including controls
over safeguarding securities, as a basis for designing our
auditing procedures for the purpose of expressing our opinion
on the financial statements and to comply with the
requirements of Form N-CEN, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's
internal control over financial reporting. Accordingly, we
express no such opinion.
The management of the Fund is responsible for establishing
and maintaining effective internal control over financial
reporting. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected
benefits and related costs of controls. 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 U.S. 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 U.S. 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 a 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.
A deficiency in internal control over financial reporting exists
when the design or operation of a control does not allow
management or employees, in the normal course of
performing their assigned functions, to prevent or detect
misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal
control over financial reporting, such that there is a reasonable
possibility that a material misstatement of the company's
annual or interim financial statements will not be prevented or
detected on a timely basis.
Our consideration of the Fund's internal control over financial
reporting was for the limited purpose described in the first
paragraph and would not necessarily disclose all deficiencies
in internal control that might be material weaknesses under
standards established by the Public Company Accounting
Oversight Board (United States). However, we noted no
deficiencies in the Fund's internal control over financial
reporting and its operation, including controls over
safeguarding securities that we consider to be a material
weakness as defined above as of October 31, 2020.
This report is intended solely for the information and use of
management and the Board of Trustees of FS Multi-
Alternative Income Fund and the Securities and Exchange
Commission and is not intended to be and should not be used
by anyone other than these specified parties.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
December 23, 2020

INST DEFINING RIGHTS

 

AMENDED AND RESTATED APPENDIX A TO SHAREHOLDER SERVICES PLAN DATED SEPTEMBER 11, 2018

FS MULTI-ALTERNATIVE INCOME FUND

Class of Shares	Service Fee
A	0.25%
I	None

Agreed to and accepted as of July 8, 2020.
FS MULTI-ALTERNATIVE INCOME FUND
By:	/s/ Michael C. Forman
	Name: Michael C. Forman
	Title: Chief Executive Officer

INST DEFINING RIGHTS

 

FS MULTI-ALTERNATIVE INCOME FUND

AMENDED AND RESTATED CLASS SHARES PLAN

Adopted: September 11, 2018
Amended: July 8, 2020

I. BACKGROUND

This Class Shares Plan (the “Plan”) for FS Multi-Alternative Income Fund (the “Fund”) has been prepared to provide the Board of Trustees of the Fund (the “Board”) with an overview of the proposed multiple class structure. The Fund is a non-diversified, closed-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”).

In an order dated September 12, 2016, the U.S. Securities and Exchange Commission (the “SEC”) granted exemptive relief (the “Exemptive Order”) to certain of the Fund’s affiliates (the “Applicants”), permitting certain registered investment companies to issue multiple classes of shares with sales loads and/or asset-based distribution and/or service fees and contingent deferred sales loads (“CDSCs”). As a continuously offered registered closed-end management investment company, the investment adviser to which is under common control with the investment adviser to the Applicants, and which provides periodic liquidity with respect to its shares pursuant to Rule 13e-4 under the Securities Exchange Act of 1934, the Fund is eligible to rely on the Exemptive Order to offer multiple classes of its common shares of beneficial interest, par value $0.001 per share in accordance with Rule 18f-3 of the 1940 Act. Although not directly subject to Rule 18f-3 under the 1940 Act, as a condition to reliance on the Exemptive Order, the Fund must comply with the provisions of Rule 18f-3 as if they applied to the Fund.

This document sets forth the separate arrangements, characteristics, and expense allocations for each class and all related conversion features and exchange privileges, thus providing the framework for the Fund’s multiple class structure. In addition, the Board’s responsibilities with respect to the multiple class shares program are set forth herein. Any material amendments to the Plan will be presented to the Board for its approval.

II. MULTIPLE CLASS SHARES STRUCTURE

The Fund’s multiple class shares program will allow an investor to select the most appropriate expense structure. Specifically, the investor will be able to choose a share class that the investor believes is most beneficial given the amount of the investment, type of account through which the investment is made, length of time the investor expects to hold his or her shares and other relevant circumstances. The investor’s choice of a class also determines how the investor’s sales representative will be compensated on that sale of shares.

The Exemptive Order also authorizes the Board to create additional classes of shares that are tailored to particular types of customers and distribution channels. This flexibility will allow the Fund to quickly adapt to future changes in the marketplace.

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A. CLASS SPECIFICATIONS

The rights of each class of shares of the Fund shall be as set forth in applicable resolutions adopted by the Board.

