Quarterly Report (10-q)

Quarterly Report (10-q)

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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 June 30, 2017



	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," "smaller reporting company" and "emerging growth 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 August 9, 2017.

FIFTH STREET SENIOR FLOATING RATE CORP.

FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2017

TABLE OF CONTENTS




		PART I — FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited):
		Consolidated Statements of Assets and Liabilities as of June 30, 2017 and September 30, 2016	3
		Consolidated Statements of Operations for the three and nine months ended June 30, 2017 and 2016	4
		Consolidated Statements of Changes in Net Assets for the nine months ended June 30, 2017 and 2016	5
		Consolidated Statements of Cash Flows for the nine months ended June 30, 2017 and 2016	6
		Consolidated Schedule of Investments as of June 30, 2017	7
		Consolidated Schedule of Investments as of September 30, 2016	14
		Notes to Consolidated Financial Statements	22
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		59
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		84
Item 4.	Controls and Procedures		85
		PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		85
Item 1A.	Risk Factors		86
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		86
Item 3.	Defaults Upon Senior Securities		86
Item 4.	Mine Safety Disclosures		86
Item 5.	Other Information		87
Item 6.	Exhibits		87
Signatures			87

PART I — FINANCIAL INFORMATION



Item 1.	Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Assets and Liabilities

(unaudited)



	June 30, 2017			September 30, 2016
ASSETS
Investments at fair value:
Control investments (cost June 30, 2017 and September 30, 2016: $71,117,506)	$	61,614,406		$	63,316,667
Affiliate investments (cost June 30, 2017: $18,006,812; cost September 30, 2016: $15,953,798)	11,778,272			13,006,458
Non-control/Non-affiliate investments (cost June 30, 2017: $500,706,398; cost September 30, 2016: $513,397,659)	491,785,575			497,281,256
Total investments at fair value (cost June 30, 2017: $589,830,716; cost September 30, 2016: $600,468,963)	565,178,253			573,604,381
Cash and cash equivalents	19,258,982			19,778,841
Restricted cash	7,651,878			9,036,838
Interest, dividends and fees receivable	2,883,409			4,579,935
Due from portfolio companies	305,501			336,429
Receivables from unsettled transactions	846,065			12,869,092
Deferred financing costs	1,348,806			2,063,133
Other assets	344,196			148,492
Total assets	$	597,817,090		$	622,417,141
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable, accrued expenses and other liabilities	$	466,921		$	1,246,286
Base management fee and incentive fee payable	2,163,704			2,987,721
Due to FSC CT	427,646			402,073
Interest payable	1,946,228			1,798,653
Payables from unsettled transactions	12,831,700			—
Amounts payable to syndication partners	—			18,750
Director fees payable	122,450			236,275
Credit facilities payable	86,656,800			107,426,800
Notes payable (net of $2,296,658 and $2,514,236 of unamortized financing costs as of June 30, 2017 and September 30, 2016, respectively)	179,503,342			177,485,764
Secured borrowings at fair value (proceeds September 30, 2016: $5,000,000)	—			4,985,425
Total liabilities	284,118,791			296,587,747
Commitments and contingencies (Note 13)
Net assets:
Common stock, $0.01 par value, 150,000,000 shares authorized; 29,466,768 shares issued and outstanding at June 30, 2017 and September 30, 2016	294,668			294,668
Additional paid-in-capital	373,995,934			373,995,934
Net unrealized depreciation on investments and secured borrowings	(24,652,463		)	(26,850,007		)
Net realized loss on investments	(24,371,682		)	(10,969,707		)
Accumulated overdistributed net investment income	(11,568,158		)	(10,641,494		)
Total net assets (equivalent to $10.65 and $11.06 per common share at June 30, 2017 and September 30, 2016, respectively) (Note 12)	313,698,299			325,829,394
Total liabilities and net assets	$	597,817,090		$	622,417,141

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Operations

(unaudited)



