Oaktree Strategic Income Corp - FORM 10-Q

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EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 - Oaktree Strategic Income Corp	fsfr-ex321_201533110xq.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 - Oaktree Strategic Income Corp	fsfr-ex322_201533110xq.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A) - Oaktree Strategic Income Corp	fsfr-ex312_201533110xq.htm
EX-10.1 - AMENDMENT NO. 3 TO THE AMENDED AND RESTATED CREDIT AGREEMENT - Oaktree Strategic Income Corp	natixis-fifthstreetxarcaam.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A) - Oaktree Strategic Income Corp	fsfr-ex311_201533110xq.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)



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

For the quarterly period ended March 31, 2015



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

COMMISSION FILE NUMBER: 1-35999

Fifth Street Senior Floating Rate Corp.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



DELAWARE (State or jurisdiction of incorporation or organization)		61-1713295 (I.R.S. Employer Identification No.)

777 West Putnam Avenue, 3rd Floor Greenwich, CT (Address of principal executive office)		06830 (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:

(203) 681-3600

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 periods as the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ 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 such shorter period that the registrant was required to submit and post such files). YES ¨ NO ¨

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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) YES ¨ NO þ

The registrant had 29,466,768 shares of common stock outstanding as of May 8, 2015.

TABLE OF CONTENTS




		PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):
		Consolidated Statements of Assets and Liabilities as of March 31, 2015 and September 30, 2014	1
		Consolidated Statements of Operations for the three and six months ended March 31, 2015 and March 31, 2014	2
		Consolidated Statements of Changes in Net Assets for the six months ended March 31, 2015 and March 31, 2014	3
		Consolidated Statements of Cash Flows for the six months ended March 31, 2015 and March 31, 2014	4
		Consolidated Schedule of Investments as of March 31, 2015	5
		Consolidated Schedule of Investments as of September 30, 2014	11
		Notes to Consolidated Financial Statements	15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		47
Item 4.	Controls and Procedures		49
		PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		49
Item 1A.	Risk Factors		49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 6.	Exhibits		49
Signatures

PART I — FINANCIAL INFORMATION



Item 1.	Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Assets and Liabilities

(unaudited)



	March 31, 2015			September 30, 2014
ASSETS
Investments at fair value:
Non-control/Non-affiliate investments (cost March 31, 2015: $587,106,486; cost September 30, 2014: $299,997,247)	$	583,559,421		$	300,001,397
Total investments at fair value (cost March 31, 2015: $587,106,486; cost September 30, 2014: $299,997,247)	583,559,421			300,001,397
Cash and cash equivalents	72,308,303			107,429,760
Restricted cash	5,680,208			2,127,405
Interest and fees receivable	1,350,840			1,120,010
Due from portfolio companies	463,848			200,840
Receivables from unsettled transactions	5,877,625			—
Deferred financing costs	4,556,252			1,625,932
Other assets	144,268			—
Total assets	$	673,940,765		$	412,505,344
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	1,980,680		$	1,213,683
Base management fee payable	1,523,159			475,437
Part I incentive fee payable	1,161,808			926,180
Part II incentive fee payable	—			54,826
Due to FSC CT	213,019			239,617
Interest payable	813,942			205,646
Distribution payable	8,840,030			8,840,030
Payables from unsettled transactions	12,284,000			27,863,000
Credit facilities payable	280,097,646			—
Total liabilities	306,914,284			39,818,419
Commitments and contingencies (Note 3)
Net assets:
Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding at March 31, 2015 and September 30, 2014	294,668			294,668
Additional paid-in-capital	374,101,816			374,101,816
Net unrealized appreciation (depreciation) on investments	(3,547,065		)	4,150
Net realized loss on investments	(1,556,035		)	—
Accumulated overdistributed net investment income	(2,266,903		)	(1,713,709		)
Total net assets (equivalent to $12.46 and $12.65 per common share at March 31, 2015 and September 30, 2014, respectively) (Note 12)	367,026,481			372,686,925
Total liabilities and net assets	$	673,940,765		$	412,505,344

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Operations

(unaudited)



	Three months ended March 31, 2015			Three months ended March 31, 2014			Six months ended March 31, 2015			Six months ended March 31, 2014
Interest income:
Non-control/Non-affiliate investments	$	9,621,423		$	2,567,868		$	17,505,207		$	3,870,947
Interest on cash and cash equivalents	5,250			197			9,185			2,217
Total interest income	9,626,673			2,568,065			17,514,392			3,873,164
Fee income:
Non-control/Non-affiliate investments	2,265,158			837,855			10,237,804			1,839,099
Total fee income	2,265,158			837,855			10,237,804			1,839,099
Total investment income	11,891,831			3,405,920			27,752,196			5,712,263
Expenses:
Base management fee	1,523,167			407,087			2,680,078			641,636
Part I incentive fee	1,161,808			280,597			3,754,403			280,597
Part II incentive fee	—			—			(54,826		)	—
Professional fees	188,709			204,167			498,495			325,699
Board of Directors fees	86,050			43,250			184,300			97,500
Interest expense	1,705,137			434,960			2,591,292			575,993
Administrator expense	177,562			111,364			423,697			218,624
General and administrative expenses	347,740			133,781			547,891			278,029
Total expenses	5,190,173			1,615,206			10,625,330			2,418,078
Net investment income	6,701,658			1,790,714			17,126,866			3,294,185
Unrealized appreciation (depreciation) on investments:
Non-control/Non-affiliate investments	837,791			(318,940		)	(3,551,215		)	(613,379		)
Net unrealized appreciation (depreciation) on investments	837,791			(318,940		)	(3,551,215		)	(613,379		)
Realized gain (loss) on investments:
Non-control/Non-affiliate investments	(996,243		)	232,188			(1,556,035		)	254,813
Net realized gain (loss) on investments	(996,243		)	232,188			(1,556,035		)	254,813
Net increase in net assets resulting from operations	$	6,543,206		$	1,703,962		$	12,019,616		$	2,935,619
Net investment income per common share — basic and diluted	$	0.23		$	0.27		$	0.58		$	0.49
Earnings per common share — basic and diluted	$	0.22		$	0.26		$	0.41		$	0.44
Weighted average common shares outstanding — basic and diluted	29,466,768			6,666,768			29,466,768			6,666,768
Distributions per common share	$	0.30		$	0.23		$	0.60		$	0.44

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Changes in Net Assets

(unaudited)



	Six months ended March 31, 2015			Six months ended March 31, 2014
Operations:
Net investment income	$	17,126,866		$	3,294,185
Net unrealized depreciation on investments	(3,551,215		)	(613,379		)
Net realized gain (loss) on investments	(1,556,035		)	254,813
Net increase in net assets resulting from operations	12,019,616			2,935,619
Stockholder transactions:
Distributions to stockholders	(17,680,060		)	(2,933,378		)
Net decrease in net assets from stockholder transactions	(17,680,060		)	(2,933,378		)
Capital share transactions:
Issuance of common stock under dividend reinvestment plan	550,472			8,288
Repurchases of common stock under dividend reinvestment plan	(550,472		)	(8,288		)
Net decrease in net assets from capital share transactions	—			—
Total increase (decrease) in net assets	(5,660,444		)	2,241
Net assets at beginning of period	372,686,925			100,842,878
Net assets at end of period	$	367,026,481		$	100,845,119
Net asset value per common share	$	12.46		$	15.13
Common shares outstanding at end of period	29,466,768			6,666,768

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Cash Flows

(unaudited)



	Six months ended March 31, 2015			Six months ended March 31, 2014
Cash flows used in operating activities:
Net increase in net assets resulting from operations	$	12,019,616		$	2,935,619
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Net unrealized depreciation on investments	3,551,215			613,379
Net realized (gains) losses on investments	1,556,035			(254,813		)
Recognition of fee income	(10,237,804		)	—
Accretion of original issue discount on investments	(93,819		)	(13,006		)
Amortization of deferred financing costs	288,780			95,643
Changes in operating assets and liabilities:
Fee income received	10,359,966			—
Increase in restricted cash	(3,552,803		)	(1,642,927		)
Increase in interest and fees receivable	(230,830		)	(494,798		)
Increase in due from portfolio companies	(263,008		)	(642,967		)
Increase in receivables from unsettled transactions	(5,877,625		)	(4,023,028		)
Increase in other assets	(144,268		)	(29,957		)
Increase in accounts payable, accrued expenses and other liabilities	766,997			607,032
Increase in base management fee payable	1,047,722			345,708
Increase in incentive fee payable	180,802			280,597
Increase (decrease) in due to FSC CT	(26,598		)	218,651
Increase in interest payable	608,296			494,717
Increase (decrease) in payables from unsettled transactions	(15,579,000		)	6,655,042
Purchases of investments and net revolver activity	(559,733,049		)	(186,975,865		)
Principal payments applied to investments (scheduled payments)	5,104,316			3,014,714
Principal payments applied to investments (payoffs)	19,035,025			5,524,270
Proceeds from the sale of investments	246,900,091			46,992,313
Net cash used in operating activities	(294,319,943		)	(126,299,676		)
Cash flows from financing activities:
Distributions paid in cash	(17,246,289		)	(1,391,734		)
Borrowings under credit facilities	378,450,000			80,873,200
Repayments of borrowings under credit facilities	(98,352,354		)	—
Repurchases of common stock under dividend reinvestment plan	(433,771		)	(8,288		)
Deferred financing costs paid	(3,219,100		)	(1,836,347		)
Net cash provided by financing activities	259,198,486			77,636,831
Net decrease in cash and cash equivalents	(35,121,457		)	(48,662,845		)
Cash and cash equivalents, beginning of period	107,429,760			52,346,831
Cash and cash equivalents, end of period	$	72,308,303		$	3,683,986
Supplemental information:
Cash paid for interest	$	1,885,465		$	—
Non-cash financing activities:
Issuance of shares of common stock under dividend reinvestment plan	$	550,472		$	8,288

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

March 31, 2015

(unaudited)



Portfolio Company/Type of Investment (1)(2)	Industry	Principal (5)		Cost		Fair Value
Control Investments (3)				$	—	$	—
Affiliate Investments (4)				$	—	$	—
Non-Control/Non-Affiliate Investments (6)
Triple Point Group Holdings, Inc.	Application software
First Lien Revolver, LIBOR+4.25% (1% floor) cash due 7/10/2018 (8)				$	—	$	—
				—		—
Blackhawk Specialty Tools, LLC	Oil & gas equipment & services
First Lien Term Loan, LIBOR+5.25% (1.25% floor) cash due 8/1/2019 (8)(10)		$	4,624,995	4,624,995		4,497,808
				4,624,995		4,497,808
New Trident Holdcorp, Inc.	Healthcare services
First Lien Term Loan B, LIBOR+5.25% (1.25% floor) cash due 7/31/2019 (8)(10)		8,083,823		8,013,208		7,912,042
Second Lien Term Loan, LIBOR+9% (1.25% floor) cash due 7/31/2020 (8)		1,000,000		1,000,000		988,330
				9,013,208		8,900,372
Landslide Holdings, Inc.	Application software
First Lien Revolver, LIBOR+4.25% (1% floor) cash due 8/9/2018 (8)				—		—
				—		—
Smile Brands Group Inc.	Healthcare services
First Lien Term Loan B, LIBOR+6.25% (1.25% floor) cash due 8/16/2019 (8)(10)		4,925,000		4,925,000		4,481,750
				4,925,000		4,481,750
NXT Capital, LLC	Diversified capital markets
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 9/4/2018 (8)(10)		5,419,975		5,419,975		5,447,075
				5,419,975		5,447,075
Vitera Healthcare Solutions, LLC	Healthcare technology
First Lien Term Loan, LIBOR+5% (1% floor) cash due 11/4/2020 (8)(10)		4,937,500		4,937,500		4,956,016
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 11/4/2021 (8)		3,000,000		3,000,000		2,947,500
				7,937,500		7,903,516
The Active Network, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 11/15/2021 (8)		2,400,000		2,400,000		2,316,000
				2,400,000		2,316,000
Accruent, LLC	Internet software & services
First Lien Term Loan, LIBOR+4.5% (1.25% floor) cash due 11/25/2019 (8)(9)(10)		34,825,000		34,825,000		34,296,083
				34,825,000		34,296,083
Travel Leaders Group, LLC	Hotels, resorts & cruise lines
First Lien Term Loan B, LIBOR+6% (1% floor) cash due 12/5/2018 (8)(10)		9,375,000		9,375,000		9,398,438
				9,375,000		9,398,438
Pacific Architects and Engineers Incorporated	Diversified support services
First Lien Term Loan B, LIBOR+6.25% (1% floor) cash due 7/17/2018 (8)(10)		3,456,250		3,456,250		3,404,406
				3,456,250		3,404,406
Power Products, LLC	Electrical components & equipment
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 12/13/2019 (8)(9)(10)		2,427,142		2,427,142		2,412,142
				2,427,142		2,412,142
Survey Sampling International, LLC	Research & consulting services
First Lien Term Loan, LIBOR+5.0% (1% floor) cash due 12/16/2020 (8)(10)		6,800,000		6,800,000		6,774,500
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 12/16/2021 (8)		1,000,000		1,000,000		982,500
				7,800,000		7,757,000

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

March 31, 2015

(unaudited)



Portfolio Company/Type of Investment (1)(2)	Industry	Principal (5)		Cost		Fair Value
Answers Corporation	Internet software & services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 10/1/2021 (8)(10)		$	11,970,000	$	11,914,337	$	11,481,205
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 10/3/2022 (8)		8,000,000		7,812,632		7,540,000
				19,726,969		19,021,205
Maxor National Pharmacy Services, LLC	Pharmaceuticals
First Lien Term Loan, LIBOR+5.25% (1.25% floor) cash due 1/31/2020 (8)(10)		9,875,000		9,875,000		9,856,032
				9,875,000		9,856,032
NextCare, Inc.	Healthcare services
Senior Term Loan, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)(10)		5,350,075		5,350,075		5,357,594
Acquisition Line, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)(10)				1,091,964		1,091,964
Delayed Draw Term Loan, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)				—		—
Senior Revolver, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)(10)				—		—
				6,442,039		6,449,558
J.A. Cosmetics Holdings, Inc.	Personal products
First Lien Term Loan, LIBOR+5% (1.25% floor) cash due 1/31/2019 (8)(10)		4,875,000		4,875,000		4,881,094
				4,875,000		4,881,094
B&H Education, Inc.	Education services
First Lien Term Loan, LIBOR+5.25% (1.5% floor) cash due 5/3/2015 (8)(10)		5,686,571		5,682,494		5,685,763
				5,682,494		5,685,763
Deluxe Entertainment Services Group Inc.	Movies & entertainment
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 2/28/2020 (8)(10)		3,050,255		2,879,167		2,966,373
				2,879,167		2,966,373
Aptean, Inc.	Application software
Second Lien Term Loan, LIBOR+7.5% (1% floor) cash due 2/24/2021 (8)		1,250,000		1,250,000		1,211,463
				1,250,000		1,211,463
CM Delaware LLC	Advertising
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 3/18/2021 (7)(8)(9)(10)		2,178,000		2,178,000		2,171,194
				2,178,000		2,171,194
Stratus Technologies, Inc.	Computer hardware
First Lien Term Loan, LIBOR+5% (1% floor) cash due 4/28/2021 (8)(10)		4,256,944		4,256,944		4,249,835
				4,256,944		4,249,835
TravelCLICK, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+7.75% (1% floor) cash due 11/8/2021 (8)		4,000,000		4,000,000		3,930,000
				4,000,000		3,930,000
Language Line, LLC	Integrated telecommunication services
Second Lien Term Loan, LIBOR+8.75% (1.75% floor) cash due 12/20/2016 (8)		6,900,000		6,878,079		6,871,262
				6,878,079		6,871,262
IPC Systems, Inc.	Alternative carriers
First Lien Term Loan, LIBOR+5% (1% floor) cash due 11/8/2020 (8)(10)		11,200,000		11,200,000		11,291,000
				11,200,000		11,291,000
GTCR Valor Companies, Inc.	Advertising
First Lien Term Loan, LIBOR+5% (1% floor) cash due 5/30/2021 (8)(10)		13,524,015		13,524,015		13,490,272
				13,524,015		13,490,272
ConvergeOne Holdings Corp.	Integrated telecommunication services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 6/17/2020 (8)(10)		3,970,000		3,970,000		3,967,519
				3,970,000		3,967,519
Verdesian Life Sciences, LLC	Fertilizers & agricultural chemicals
First Lien Term Loan, LIBOR+5% (1% floor) cash due 7/1/2020 (8)(10)		3,854,973		3,854,973		3,874,247
				3,854,973		3,874,247

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

March 31, 2015

(unaudited)