With respect to each class of shares created hereunder: (i) each share of the Fund will represent an equal pro rata interest in the Fund; (ii) each new class will have a different class name (or other designation) that identifies the class as separate from any other class; (iii) each class may bear the expenses of the Fund’s operations which are directly attributable to such class, to the extent consistent with Rule 18f-3 under the 1940 Act, guidance by the SEC, and, to the extent relevant, guidance issued by the Internal Revenue Service; and (iv) shareholders of each class will have exclusive voting rights regarding any matter submitted to shareholders that relates solely to such class and will have separate voting rights on any matter submitted to shareholders in which the interests of that class differ from the interests of any other class. No class of shares shall entitle the holder to conversion or exchange rights. The particular attributes of Class A and Class I shares, as described in the Fund’s prospectus (the “Prospectus”) filed as part of the registration statement on Form N-2 (Registration File No. 333-224312 and Registration File No. 811-23338) (the “Registration Statement”), are as follows:

Class A Shares

Shareholders of Class A shares will pay upfront selling commissions of up to 5.75% of the gross proceeds of Class A shares sold in the Fund’s public offering. Class A shares that are issued under the Fund’s distribution reinvestment plan are not subject to an upfront sales load. Class A shares are also subject to a monthly shareholder servicing fee at an annual rate of up to 0.25% of the average daily net assets of the Fund attributable to Class A shares. Class A shares will not be subject to a distribution fee or CDSC.

Class I Shares

Class I shares will not carry upfront selling commissions, distribution fees, shareholder servicing fees or CDSCs.

COMPLIANCE GUIDELINES

The broker-dealer or other financial intermediary selling the Fund’s shares is responsible for determining the suitability of their client’s investment in the Fund, including the determination as to which class is appropriate for the investor to purchase. The initial minimum permitted purchase is $2,500 for regular accounts and $1,000 for retirement plan accounts for Class A shares and additional purchases must be in increments of $100 for regular accounts and $50 for retirement plan accounts for Class A shares, except for purchases made pursuant to the Fund’s distribution reinvestment plan. The minimum initial investment for Class I shares is $1,000,000, while subsequent investments may be made in any amount. Any minimum investment requirement may be waived in the Fund’s sole discretion. Class I shares may only be available through certain financial intermediaries.

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III. ALLOCATION OF EXPENSES

Under the multiple class shares program, expenses related to the distribution of any particular class of common shares (and such other expenses as may be permitted by rule or order of the SEC and as the Board shall by resolution deem appropriate) shall be allocated to the shares of such class based on the methodology for the allocation of expenses reviewed and approved by the Board. Any subsequent changes to the allocation methodology must similarly be reviewed and approved by the Board. However, under Rule 18f-3, the Board’s approval of the Plan constitutes an approval of the included allocation of expenses.

The Board receives quarterly and annual statements concerning, as applicable, distribution expenditures under the Fund’s Rule 12b-1 plans. These statements, including the allocations upon which they are based, are presented to the Trustees for review.

IV. BOARD RESPONSIBILITIES

The responsibilities of the Board under the multiple class shares program and Rule 18f-3 are as follows:

A. BOARD APPROVALS

The Board must approve the initial Plan and all material amendments to the Plan. Specifically, these approvals require the vote of a majority of the trustees and a majority of the trustees who are not “interested persons” of the Fund, as such term is defined under the 1940 Act (the “Independent Trustees”). In order to approve the Plan or an amended Plan, the Board must find that the Plan, including the expense allocation, is in the best interest of each class individually and the Fund as a whole. Before any vote on the Plan, the Trustees are obligated to request and evaluate, and any agreement relating to a class arrangement shall require the parties thereto to furnish, such information as may be reasonably necessary to evaluate the Plan.

B. MONITORING FOR CONFLICTS OF INTEREST

On an ongoing basis, and pursuant to their fiduciary responsibility under the 1940 Act, the trustees monitor the Fund for the existence of any material conflicts between the interests of the shareholders of different classes. If such a conflict arises, the Board, including a majority of the Independent Trustees, will take such action as is reasonably necessary to eliminate the conflict. The Fund’s investment adviser, FS Multi-Alternative Advisor, LLC (“FS Multi-Alternative Advisor”), has agreed that it will be responsible for reporting any potential or existing conflicts to the Trustees. If a conflict among classes arises, FS Multi-Alternative Advisor will remedy such conflict at its own expense.

C. APPROVAL OF RULE 12b-1 PLANS

The implementation of the multiple class shares program has not altered the requirement under Rule 12b-1 that the Board annually approve the Fund’s 12b-1 Plan and any related agreements.

D. DIVIDEND RATE APPROVAL

The Board will be responsible for approving the Fund’s dividend distribution policy.

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V. CONCLUSION

The foregoing information provides an overview of FS Multi-Alternative Income Fund’s multiple class structure. In addition, this document provides the Board with an outline of their duties in monitoring the class shares program. Therefore, it is suggested that each trustee retain this document for use in connection with their future responsibilities with regard to the multiple class shares program.

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