	Three months ended June 30, 2017			Three months ended June 30, 2016			Nine months ended June 30, 2017			Nine months ended June 30, 2016
Interest income:
Control investments	$	1,452,148		$	1,351,423		$	4,250,910		$	3,681,941
Affiliate investments	130,217			85,003			331,804			85,003
Non-control/Non-affiliate investments	10,406,975			10,078,942			28,930,631			31,416,467
Interest on cash and cash equivalents	36,094			20,141			98,590			53,311
Total interest income	12,025,434			11,535,509			33,611,935			35,236,722
PIK interest income:
Affiliate investments	63,551			42,502			164,331			42,502
Non-control/Non-affiliate investments	—			21,753			20,965			62,786
Total PIK interest income	63,551			64,255			185,296			105,288
Fee income:
Affiliate investments	3,351			3,148			9,647			3,148
Non-control/Non-affiliate investments	498,497			811,548			1,177,271			2,865,229
Total fee income	501,848			814,696			1,186,918			2,868,377
Dividend and other income:
Control investments	—			700,000			187,420			2,012,500
Allowance for control investments	(420,192		)	—			(420,192		)	—
Total dividend and other income	(420,192		)	700,000			(232,772		)	2,012,500
Total investment income	12,170,641			13,114,460			34,751,377			40,222,887
Expenses:
Base management fee	1,419,603			1,511,490			4,234,003			4,618,171
Part I incentive fee	1,143,101			1,219,810			2,420,829			3,733,909
Professional fees	280,008			894,245			972,310			3,529,285
Board of Directors fees	127,464			143,425			385,064			465,025
Interest expense	2,661,975			2,437,152			8,124,752			7,048,434
Administrator expense	127,533			92,622			456,018			406,030
General and administrative expenses	480,490			652,199			1,513,902			1,471,399
Total expenses	6,240,174			6,950,943			18,106,878			21,272,253
Base management fee waived	—			—			(6,232		)	—
Insurance recoveries	—			—			(250,000		)	—
Net expenses	6,240,174			6,950,943			17,850,646			21,272,253
Net investment income	5,930,467			6,163,517			16,900,731			18,950,634
Unrealized appreciation (depreciation) on investments:
Control investments	103,555			(1,348,337		)	(1,702,261		)	(5,765,722		)
Affiliate investments	(1,633,615		)	(2,380,733		)	(3,281,200		)	(2,380,733		)
Non-control/Non-affiliate investments	(4,272,744		)	6,988,548			7,195,580			(10,494,079		)
Net unrealized appreciation (depreciation) on investments	(5,802,804		)	3,259,478			2,212,119			(18,640,534		)
Net unrealized appreciation on secured borrowings	—			—			(14,575		)	—
Realized gain (loss) on investments:
Non-control/Non-affiliate investments	11,535			(8,506,936		)	(13,401,975		)	(13,360,666		)
Net realized gain (loss) on investments	11,535			(8,506,936		)	(13,401,975		)	(13,360,666		)
Net increase (decrease) in net assets resulting from operations	$	139,198		$	916,059		$	5,696,300		$	(13,050,566	)
Net investment income per common share — basic and diluted	$	0.20		$	0.21		$	0.57		$	0.64
Earnings (loss) per common share — basic and diluted	$ 0.00			$	0.03		$	0.19		$	(0.44	)
Weighted average common shares outstanding — basic and diluted	29,466,768			29,466,768			29,466,768			29,466,768
Distributions per common share (Note 6)	$	0.190		$	0.225		$	0.605		$	0.675

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Changes in Net Assets

(unaudited)



	Nine months ended June 30, 2017			Nine months ended June 30, 2016
Operations:
Net investment income	$	16,900,731		$	18,950,634
Net unrealized appreciation (depreciation) on investments	2,212,119			(18,640,534		)
Net unrealized appreciation on secured borrowings	(14,575		)	—
Net realized loss on investments	(13,401,975		)	(13,360,666		)
Net increase (decrease) in net assets resulting from operations	5,696,300			(13,050,566		)
Stockholder transactions:
Distributions to stockholders	(17,827,395		)	(19,890,068		)
Net decrease in net assets from stockholder transactions	(17,827,395		)	(19,890,068		)
Capital share transactions:
Issuance of common stock under dividend reinvestment plan	208,742			563,844
Repurchases of common stock under dividend reinvestment plan	(208,742		)	(563,844		)
Net increase in net assets from capital share transactions	—			—
Total decrease in net assets	(12,131,095		)	(32,940,634		)
Net assets at beginning of period	325,829,394			356,807,103
Net assets at end of period	$	313,698,299		$	323,866,469
Net asset value per common share	$	10.65		$	10.99
Common shares outstanding at end of period	29,466,768			29,466,768

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Statements of Cash Flows

(unaudited)