Portfolio Company/Type of Investment (1)(2)	Industry	Principal (5)		Cost			Fair Value
PR Wireless, Inc.	Wireless telecommunication services
First Lien Term Loan, LIBOR+9% (1% floor) cash due 6/27/2020 (7)(8)		$	2,977,500	$	2,977,500		$	2,798,850
35.5263 Common Stock Warrants (7)				—			167,990
				2,977,500			2,966,840
TV Borrower US, LLC	Integrated telecommunication services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 1/8/2021 (7)(8)(10)		6,965,000		6,965,000			6,837,889
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 7/8/2021 (7)(8)		3,000,000		3,000,000			2,910,000
				9,965,000			9,747,889
Symphony Teleca Services, Inc.	Application software
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/7/2019 (8)(10)		2,468,750		2,468,750			2,456,406
				2,468,750			2,456,406
American Dental Partners, Inc.	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/29/2021 (8)(10)		5,970,000		5,970,000			5,947,613
				5,970,000			5,947,613
BeyondTrust Software, Inc.	Application software
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/25/2019 (8)(10)		33,707,233		33,689,205			33,386,005
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/25/2019 (8)(11)				(1,502		)	—
500,000 Class A membership interest in BeyondTrust Holdings LLC				500,000			520,376
				34,187,703			33,906,381
Reliant Hospital Partners, LLC	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 10/1/2019 (8)(10)		7,453,125		7,453,125			7,378,594
				7,453,125			7,378,594
Hill International, Inc.	Construction and engineering
First Lien Term Loan, LIBOR+6.75% (1% floor) cash due 9/26/2020 (8)(10)		6,069,500		6,069,500			6,004,527
				6,069,500			6,004,527
Teaching Strategies, LLC	Education services
First Lien Term Loan, LIBOR+5.5% (0.5% floor) cash due 10/1/2019 (8)(10)		19,719,813		19,698,264			19,689,219
First Lien Delayed Draw Term Loan, LIBOR+5.5% (0.5% floor) cash due 10/1/2019 (8)		7,110,000		7,107,366			7,059,709
First Lien Revolver, LIBOR+5.5% (0.5% floor) cash due 10/1/2019 (8)		1,200,000		1,199,122			1,200,000
				28,004,752			27,948,928
Dynatect Group Holdings, Inc.	Industrial machinery
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 9/30/2020 (8)(10)		3,990,000		3,990,000			3,985,652
First Lien Delayed Draw Term Loan, LIBOR+4.5% (1% floor) cash due 9/30/2020 (8)(10)				—			—
				3,990,000			3,985,652
Idera, Inc.	Internet software & services
First Lien Term Loan, LIBOR+5.5% (0.5% floor) cash due 10/5/2020 (8)(10)		20,200,000		20,177,660			20,024,464
First Lien Revolver, LIBOR+5.5% (0.5% floor) cash due 10/5/2019 (8)(11)				(894		)	—
				20,176,766			20,024,464
Central Security Group, Inc.	Specialized consumer services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 11/6/2020 (8)(10)		8,578,500		8,578,500			8,589,223
				8,578,500			8,589,223
Sutherland Global Services, Inc.	Diversified support services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 4/23/2021 (8)(10)		6,766,000		6,766,000			6,811,095
				6,766,000			6,811,095

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

March 31, 2015

(unaudited)



Portfolio Company/Type of Investment (1)(2)	Industry	Principal (5)		Cost			Fair Value
Kellermeyer Bergensons Services, LLC	Diversified support services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 10/29/2021 (8)(10)		$	5,386,500	$	5,386,500		$	5,373,034
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 4/29/2022 (8)		410,000		410,000			410,000
				5,796,500			5,783,034
GOBP Holdings Inc.	Food retail
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 10/21/2021 (8)(10)		4,089,750		4,089,750			4,112,775
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 10/21/2022 (8)		3,000,000		3,000,000			2,970,000
				7,089,750			7,082,775
NAVEX Global, Inc.	Internet software & services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 11/19/2021 (8)(10)		9,284,423		9,284,423			9,261,212
Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 11/18/2022 (8)		1,500,000		1,500,000			1,485,000
				10,784,423			10,746,212
Executive Consulting Group, LLC	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2019 (8)(10)		7,000,000		7,000,000			6,996,259
Delayed Draw Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2017 (8)(10)				—			—
				7,000,000			6,996,259
TIBCO Software, Inc.	Internet software & services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/4/2020 (8)(10)		12,900,000		12,659,917			12,924,188
First Lien Revolver, LIBOR+4% cash due 11/25/2020 (8)				—			—
				12,659,917			12,924,188
Metamorph US 3, LLC	Internet software & services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(10)		26,036,250		26,005,583			25,650,004
First Lien Revolver, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(11)				(3,439		)	—
				26,002,144			25,650,004
Compuware Holdings, LLC	Internet software & services
First Lien Term Loan B1, LIBOR+5.25% (1% floor) cash due 12/11/2019 (8)(10)		2,468,750		2,468,750			2,416,289
First Lien Term Loan B2, LIBOR+5.25% (1% floor) cash due 12/10/2021 (8)(10)		6,483,750		6,359,940			6,302,756
				8,828,690			8,719,045
AMAG Pharmaceuticals, Inc.	Diversified financial services
First Lien Term Loan, LIBOR+6.25% (1% floor) cash due 11/12/2020 (8)(10)		14,625,000		14,625,000			14,789,531
				14,625,000			14,789,531
Novetta Solutions, LLC	Diversified support services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 10/2/2020 (8)(10)		5,771,000		5,771,000			5,771,000
				5,771,000			5,771,000
AF Borrower, LLC	IT consulting & other services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 12/15/2021 (8)(10)		8,300,000		8,300,000			8,327,639
				8,300,000			8,327,639
Ameritox Ltd.	Healthcare services
First Lien Term Loan, LIBOR+7.5% (1% floor) cash due 6/23/2019 (8)(10)		27,825,000		27,814,333			27,291,427
First Lien Revolver, LIBOR+7.5% (1% floor) cash due 6/23/2019 (8)		666,667		665,905			666,667
				28,480,238			27,958,094
TrialCard Incorporated	Healthcare services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 12/31/2019 (8)(10)		27,825,000		27,804,026			27,644,738
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 12/31/2019 (8)(11)				(1,498		)	—
				27,802,528			27,644,738
Motion Recruitment Partners LLC	Diversified support services
First Lien Term Loan, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(10)		43,700,000		43,673,101			43,700,000
First Lien Revolver, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(11)				(2,401		)	—
				43,670,700			43,700,000

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

March 31, 2015

(unaudited)



Portfolio Company/Type of Investment (1)(2)	Industry	Principal (5)		Cost		Fair Value
PowerPlan, Inc.	Internet software & services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 2/23/2022 (8)(10)		$	13,900,000	$	13,900,000	$	13,900,000
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 2/23/2021 (8)				—		—
				13,900,000		13,900,000
Riverbed Technology, Inc.	Application software
First Lien Term Loan, LIBOR+5% (1% floor) cash due 2/25/2022 (8)		7,500,000		7,500,000		7,582,500
				7,500,000		7,582,500
GK Holdings, Inc.	IT consulting & other services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 1/30/2021 (8)(10)		3,491,250		3,491,250		3,499,978
				3,491,250		3,499,978
Digital River, Inc.	Internet software & services
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 2/12/2021 (8)(10)		10,000,000		10,000,000		9,925,000
				10,000,000		9,925,000
Curo Health Services Holdings, Inc.	Healthcare services
First Lien Term Loan B, LIBOR+5.5% (1% floor) cash due 2/5/2022 (8)(10)		7,000,000		7,000,000		7,037,905
				7,000,000		7,037,905
Research Now Group, Inc.	Data processing & outsourced services
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 3/18/2021 (8)(10)		5,000,000		5,000,000		5,012,500
Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 3/18/2022 (8)		4,000,000		4,000,000		4,010,000
				9,000,000		9,022,500
Total Non-Control/Non-Affiliate Investments (159.0% of net assets)				$	587,106,486	$	583,559,421
Total Portfolio Investments (159.0% of net assets)				$	587,106,486	$	583,559,421

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

March 31, 2015

(unaudited)


(1)	All debt investments are income producing unless otherwise noted. Equity is non-income producing unless otherwise noted.


(2)	See Note 3 to the Consolidated Financial Statements for portfolio composition by geographic region.


(3)	Control Investments are defined by the Investment Company Act of 1940 ("1940 Act") as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.


(4)	Affiliate Investments are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.


(5)	Principal amount is net of repayments, if any.


(6)	Non-Control/Non-Affiliate Investments are defined by the 1940 Act as investments that are neither Control Investments nor Affiliate Investments.


(7)	Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act.

(8)

The principal balance outstanding for all floating rate loans is indexed to LIBOR and an alternate base rate (e.g., prime rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each of these loans, the Company has provided the applicable margin over LIBOR based on each respective credit agreement.

(9)

Interest rates have been adjusted on certain term loans from the stated rates in the original credit agreement as shown in the Consolidated Schedule of Investments. These rate adjustments are temporary in nature due to tier pricing arrangements or financial or payment covenant violations in the original credit agreements, or permanent in nature per loan amendment or waiver documents. The table below summarizes these rate adjustments by portfolio company:



Portfolio Company	Effective date	Cash interest	Reason
Power Products, LLC	February 9, 2015	+ 0.25% on First Lien Term Loan	Per loan amendment
Accruent, LLC	November 14, 2014	+ 1.50% on First Lien Term Loan	Per loan amendment
CM Delaware LLC	May 5, 2014	+ 0.75% on First Lien Term Loan	Per loan amendment


(10)	Investment pledged as collateral under one or more of the Company's credit facilities. A single investment may be divided into parts that are individually pledged as collateral to separate credit facilities.


(11)	Investment has undrawn commitments and a negative cost basis as a result of unamortized fees. Unamortized fees are classified as unearned income which reduces cost basis.

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2014



Portfolio Company/Type of Investment (1)(2)(8)	Industry	Principal (5)		Cost		Fair Value
Control Investments (3)				$	—	$	—
Affiliate Investments (4)				$	—	$	—
Non-Control/Non-Affiliate Investments (6)
Triple Point Group Holdings, Inc.	Application software
First Lien Term Loan, LIBOR+4.25% (1% floor) cash due 7/10/2020 (8)(10)		$	2,181,723	$	2,079,045	$	2,001,494
First Lien Revolver, LIBOR+4.25% (1% floor) cash due 7/10/2018 (8)				—		—
				2,079,045		2,001,494
BioScrip, Inc.	Healthcare services
First Lien Term Loan B, LIBOR+5.25% (1.25% floor) cash due 7/31/2020 (8)(10)		1,670,679		1,670,678		1,671,520
				1,670,678		1,671,520
Blackhawk Specialty Tools, LLC	Oil & gas equipment & services
First Lien Term Loan, LIBOR+5.25% (1.25% floor) cash due 8/1/2019 (8)(10)		4,749,995		4,749,995		4,708,121
				4,749,995		4,708,121
New Trident Holdcorp, Inc.	Healthcare services
First Lien Term Loan B, LIBOR+5.25% (1.25% floor) cash due 7/31/2019 (8)(10)		4,950,000		4,950,000		4,959,019
Second Lien Term Loan, LIBOR+9% (1.25% floor) cash due 7/31/2020 (8)		1,000,000		1,000,000		1,003,056
				5,950,000		5,962,075
Landslide Holdings, Inc.	Application software
First Lien Revolver, L+4.25% (1% floor) cash due 8/9/2018				—		—
				—		—
Smile Brands Group Inc.	Healthcare services
First Lien Term Loan B, LIBOR+6.25% (1.25% floor) cash due 8/16/2019 (8)(10)		4,950,000		4,950,000		4,855,860
				4,950,000		4,855,860
NXT Capital, LLC	Diversified capital markets
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 9/4/2018 (8)(10)		5,447,487		5,447,487		5,459,605
				5,447,487		5,459,605
Vitera Healthcare Solutions, LLC	Healthcare technology
First Lien Term Loan, LIBOR+5% (1% floor) cash due 11/4/2020 (8)(10)		4,962,500		4,962,500		4,980,474
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 11/4/2021 (8)		3,000,000		3,000,000		3,030,948
				7,962,500		8,011,422
The Active Network, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 11/15/2021 (8)		2,400,000		2,400,000		2,401,616
				2,400,000		2,401,616
Accruent, LLC	Internet software & services
First Lien Term Loan, LIBOR+4.5% (1.25% floor) cash due 11/25/2019 (8)(10)		6,461,732		6,461,732		6,366,822
				6,461,732		6,366,822
Travel Leaders Group, LLC	Hotels, resorts & cruise lines
First Lien Term Loan B, LIBOR+6% (1% floor) cash due 12/5/2018 (8)(10)		9,625,000		9,625,000		9,592,523
				9,625,000		9,592,523
Pacific Architects and Engineers Incorporated	Diversified support services
First Lien Term Loan B, LIBOR+6.25% (1% floor) cash due 7/17/2018 (8)(10)		3,473,750		3,473,750		3,461,756
				3,473,750		3,461,756
Power Products, LLC	Electrical components & equipment
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 12/13/2019 (8)(10)		4,975,000		4,975,000		4,860,113
				4,975,000		4,860,113
Survey Sampling International, LLC	Research & consulting services
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 12/12/2019 (8)(10)		4,937,500		4,937,500		4,941,631
				4,937,500		4,941,631
Therakos, Inc.	Healthcare services
First Lien Term Loan, LIBOR+6.25% (1.25% floor) cash due 12/27/2017 (8)(10)		1,946,028		1,946,028		1,927,011
				1,946,028		1,927,011

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2014



Portfolio Company/Type of Investment (1)(2)(8)	Industry	Principal (5)		Cost		Fair Value
Answers Corporation	Internet software & services
First Lien Term Loan, LIBOR+4.5% (3.25% floor) cash due 12/20/2018 (8)(10)		$	4,812,500	$	4,812,500	$	4,871,425
Second Lien Term Loan, LIBOR+10% (1% floor) cash due 6/19/2020 (8)(10)		2,000,000		2,000,000		2,046,110
				6,812,500		6,917,535
Maxor National Pharmacy Services, LLC	Pharmaceuticals
First Lien Term Loan, LIBOR+5.25% (1.25% floor) cash due 1/31/2020 (8)(10)		9,925,000		9,925,000		9,887,945
				9,925,000		9,887,945
NextCare, Inc.	Healthcare services
Senior Term Loan, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)(10)		5,384,152		5,384,152		5,396,673
Delayed Draw Term Loan, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)(10)				—		—
Senior Revolver, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)(10)		187,410		187,410		187,410
Acquisition Line, LIBOR+5.75% (1.25% floor) cash due 10/10/2017 (8)(10)		398,781		398,781		398,781
				5,970,343		5,982,864
J.A. Cosmetics Holdings, Inc.	Personal products
First Lien Term Loan, LIBOR+5% (1.25% floor) cash due 1/31/2019 (8)(10)		4,937,500		4,937,500		4,888,194
				4,937,500		4,888,194
Aegis Toxicology Sciences Corporation	Healthcare services
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 8/24/2021 (8)		3,100,000		3,100,000		3,107,612
				3,100,000		3,107,612
B&H Education, Inc.	Education services
First Lien Term Loan, LIBOR+5.25% (1.5% floor) cash due 5/3/2015 (8)(10)		6,382,886		6,354,343		6,376,798
				6,354,343		6,376,798
Deluxe Entertainment Services Group Inc.	Movies & entertainment
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 2/28/2020 (8)(10)		4,672,320		4,483,834		4,640,481
				4,483,834		4,640,481
Aptean, Inc.	Application software
Second Lien Term Loan, LIBOR+7.5% (1% floor) cash due 2/24/2021 (8)		1,250,000		1,250,000		1,258,260
				1,250,000		1,258,260
Extreme Reach, Inc.	Advertising
First Lien Term Loan, LIBOR+5.75% (1% floor) cash due 1/24/2020 (8)(10)		5,432,000		5,432,000		5,473,100
				5,432,000		5,473,100
CM Delaware LLC	Advertising
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 3/18/2021 (7)(8)(9)(10)		2,189,000		2,189,000		2,189,687
				2,189,000		2,189,687
Stratus Technologies, Inc.	Computer hardware
First Lien Term Loan, LIBOR+5% (1% floor) cash due 4/28/2021 (8)(10)		4,604,167		4,604,167		4,605,770
				4,604,167		4,605,770
TravelCLICK, Inc.	Internet software & services
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 5/6/2019 (8)(10)		4,987,816		4,987,816		4,993,915
Second Lien Term Loan, LIBOR+7.75% (1% floor) cash due 11/8/2021 (8)		4,000,000		4,000,000		4,002,939
				8,987,816		8,996,854
LTI Flexible Products, Inc.	Electronic components
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 5/1/2021 (8)(10)		4,588,500		4,588,500		4,611,005
				4,588,500		4,611,005
Language Line, LLC	Integrated telecommunication services
Second Lien Term Loan, LIBOR+8.75% (1.75% floor) cash due 12/20/2016 (8)		4,400,000		4,394,774		4,403,484
				4,394,774		4,403,484
IPC Systems, Inc.	Alternative carriers
First Lien Term Loan, LIBOR+5% (1% floor) cash due 11/8/2020 (8)(10)		4,987,500		4,987,500		4,987,468
				4,987,500		4,987,468
LTCG Holdings Corp.	Healthcare services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 6/6/2020 (8)(10)		1,185,000		1,185,000		1,185,844
				1,185,000		1,185,844
GTCR Valor Companies, Inc.	Advertising
First Lien Term Loan, LIBOR+5% (1% floor) cash due 5/30/2021 (8)(10)		3,179,723		3,179,723		3,176,754
Delayed Draw Term Loan, L+5% (1% floor) cash due 5/30/2021				—		—
				3,179,723		3,176,754