	Nine months ended June 30, 2017			Nine months ended June 30, 2016
Operating activities:
Net increase (decrease) in net assets resulting from operations	$	5,696,300		$	(13,050,566	)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by operating activities:
Net unrealized (appreciation) depreciation on investments	(2,212,119		)	18,640,534
Net unrealized appreciation on secured borrowings	14,575			—
Net realized loss on investments	13,401,975			13,360,666
PIK interest income	(185,296		)	(105,288		)
Recognition of fee income	(1,186,918		)	(2,868,377		)
Accretion of original issue discount on investments	(2,835,312		)	(1,281,598		)
Amortization of deferred financing costs	1,056,905			650,381
Changes in operating assets and liabilities:
Fee income received	1,136,616			2,872,568
Decrease in restricted cash	1,384,960			3,278,098
(Increase) decrease in interest, dividends and fees receivable	1,696,526			(1,429,710		)
(Increase) decrease in due from portfolio companies	30,928			(258,147		)
Decrease in receivables from unsettled transactions	12,023,027			4,642,115
Increase in other assets	(195,704		)	(281,093		)
Decrease in accounts payable, accrued expenses and other liabilities	(779,365		)	(71,205		)
Increase (decrease) in base management fee and incentive fee payable	(824,017		)	676,121
Increase (decrease) in due to FSC CT	25,573			(397		)
Increase in interest payable	147,575			48,219
Increase in payables from unsettled transactions	12,831,700			1,615,500
Decrease in amounts payable to syndication partners	(18,750		)	—
Decrease in director fees payable	(113,825		)	—
Purchases of investments and net revolver activity	(182,183,437		)	(260,058,416		)
Principal payments received on investments (scheduled payments)	11,667,577			8,027,442
Principal payments received on investments (payoffs)	143,971,302			107,307,730
PIK interest income received in cash	—			154,217
Proceeds from the sale of investments	26,851,740			139,305,087
Net cash provided by operating activities	41,402,536			21,173,881
Financing activities:
Distributions paid in cash	(17,618,653		)	(19,326,224		)
Borrowings under credit facilities	39,700,000			19,667,000
Repayments of borrowings under credit facilities	(60,470,000		)	(40,500,000		)
Repayments of secured borrowings	(5,000,000		)	—
Proceeds from issuance of notes payable	7,500,000			29,715,000
Repayments of notes payable	(5,700,000		)	(36,081,000		)
Repurchases of common stock under dividend reinvestment plan	(208,742		)	(563,844		)
Deferred financing costs paid	(125,000		)	(450,374		)
Net cash used by financing activities	(41,922,395		)	(47,539,442		)
Net decrease in cash and cash equivalents	(519,859		)	(26,365,561		)
Cash and cash equivalents, beginning of period	19,778,841			41,433,301
Cash and cash equivalents, end of period	$	19,258,982		$	15,067,740
Supplemental information:
Cash paid for interest	$	6,920,272		$	6,349,834
Non-cash operating activities:
Purchase of investment from restructuring	$	—		$	(12,559,122	)
Proceeds from investment restructuring	$	—		$	12,559,122
Non-cash financing activities:
Issuance of shares of common stock under dividend reinvestment plan	$	208,742		$	563,844

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

June 30, 2017

(unaudited)



Portfolio Company/Type of Investment (1)(2)(10)(14)	Industry	Principal (5)		Cost			Fair Value
Control Investments (3)
FSFR Glick JV LLC (7)(12)(15)	Multi-sector holdings
Subordinated Note, LIBOR+8% cash due 10/20/2021 (8)		$	64,005,755	$	64,005,755		$	61,614,406
87.5% equity interest				7,111,751			—
				71,117,506			61,614,406
Total Control Investments (19.6% of net assets)				$	71,117,506		$	61,614,406
Affiliate Investments (4)
Ameritox Ltd.	Healthcare services
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021 (8)(13)		$	8,443,901	$	8,433,846		$	8,443,901
3,309,873.6 Class A Preferred Units in Ameritox Holdings II, LLC				3,309,874			3,334,371
327,393.6 Class B Preferred Units in Ameritox Holdings II, LLC				327,394			—
1,007.36 Class A Units in Ameritox Holdings II, LLC				5,935,698			—
				18,006,812			11,778,272
Total Affiliate Investments (3.8% of net assets)				$	18,006,812		$	11,778,272

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)(11)				$	—		$	(437,932	)
				—			(437,932		)
New Trident Holdcorp, Inc. (9)	Healthcare services
First Lien Term Loan B, LIBOR+5.25% (1.25% floor) cash due 7/31/2019 (8)(13)		$	13,590,940	13,286,561			11,389,208
Second Lien Term Loan, LIBOR+9% (1.25% floor) cash due 7/31/2020 (8)		1,000,000		977,880			740,835
				14,264,441			12,130,043
Accruent, LLC	Internet software & services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 5/16/2022 (8)(13)		9,900,000		9,819,870			9,960,242
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 5/16/2022 (8)(11)				(685		)	517
				9,819,185			9,960,759
Survey Sampling International, LLC	Research & consulting services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 12/16/2020 (8)(13)		5,683,063		5,654,610			5,697,270
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 12/16/2021 (8)		1,000,000		987,381			985,000
				6,641,991			6,682,270
Answers Corporation	Internet software & services
Delayed Draw DIP Facility, LIBOR+7% (1% floor) cash due 4/15/2021 (8)(13)		2,825,332		2,759,367			2,842,990
				2,759,367			2,842,990
Maxor National Pharmacy Services, LLC	Pharmaceuticals
First Lien Term Loan, LIBOR+5.25% (1.25% floor) cash due 1/31/2020 (8)(13)		9,092,205		9,092,205			9,034,233
				9,092,205			9,034,233
NextCare, Inc.	Healthcare services
Senior Term Loan, LIBOR+6% (1% floor) cash due 7/31/2018 (8)(13)		6,975,766		6,975,766			6,598,694
Delayed Draw Term Loan, LIBOR+6% (1% floor) cash due 7/31/2018 (8)		1,397,381		1,397,381			1,306,322
				8,373,147			7,905,016
Aptean, Inc.	Application software
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 12/20/2022 (8)(13)		11,271,750		11,194,953			11,331,660
Second Lien Term Loan, LIBOR+9.5% (1% floor) cash due 12/20/2023 (8)		200,000		197,214			200,626
				11,392,167			11,532,286
Stratus Technologies, Inc.	Computer hardware
First Lien Term Loan, LIBOR+5% (1% floor) cash due 4/28/2021 (8)(13)		1,340,543		1,302,855			1,342,218
				1,302,855			1,342,218
TravelCLICK, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+7.75% (1% floor) cash due 11/6/2021 (8)(13)		2,048,485		2,008,288			2,058,727
				2,008,288			2,058,727

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

June 30, 2017

(unaudited)



Portfolio Company/Type of Investment (1)(2)(10)(14)	Industry	Principal (5)		Cost			Fair Value
GTCR Valor Companies, Inc.	Advertising
First Lien Term Loan, LIBOR+6% (1% floor) cash due 6/16/2023 (8)(13)		$	12,127,508	$	11,582,138		$	12,214,705
				11,582,138			12,214,705
Verdesian Life Sciences, LLC	Fertilizers & agricultural chemicals
First Lien Term Loan, LIBOR+5% (1% floor) cash due 7/1/2020 (8)(13)		3,295,860		3,271,743			2,776,762
				3,271,743			2,776,762
TV Borrower US, LLC (7)	Integrated telecommunication services
First Lien Dollar Term B-1 Loan, LIBOR+4.75% (1% floor) cash due 2/16/2024 (8)		3,391,500		3,375,357			3,415,529
				3,375,357			3,415,529
American Dental Partners, Inc.	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/19/2021 (8)(13)		5,133,293		5,118,578			4,902,295
				5,118,578			4,902,295
BeyondTrust Software, Inc.	Application software
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/25/2019 (8)(13)		16,412,731		16,303,289			16,371,697
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/25/2019 (8)(11)				(20,850		)	(9,012		)
500,000 Class A membership interests in BeyondTrust Holdings LLC				500,000			584,914
				16,782,439			16,947,599
Dynatect Group Holdings, Inc.	Industrial machinery
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 9/30/2020 (8)		3,796,203		3,796,203			3,748,751
				3,796,203			3,748,751
Idera, Inc.	Internet software & services
First Lien Term Loan B, L+5% (1% floor) cash due 6/27/2024		3,466,364		3,431,700			3,466,364
				3,431,700			3,466,364
Central Security Group, Inc. (9)	Specialized consumer services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 10/6/2020 (8)		1,670,022		1,664,536			1,673,504
				1,664,536			1,673,504
Kellermeyer Bergensons Services, LLC	Diversified support services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 10/29/2021 (8)(13)		5,265,000		5,219,193			5,159,700
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 4/29/2022 (8)(13)		280,000		280,000			269,500
				5,499,193			5,429,200
GOBP Holdings Inc.	Food retail
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 10/21/2022 (8)(13)		3,685,714		3,641,981			3,717,964
				3,641,981			3,717,964
NAVEX Global, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 11/18/2022 (8)		910,156		910,156			905,605
				910,156			905,605
Executive Consulting Group, LLC	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2019 (8)(13)		7,000,000		7,000,000			6,966,108
Delayed Draw Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2019 (8)		3,833,320		3,833,320			3,825,481
				10,833,320			10,791,589
TIBCO Software, Inc. (9)	Internet software & services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/4/2020 (8)		7,859,452		7,590,772			7,912,778
				7,590,772			7,912,778