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2014



Portfolio Company/Type of Investment (1)(2)(8)	Industry	Principal (5)		Cost			Fair Value
ConvergeOne Holdings Corp.	Integrated telecommunication services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 6/17/2020 (8)(10)		$	3,990,000	$	3,990,000		$	3,992,347
				3,990,000			3,992,347
American Residential Services, L.L.C.	Specialized consumer services
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 6/30/2021 (8)(10)		3,192,000		3,192,000			3,193,060
				3,192,000			3,193,060
Verdesian Life Sciences, LLC	Fertilizers & agricultural chemicals
First Lien Term Loan, LIBOR+5% (1% floor) cash due 7/1/2020 (8)(10)		3,955,000		3,955,000			4,039,398
				3,955,000			4,039,398
PR Wireless, Inc.	Wireless telecommunication services
First Lien Term Loan, LIBOR+9% (1% floor) cash due 6/27/2020 (7)(10)		2,992,500		2,992,500			2,797,378
35.5263 Common Stock Warrants (7)				—			167,990
				2,992,500			2,965,368
TV Borrower US, LLC	Integrated telecommunication services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 1/8/2021 (7)(10)		7,000,000		7,000,000			7,000,000
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 7/8/2021 (7)		3,000,000		3,000,000			3,000,000
				10,000,000			10,000,000
Symphony Teleca Services, Inc.	Application software
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/7/2019 (10)		2,500,000		2,500,000			2,500,000
				2,500,000			2,500,000
St. George's University Scholastic Services LLC	Education services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/7/2021 (7)(10)		3,000,000		3,000,000			3,000,000
				3,000,000			3,000,000
CPI Buyer, LLC	Healthcare equipment
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 8/15/2021		8,900,000		8,900,000			8,900,000
				8,900,000			8,900,000
EP Minerals, LLC	Specialty chemicals
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 8/20/2020 (10)		3,200,000		3,200,000			3,200,000
				3,200,000			3,200,000
American Dental Partners, Inc.	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/29/2021		6,000,000		6,000,000			6,000,000
				6,000,000			6,000,000
BeyondTrust Software, Inc.	Application software
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/25/2019 (10)		67,500,000		67,460,337			67,500,000
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/25/2019 (11)				(3,305		)	—
500,000 Class A membership interest in BeyondTrust Holdings LLC				500,000			500,000
				67,957,032			68,000,000
Reliant Hospital Partners, LLC	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 10/1/2019 (10)		7,500,000		7,500,000			7,500,000
				7,500,000			7,500,000
Hill International, Inc.	Construction and engineering
First Lien Term Loan, LIBOR+6.75% (1% floor) cash due 9/26/2019 (10)		6,100,000		6,100,000			6,100,000
				6,100,000			6,100,000
Scientific Games International, Inc.	Casinos & gaming
First Lien Term Loan, LIBOR+5% (1% floor) cash due 9/17/2021 (10)		13,300,000		13,300,000			13,300,000
				13,300,000			13,300,000
Evergreen Skills Lux S.a.r.l	Internet software & services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 4/28/2021 (7)(10)		2,400,000		2,400,000			2,400,000
				2,400,000			2,400,000

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2014



Portfolio Company/Type of Investment (1)(2)(8)	Industry	Principal (5)	Cost		Fair Value
Vestcom International, Inc.	Data processing & outsourced services
First Lien Term Loan, LIBOR+4.25% (1% floor) cash due 9/30/2021 (10)		6,000,000	6,000,000		6,000,000
			6,000,000		6,000,000
Total Non-Control/Non-Affiliate Investments (80.5% of net assets)			$	299,997,247	$	300,001,397
Total Portfolio Investments (80.5% of net assets)			$	299,997,247	$	300,001,397

See notes to Consolidated Financial Statements.


(1)	All debt investments are income producing unless otherwise noted.


(2)	See Note 3 to the Consolidated Financial Statements for portfolio composition by geographic region.


(3)	Control Investments are defined by the 1940 Act as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.


(4)	Affiliate Investments are defined by the 1940 Act as investments in companies in which the Company owns between 5% and 25% of the voting securities.


(5)	Principal amount is net of repayments, if any.


(6)	Non-Control/Non-Affiliate Investments are defined by the 1940 Act as investments that are neither Control Investments nor Affiliate Investments.


(7)	Investment is not a qualifying asset as defined under Section 55(a) of the 1940 Act.

(8)

(9)


(10)	Held by the Company, in whole or in part, indirectly through FS Senior Funding LLC and pledged as collateral under the Company's credit facility with Natixis, New York Branch.


(11)	Investment has undrawn commitments and a negative cost basis as a result of unamortized fees. Unamortized fees are classified as unearned income which reduces cost basis.

See notes to Consolidated Financial Statements.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Organization

Fifth Street Senior Floating Rate Corp. (the "Company") was formed in May 2013 as a Delaware corporation and structured as an externally managed, closed-end, non-diversified management investment company, that has elected to be treated as a business development company under the Investment Company Act of 1940 (the "1940 Act"). The Company is managed by Fifth Street Management LLC (the "Investment Adviser").

The Company also has wholly-owned subsidiaries that are consolidated for accounting purposes and the portfolio investments held by the subsidiaries are included in the Company's Consolidated Financial Statements. All significant intercompany balances and transactions have been eliminated.

On July 17, 2013, the Company completed an initial public offering of 6,666,668 shares of its common stock at the public offering price of $15.00 per share. The proceeds of its initial public offering totaled $100.0 million and all offering costs were borne by the Company's Investment Adviser, including $5.3 million of underwriting commissions and $0.4 million of other offering related expenses. The Company's common stock is listed on the NASDAQ Global Select Market, where it trades under the symbol "FSFR."

On August 19, 2014, the Company completed a follow-on public offering of 22,800,000 shares of its common stock at the public offering price of $12.91 per share. The net proceeds totaled $276.2 million after deducting underwriting commissions of $17.7 million and offering costs of $0.5 million.

Note 2. Significant Accounting Policies

Basis of Presentation:

The Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Regulation S-X. In the opinion of management, all adjustments of a normal recurring nature considered necessary for the fair presentation of the Consolidated Financial Statements have been made. The financial results of the Company’s portfolio investments are not consolidated in the Company’s Consolidated Financial Statements. As provided under ASU 2013-08 which amended Accounting Standards Codification ("ASC") 946 – Financial Services – Investment Companies ("ASC 946"), the Company is an investment company as it is regulated under the 1940 Act and is applying guidance in ASC 946.

Use of Estimates:

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions affecting amounts reported in the financial statements and accompanying notes. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions and conditions. The most significant estimates inherent in the preparation of the Company's Consolidated Financial Statements are the valuation of investments and revenue recognition.

The Consolidated Financial Statements include portfolio investments at fair value of $583.6 million and $300.0 million at March 31, 2015 and September 30, 2014, respectively. The portfolio investments represent 159.0% and 80.5% of net assets at March 31, 2015 and September 30, 2014, respectively, and their fair values have been determined in good faith by the Company's Board of Directors in the absence of readily available market values. Because of the inherent uncertainty of valuation, the determined values may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.

The Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, "Control Investments" are defined as investments in companies in which the Company owns more than 25% of the voting securities or has rights to maintain greater than 50% of the board representation; "Affiliate Investments" are defined as investments in companies in which the Company owns between 5% and 25% of the voting securities; and "Non-Control/Non-Affiliate Investments" are defined as investments that are neither Control Investments nor Affiliate Investments.

Fair Value Measurements:

The Financial Accounting Standards Board ("FASB") ASC 820 Fair Value Measurements and Disclosures ("ASC 820") defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A liability's fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available or reliable, valuation techniques are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the investments or market and the investments' complexity.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Assets recorded at fair value in the Company's Consolidated Financial Statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels, defined by ASC 820 and directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:


•	Level 1 — Unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.


•	Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data at the measurement date for substantially the full term of the assets or liabilities.


•	Level 3 — Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Under ASC 820, the Company performs detailed valuations of its debt and equity investments on an individual basis, using bond yield, market and income approaches as appropriate. In general, the Company utilizes the bond yield method in determining the fair value of its debt investments when there is no readily available market quotation, as long as it is appropriate. If, in the Company's judgment, the bond yield approach is not appropriate, it may use the market or income approach in determining the fair value of the Company's investment in the portfolio company. In certain instances, the Company may use alternative methodologies, including an asset liquidation model, expected recovery model or other alternative approaches.

Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, the Company's capital markets group obtains and analyzes readily available market quotations provided by independent pricing services for all of the Company’s senior secured debt investments for which quotations are available. In determining the fair value of a particular investment, pricing services use observable market information, including both binding and non-binding indicative quotations. These investments are generally classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustment for investment-specific factors or restrictions.

The Company evaluates the prices obtained from independent pricing services based on available market information and company specific data that could affect the credit quality and/or fair value of the investment. Investments for which market quotations are readily available maybe be valued at such market quotations. In order to validate market quotations, the Company looks at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. The Company does not adjust any of the prices received from these sources unless the Company has a reason to believe any such market quotations are not reflective of the fair value of an investment.

Market quotations may be deemed not to represent fair value where the Company believes that facts and circumstances applicable to an issuer, a seller or purchaser or the market for a particular security causes current market quotations not to reflect the fair value of the security, among other reasons. Examples of these events could include cases when a security trades infrequently causing a quoted purchase or sale price to become stale or in the event of a "fire sale" by a distressed seller. In these instances, the Company values such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available (as discussed below).

If the quotation provided by the pricing service is based on only one or two market sources, the Company performs additional procedures to corroborate such information, generally including but not limited to, the bond yield approach discussed below and a quantitative and qualitative assessment of the credit quality and market trends affecting the portfolio company.

Under the bond yield approach, the Company uses bond yield models to determine the present value of the future cash flow streams of its debt investments. The Company reviews various sources of transactional data, including private mergers and acquisitions involving debt investments with similar characteristics, and assesses the information in the valuation process.

Under the market approach, the Company estimates the enterprise value of the portfolio companies in which it invests. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is best expressed as a range of fair values, from which the Company derives a single estimate of enterprise value. To estimate the enterprise value of a portfolio company, the Company analyzes various factors, including the portfolio company's historical and projected financial results. Typically, private companies are valued based on multiples of EBITDA (earnings before interest, taxes, depreciation and amortization), cash flows, net income, revenues, or, in limited cases, book value. The Company generally requires portfolio companies to provide annual audited and quarterly or monthly unaudited financial statements, as well as annual projections for the upcoming fiscal year.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Under the income approach, the Company generally prepares and analyzes discounted cash flow models based on projections of the future free cash flows of the business.

The Company estimates the fair value of privately held warrants using a Black Scholes pricing model. At each reporting date, privately held warrants are valued based on an analysis of various factors and subjective assumptions including, but not limited to, the current stock price (by analyzing the portfolio company’s operating performance and financial condition and general market conditions), the expected period until exercise, expected volatility of the underlying stock price, expected dividends, and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.

The Company's Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of the Company's investments:


•	The quarterly valuation process begins with each portfolio company or investment being initially valued either by the Company's capital markets group for quoted investments or the Company's finance department for unquoted investments;

•Preliminary valuations are then reviewed and discussed with principals of the Investment Adviser;


•	Separately, independent valuation firms engaged by the Board of Directors prepare preliminary valuations of the Company's investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to the Company;


•	The finance department compares and contrasts its preliminary valuations to the preliminary valuations of the independent valuation firms;


•	The finance department prepares a valuation report for the Audit Committee of the Board of Directors;


•	The Audit Committee of the Board of Directors is apprised of the preliminary valuations of the independent valuation firms;


•	The Audit Committee of the Board of Directors reviews the preliminary valuations with the portfolio managers of the Investment Adviser, and the finance department responds and supplements the preliminary valuations to reflect any comments provided by the Audit Committee;


•	The Audit Committee of the Board of Directors makes a recommendation to the Board of Directors regarding the fair value of the investments in the Company's portfolio; and


•	The Board of Directors discusses valuations and determines the fair value of each investment in the Company's portfolio in good faith.

The fair value of each of the Company's investments at March 31, 2015 and September 30, 2014 was determined in good faith by the Board of Directors. The Board of Directors has authorized the engagement of independent valuation firms to provide valuation assistance. The Company will continue to engage independent valuation firms to provide assistance regarding the determination of the

fair value of a portion of the Company's portfolio securities for which market quotations are not readily available or are readily

available but deemed not reflective of the fair value of the investment each quarter, with a substantial portion being valued over the

course of each fiscal year. However, the Board of Directors is ultimately and solely responsible for the valuation of the portfolio investments at fair value as determined in good faith pursuant to the Company's valuation policy and a consistently applied valuation process.

Investment Income:

Interest income, adjusted for accretion of original issue discount ("OID") is recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company stops accruing interest on investments when it is determined that interest is no longer collectible.

The Company generally recognizes dividend income on the ex-dividend date.

The Company may invest in debt securities which contain payment-in-kind ("PIK") interest provisions. PIK interest is computed at the contractual rate specified in each investment agreement and added to the principal balance of the investment and recorded as income.

Fee income consists of the monthly servicing fees, advisory fees, structuring fees and prepayment fees that the Company receives in connection with its debt investments. These fees are recognized as earned.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents:

Cash, cash equivalents and restricted cash consist of demand deposits and highly liquid investments with maturities of three months or less, when acquired. The Company places its cash, cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insured limit.

Restricted Cash:

As of March 31, 2015, included in restricted cash is $5.7 million that was held at U.S. Bank, National Association and Wells Fargo in connection with the Company's Natixis and Citibank facilities (as defined in Note 6 — Lines of Credit). Pursuant to the terms of the credit agreements, the Company is restricted in terms of access to $5.7 million until such time as the Company submits its required monthly reporting schedules and Natixis, New York Branch and Citibank and each verifies the Company's compliance with the terms of the credit agreements with the Company.

Due from Portfolio Companies:

Due from portfolio companies consists of amounts payable to the Company from its portfolio companies, excluding those amounts attributable to interest, dividends or fees receivable. These amounts are recognized as they become payable to the Company (e.g., principal payments on the scheduled amortization payment date).

Deferred Financing Costs:

Deferred financing costs consist of fees and expenses in connection with the closing or amending of the Company's credit facilities, and are capitalized at the time of payment. Deferred financing costs are amortized using the straight line method over the terms of the respective credit facilities. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations.

Offering Costs:

Offering costs consist of fees and expenses incurred in connection with the public offer and sale of Company's common stock, including legal, accounting and printing fees. There were no offering costs charged to capital during the six months ended March 31, 2015 and March 31, 2014.

Income Taxes:

As a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code ("Code"), the Company is not subject to U.S. federal income tax on the portion of its taxable income and gains distributed to its stockholders as a dividend. The Company intends to distribute between 90% and 100% of its taxable income and gains, within the Subchapter M rules, and thus the Company anticipates that it will not incur any U.S. federal or state income tax at the corporate level. As a RIC, the Company is also subject to a U.S. federal excise tax based on distributive requirements of its taxable income on a calendar year basis. The Company anticipates timely distribution of its taxable income within the tax rules; however, the Company incurred a de minimis U.S. federal excise tax for calendar year 2013. The Company does not expect to incur a U.S. federal excise tax for calendar year 2014. The Company may incur a U.S. federal excise tax in future years.

ASC 740 Accounting for Uncertainty in Income Taxes ("ASC 740") provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the Company's Consolidated Financial Statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. The Company recognizes the tax benefits of uncertain tax positions only where the position is "more likely than not" to be sustained assuming examination by tax authorities. The Company identifies its major tax jurisdictions as U.S. Federal and Connecticut, and the Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

Recent Accounting Pronouncements

In May 2014, the FASB issued guidance to establish a comprehensive and converged standard on revenue recognition to enable financial statement users to better understand and consistently analyze an entity’s revenue across industries, transactions, and geographies. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

or services. To achieve that core principle, an entity should apply the following steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance also specifies the accounting for certain costs to obtain or fulfill a contract with a customer. The guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. Qualitative and quantitative information is required to be disclosed about: (1) contracts with customers, (2) significant judgments and changes in judgments and (3) assets recognized from costs to obtain or fulfill a contract. The guidance will apply to all entities. The guidance is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2016. Early application is not permitted. The Company is in the process of evaluating the impact that this guidance will have on its Consolidated Financial Statements.

In April 2015, the FASB issued a new accounting standards update that requires debt issuance costs (deferred financing costs) related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the related debt liability, similar to the presentation of debt discounts. The update is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The Company is in the process of evaluating the impact this guidance will have on its consolidated financial statements, however, because the update impacts presentation and disclosure only, the Company does not believe adoption will have a significant impact on its Consolidated Financial Statements.