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

June 30, 2017

(unaudited)



Portfolio Company/Type of Investment (1)(2)(10)(14)	Industry	Principal (5)		Cost			Fair Value
Metamorph US 3, LLC (9)	Internet software & services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(13)		$	14,108,177	$	13,838,871		$	8,089,530
First Lien Revolver, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(11)(13)		600,000		572,567			(167,856		)
				14,411,438			7,921,674
Compuware Corporation	Internet software & services
First Lien Term Loan B3, LIBOR+4.25% (1% floor) cash due 12/15/2021 (8)(13)		7,445,002		7,360,988			7,510,146
				7,360,988			7,510,146
Motion Recruitment Partners LLC	Diversified support services
First Lien Term Loan, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(13)		13,606,554		13,587,725			13,539,915
First Lien Revolver, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(11)				(1,680		)	(14,203		)
				13,586,045			13,525,712
PowerPlan, Inc. (9)	Internet software & services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 2/23/2022 (8)(13)		17,844,314		17,802,721			17,788,163
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 2/23/2021 (8)(11)				—			(6,608		)
				17,802,721			17,781,555
Digital River, Inc.	Internet software & services
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 2/12/2021 (8)(13)		4,723,868		4,678,690			4,747,488
				4,678,690			4,747,488
Research Now Group, Inc.	Data processing & outsourced services
Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 3/18/2022 (8)		4,000,000		3,960,000			3,940,000
				3,960,000			3,940,000
My Alarm Center, LLC	Security & alarm services
First Lien Term Loan A, LIBOR+8% (1% floor) cash due 1/9/2019 (8)(13)		16,047,619		16,047,619			16,368,572
First Lien Term Loan B, LIBOR+8% (1% floor) cash due 1/9/2019 (8)		949,633		949,633			968,625
First Lien Term Loan C, LIBOR+8% (1% floor) cash due 1/9/2019 (8)		864,435		864,435			881,724
First Lien Term Revolver, LIBOR+8% (1% floor) cash due 1/9/2019 (8)		813,333		813,333			829,600
				18,675,020			19,048,521
Raley's	Food retail
First Lien Term Loan, LIBOR+6.25% (1% floor) cash due 5/18/2022 (8)(13)		3,237,242		3,188,990			3,261,521
				3,188,990			3,261,521
Aptos, Inc.	Data processing & outsourced services
First Lien Term Loan, LIBOR+6.75% (1% floor) cash due 9/1/2022 (8)(13)		5,955,000		5,851,928			5,895,450
				5,851,928			5,895,450
All Web Leads, Inc.	Advertising
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 12/29/2020 (8)(13)		28,105,908		28,105,908			24,354,233
				28,105,908			24,354,233
USAGM Holdco, LLC	Security & alarm services
First Lien Term Loan, LIBOR+3.75% (1% floor) cash due 7/28/2022 (8)		3,000,000		3,022,137			3,013,125
				3,022,137			3,013,125
Internet Pipeline, Inc.	Internet software & services
First Lien Term Loan, LIBOR+7.25% (1% floor) cash due 8/4/2022 (8)(13)		11,726,267		11,726,267			11,753,451
First Lien Revolver, LIBOR+7.25% (1% floor) cash due 8/4/2021 (8)				—			1,855
				11,726,267			11,755,306
Poseidon Merger Sub, Inc.	Advertising
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 8/15/2023 (8)		7,000,000		6,990,363			7,109,169
				6,990,363			7,109,169
American Seafoods Group LLC	Food distributors
First Lien Term Loan, LIBOR+5% (1% floor) cash due 8/19/2021 (8)(13)		2,657,896		2,621,987			2,675,624
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 2/19/2022 (8)		3,000,000		2,978,793			2,910,000
				5,600,780			5,585,624

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

June 30, 2017

(unaudited)



Portfolio Company/Type of Investment (1)(2)(10)(14)	Industry	Principal (5)		Cost			Fair Value
Valet Merger Sub, Inc.	Environmental & facilities services
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/24/2021 (8)(13)		$	5,895,000	$	5,865,296		$	5,947,489
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/24/2021 (8)		500,000		488,680			507,420
				6,353,976			6,454,909
DigiCert, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 10/21/2022 (8)(13)		2,000,000		1,984,175			2,003,447
				1,984,175			2,003,447
Lytx, Inc.	Research & consulting services
First Lien Term Loan, LIBOR+8.5% (1% floor) cash due 3/15/2023 (8)		9,876,400		9,876,400			10,170,320
500 Class A Units in Lytx Holdings, LLC				514,743			699,332
				10,391,143			10,869,652
4 Over International, LLC	Commercial printing
First Lien Term Loan, LIBOR+6.0% (1% floor) cash due 6/7/2022 (8)(13)		5,880,206		5,831,559			5,920,300
First Lien Revolver, LIBOR+6.0% (1% floor) cash due 6/7/2021 (8)(11)				(536		)	467
				5,831,023			5,920,767
OBHG Management Services, LLC	Healthcare services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 6/28/2022 (8)(13)		16,002,000		15,996,082			15,898,857
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 6/28/2021 (8)(11)				(32		)	(645		)
				15,996,050			15,898,212
Ancile Solutions, Inc.	Internet software & services
First Lien Term Loan, LIBOR+7% (1% floor) cash due 6/30/2021 (8)(13)		9,944,654		9,711,690			10,015,553
				9,711,690			10,015,553
Pomeroy Group Holdings, Inc.	IT consulting & other services
First Lien Term Loan, LIBOR+6% (1% floor) cash due 11/12/2021 (8)(13)		4,454,774		4,343,940			4,254,309
				4,343,940			4,254,309
Sailpoint Technologies, Inc.	Application software
First Lien Term Loan, LIBOR+8% (1% floor) cash due 8/16/2021 (8)		17,391,304		17,058,234			17,043,478
First Lien Revolver, LIBOR+8% (1% floor) cash due 8/16/2021 (8)(11)				(3,267		)	(600		)
				17,054,967			17,042,878
SMS Systems Maintenance Services, Inc.	IT consulting & other services
First Lien Term Loan B, LIBOR+5% (1% floor) cash due 10/30/2023 (8)(13)		9,950,000		9,894,285			9,943,831
				9,894,285			9,943,831
Cardenas Markets LLC	Food retail
First Lien Term Loan, LIBOR+5.75% (1% floor) cash due 11/29/2023 (8)(13)		3,283,500		3,253,407			3,287,605
				3,253,407			3,287,605
Ministry Brands, LLC	Internet software & services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 12/2/2022 (8)(13)		9,673,175		9,585,868			9,750,662
First Lien Delayed Draw Term Loan, LIBOR+5% (1% floor) cash due 12/2/2022 (8)(13)		2,671,520		2,647,405			2,692,922
Second Lien Term Loan, LIBOR+9.25% (1% floor) cash due 6/2/2023 (8)(13)		1,568,067		1,546,657			1,605,798
Second Lien Delayed Draw Term Loan, LIBOR+9.25% (1% floor) cash due 6/2/2023 (8)		431,933		426,035			426,035
First Lien Revolver, LIBOR+5% (1% floor) cash due 12/2/2022 (8)(11)				(903		)	801
				14,205,062			14,476,218
Impact Sales, LLC	Advertising
First Lien Term Loan B, LIBOR+7% (1% floor) cash due 12/30/2021 (8)		3,731,250		3,632,399			3,740,083
First Lien Delayed Draw Term Loan, LIBOR+7% (1% floor) cash due 12/30/2021 (8)		171,445		171,445			180,322
				3,803,844			3,920,405

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

June 30, 2017

(unaudited)