Note 3. Portfolio Investments

At March 31, 2015, 159.0% of net assets, or $583.6 million, was invested in 59 portfolio investments and 19.7% of net assets, or $72.3 million, was in cash and cash equivalents (excluding restricted cash). In comparison, at September 30, 2014, 80.5% of net assets, or $300.0 million, was invested in 48 portfolio investments and 28.8% of net assets, or $107.4 million, was in cash and cash equivalents (excluding restricted cash). As of March 31, 2015 and September 30, 2014, 99.9% and 99.8%, respectively, of the Company's investment portfolio, at cost and fair value, consisted of senior secured debt investments that bore interest at floating rates which are secured by first or second priority liens on the assets of the portfolio companies.

During the three and six months ended March 31, 2015, the Company recorded net unrealized appreciation (depreciation) of $0.8 million and $(3.6) million, respectively. During the three and six months ended March 31, 2014, the Company recorded net unrealized depreciation of $0.3 million and $0.6 million, respectively. During the three and six months ended March 31, 2015, the Company recorded net realized losses of $1.0 million and $1.6 million, respectively. During the three and six months ended March 31, 2014, the Company recorded net realized gains of $0.2 million and $0.3 million, respectively.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The composition of the Company's investments as of March 31, 2015 and September 30, 2014 at cost and fair value was as follows:



	March 31, 2015				September 30, 2014
	Cost		Fair Value		Cost		Fair Value
Investments in debt securities (senior secured)	$	586,606,486	$	582,871,055	$	299,497,247	$	299,333,407
Investment in equity securities (common stock and warrants)	500,000		688,366		500,000		667,990
Total	$	587,106,486	$	583,559,421	$	299,997,247	$	300,001,397

The following table presents the financial instruments carried at fair value as of March 31, 2015, by caption on the Company's Consolidated Statements of Assets and Liabilities for each of the three levels of hierarchy established by ASC 820:



	Level 1		Level 2		Level 3		Total
Investments in debt securities (senior secured)	$	—	$	—	$	582,871,055	$	582,871,055
Investment in equity securities (common stock and warrants)					688,366		688,366
Total investments at fair value	$	—	$	—	$	583,559,421	$	583,559,421

The following table presents the financial instruments carried at fair value as of September 30, 2014, by caption on the Company's Consolidated Statements of Assets and Liabilities for each of the levels of hierarchy established by ASC 820:



	Level 1		Level 2		Level 3		Total
Investments in debt securities (senior secured)	$	—	$	—	$	299,333,407	$	299,333,407
Investment in equity securities (common stock and warrants)					667,990		667,990
Total investments at fair value	$	—	$	—	$	300,001,397	$	300,001,397

When a determination is made to classify a financial instrument within Level 3 of the valuation hierarchy, the determination is based upon the fact that the unobservable factors are the most significant to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated by external sources). Accordingly, the appreciation (depreciation) in the tables below includes changes in fair value due in part to observable factors that are part of the valuation methodology.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a roll-forward in the changes in fair value from December 31, 2014 to March 31, 2015, for all investments for which the Company determines fair value using unobservable (Level 3) factors:



	Senior Secured Debt			Common Equity/Warrants		Total
Fair value at December 31, 2014	$	595,214,098		$	640,156	$	595,854,254
New investments & net revolver activity	116,458,781			—		116,458,781
Redemptions/repayments	(128,676,216		)	—		(128,676,216		)
Accretion of original issue discount	50,643			—		50,643
Net change in unearned income	30,411			—		30,411
Net unrealized appreciation on investments	789,581			48,210		837,791
Net realized loss on investments	(996,243		)	—		(996,243		)
Fair value as of March 31, 2015	$	582,871,055		$	688,366	$	583,559,421
Net unrealized depreciation relating to Level 3 assets still held at March 31, 2015 and reported within net unrealized depreciation on investments in the Consolidated Statement of Operations for the three months ended March 31, 2015	$	408,419		$	48,210	$	456,629

The following table provides a roll-forward in the changes in fair value from December 31, 2013 to March 31, 2014, for all investments for which the Company determines fair value using unobservable (Level 3) factors:



	Senior Secured Debt			Total
Fair value at December 31, 2013	$	135,371,106		$	135,371,106
New investments & net revolver activity	94,809,197			94,809,197
Redemptions/repayments	(50,121,882		)	(50,121,882		)
Accretion of original issue discount	8,542			8,542
Net unrealized depreciation on investments	(318,940		)	(318,940		)
Net realized gain on investments	4,602			4,602
Fair value as of March 31, 2014	$	179,752,625		$	179,752,625
Net unrealized depreciation relating to Level 3 assets still held at March 31, 2014 and reported within net unrealized depreciation on investments in the Consolidated Statement of Operations for the three months ended March 31, 2014	$	(314,338	)	$	(314,338	)

The following table provides a roll-forward in the changes in fair value from September 30, 2014 to March 31, 2015, for all investments for which the Company determines fair value using unobservable (Level 3) factors:



	Senior Secured Debt			Common Equity/Warrants		Total
Fair value at September 30, 2014	$	299,333,407		$	667,990	$	300,001,397
New investments & net revolver activity	559,733,049			—		559,733,049
Redemptions/repayments	(271,039,432		)	—		(271,039,432		)
Accretion of original issue discount	93,819			—		93,819
Net change in unearned income	(122,162		)	—		(122,162		)
Net unrealized appreciation (depreciation) on investments	(3,571,591		)	20,376		(3,551,215		)
Net realized loss on investments	(1,556,035		)	—		(1,556,035		)
Fair value as of March 31, 2015	$	582,871,055		$	688,366	$	583,559,421
Net unrealized depreciation relating to Level 3 assets still held at March 31, 2015 and reported within net unrealized depreciation on investments in the Consolidated Statement of Operations for the six months ended March 31, 2015	$	(3,907,321	)	$	20,376	$	(3,886,945	)

The following table provides a roll-forward in the changes in fair value from September 30, 2013 to March 31, 2014, for all investments for which the Company determines fair value using unobservable (Level 3) factors:

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Senior Secured Debt			Total
Fair value at September 30, 2013	$	48,653,617		$	48,653,617
New investments & net revolver activity	186,975,865			186,975,865
Redemptions/repayments	(55,281,086		)	(55,281,086		)
Accretion of original issue discount	13,006			13,006
Net unrealized depreciation on investments	(613,379		)	(613,379		)
Net realized gain on investments	4,602			4,602
Fair value as of March 31, 2014	$	179,752,625		$	179,752,625
Net unrealized depreciation relating to Level 3 assets still held at March 31, 2014 and reported within net unrealized depreciation on investments in the Consolidated Statement of Operations for the six months ended March 31, 2014	$	(608,777	)	$	(608,777	)

The Company generally utilizes a bond yield model to estimate the fair value of its debt investments when there is not a readily available market value (Level 3), which model is based on the present value of expected cash flows from the debt investments. The significant observable inputs into the model are market interest rates for debt with similar characteristics, which are adjusted for the portfolio company's credit risk. The credit risk component of the valuation considers several factors including financial performance, business outlook, debt priority and collateral position. These factors are incorporated into the calculation of the capital structure premium, tranche specific risk premium/(discount), size premium and industry premium/(discount), which are significant unobservable inputs into the model.

Significant Unobservable Inputs for Level 3 Investments

The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value as of March 31, 2015:



Asset	Fair Value		Valuation Technique	Unobservable Input	Range					Weighted Average (c)
Senior secured debt	$	295,898,251	Bond yield approach	Capital structure premium	(a)	0.0	%	-	1.0%	0.0%
				Tranche specific risk premium / (discount)	(a)	(3.3	)%	-	6.0%	(0.9)%
				Size premium	(a)	0.0	%	-	2.0%	1.3%
				Industry premium / (discount)	(a)	(1.1	)%	-	0.5%	0.3%
	286,972,804		Market quotations	Broker quoted price	(d)	N/A		-	N/A	N/A
Common equity/warrants	688,366		Market and income approaches	Weighted average cost of capital		22.0	%	-	22.0%	22.0%
				Company specific risk premium	(a)	1.0	%	-	1.0%	1.0%
				Revenue growth rate		14.1	%	-	14.1%	14.1%
				EBITDA multiple	(b)	10.2x		-	10.2x	10.2x
				Revenue multiple	(b)	4.1x		-	5.3x	4.7x
Total	$	583,559,421

_____________________

(a) Used when market participant would take into account this premium or discount when pricing the investment.

(b) Used when market participant would use such multiples when pricing the investment.

(d) The Company generally uses prices provided by an independent pricing service which are non-binding indicative prices on or near the valuation date as the primary basis for the fair value determinations for quoted senior secured debt investments. Since these prices are non-binding, they may not be indicative of fair value. Each quoted price is evaluated by the Audit Committee in conjunction with additional information compiled by the Company, including financial performance, recent business developments and various other factors.

The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments, which are carried at fair value as of September 30, 2014:

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Asset	Fair Value		Valuation Technique	Unobservable Input	Range					Weighted Average (c)
Senior secured debt	$	299,333,407	Bond yield approach	Capital structure premium	(a)	0.0	%	-	2.0%	0.3%
				Tranche specific risk premium / (discount)	(a)	(3.0	)%	-	5.0%	(0.1)%
				Size premium	(a)	0.0	%	-	1.5%	0.5%
				Industry premium / (discount)	(a)	(0.7	)%	-	1.1%	0.3%
Common equity/warrants	667,990		Market and income approaches	Weighted average cost of capital		7.0	%	-	21.0%	17.5%
				Company specific risk premium	(a)	4.0	%	-	5.0%	4.3%
				Revenue growth rate		11.7	%	-	41.9%	34.3%
				EBITDA multiple	(b)	9.5x		-	9.9x	9.6x
				Revenue multiple	(b)	4.1x		-	5.3x	4.7x
Total	$	300,001,397

_____________________

(a) Used when market participant would take into account this premium or discount when pricing the investment.

(b) Used when market participant would use such multiples when pricing the investment.

Under the bond yield approach, the significant unobservable inputs used in the fair value measurement of the Company's investments in debt securities are capital structure premium, tranche specific risk premium/(discount), size premium and industry premium/(discount). Significant increases or decreases in any of those inputs in isolation may result in a significantly lower or higher fair value measurement, respectively.

Under the market and income approaches, the significant unobservable inputs used in the fair value measurement of the Company's investments in debt or equity securities are the weighted average cost of capital, company specific risk premium, revenue growth rate, EBITDA multiple and revenue multiple. Significant increases or decreases in a portfolio company's weighted average cost of capital or company specific risk premium in isolation may result in a significantly lower or higher fair value measurement, respectively. Significant increases or decreases in the revenue growth rate or valuation multiples in isolation may result in a significantly higher or lower fair value measurement, respectively.

Financial Instruments Disclosed, But Not Carried, At Fair Value

The following table presents the carrying value and fair value of the Company’s financial liabilities disclosed, but not carried, at fair value as of March 31, 2015, and the level of each financial liability within the fair value hierarchy:



Credit Facilities Payable	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Natixis facility payable	$	183,397,646	$	183,397,646	$	—	$	—	$	183,397,646
Citibank facility payable	96,700,000		96,700,000		—		—		96,700,000
Total credit facilities payable	$	280,097,646	$	280,097,646	$	—	$	—	$	280,097,646

The carrying values of credit facilities payable approximates their fair values and are included in Level 3 of the hierarchy.

Off-Balance Sheet Arrangements

The Company's off-balance sheet arrangements consisted of $41.8 million and $19.6 million of unfunded commitments to provide debt financing to its portfolio companies as of March 31, 2015 and September 30, 2014, respectively. Such commitments are subject to the portfolio companies' satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Statements of Assets and Liabilities and are not reflected in the Company's Consolidated Statements of Assets and Liabilities.

A summary of the composition of the unfunded commitments (consisting of revolvers and term loans) as of March 31, 2015 and September 30, 2014 is shown in the table below:

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	March 31, 2015		September 30, 2014
TIBCO Software, Inc.	$	5,300,000	$	—
Landslide Holdings, Inc.	5,000,000		5,000,000
Triple Point Group Holdings, Inc.	4,952,965		4,984,375
Executive Consulting Group, Inc.	4,800,000		—
Motion Recruitment Partners LLC	3,900,000		—
BeyondTrust Software, Inc.	3,605,000		5,625,000
Metamorph US 3, LLC	2,400,000		—
Idera, Inc.	2,400,000		—
PowerPlan, Inc.	2,100,000		—
TrialCard Incorporated	2,000,000		—
Dynatect Group	1,800,000		—
Ameritox Ltd.	1,333,333		—
Teaching Strategies, LLC	1,200,000		—
NextCare, Inc.	1,049,870		1,555,642
GTCR Valor Companies, Inc.	—		2,412,308
Total	$	41,841,168	$	19,577,325

Portfolio Composition

The Company primarily invests in portfolio companies located in North America. The following tables show the portfolio composition by geographic region at cost and fair value as a percentage of total investments. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company's business.



	March 31, 2015				September 30, 2014
Cost:
Northeast U.S.	$	200,733,486	34.19	%	$	70,932,234	23.64	%
Southwest U.S.	136,413,128		23.23		103,814,102		34.61
Southeast U.S.	82,588,501		14.07		31,308,250		10.44
West U.S.	78,567,580		13.38		32,871,451		10.96
Midwest U.S.	73,683,291		12.55		40,489,710		13.50
International	15,120,500		2.58		20,581,500		6.85
Total	$	587,106,486	100.00	%	$	299,997,247	100.00	%

Fair Value:
Northeast U.S.	$	199,819,093	34.24	%	$	70,855,117	23.62	%
Southwest U.S.	135,232,106		23.17		103,704,012		34.57
Southeast U.S.	82,434,228		14.13		31,405,771		10.47
West U.S.	78,437,127		13.44		32,989,244		11.00
Midwest U.S.	72,750,944		12.47		40,492,198		13.50
International	14,885,923		2.55		20,555,055		6.84
Total	$	583,559,421	100.00	%	$	300,001,397	100.00	%

The composition of the Company's portfolio by industry at cost and fair values as of March 31, 2015 and September 30, 2014 were as follows:

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	March 31, 2015				September 30, 2014
Cost:
Internet software & services	$	163,303,909	27.82	%	$	27,062,048	9.02	%
Healthcare services	104,086,138		17.73		38,272,049		12.76
Diversified support services	65,460,450		11.15		3,473,750		1.16
Application software	45,406,453		7.73		73,786,077		24.60
Education services	33,687,246		5.74		9,354,343		3.12
Pharmaceuticals	24,500,000		4.17		9,925,000		3.31
Integrated telecommunication services	20,813,079		3.55		18,384,774		6.13
Advertising	15,702,015		2.67		10,800,723		3.60
IT consulting & other services	11,791,250		2.01		—		—
Alternative carriers	11,200,000		1.91		4,987,500		1.66
Hotels, resorts & cruise lines	9,375,000		1.60		9,625,000		3.21
Data processing & outsourced services	9,000,000		1.53		6,000,000		2.00
Specialized consumer services	8,578,500		1.46		3,192,000		1.06
Healthcare technology	7,937,500		1.35		7,962,500		2.65
Research & consulting services	7,800,000		1.33		4,937,500		1.65
Food retail	7,089,750		1.21		—		—
Construction & engineering	6,069,500		1.03		6,100,000		2.03
Diversified capital markets	5,419,975		0.91		5,447,487		1.81
Personal products	4,875,000		0.83		4,937,500		1.65
Oil & gas equipment & services	4,624,995		0.79		4,749,995		1.58
Computer hardware	4,256,944		0.73		4,604,167		1.53
Industrial machinery	3,990,000		0.68		—		—
Fertilizers & agricultural chemicals	3,854,973		0.66		3,955,000		1.32
Wireless telecommunication services	2,977,500		0.51		2,992,500		1.00
Movies & entertainment	2,879,167		0.49		4,483,834		1.49
Electrical components & equipment	2,427,142		0.41		4,975,000		1.66
Casinos & gaming	—		—		13,300,000		4.43
Healthcare equipment	—		—		8,900,000		2.97
Electronic components	—		—		4,588,500		1.53
Specialty chemicals	—		—		3,200,000		1.07
Total	$	587,106,486	100.00	%	$	299,997,247	100.00	%

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	March 31, 2015				September 30, 2014
Fair Value:
Internet software & services	$	161,452,201	27.67	%	$	27,082,827	9.03	%
Healthcare services	102,794,883		17.62		38,192,786		12.73
Diversified support services	65,469,535		11.22		3,461,756		1.15
Application software	45,156,750		7.74		73,759,754		24.59
Education services	33,634,691		5.76		9,376,798		3.13
Pharmaceuticals	24,645,563		4.22		9,887,945		3.30
Integrated telecommunication services	20,586,670		3.53		18,395,831		6.13
Advertising	15,661,466		2.68		10,839,541		3.61
IT consulting & other services	11,827,617		2.03		—		—
Alternative carriers	11,291,000		1.93		4,987,468		1.66
Hotels, resorts & cruise lines	9,398,438		1.61		9,592,523		3.20
Data processing & outsourced services	9,022,500		1.55		6,000,000		2.00
Specialized consumer services	8,589,223		1.47		3,193,060		1.06
Healthcare technology	7,903,516		1.35		8,011,422		2.67
Research & consulting services	7,757,000		1.33		4,941,631		1.65
Food retail	7,082,775		1.21		—		—
Construction & engineering	6,004,527		1.03		6,100,000		2.03
Diversified capital markets	5,447,075		0.94		5,459,605		1.80
Personal products	4,881,094		0.84		4,888,194		1.63
Oil & gas equipment & services	4,497,808		0.77		4,708,121		1.57
Computer hardware	4,249,835		0.73		4,605,770		1.54
Industrial machinery	3,985,652		0.68		—		—
Fertilizers & agricultural chemicals	3,874,247		0.66		4,039,398		1.35
Wireless telecommunication services	2,966,840		0.51		2,965,368		0.99
Movies & entertainment	2,966,373		0.51		4,640,481		1.55
Electrical components & equipment	2,412,142		0.41		4,860,113		1.62
Casinos & gaming	—		—		13,300,000		4.43
Healthcare equipment	—		—		8,900,000		2.97
Electronic components	—		—		4,611,005		1.54
Specialty chemicals	—		—		3,200,000		1.07
Total	$	583,559,421	100.00	%	$	300,001,397	100.00	%

The Company's investments are generally in middle market companies in a variety of industries. At March 31, 2015, the Company had no single investment that represented greater than 10% of the total investment portfolio at fair value. At September 30, 2014, the Company had no single investment that represented greater than 25% of the total investment portfolio at fair value. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, can fluctuate upon repayment or sale of an investment and in any given year can be highly concentrated among several investments. For the three and six months ended March 31, 2015, no individual investment produced income that exceeded 15% of total investment income. For the three and six months ended March 31, 2014, no individual investment produced income that exceeded 10% of total investment income.

Note 4. Fee Income

The Company receives a variety of fees in the ordinary course of business including servicing, advisory, structuring and prepayment fees, which are classified as fee income and recognized as they are earned.

Note 5. Share Data

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On August 19, 2014, the Company completed a follow-on public offering of 22,800,000 shares of its common stock at the public offering price of $12.91. The net proceeds totaled $276.2 million after deducting underwriting commissions of $17.7 million and offering costs of $0.5 million.

The following sets forth the computation of basic and diluted earnings per share, pursuant to ASC 260-10 Earnings per Share, for the three and six months ended March 31, 2015 and March 31, 2014:



	Three months ended March 31, 2015		Three months ended March 31, 2014		Six months ended March 31, 2015		Six months ended March 31, 2014
Earnings per common share — basic and diluted:
Net increase in net assets resulting from operations	$	6,543,206	$	1,703,962	$	12,019,616	$	2,935,619
Weighted average common shares outstanding	29,466,768		6,666,768		29,466,768		6,666,768
Earnings per common share — basic and diluted	$	0.22	$	0.26	$	0.41	$	0.44

The Company's Board of Directors has declared the following distributions, including shares issued under the Company's dividend reinvestment plan ("DRIP"), from inception to March 31, 2015:



Date Declared	Record Date	Payment Date	Amount per Share	Total Distribution	DRIP Shares Issued (1)	DRIP Shares Value
October 8, 2013	October 21, 2013	October 31, 2013	$0.01	$66,668	—	$—
October 8, 2013	December 16, 2013	January 31, 2014	0.20	1,333,354	606	8,288
January 3, 2014	March 31, 2014	April 15, 2014	0.23	1,533,357	469	6,734
February 11, 2014	June 30, 2014	July 15, 2014	0.27	1,800,027	1,279	17,924
May 12, 2014	September 15, 2014	October 15, 2014	0.30	8,840,030	17,127	191,093
September 9, 2014	December 15, 2014	January 15, 2015	0.30	8,840,030	23,183	242,678
November 20, 2014	April 2, 2015	April 15, 2015	0.30	8,840,030	28,296	307,794
February 4, 2015	May 1, 2015	May 15, 2015	0.10
February 4, 2015	June 1, 2015	June 15, 2015	0.10
February 4, 2015	July 1, 2015	July 15, 2015	0.10
February 4, 2015	August 3, 2015	August 17, 2015	0.10

_______________________

(1) Shares were purchased on the open market and distributed.

Note 6. Lines of Credit

Natixis Facility

On November 1, 2013, FS Senior Funding LLC, the Company's wholly-owned, special purpose financing subsidiary, entered into a $100 million revolving credit facility (the "Natixis facility") with the lenders referred to therein, Natixis, New York Branch, as administrative agent, and U.S. Bank National Association, as collateral agent and custodian.

Borrowings under the Natixis facility are subject to certain customary advance rates and accrue interest at a rate equal to either the applicable commercial paper rate (subject to an overall cap) plus 1.90% in the case of a lender that is a commercial paper conduit or otherwise the three-month LIBOR plus 2.00% per annum. In addition, there is a commitment fee payable on the undrawn amount under the credit facility equal to 1.00% (or 0.50% for the first six months after the closing date) of such undrawn amount. Interest and commitment fees are payable quarterly in arrears. The reinvestment period under the credit facility ends 18 months after the closing date and the credit facility will mature on November 1, 2021.

On October 16, 2014, the Company entered into agreements to expand the Natixis facility from $100 million to $200 million, including a $100 million term loan and a $100 million revolving credit facility. Fifth Third Bank ("Fifth Third") also joined the facility as a term loan lender. The $50 million term loan provided by Fifth Third is priced at LIBOR plus 2% per annum, and the $100 million revolving credit facility and $50 million term loan provided by Natixis, New York Branch, are priced at the applicable commercial paper rate plus 1.9% per annum. The facility maturity date remains unchanged.

As of March 31, 2015, the Company had $183.4 million outstanding under the Natixis facility. Borrowings under the Natixis facility are secured by all of the assets of FS Senior Funding LLC and all of the Company's equity interest in FS Senior Funding LLC.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company may use the Natixis facility to fund a portion of its loan origination activities and for general corporate purposes. Each loan origination under the Natixis facility is subject to the satisfaction of certain conditions. The Company's borrowings under the Natixis facility bore interest at a weighted average interest rate of 2.242% and 2.180% for the six months ended March 31, 2015 and March 31, 2014, respectively. For the three and six months ended March 31, 2015, the Company recorded interest expense of $1.1 million and $2.0 million, respectively, related to the Natixis facility. For the three and six months ended March 31, 2014, the Company recorded interest expense of $0.4 million and $0.6 million, respectively, related to the Natixis facility.

Citibank Facility

On January 15, 2015, FS Senior Funding II LLC, the Company's wholly-owned, special purpose financing subsidiary, entered into a $175 million revolving credit facility (the "Citibank facility") with the lenders referred to therein, Citibank, N.A., as administrative agent, and Wells Fargo Bank, N. A., as collateral agent and custodian.

Borrowings under the Citibank facility are subject to certain customary advance rates and accrue interest at a rate equal to LIBOR plus 2.00% per annum on broadly syndicated loans and LIBOR plus 2.25% per annum on all other eligible loans during the reinvestment period. In addition, there is a commitment fee payable on the undrawn amount under the credit facility of either 0.50% per annum on the unused amount of the credit facility (if the advances outstanding on the credit facility exceed 50% of the aggregate commitments by lenders to make advances on such day) or 0.75% per annum on the unused amount of the credit facility (if the advances outstanding on the credit facility do not exceed 50% of the aggregate commitments by lenders to make advances on such day) for the duration of the reinvestment period. Interest and commitment fees are payable quarterly in arrears. The reinvestment period under the credit facility ends three years after the closing date and the credit facility will mature on January 15, 2020.

As of March 31, 2015, the Company had $96.7 million outstanding under the Citibank facility. Borrowings under the Citibank facility are secured by all of the assets of FS Senior Funding II LLC and all of the Company's equity interest in FS Senior Funding II LLC. The Company may use the Citibank facility to fund a portion of its loan origination activities and for general corporate purposes. Each loan origination under the Citibank facility is subject to the satisfaction of certain conditions. The Company's borrowings under the Citibank facility bore interest at a weighted average interest rate of 2.511% for the three months ended March 31, 2015. For the three months ended March 31, 2015, the Company recorded interest expense of $0.6 million related to the Citibank facility.

Note 7. Interest and Dividend Income

Interest income is recorded on an accrual basis to the extent that such amounts are expected to be collected. In accordance with the Company's policy, accrued interest is evaluated periodically for collectability. The Company stops accruing interest on investments when it is determined that interest is no longer collectible. Distributions of income from portfolio companies are generally recorded as dividend income on the ex-dividend date.

As of March 31, 2015, September 30, 2014 and March 31, 2014, there were no investments on which the Company had stopped accruing interest or OID income. For the three and six months ended March 31, 2015 and March 31, 2014, there were no income non-accrual amounts.

Note 8. Taxable/Distributable Income and Dividend Distributions

Taxable income may differ from net increase (decrease) in net assets resulting from operations primarily due to unrealized appreciation (depreciation) on investments, as investment gains and losses are not included in taxable income until they are realized.

Listed below is a reconciliation of net increase in net assets resulting from operations to taxable income for the three months ended March 31, 2015 and March 31, 2014:



	Three months ended March 31, 2015			Three months ended March 31, 2014			Six months ended March 31, 2015		Six months ended March 31, 2014
Net increase in net assets resulting from operations	$	6,543,206		$	1,703,962		$	12,019,616	$	2,935,619
Net unrealized (appreciation) depreciation on investments	(837,791		)	318,940			3,551,215		613,379
Book/tax difference due to deferred loan fees	(30,410		)	—			82,162		—
Book/tax difference due to capital losses not recognized	996,243			—			1,556,035		—
Other book/tax differences	—			(66		)	—		37,385
Taxable/Distributable Income (1)	$	6,671,248		$	2,022,836		$	17,209,028	$	3,586,383

__________________


(1)	The Company's taxable income for the three and six months ended March 31, 2015 is an estimate and will not be finally determined until the Company files its tax return for the fiscal year ending September 30, 2015. Therefore, the final taxable income may be different than the estimate.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2014, the components of accumulated undistributed income on a tax basis were as follows:



Undistributed ordinary income, net (RIC status)	$	—
Realized capital gains (losses)	—
Unrealized gains, net	4,150

The effect of the permanent book/tax reclassifications during the fiscal year ended September 30, 2014 resulted in increase/(decrease) to the components of net assets on the Consolidated Statements of Assets and Liabilities as of September 30, 2014 as follows:



Undistributed Net Investment Income	$	2,056,904
Accumulated Net Realized Gain/(Loss) on Investments	(269,981		)
Paid-In Capital	(1,786,923		)

For financial reporting purposes, capital accounts have been adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to the tax treatment of prepayment fees, nondeductible excise taxes paid, reclassification of distributions paid and return of capital distributions.

On December 22, 2010, the Regulated Investment Company Modernization Act of 2010 (the "Act") was enacted, which changed various technical rules governing the tax treatment of RICs. The changes are generally effective for taxable years beginning after the date of enactment. Under the Act, the Company is permitted to carry forward any net capital losses, if any, incurred in taxable years beginning after the date of enactment for an unlimited period.

Distributions to stockholders are recorded on the ex-dividend date. The Company is required to distribute annually to its stockholders at least 90% of its net taxable income and net realized short-term capital gains in excess of net realized long-term capital losses for each taxable year in order to be eligible for the tax benefits allowed to a RIC under Subchapter M of the Code. The Company anticipates paying out as a dividend all or substantially all of those amounts. The amount to be paid out as a dividend is determined by the Board of Directors and is based on management's estimate of the Company's annual taxable income. The Company maintains an "opt out" dividend reinvestment plan for its stockholders.

For income tax purposes, the Company estimates that its distributions for the calendar year will be composed primarily of ordinary income, and will be reflected as such on the Form 1099-DIV for the calendar year. To the extent that the Company’s taxable earnings fall below the amount of dividends declared, however, a portion of the total amount of the Company’s dividends for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.

As a RIC, the Company is also subject to a U.S. federal excise tax based on distributive requirements of its taxable income on a calendar year basis. The Company incurred a de minimis U.S. federal excise tax for calendar year 2013. The Company does not expect to incur a U.S. federal excise tax for calendar year 2014.

Note 9. Realized Gains or Losses and Net Unrealized Appreciation or Depreciation on Investments

Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption and the cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period, net of recoveries. Realized losses may also be recorded in connection with the Company's determination that certain investments are considered worthless securities and/or meet the conditions for loss recognition per the applicable tax rules.

Net unrealized appreciation or depreciation reflects the net change in the valuation of the portfolio pursuant to the Company's valuation guidelines and the reclassification of any prior period unrealized appreciation or depreciation.

During the six months ended March 31, 2015, the Company recorded investment realization events, including the following:


•	In October 2014, the Company received a cash payment of $6.8 million from Answers Corporation in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par (plus additional fees) and no realized gain or loss was recorded on the transaction;


•	In December 2014, the Company received a cash payment of $4.9 million from Survey Sampling International, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction; and

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the six months ended March 31, 2015, the Company received cash payments of $246.9 million in connection with full or partial sales of debt investments and recorded a net realized loss of $1.6 million.

During the six months ended March 31, 2014, the Company received cash payments of $51.9 million in connection with the full or partial sales of debt investments in the open market and recorded a net realized gain of $0.3 million.

During the three and six months ended March 31, 2015, the Company recorded $0.8 million and $(3.6) million, respectively, of net unrealized appreciation (depreciation) on its investments. During the three and six months ended March 31, 2014, the Company recorded $0.3 million and $0.6 million, respectively, of net unrealized depreciation on its debt investments. For the three months ended March 31, 2015, the Company's net unrealized depreciation consisted of $48,210 of net unrealized appreciation on equity investments, $408,419 of net unrealized appreciation on debt investments and $381,162 of net reclassifications to realized loss on debt and equity investments (resulting in unrealized appreciation). For the six months ended March 31, 2015, the Company's net unrealized depreciation consisted of $3,907,322 of net unrealized depreciation on debt investments, offset by $20,376 of net unrealized appreciation on equity investments and $335,731 of net reclassifications to realized loss on debt and equity investments (resulting in unrealized appreciation).

For the three months ended March 31, 2014, the Company's net unrealized depreciation consisted of $314,338 of net unrealized depreciation on debt investments and $4,602 of net reclassifications to realized gains on debt investments (resulting in unrealized depreciation). For the six months ended March 31, 2014, the Company's net unrealized depreciation consisted of $608,777 of net unrealized depreciation on debt investments and $4,602 of net reclassifications to realized gains on debt investments (resulting in unrealized depreciation).

Note 10. Concentration of Credit Risks

The Company places its cash in financial institutions and at times such balances may be in excess of the FDIC insured limit. The Company limits its exposure to credit loss by depositing its cash with high credit quality financial institutions and monitoring their financial stability.

Note 11. Related Party Transactions

The Company has entered into an investment advisory agreement with the Investment Adviser. Under the investment advisory agreement, the Company pays the Investment Adviser a fee for its services consisting of two components — a base management fee and an incentive fee.

Base management Fee

The base management fee is calculated at an annual rate of 1% of the Company's gross assets (i.e., total assets held before deduction of any liabilities), which includes any investments acquired with the use of leverage and excludes any cash, cash equivalents and restricted cash. The base management fee is calculated based on the average value of the Company's gross assets at the end of the two most recently completed quarters. The base management fee is payable quarterly in arrears and the fee for any partial month or quarter is appropriately prorated.

For the three and six months ended March 31, 2015, base management fees were $1.5 million and $2.7 million, respectively. For the three and six months ended March 31, 2014, base management fees were $0.4 million and $0.6 million, respectively. At March 31, 2015 and September 30, 2014, respectively, the Company had liabilities on its Consolidated Statements of Assets and Liabilities in the amount of $1.5 million and $0.5 million, reflecting the unpaid portion of the base management fee payable to the Investment Adviser.

Incentive Fee

The incentive fee portion of the investment advisory agreement has two parts. The first part ("Part I Incentive Fee" or "income incentive fee") is calculated and payable quarterly in arrears based on the Company's "Pre-Incentive Fee Net Investment Income" for the immediately preceding fiscal quarter. For this purpose, "Pre-Incentive Fee Net Investment Income" means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the fiscal quarter, minus the Company's operating expenses for the quarter (including the base management fee, expenses payable under the Company's administration agreement, and any interest expense and dividends paid on any issued and outstanding indebtedness or preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income, expressed as a rate of return on the value of the Company's net assets at the end of the immediately preceding fiscal quarter, will be compared to a "hurdle rate" of 1.5% per quarter (6% annualized), subject to a "catch-up" provision measured as of the end of each fiscal quarter. The Company's net investment income used to calculate this part of the incentive fee is also included in the amount of its gross assets used to calculate the 1% base management fee. The operation of the incentive fee with respect to the Company's Pre-Incentive Fee Net Investment Income for each quarter is as follows:


•	No incentive fee is payable to the Investment Adviser in any fiscal quarter in which the Company's Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.5% (the "preferred return" or "hurdle");

•

50% of the Company's Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than or equal to 2.5% in any fiscal quarter (10% annualized) is payable to the Investment Adviser. The Company refers to this portion of its Pre-Incentive Fee Net Investment Income (which exceeds the hurdle rate but is less than or equal to 2.5%) as the "catch-up." The "catch-up" provision is intended to provide the Investment Adviser with an incentive fee of 20% on all of the Company's Pre-Incentive Fee Net Investment Income as if a hurdle rate did not apply when the Company's Pre-Incentive Fee Net Investment Income exceeds 2.5% in any fiscal quarter; and


•	20% of the amount of the Company's Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.5% in any fiscal quarter (10% annualized) is payable to the Investment Adviser once the hurdle is reached and the catch-up is achieved (20% of all Pre-Incentive Fee Net Investment Income thereafter is allocated to the Investment Adviser).