Portfolio Company/Type of Investment (1)(2)(10)(14)	Industry	Principal (5)		Cost			Fair Value
Auction.com, LLC	Internet software & services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 5/12/2019 (8)(13)		$	198,477	$	198,854		$	200,462
				198,854			200,462
Empower Payments Acquisition, Inc.	Commercial printing
First Lien Term Loan B, LIBOR+5.5% (1% floor) cash due 11/30/2023 (8)(13)		6,169,000		6,054,561			6,222,473
				6,054,561			6,222,473
First American Payment Systems, L.P.	Diversified support services
First Lien Term Loan B, LIBOR+5.75% (1% floor) cash due 1/8/2024 (8)(13)		4,312,500		4,272,520			4,361,016
				4,272,520			4,361,016
DFT Intermediate LLC	Specialized finance
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 3/1/2023 (8)(13)		14,962,500		14,609,258			14,729,700
First Lien Revolver, LIBOR+5.5% (1% floor) cash due 3/1/2022 (8)		750,000		732,500			738,331
				15,341,758			15,468,031
Systems Inc.	Industrial machinery
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 3/3/2022 (8)(13)		9,170,213		9,041,830			9,124,362
First Lien Revolver, LIBOR+5.5% (1% floor) cash due 3/3/2022 (8)(11)				(8,400		)	(7,920		)
				9,033,430			9,116,442
Onvoy, LLC	Integrated telecommunication services
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 2/10/2024 (8)(13)		7,980,000		7,942,025			8,019,900
				7,942,025			8,019,900
Salient CRGT, Inc.	IT consulting & other services
First Lien Term Loan, LIBOR+5.75% (1% floor) cash due 2/28/2022 (8)(13)		6,459,375		6,338,841			6,443,227
				6,338,841			6,443,227
MHE Intermediate Holdings	Diversified support services
First Lien Term Loan B, LIBOR+5% (1% floor) cash due 3/11/2024 (8)(13)		11,804,356		11,576,722			11,844,250
First Lien Revolver, LIBOR+5% (1% floor) cash due 3/10/2023 (8)		656,814		555,477			674,128
Delayed Draw Term Loan, LIBOR+5% (1% floor) cash due 3/11/2024 (8)		1,131,367		1,036,890			1,131,367
				13,169,089			13,649,745
Paris Presents Incorporated	Personal Products
First Lien Term Loan B, LIBOR+5% (1% floor) cash due 12/31/2020 (8)(13)		3,142,003		3,112,731			3,142,003
Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 12/31/2021 (8)(13)		3,500,000		3,433,750			3,465,000
				6,546,481			6,607,003
PSI Services LLC	Human Resource & Employment Services
First Lien Term Loan B, LIBOR+5% (1% floor) cash due 1/20/2023 (8)(13)		6,753,906		6,656,896			6,656,896
				6,656,896			6,656,896
MHVC Acquisition Corp.	Aerospace & Defense
First Lien Term Loan B, LIBOR+5.25% (1% floor) cash due 4/25/2024 (8)(13)		6,500,000		6,468,283			6,581,250
				6,468,283			6,581,250
LSF9 Atlantis Holdings, LLC	Computer & Electronics Retail
First Lien Term Loan B, LIBOR+6% (1% floor) cash due 4/21/2023 (8)(13)		7,500,000		7,427,113			7,585,950
				7,427,113			7,585,950
Everi Payments Inc.	Casinos & gaming
First Lien Term Loan B, LIBOR+4.5% (1% floor) cash due 5/9/2024 (8)(13)		5,000,000		4,975,301			5,041,425
				4,975,301			5,041,425
See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

June 30, 2017

(unaudited)



Portfolio Company/Type of Investment (1)(2)(10)(14)	Industry	Principal (5)		Cost		Fair Value
BJ's Wholesale Club, Inc.	Hypermarkets & super centers
First Lien Term Loan B, LIBOR+3.75% (1% floor) cash due 1/26/2024 (8)		$	3,000,000	$	3,003,703	$	2,914,995
				3,003,703		2,914,995
Bass Pro Group, LLC	Specialty Stores
First Lien Term Loan B, LIBOR+5% (1% floor) cash due 12/15/2023 (8)		3,000,000		2,940,769		2,921,820
				2,940,769		2,921,820
Imagine ! Print Solutions, LLC	Advertising
First Lien Term Loan B, LIBOR+4.75% (1% floor) cash due 6/21/2022 (8)		6,982,500		6,912,675		6,982,500
				6,912,675		6,982,500
MNO Holdings III Corp.	Specialty Stores
First Lien Term Loan B, LIBOR+4.5% (1% floor) cash due 6/19/2024 (8)(13)		2,500,000		2,487,500		2,521,875
				2,487,500		2,521,875
Total Non-Control/Non-Affiliate Investments (156.8% of net assets)				$	500,706,398	$	491,785,575
Total Portfolio Investments (180.2% of net assets)				$	589,830,716	$	565,178,253
Cash and Cash Equivalents
Wells Fargo Bank Institutional Money Market Fund				$	16,260,430	$	16,260,430
Other cash accounts				2,998,552		2,998,552
Total Cash and Cash Equivalents (6.1% of net assets)				$	19,258,982	$	19,258,982
Total Portfolio Investments, Cash and Cash Equivalents (186.3% of net assets)				$	609,089,698	$	584,437,235

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

June 30, 2017

(unaudited)


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


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


(3)	Control Investments generally are defined by the Investment Company Act of 1940, as amended ("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 generally 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 includes accumulated payment in kind ("PIK") interest and is net of repayments, if any.