For the three and six months ended March 31, 2015, the Part I incentive fee was $1.2 million and $3.8 million, respectively, and for the three and six months ended March 31, 2014, the Part I incentive fee was $0.3 million. At March 31, 2015, the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of $1.2 million, reflecting the unpaid portion of the Part I incentive fee payable to the Investment Adviser.

The second part ("Part II incentive fee" or "capital gain incentive fee") of the incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the investment advisory agreement, as of the termination date) and equals 20% of the Company's realized capital gains, if any, on a cumulative basis from inception through the end of each fiscal year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.

In accordance with GAAP, the Company had cumulatively accrued a Part II incentive fee as September 30, 2014 of $54,826 which was reversed due to unrealized losses on the investment portfolio during the three and six months ended March 31, 2015. For the three and six months ended March 31, 2014, there was no Part II incentive fee to the investment adviser. GAAP requires that the capital gains incentive fee accrual consider the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the investment advisory and management agreement. This GAAP accrual is calculated using the aggregate cumulative realized capital gains and losses and aggregate cumulative unrealized capital depreciation included in the calculation of the Part II incentive fee plus the aggregate cumulative unrealized capital appreciation. If such amount is positive at the end of a period, then GAAP requires the Company to record a capital gains incentive fee equal to 20% of such cumulative amount, less the aggregate amount of actual Part II incentive fees paid or capital gains incentive fees accrued under GAAP in all prior periods. As of March 31, 2015, the Company has not paid any Part II incentive fees since inception. The resulting accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior periods or a reversal of previously recorded expense if such cumulative amount is less than in the prior periods. If such cumulative amount is negative, then there is no accrual. There can be no assurance that such unrealized capital appreciation will be realized in the future.

Indemnification

The investment advisory agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of their respective duties or by reason of the reckless disregard of their respective duties and obligations, the Company's Investment Adviser and its officers, managers, agents, employees, controlling persons, members (or their owners) and any other person or entity affiliated with it, are entitled to indemnification from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of the Investment Adviser's services under the investment advisory agreement or otherwise as the Company's Investment Adviser.

Administration Agreement

On January 1, 2015, the Company entered into an administration agreement with its administrator, FSC CT LLC ("FSC CT"), under substantially similar terms as its prior administration agreement with FSC CT, Inc. Under the administration agreement with FSC

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CT, administrative services are provided to the Company, including office facilities and equipment, and clerical, bookkeeping and recordkeeping services at such facilities. Under the administration agreement, FSC CT also performs or oversees the performance of the Company's required administrative services, which includes being responsible for the financial records which the Company is required to maintain and preparing reports to the Company's stockholders and reports filed with the SEC. In addition, FSC CT assists the Company in determining and publishing the Company's net asset value, overseeing the preparation and filing of the Company's 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. For providing these services, facilities and personnel, the Company provides reimbursement for the allocable portion of overhead and other expenses incurred in connection with payments of rent at market rates and the Company's allocable portion of the costs of compensation and related expenses of the Company's chief financial officer and chief compliance officer and their staffs. Such reimbursement is at cost with no profit to, or markup by, FSC CT. FSC CT may also provide, on the Company's behalf, managerial assistance to the Company's portfolio companies. The administration agreement may be terminated by either party without penalty upon 60 days' written notice to the other party.

For the three and six months ended March 31, 2015, the Company accrued administrative expenses of $0.3 million and $0.6 million, respectively. For the three and six months ended March 31, 2014, the Company accrued administrative expenses of $0.1 million and $0.2 million, respectively. At March 31, 2015 and September 30, 2014, $0.2 million was included in Due to FSC CT in the Consolidated Statements of Assets and Liabilities.

Note 12. Financial Highlights



	Three months ended March 31, 2015			Three months ended March 31, 2014			Six months ended March 31, 2015			Six months ended March 31, 2014
Net asset value at beginning of period	$	12.53		$	15.10		$	12.65		$	15.13
Net investment income (5)	0.23			0.27			0.58			0.49
Net unrealized appreciation (depreciation) on investments (5)	0.03			(0.04		)	(0.12		)	(0.09		)
Net realized gain (loss) on investments (5)	(0.03		)	0.03			(0.05		)	0.04
Distributions to stockholders	(0.30		)	(0.23		)	(0.60		)	(0.44		)
Net asset value at end of period	$	12.46		$	15.13		$	12.46		$	15.13
Per share market value at beginning of period	10.22			13.24			11.82			13.54
Per share market value at end of period	10.63			14.38			10.63			14.38
Total return (1)	6.99		%	10.19		%	(5.00		)%	7.83		%
Common shares outstanding at beginning of period	29,466,768			6,666,768			29,466,768			6,666.768
Common shares outstanding at end of period	29,466,768			6,666,768			29,466,768			6,666,768
Net assets at beginning of period	$	369,323,305		$	100,674,516		$	372,686,925		$	100,842,878
Net assets at end of period	$	367,026,481		$	100,845,119		$	367,026,481		$	100,845,119
Average net assets (2)	$	372,522,205		$	101,507,563		$	373,212,472		$	100,998.244
Ratio of net investment income to average net assets (3)	7.30		%	7.15		%	9.20		%	6.54		%
Ratio of total expenses to average net assets (3)	5.65		%	6.45		%	5.71		%	4.8		%
Ratio of portfolio turnover to average investments at fair value	3.54		%	26.66		%	9.87		%	37.39		%
Weighted average outstanding debt (4)	$	236,704,436		$	61,707,326		$	183,358,719		$	33,110,765
Average debt per share	$	8.03		$	9.26		$	6.22		$	4.97

_______________



(1)	Total return equals the increase or decrease of ending market value over beginning market value, plus distributions, divided by the beginning market value, assuming dividend reinvestment prices obtained under the Company's dividend reinvestment plan. Total return is not annualized during interim periods.
(2)	Calculated based upon the weighted average net assets for the period.
(3)	Interim periods are annualized.
(4)	Calculated based upon the weighted average of loans payable for the period.
(5)	Calculated based upon weighted average shares outstanding for the period.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 13. Subsequent Events

The Company's management evaluates subsequent events through the date of issuance of the Consolidated Financial Statements. There have been no subsequent events that occurred during such period that would require disclosure in, or would be required to be recognized in, the Consolidated Financial Statements as of and for the six months ended March 31, 2015, except as follows:

In April 2015, the Company invested $53.4 million in FSFR Glick JV LLC ("FSFR Glick JV") to facilitate the acquisition of $94.4 million in principal amount of senior secured loans. FSFR Glick JV has drawn $34.4 million under its $200.0 million revolving credit facility with Credit Suisse Securities (USA) LLC. These transactions were in connection with the Company's agreement in November 2014 with entities controlled by members of the Glick Family ("GF Funding") to provide $100.0 million of subordinated notes and equity to the FSFR Glick JV, with the Company providing $87.5 million and GF Funding providing $12.5 million. The FSFR Glick JV invests in middle market and other corporate debt securities. In future reporting periods, the Company's debt and equity investment in the FSFR Glick JV will be accounted for as a control investment within the Consolidated Schedule of Investments.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in connection with our Consolidated Financial Statements and the notes thereto included elsewhere in this quarterly report on Form 10-Q.

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


•	our future operating results and dividend projections;


•	our business prospects and the prospects of our portfolio companies;


•	the impact of the investments that we expect to make;


•	the ability of our portfolio companies to achieve their objectives;


•	our expected financings and investments;


•	the adequacy of our cash resources and working capital; and


•	the timing of cash flows, if any, from the operations of our portfolio companies.

In addition, words such as "anticipate," "believe," "expect," "seek," "plan," "should," "estimate," "project" and "intend" indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in "Risk Factors" in our annual report on Form 10-K for the year ended September 30, 2014 and elsewhere in this quarterly report on Form 10-Q for the quarter ended March 31, 2015. Other factors that could cause actual results to differ materially include:


•	changes in the economy and the financial markets;


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


•	future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business development companies or RICs; and


•	other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this annual report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Except as otherwise specified, references to the "Company," "we," "us," and "our," refer to Fifth Street Senior Floating Rate Corp.

All amounts are in dollars, except share amounts, percentages and as otherwise indicated.

Overview

We were formed in May 2013 as a Delaware corporation and structured as an externally managed, closed-end, non-diversified management investment company. Our investment objective is to maximize our portfolio’s total return by generating current income from our debt investments while seeking to preserve our capital. We have elected to be treated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes we have elected to be treated, and intend to continue to qualify annually, as a RIC under Subchapter M of the Code. Also, we are an "emerging growth company," as defined in the JOBS Act, and intend to take advantage of the exemption for emerging growth companies allowing us to temporarily forego the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002. We do not intend to take advantage of other disclosure or reporting exemptions for emerging growth companies under the JOBS Act.

On July 17, 2013, we completed an initial public offering of 6,666,668 shares of our common stock at the public offering price of $15.00 per share. The proceeds of our initial public offering totaled $100.0 million and all offering costs were borne by our investment adviser, including $5.3 million of underwriting commissions and $0.4 million of other offering related expenses.

On August 19, 2014, we completed a follow-on public offering of 22,800,000 shares of its common stock at the public offering price of $12.91 per share. The net proceeds totaled $276.2 million after deducting underwriting commissions of $17.7 million and offering costs of $0.5 million. Our common stock is listed on the NASDAQ Global Select Market, where it trades under the symbol "FSFR."

Critical Accounting Policies

Basis of Presentation

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions affecting amounts reported in the consolidated financial statements. We have identified investment valuation and revenue recognition as our most critical accounting estimates. We continuously evaluate our estimates, including those related to the matters described below. These estimates are based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. A discussion of our critical accounting policies follows.

Investment Valuation

We are required to report our investments that are not publicly traded or for which current market values are not readily available at fair value. The fair value is deemed to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

In accordance with authoritative accounting guidance, we perform detailed valuations of our debt and equity investments on an individual basis, using bond yield, market and income approaches as appropriate. In general, we utilize a bond yield method for the majority of our investments where there is no readily available market quotation, as long as it is appropriate. If, in our judgment, the bond yield approach is not appropriate, we may use the market approach, income approach, or, in certain cases, an alternative methodology potentially including market quotations, an asset liquidation model, expected recovery model or other alternative approaches.

Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, our capital markets group obtains and analyzes readily available market quotations provided by independent pricing services for all of our senior secured debt investments for which quotations are available. In determining the fair value of a particular investment, pricing services use observable market information, including both binding and non-binding indicative quotations. These investments are generally classified as Level 3 because the quoted prices may be indicative in nature for securities that are in an inactive market, may be for similar securities or may require adjustment for investment-specific factors or restrictions.

We evaluate the prices obtained from independent pricing services based on available market information and company specific data that could affect the credit quality and/or fair value of the investment. Investments for which market quotations are readily available may be valued at such market quotations. In order to validate market quotations, we look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. We do not adjust any of the prices received from these sources unless we have a reason to believe any such market quotations are not reflective of the fair value of an investment.

Market quotations may be deemed not to represent fair value where we believe that facts and circumstances applicable to an issuer, a seller or purchaser or the market for a particular security causes current market quotations not to reflect the fair value of the security, among other reasons. Examples of these events could include cases when a security trades infrequently causing a quoted purchase or sale price to become stale or in the event of a “fire sale” by a distressed seller. In these instances, we value such investments by using the valuation procedure that we use with respect to assets for which market quotations are not readily available (as discussed below).

If the quotation provided by the pricing service is based on only one or two market sources, we perform additional procedures to corroborate such information, generally including but not limited to, the bond yield approach discussed below and a quantitative and qualitative assessment of the credit quality and market trends affecting the portfolio company.

Under the bond yield approach, we use bond yield models to determine the present value of the future cash flow streams of our debt investments. We review various sources of transactional data, including private mergers and acquisitions involving debt investments with similar characteristics, and assess the information in the valuation process.

Under the market approach, we estimate the enterprise value of the portfolio companies in which we invest. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is best expressed as a range of fair values from which we derive a single estimate of enterprise value. To estimate the enterprise value of a portfolio company, we analyze various factors, including the portfolio company's historical and projected financial results. Typically, private companies are valued based on multiples of EBITDA (earnings before interest, taxes, depreciation and amortization), cash flows, net income or revenues. We generally require portfolio companies to provide annual audited and quarterly or monthly unaudited financial statements, as well as annual projections for the upcoming fiscal year.

Under the income approach, we generally prepare and analyze discounted cash flow models based on our projections of the future free cash flows of the business.

We estimate the fair value of privately held warrants using a Black Scholes pricing model. At each reporting date, privately held warrants are valued based on an analysis of various factors and subjective assumptions including, but not limited to, the current stock price (by analyzing the portfolio company’s operating performance and financial condition and general market conditions), the expected period until exercise, expected volatility of the underlying stock price, expected dividends, and the risk free rate. Changes in the subjective input assumptions can materially affect the fair value estimates.

Our Board of Directors undertakes a multi-step valuation process each quarter in connection with determining the fair value of our investments:


•	The quarterly valuation process begins with each portfolio company or investment being initially valued either by our capital markets group for quoted investments or our finance department for unquoted investments;

•Preliminary valuations are then reviewed and discussed with principals of the Investment Adviser;


•	Separately, independent valuation firms engaged by the Board of Directors prepare preliminary valuations of our investments, on a selected basis, for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment, and submit the reports to us;


•	Our finance department compares and contrasts its preliminary valuations to the preliminary valuations of the independent valuation firms;


•	Our finance department prepares a valuation report for the Audit Committee of our Board of Directors;


•	The Audit Committee of our Board of Directors is apprised of the preliminary valuations of the independent valuation firms;


•	The Audit Committee of our Board of Directors reviews the preliminary valuations with the portfolio managers of the Investment Adviser, and our finance department responds and supplements the preliminary valuations to reflect any comments provided by the Audit Committee;


•	The Audit Committee of our Board of Directors makes a recommendation to our Board of Directors regarding the fair value of the investments in our portfolio; and


•	Our Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith.

The fair value of all of our investments at March 31, 2015 and September 30, 2014, was determined by our Board of Directors. Our Board of Directors has authorized the engagement of independent valuation firms to provide us with valuation assistance. We will continue to engage independent valuation firms to provide us with assistance regarding our determination of the fair value of selected portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter; however, our Board of Directors is ultimately and solely responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and a consistently applied valuation process.

In certain cases, an independent valuation firm may perform a portfolio company valuation which is reviewed and, where appropriate, relied upon by our Board of Directors in determining the fair value of such investment.

The percentages of our portfolio, at fair value, valued by independent valuation firms each period during the current and preceding fiscal years were as follows:



For the quarter ended December 31, 2013	34.1	%
For the quarter ended March 31, 2014	30.5	%
For the quarter ended June 30, 2014	56.6	%
For the quarter ended September 30, 2014	44.3	%
For the quarter ended December 31, 2014	54.1	%
For the quarter ended March 31, 2015	32.1	%

As of March 31, 2015 and September 30, 2014, approximately 86.6% and 72.7%, respectively, of our total assets represented investments in portfolio companies valued at fair value.

Revenue Recognition

Interest and Dividend Income

Interest income, adjusted for accretion of original issue discount, or OID, is recorded on the accrual basis to the extent that such amounts are expected to be collected. We stop accruing interest on investments when it is determined that interest is no longer collectible. Distributions of income from portfolio companies are generally recorded as dividend income on the ex-dividend date.

Fee Income

We receive a variety of fees in the ordinary course of business including servicing, advisory, structuring and prepayment fees which are classified as fee income and recognized as they are earned.

Payment-in-Kind (PIK) Interest

Although none of our investments bore PIK interest as of March 31, 2015, a portion of our loans may contain contractual PIK interest provisions in the future. The PIK interest, which represents contractually deferred interest, will be added to the loan balance that is generally due at the end of the loan term, and would generally be recorded on the accrual basis to the extent such amounts are expected to be collected. We would generally cease accruing PIK interest if there is insufficient value to support the accrual or if we do not expect the portfolio company to be able to pay all principal and interest due. Our decision to cease accruing PIK interest would involve subjective judgments and determinations based on available information about a particular portfolio company, including whether the portfolio company is current with respect to its payment of principal and interest on its loans and debt securities; monthly and quarterly financial statements and financial projections for the portfolio company; our assessment of the portfolio company's business development success, including product development, profitability and the portfolio company's overall adherence to its business plan; information obtained by us in connection with periodic formal update interviews with the portfolio company's management and, if appropriate, the private equity sponsor; and information about the general economic and market conditions in which the portfolio company operates. Based on this and other information, we would determine whether to cease accruing PIK interest on a loan or debt security. Our determination to cease accruing PIK interest on a loan or debt security would generally be made well before our full write-down of such loan or debt security. There were no investments on which we earned PIK interest for the three and six months ended March 31, 2015 and March 31, 2014.

For a discussion of risks we are subject to if we were to acquire loans that bear PIK interest, see "Risk Factors — Risks Relating to Our Business and Structure — We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income," "— We may in the future choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive" and "— Our incentive fee may induce our investment adviser to make speculative investments" in our annual report on Form 10-K for the year ended September 30, 2014. In addition, if it is subsequently determined that we will not be able to collect any previously accrued PIK interest, the fair value of our loans or debt securities would decline by the amount of such previously accrued, but uncollectible, PIK interest. The accrual of PIK interest on our debt investments would increase the recorded cost basis of these investments in our financial statements and, as a result, would increase the cost basis of these investments for purposes of computing the capital gains incentive fee payable by us to our investment adviser.

To maintain our status as a RIC, PIK income must be paid out to our stockholders in the form of distributions even though we have not yet collected the cash and may never collect the cash relating to the PIK interest. We did not have any accumulated PIK interest as of March 31, 2015 and September 30, 2014.

Portfolio Composition

Our investments principally consist of senior secured loans in privately-held companies. Our loans are typically secured by a first or second lien on the assets of the portfolio company and generally have terms of up to seven years (but an expected average life of between three and four years). We are currently focusing our origination efforts on a prudent mix of first lien and second lien loans which we believe will provide superior risk-adjusted returns while maintaining adequate credit protection. The mix may change over time based on market conditions and management's view of where the best risk-adjusted returns are available.

As of March 31, 2015 and September 30, 2014, 99.9% and 99.8%, respectively, of our investment portfolio, at cost and fair value, was invested in senior secured debt investments that bore interest at floating rates.

The industry composition of our portfolio at cost and fair value, respectively, as a percentage of total investments was as follows:



	March 31, 2015		September 30, 2014
Cost:
Internet software & services	27.82	%	9.02	%
Healthcare services	17.73		12.76
Diversified support services	11.15		1.16
Application software	7.73		24.60
Education services	5.74		3.12
Pharmaceuticals	4.17		3.31
Integrated telecommunication services	3.55		6.13
Advertising	2.67		3.60
IT consulting & other services	2.01		—
Alternative carriers	1.91		1.66
Hotels, resorts & cruise lines	1.60		3.21
Data processing & outsourced services	1.53		2.00
Specialized consumer services	1.46		1.06
Healthcare technology	1.35		2.65
Research & consulting services	1.33		1.65
Food retail	1.21		—
Construction & engineering	1.03		2.03
Diversified capital markets	0.91		1.81
Personal products	0.83		1.65
Oil & gas equipment & services	0.79		1.58
Computer hardware	0.73		1.53
Industrial machinery	0.68		—
Fertilizers & agricultural chemicals	0.66		1.32
Wireless telecommunication services	0.51		1.00
Movies & entertainment	0.49		1.49
Electrical components & equipment	0.41		1.66
Casinos & gaming	—		4.43
Healthcare equipment	—		2.97
Electronic components	—		1.53
Specialty chemicals	—		1.07
	100.00	%	100.00	%



Fair value:	March 31, 2015		September 30, 2014
Internet software & services	27.67	%	9.03	%
Healthcare services	17.62		12.73
Diversified support services	11.22		1.15
Application software	7.74		24.59
Education services	5.76		3.13
Pharmaceuticals	4.22		3.30
Integrated telecommunication services	3.53		6.13
Advertising	2.68		3.61
IT consulting & other services	2.03		—
Alternative carriers	1.93		1.66
Hotels, resorts & cruise lines	1.61		3.20
Data processing & outsourced services	1.55		2.00
Specialized consumer services	1.47		1.06
Healthcare technology	1.35		2.67
Research & consulting services	1.33		1.65
Food retail	1.21		—
Construction & engineering	1.03		2.03
Diversified capital markets	0.94		1.80
Personal products	0.84		1.63
Oil & gas equipment & services	0.77		1.57
Computer hardware	0.73		1.54
Industrial machinery	0.68		—
Fertilizers & agricultural chemicals	0.66		1.35
Wireless telecommunication services	0.51		0.99
Movies & entertainment	0.51		1.55
Electrical components & equipment	0.41		1.62
Casinos & gaming	—		4.43
Healthcare equipment	—		2.97
Electronic components	—		1.54
Specialty chemicals	—		1.07
	100.00	%	100.00	%

Portfolio Asset Quality

We employ a ranking system to assess and monitor the credit risk of our investment portfolio. We rank all investments on a scale from 1 to 4. The system is intended to reflect the performance of the borrower's business, the collateral coverage of the loan, and other factors considered relevant to making a credit judgment. We have determined that there should be an individual ranking assigned to each tranche of securities in the same portfolio company where appropriate. This may arise when the perceived risk of loss on the investment varies significantly between tranches due to their respective seniority in the capital structure.


•	Investment Ranking 1 is used for investments that are performing above expectations and/or capital gains are expected.


•	Investment Ranking 2 is used for investments that are performing substantially within our expectations, and whose risks remain materially consistent with the potential risks at the time of the original or restructured investment. All new investments are initially ranked 2.

•

Investment Ranking 3 is used for investments that are performing below our expectations and for which risk has materially increased since the original or restructured investment. The portfolio company may be out of compliance with debt covenants and may require closer monitoring. To the extent that the underlying agreement has a PIK interest provision, investments with a ranking of 3 are generally those on which we are not accruing PIK interest.


•	Investment Ranking 4 is used for investments that are performing substantially below our expectations and for which

risk has increased substantially since the original or restructured investment. Investments with a ranking of 4 are those for which some loss of principal is expected and are generally those on which we are not accruing cash interest.

The following table shows the distribution of our investments on the 1 to 4 investment ranking scale at fair value as of March 31, 2015 and September 30, 2014:



Investment Ranking	March 31, 2015					September 30, 2014
Investment Ranking	Fair Value		% of Portfolio		Leverage Ratio	Fair Value		% of Portfolio		Leverage Ratio
1	—		—		—	—		—		—
2	$	583,559,421	100.00	%	4.48	$	300,001,397	100.00	%	4.48
3	—		—		—	—		—		—
4	—		—		—	—		—		—
Total	$	583,559,421	100.00	%	4.48	$	300,001,397	100.00	%	4.48

We may from time to time modify the payment terms of our investments, either in response to current economic conditions and their impact on certain of our portfolio companies or in accordance with tier pricing provisions in certain loan agreements. Such modified terms may include increased PIK interest provisions and reduced cash interest rates. Any future modifications to our loan agreements, may limit the amount of interest income that we recognize from the modified investments, which may, in turn, limit our ability to make distributions to our stockholders. As of March 31, 2015, we had modified the payment terms of our investment in three portfolio companies. As of September 30, 2014, we had modified the payment terms of our investment in one portfolio company.

Loans and Debt Securities on Non-Accrual Status

As of March 31, 2015, September 30, 2014 and March 31, 2014, there were no investments on which we had stopped accruing cash interest or OID income. For the three and six months ended March 31, 2015 and March 31, 2014, there were no income non-accrual amounts.

Discussion and Analysis of Results and Operations

Results of Operations

The principal measure of our financial performance is the net increase (decrease) in net assets resulting from operations, which includes net investment income (loss), net realized gain (loss) and net unrealized appreciation (depreciation). Net investment income is the difference between our income from interest, dividends, fees, and other investment income and total expenses. Net realized gain (loss) on investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment portfolio.

Comparison of the three and six months ended March 31, 2015 and March 31, 2014

Total Investment Income

Total investment income includes interest income on our investments, fee income and other investment income. Fee income consists principally of servicing, advisory, structuring and prepayment fees.

Total investment income for the three months ended March 31, 2015 and March 31, 2014 was $11.9 million and $3.4 million, respectively. For the three months ended March 31, 2015, this amount primarily consisted of $9.6 million of interest income from portfolio investments and $2.3 million of fee income. For the three months ended March 31, 2014, this amount primarily consisted of $2.6 million of interest income from portfolio investments and $0.8 million of fee income.

Total investment income for the six months ended March 31, 2015 and March 31, 2014 was $27.8 million and $5.7 million, respectively. For the six months ended March 31, 2015, this amount primarily consisted of $17.5 million of interest income from portfolio investments and $10.2 million of fee income. For the six months ended March 31, 2014, this amount primarily consisted of $3.9 million of interest income from portfolio investments and $1.8 million of fee income.

The weighted average cash yield on our debt investments at March 31, 2015 and September 30, 2014 was 7.35% and 7.24%, respectively.

The increase in our total investment income for the three and six months ended March 31, 2015, as compared to the three and six months ended March 31, 2014, was primarily attributable to higher average levels of outstanding debt investments,

which was principally due to a net increase of 25 debt investments in our portfolio year over year and an increase in fees related to investment activity, partially offset by amortization repayments received on our debt investments.

Expenses

Total expenses for the three months ended March 31, 2015 and March 31, 2014 were $5.2 million and $1.6 million, respectively. Total expenses increased for the three months ended March 31, 2015 as compared to the three months ended March 31, 2014 by $3.6 million. This was due primarily to increases in:


•	Base management fee, which was primarily attributable to a $403.8 million increase in the fair value of the investment portfolio due to an increase in net investment fundings in the year-over-year period;


•	Part I incentive fee, which was attributable to a $5.8 million increase in pre-incentive fee net investment income for the year-over-year period; and


•	Interest expense, which was attributable to a $175.0 million increase in weighted average debt outstanding for the year-over-year period.

Net expenses for the six months ended March 31, 2015 and March 31, 2014 were $10.6 million and $2.4 million, respectively. Net expenses increased for the six months ended March 31, 2015 as compared to the six months ended March 31, 2014 by $8.2 million. This was due primarily to increases in:


•	Base management fee, which was attributable to the increase in the fair value of the investment portfolio discussed above;


•	Part I incentive fee, which was attributable to a $17.3 million increase in pre-incentive fee net investment income for the year-over-year period; and


•	Interest expense, which was attributable to a $150.3 million increase in weighted average debt outstanding for the year-over-year period.

Net Investment Income

As a result of the $8.5 million increase in total investment income as compared to the $3.6 million increase in total expenses, net investment income for the three months ended March 31, 2015 reflected a $4.9 million increase compared to the three months ended March 31, 2014.

As a result of the $22.0 million increase in total investment income as compared to the $8.2 million increase in total expenses, net investment income for the six months ended March 31, 2015 reflected a $13.8 million increase compared to the six months ended March 31, 2014.

Realized Gain (Loss) on Investments

During the six months ended March 31, 2015, we recorded investment realization events, including the following:


•	In October 2014, we received a cash payment of $6.8 million from Answers Corporation in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par (plus additional fees) and no realized gain or loss was recorded on the transaction;


•	In December 2014, we received a cash payment of $4.9 million from Survey Sampling International, LLC in full satisfaction of all obligations under the loan agreement. The debt investment was exited at par and no realized gain or loss was recorded on the transaction; and

During the six months ended March 31, 2015, we received cash payments of $246.9 million in connection with full or partial sales of debt investments and recorded a net realized loss of $1.6 million.

During the six months ended March 31, 2014, we received cash payments of $51.9 million in connection with payoffs and open market sales of debt securities and recorded a net realized gain of $0.3 million.

Net Unrealized Appreciation (Depreciation) on Investments

Net unrealized appreciation or depreciation is the net change in the fair value of our investments during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

During the three and six months ended March 31, 2015, we recorded net unrealized appreciation (depreciation) of $0.8 million and $(3.6) million, respectively. For the three months ended March 31, 2015 this consisted of $48,210 of net unrealized appreciation on equity investments, $408,419 of net unrealized appreciation on debt investments and $381,162 of net

reclassifications to realized loss on debt and equity investments (resulting in unrealized appreciation). For the six months ended March 31, 2015, this consisted of $3,907,322 of net unrealized depreciation on debt investments, offset by $20,376 of net unrealized appreciation on equity investments and $335,731 of net reclassifications to realized loss on debt and equity investments (resulting in unrealized appreciation).

For the three months ended March 31, 2014, our net unrealized depreciation consisted of $314,338 of net unrealized depreciation on debt investments and $4,602 of net reclassifications to realized gains on debt investments (resulting in unrealized depreciation). For the six months ended March 31, 2014, our net unrealized depreciation consisted of $608,777 of net unrealized depreciation on debt investments and $4,602 of net reclassifications to realized gains on debt investments (resulting in unrealized depreciation).

Financial Condition, Liquidity and Capital Resources

Cash Flows

We have a number of alternatives available to fund the growth of our investment portfolio and our operations, including, but not limited to, raising equity, increasing debt and funding from operational cash flow. Additionally, we may reduce investment size by syndicating a portion of any given transaction. We intend to fund our future distribution obligations through operating cash flow or with funds obtained through future equity and debt offerings or as we deem appropriate.

For the six months ended March 31, 2015, we experienced a net decrease in cash and cash equivalents of $35.1 million. During that period, we used $294.3 million of cash in operating activities, primarily for the funding of $559.7 million of investments and net revolvers, partially offset by $271.0 million of principal payments and proceeds from the sale of investments and $17.1 million of net investment income. During the same period, cash provided by financing activities was $259.2 million, primarily consisting of $280.1 million of net borrowings under credit facilities, partially offset by $17.2 million of cash distributions paid and $3.2 million of deferred financing costs recognized.

For the six months ended March 31, 2014, we experienced a net decrease in cash and cash equivalents of $48.7 million. During that period, we used $126.3 million of cash in operating activities, primarily for the funding of $187.0 million of investments and net revolvers, partially offset by $55.5 million of amortization payments and proceeds from the sale of investments and $3.3 million of net investment income. During the same period, cash provided by financing activities was $77.6 million, primarily consisting of $80.9 million of borrowings under our credit facility, net of $1.8 million of deferred financing costs paid and $1.4 million of dividends paid.

As of March 31, 2015, we had $72.3 million of cash and cash equivalents, $5.7 million of restricted cash, portfolio investments (at fair value) of $583.6 million, distribution payable of $8.8 million, payables from unsettled transactions of $12.3 million and unfunded commitments of $41.8 million.

As of September 30, 2014, we had $107.4 million of cash and cash equivalents, $2.1 million of restricted cash, portfolio investments (at fair value) of $300.0 million, distribution payable of $8.8 million, payables from unsettled transactions of $27.9 million and unfunded commitments of $19.6 million.

Other Sources of Liquidity

We intend to continue to generate cash primarily from cash flows from operations, including interest earned, future borrowings and future offerings of our securities. Our primary use of funds is investments in our targeted asset classes and cash distributions to holders of our common stock.

Although we expect to fund the growth of our investment portfolio through the net proceeds from future equity offerings and issuances of senior securities or future borrowings to the extent permitted by the 1940 Act, our plans to raise capital may not be successful. In this regard, because our common stock has at times traded at a price below our then-current net asset value per share and we are limited in our ability to sell our common stock at a price below net asset value per share, we may be limited in our ability to raise equity capital.

In addition, we intend to distribute between 90% and 100% of our taxable income to our stockholders in order to satisfy the requirements applicable to RICs under Subchapter M of the Code. See "Regulated Investment Company Status and Dividends" below. Consequently, we may not have the funds or the ability to fund new investments, to make additional investments in our portfolio companies, to fund our unfunded commitments to portfolio companies or to repay borrowings. In addition, the illiquidity of our portfolio investments may make it difficult for us to sell these investments when desired and, if we are required to sell these investments, we may realize significantly less than their recorded value.

Also, as a business development company, we generally are required to meet a coverage ratio of total assets, less liabilities and indebtedness not represented by senior securities, to total senior securities, which include all of our borrowings and any outstanding preferred stock, of at least 200%. This requirement limits the amount that we may borrow. As of March 31, 2015, we were in compliance with this requirement. The amount of leverage that we employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing, such as the maturity, covenant package and rate structure of the proposed borrowings, our ability to raise funds through the issuance of shares of our common stock and the risks of such borrowings within the context of our investment outlook. Ultimately, we only intend to use leverage if the expected returns from borrowing to make investments will exceed the cost of such borrowing. To fund growth in our investment portfolio in the future, we anticipate needing to raise additional capital from various sources, including the equity markets and the securitization or other debt-related markets, which may or may not be available on favorable terms, if at all.

Significant Capital Transactions That Have Occurred Since Inception

The following table reflects the dividend distributions per share that our Board of Directors has declared, including shares issued under our DRIP, on our common stock since inception:

Frequency

Date Declared

Record Date

Payment Date

Amount
per Share

Total Distribution

DRIP Shares Issued (1)

DRIP Shares Value

Quarterly

October 8, 2013

October 21, 2013

October 31, 2013

$0.01

$66,668

—

Quarterly

October 8, 2013

December 16, 2013

January 31, 2014

0.20

1,333,354

606

$8,288

Quarterly

January 3, 2014

March 31, 2014

April 15, 2014

0.23

1,533,357

469

6,734

Quarterly

February 11, 2014

June 30, 2014

July 15, 2014

0.27

1,800,027

1,279

17,924

Quarterly

May 12, 2014

September 15, 2014

October 15, 2014

0.30

8,840,030

17,127

191,093

Quarterly

September 9, 2014

December 15, 2014

January 15, 2015

0.30

8,840,030

23,183

242,678

Quarterly

November 20, 2014

April 2, 2015

April 15, 2015

0.30

8,840,030

28,296

307,794

Monthly

February 4, 2015

May 1, 2015

May 15, 2015

0.10

Monthly

February 4, 2015

June 1, 2015

June 15, 2015

0.10

Monthly

February 4, 2015

July 1, 2015

July 15, 2015

0.10

Monthly

February 4, 2015

August 3, 2015

August 17, 2015

0.10

_______________________

(1) Shares were purchased on the open market and distributed.

On July 17, 2013, we completed an initial public offering of 6,666,668 shares of our common stock at the public offering price of $15.00 per share. The proceeds totaled $100.0 million and all offering costs were borne by our investment adviser, including $5.3 million of underwriting commissions and $0.4 million of other offering related expenses.

On August 19, 2014, we completed a follow-on public offering of 22,800,000 shares of our common stock at the public offering price of $12.91. The net proceeds totaled $276.2 million after deducting underwriting commissions of $17.7 million and offering costs of $0.5 million.

Borrowings

Natixis Facility

On November 1, 2013, FS Senior Funding LLC, our wholly-owned, special purpose financing subsidiary entered into the $100 million revolving credit Natixis facility with the lenders referred to therein, Natixis, New York Branch, as administrative agent, and U.S. Bank National Association, as collateral agent and custodian.

On October 16, 2014, we entered into agreements to expand the Natixis facility from $100 million to $200 million, including a $100 million term loan and a $100 million revolving credit facility. Fifth Third Bank ("Fifth Third") also joined the facility as a term loan lender. The $50 million term loan provided by Fifth Third is priced at LIBOR plus 2% per annum, and the $100 million revolving credit facility and $50 million term loan provided by Natixis, New York Branch, are priced at the applicable commercial paper rate plus 1.9% per annum. The facility maturity date remains unchanged.

As of March 31, 2015, we had $183.4 million of borrowings outstanding under the Natixis facility. Borrowings under the Natixis facility, if any, are secured by all of the assets of FS Senior Funding LLC and all of our equity interest in FS Senior Funding LLC. We may use the Natixis facility to fund a portion of FS Senior Funding LLC's loan origination activities and for general corporate purposes. Each loan origination under the Natixis facility is subject to the satisfaction of certain conditions. Our borrowings under the Natixis facility bore interest at a weighted average interest rate of 2.242% and 2.180% for the six months ended March 31, 2015 and March 31, 2014, respectively. For the three and six months ended March 31, 2015, we recorded interest expense of $1.1 million and $2.0 million, respectively, related to the Natixis facility. For the three and six months ended March 31, 2014, we recorded interest expense of $0.4 million and $0.6 million, respectively, related to the Natixis facility.

Citibank Facility

On January 15, 2015, FS Senior Funding II LLC, our wholly-owned, special purpose financing subsidiary, entered into a $175 million revolving credit facility (the "Citibank facility") with the lenders referred to therein, Citibank, N.A., as administrative agent, and Wells Fargo Bank, N. A., as collateral agent and custodian.

As of March 31, 2015, we had $96.7 million outstanding under the Citibank facility. Borrowings under the Citibank facility are secured by all of the assets of FS Senior Funding II LLC and all of our equity interest in FS Senior Funding II LLC. We may use the Citibank facility to fund a portion of its loan origination activities and for general corporate purposes. Each loan origination under the Citibank facility is subject to the satisfaction of certain conditions. Our borrowings under the Citibank facility bore interest at a weighted average interest rate of 2.511% for the three months ended March 31, 2015. For the three months ended March 31, 2015, we recorded interest expense of $0.6 million related to the Citibank facility.

Off-Balance Sheet Arrangements

We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. As of March 31, 2015 and September 30, 2014, our only off-balance sheet arrangements consisted of $41.8 million and $19.6 million, respectively, of unfunded commitments to provide debt financing to certain of our portfolio companies. Such commitments are subject to our portfolio companies' satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Statements of Assets and Liabilities and are not reflected on our Consolidated Statements of Assets and Liabilities.

A summary of the composition of unfunded commitments (consisting of revolvers & term loans) as of March 31, 2015 and September 30, 2014 is shown in the table below:



	March 31, 2015		September 30, 2014
TIBCO Software, Inc.	$	5,300,000	$	—
Landslide Holdings, Inc.	5,000,000		5,000,000
Triple Point Group Holdings, Inc.	4,952,965		4,984,375
Executive Consulting Group, Inc.	4,800,000		—
Motion Recruitment Partners LLC	3,900,000		—
BeyondTrust Software, Inc.	3,605,000		5,625,000
Metamorph US 3, LLC	2,400,000		—
Idera, Inc.	2,400,000		—
PowerPlan, Inc.	2,100,000		—
TrialCard Incorporated	2,000,000		—
Dynatect Group	1,800,000		—
Ameritox Ltd.	1,333,333		—
Teaching Strategies, LLC	1,200,000		—
NextCare, Inc.	1,049,870		1,555,642
GTCR Valor Companies, Inc.	—		2,412,308
Total	$	41,841,168	$	19,577,325

Contractual Obligations

The following table reflects information pertaining to our debt outstanding under the Natixis facility and the Citibank facility:



Credit Facilities Payable	Debt Outstanding as of September 30, 2014		Debt Outstanding as of March 31, 2015		Weighted average debt outstanding for the six months ended March 31, 2015		Maximum debt outstanding for the six months ended March 31, 2015
Natixis facility payable	$	—	$	183,397,646	$	156,163,115	$	200,000,000
Citibank facility payable	—		96,700,000		27,195,604		96,700,000
Total debt	$	—	$	280,097,646	$	183,358,719	$	296,700,000

Regulated Investment Company Status and Distributions

We have elected to be treated as a RIC under Subchapter M of the Code. As long as we continue to qualify as a RIC, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to stockholders on a timely basis.

Taxable income generally differs from net income for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized appreciation or depreciation until realized. Distributions declared and paid by us in a year may differ from taxable income for that year as such distributions may include the distribution of current year taxable income or the distribution of prior year taxable income carried forward into and distributed in the current year. Distributions also may include returns of capital.

To maintain RIC tax treatment, we must, among other things, distribute, with respect to each taxable year, at least 90% of our investment company net taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any). As a RIC, we are also subject to a U.S. federal excise tax, based on distributive requirements of our taxable income on a calendar year basis (e.g., calendar year 2014). We anticipate timely distribution of our taxable income within the tax rules; however, we incurred a de minimis U.S. federal excise tax for calendar year 2013. We do not expect to incur a U.S. federal excise tax for calendar year 2014. We may incur a U.S. federal excise tax in future years.

We intend to distribute to our stockholders between 90% and 100% of our annual taxable income (which includes our taxable interest and fee income). In addition, we may retain for investment some or all of our net taxable capital gains (i.e., realized net long-term capital gains in excess of realized net short-term capital losses) and treat such amounts as deemed distributions to our stockholders. If we do this, our stockholders will be treated as if they received actual distributions of the capital gains we retained and then reinvested the net after-tax proceeds in our common stock. Our stockholders also may be eligible to claim tax credits (or, in certain circumstances, tax refunds) equal to their allocable share of the tax we paid on the capital gains deemed distributed to them. To the extent our taxable earnings for a fiscal taxable year fall below the total amount

of our dividends for that fiscal year, a portion of those dividend distributions may be deemed a return of capital to our stockholders.

We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a business development company under the 1940 Act and due to provisions in our Natixis facility. If we do not distribute a certain percentage of our taxable income annually, we will suffer adverse tax consequences, including possible loss of our status as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.

In accordance with certain applicable Treasury regulations and private letter rulings issued by the Internal Revenue Service, a RIC may treat a distribution of its own stock as fulfilling its RIC distribution requirements if each stockholder may elect to receive his or her entire distribution in either cash or stock of the RIC, subject to a limitation that the aggregate amount of cash to be distributed to all stockholders must be at least 20% of the aggregate declared distribution. If too many stockholders elect to receive cash, each stockholder electing to receive cash must receive a pro rata amount of cash (with the balance of the distribution paid in stock). In no event will any stockholder, electing to receive cash, receive less than 20% of his or her entire distribution in cash. If these and certain other requirements are met, for U.S federal income tax purposes, the amount of the dividend paid in stock will be equal to the amount of cash that could have been received instead of stock. We have no current intention of paying dividends in shares of our stock in accordance with these Treasury regulations or private letter rulings.

Related Party Transactions

We have entered into an investment advisory agreement with Fifth Street Management. Messrs. Berman and Dimitrov, each an interested member of our Board of Directors, have a direct or indirect pecuniary interest in Fifth Street Management. Fifth Street Management is a registered investment adviser under the Investment Adviser's Act of 1940, that is partially and indirectly owned by Fifth Street Asset Management Inc. Pursuant to the investment advisory agreement, fees payable to our investment adviser will be equal to (a) a base management fee of 1.0% of the average value of our gross assets at the end of the two most recently completed quarters, which includes any borrowings for investment purposes and excludes cash, cash equivalents and restricted cash and (b) an incentive fee based on our performance. The incentive fee consists of two parts. The income incentive fee is calculated and payable quarterly in arrears and equals 20% of our "Pre-Incentive Fee Net Investment Income" for the immediately preceding quarter, subject to a preferred return, or "hurdle," and a "catch up" feature. The capital gains incentive fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the investment advisory agreement) and equals 20% of our "Incentive Fee Capital Gains," which equals our realized capital gains on a cumulative basis from inception through the end of the year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fee. The investment advisory agreement may be terminated by either party without penalty upon no fewer than 60 days' written notice to the other. During the three and six months ended March 31, 2015, we incurred fees of $2.7 million and $6.4 million, respectively, under the investment advisory agreement. During the three and six months ended March 31, 2014, we incurred fees of $0.8 million and $1.1 million, respectively, under the investment advisory agreement.

Pursuant to the administration agreement with FSC CT LLC, a wholly-owned subsidiary of our investment adviser, FSC CT will furnish us with the facilities, including our principal executive offices and administrative services necessary to conduct our day-to-day operations, including equipment, clerical, bookkeeping and recordkeeping services at such facilities. In addition, FSC CT assists us in connection with the determination and publishing of our net asset value, the preparation and filing of tax returns and the printing and dissemination of reports to our stockholders. We pay FSC CT its allocable portion of overhead and other expenses incurred by FSC CT in performing its obligations under the administration agreement, including a portion of the rent at market rates and the compensation of our chief financial officer and chief compliance officer and their respective staffs. The administration agreement may be terminated by either party without penalty upon no fewer than 60 days' written notice to the other. During the three and six months ended March 31, 2015, we incurred expenses of $0.3 million and $0.6 million, respectively, under the administration agreements. During the three and six months ended March 31, 2014, we incurred expenses of $0.1 million and $0.2 million, respectively, under the administration agreements.

We have also entered into a license agreement with Fifth Street Capital LLC pursuant to which Fifth Street Capital LLC has agreed to grant us a non-exclusive, royalty-free license to use the name "Fifth Street." Under this agreement, we will have a right to use the "Fifth Street" name for so long as Fifth Street Management LLC or one of its affiliates remains our investment adviser. Other than with respect to this limited license, we will have no legal right to the "Fifth Street" name. Fifth Street Capital LLC is controlled by Mr. Tannenbaum, our investment adviser's chief executive officer.

Recent Developments

In April 2015, we invested $53.4 million in FSFR Glick JV LLC ("FSFR Glick JV") to facilitate the acquisition of $94.4 million in principal amount of senior secured loans. FSFR Glick JV has drawn $34.4 million under its $200.0 million revolving credit facility with Credit Suisse Securities (USA) LLC. These transactions were in connection with our agreement in November 2014 with entities controlled by members of the Glick Family ("GF Funding") to provide $100.0 million of subordinated notes and equity to the FSFR Glick JV, with us providing $87.5 million and GF Funding providing $12.5 million. The FSFR Glick JV invests in middle market and other corporate debt securities. In future reporting periods, our debt and equity investment in the FSFR Glick JV will be accounted for as a control investment within the Consolidated Schedule of Investments.

Recently Issued Accounting Standards

See Note 2 to the Consolidated Financial Statements for a description of recent accounting pronouncements, including the expected dates of adoption and the anticipated impact on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments, cash and cash equivalents and idle funds investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks and limits by means of reliable administrative and information systems and other policies and programs. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent our debt investments include floating interest rates. In accordance with applicable loan agreements, certain of our portfolio companies may elect benchmark indices with various tenors on which to base the floating interest rate accruals on their loans, either in whole or in part. For example, if a borrower elects to pay interest at a floating rate that is indexed to the 30-day or 90-day LIBOR rate, the interest rate on the borrowing would be locked at such interest rate for 30 days or 90 days, respectively, at which time the borrower would again elect a rate for the subsequent period. Further, certain of our portfolio companies may elect from time to time to split the total principal balances of their loans between multiple benchmark indices for a given period. In addition, our investments are carried at fair value as determined in good faith by our Board of Directors in accordance with the 1940 Act (See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Investment Valuation"). Our valuation methodology utilizes discount rates in part in valuing our investments, and changes in those discount rates may have an impact on the valuation of our investments.

As of March 31, 2015, 100% of our debt investment portfolio (at cost and fair value) bore interest at floating rates and had interest rate floors between 1% and 2%. As of September 30, 2014, 100% of our debt investment portfolio (at cost and fair value) bore interest at floating rates and had interest rate floors between 1% and 2%.

Based on our Consolidated Statement of Assets and Liabilities as of March 31, 2015, the following table shows the approximate annualized increase (decrease) in components of net assets resulting from operations of hypothetical base rate changes in interest rates, assuming no changes in our investment and capital structure. However, there can be no assurances our portfolio companies will be able to meet their contractual obligations at any or all levels of increases in interest rates.



Basis point increase(1)	Interest Income		Interest Expense			Net increase (decrease)
500	$	24,955,203	$	(14,004,882	)	$	10,950,321
400	19,126,492		(11,203,906		)	7,922,586
300	13,297,782		(8,402,929		)	4,894,853
200	7,469,071		(5,601,953		)	1,867,118
100	1,686,326		(2,800,976		)	(1,114,650		)

__________________


(1)	A decline in interest rates would not have a material impact on our Consolidated Financial Statements.

We regularly measure exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities. Based on this review, we determine whether or not any hedging transactions are necessary to mitigate exposure to changes in interest rates. The following table shows a comparison of the interest rate base for our interest-bearing cash and outstanding investments, at principal, and our outstanding borrowings as of March 31, 2015 and September 30, 2014:



	March 31, 2015				September 30, 2014
	Interest Bearing Cash and Investments		Borrowings		Interest Bearing Cash and Investments
Money market rate	$	77,988,511	$	—	$	109,557,165
Prime rate	885,154		—		5,177,783
LIBOR:
30 day	101,351,984		—		29,929,483
60 day	19,006,203		—		3,221,875
90 day	460,470,075		—		261,536,008
180 day	5,932,827		280,097,646		—
Fixed rate	—		—		—
Total	$	665,634,754	$	280,097,646	$	409,422,314

Item 4. Controls and Procedures

All controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. As of the end of the period covered by this report, 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 defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, at the reasonable assurance level, in timely identifying, recording, processing, summarizing, and reporting any material information relating to us that is required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934.

There have been no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Although we may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise, we are currently not a party to any pending material legal proceedings.

Item 1A. Risk Factors

Our portfolio may be concentrated in a limited number of industries, which may subject us to a risk of significant loss if there is a downturn in a particular industry in which a number of our investments are concentrated. As of March 31, 2015, our investments in the internet software and services industry represented approximately 28% of the fair value of our portfolio and our investments in the healthcare services industry represented approximately 18% of the fair value of our portfolio. If an industry in which we have significant investments suffers from adverse business or economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely, which, in turn, could adversely affect our financial position and results of operations.

Healthcare companies often must obtain and maintain regulatory approvals to market many of their products, change prices for certain regulated products and consummate some of their acquisitions and divestitures. Delays in obtaining or failing to obtain or maintain these approvals could reduce revenue or increase costs. Policy changes on the local, state and federal level, such as the expansion of the government’s role in the healthcare arena and alternative assessments and tax increases specific to the healthcare industry or healthcare products as part of federal health care reform initiatives, could fundamentally change the dynamics of the healthcare industry. There have been no other material changes during the three months ended March 31, 2015 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 30, 2014.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 6. Exhibits.



Exhibit Number		Description of Exhibit

10.1*		Amendment No. 3 to the Amended and Restated Credit Agreement by and among the lenders referred to therein, FS Senior Funding LLC, Natixis, New York Branch, and U.S. Bank National Association, dated as of May 4, 2015

31.1*		Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




FIFTH STREET SENIOR FLOATING RATE CORP.

By:		/s/ Ivelin M. Dimitrov
		Ivelin M. Dimitrov
		Chief Executive Officer

By:		/s/ Richard A. Petrocelli
		Richard A. Petrocelli
		Chief Financial Officer

Date: May 11, 2015

EXHIBIT INDEX



Exhibit Number		Description of Exhibit

10.1*		Amendment No. 3 to the Amended and Restated Credit Agreement by and among the lenders referred to therein, FS Senior Funding LLC, Natixis, New York Branch, and U.S. Bank National Association, dated as of May 4, 2015

31.1*		Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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