(6)	Non-Control/Non-Affiliate Investments are 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. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of June 30, 2017, qualifying assets represented 88.7% of the Company's total assets and non-qualifying assets represented 11.3% of the Company's total assets.

(8)

The interest rate on the principal balance outstanding for all floating rate loans is indexed to London Interbank Offered Rate ("LIBOR") and/or 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 or the alternate base rate 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	PIK interest	Reason
TIBCO Software, Inc.	January 18, 2017	- 1% on First Lien Term Loan		Per loan amendment
New Trident Holdcorp, Inc.	December 9, 2016	+ 0.50% on First Lien Term Loan and Second Lien Term Loan		Per loan amendment
Metamorph US 3, LLC	October 1, 2016	+ 1% on First Lien Revolver	+ 2.0% on First Lien Term Loan	Tier pricing per loan agreement
PowerPlan, Inc.	May 21, 2016	- 0.5% on First Lien Term Loan		Tier pricing per loan agreement
Central Security Group, Inc.	February 3, 2016	+ 0.375% on First Lien Term Loan		Per loan amendment


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


(11)	Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis. A negative fair value may result from the unfunded commitment being valued below par.

(12)

As defined in the 1940 Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). See Schedule 12-14 in the accompanying notes to the Consolidated Financial Statements for transactions during the nine months ended June 30, 2017 in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to control.


(13)	Investment pledged as collateral under the Company's 2015 Debt Securitization (as defined in Note 6 - Borrowings), in whole or in part.


(14)	Equity ownership may be held in shares or units of companies related to the portfolio companies.


(15)	See Note 3 to the Consolidated Financial Statements for portfolio composition.

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016



Portfolio Company/Type of Investment (1)(2)(10)(17)	Industry	Principal (5)		Cost			Fair Value
Control Investments (3)
FSFR Glick JV LLC (7)(12)(18)	Multi-sector holdings
Subordinated Note, LIBOR+8% cash due 10/20/2021 (8)		$	64,005,755	$	64,005,755		$	56,885,646
87.5% equity interest (14)				7,111,751			6,431,021
				71,117,506			63,316,667
Total Control Investments (19.4% of net assets)				$	71,117,506		$	63,316,667
Affiliate Investments (4)
Ameritox Ltd. (15)	Healthcare services
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021 (8)(13)		6,387,128		$	6,380,832		$	6,342,286
3,309,873.6 Class A Preferred Units in Ameritox Holdings II, LLC				3,309,874			3,626,150
327,393.6 Class B Preferred Units in Ameritox Holdings II, LLC				327,394			358,679
1,007.36 Class A Units in Ameritox Holdings II, LLC				5,935,698			2,679,343
				15,953,798			13,006,458
Total Affiliate Investments (4.0% of net assets)				$	15,953,798		$	13,006,458

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)(13)		4,249,996		4,177,081			4,090,429
				4,177,081			4,090,429
New Trident Holdcorp, Inc.	Healthcare services
First Lien Term Loan B, LIBOR+5.25% (1.25% floor) cash due 7/31/2019 (8)(13)		13,707,532		13,289,778			11,788,478
Second Lien Term Loan, LIBOR+9% (1.25% floor) cash due 7/31/2020 (8)		1,000,000		972,500			820,000
				14,262,278			12,608,478
NXT Capital, LLC	Diversified capital markets
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 9/4/2018 (8)(13)		8,719,887		8,685,189			8,763,486
				8,685,189			8,763,486
Vitera Healthcare Solutions, LLC	Healthcare technology
First Lien Term Loan, LIBOR+5% (1% floor) cash due 11/4/2020 (8)(13)		4,862,500		4,856,420			4,747,016
				4,856,420			4,747,016
The Active Network, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 11/15/2021 (8)(13)		2,400,000		2,314,573			2,370,000
				2,314,573			2,370,000
Accruent, LLC	Internet software & services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 5/16/2022 (8)		9,975,000		9,881,944			9,994,012
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 5/16/2022 (8)(11)				(791		)	—
				9,881,153			9,994,012
Survey Sampling International, LLC	Research & consulting services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 12/16/2020 (8)(13)		5,726,682		5,691,793			5,726,682
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 12/16/2021 (8)		1,000,000		985,238			980,000
				6,677,031			6,706,682

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016



Portfolio Company/Type of Investment (1)(2)(10)(17)	Industry	Principal (5)		Cost		Fair Value
Answers Corporation	Internet software & services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 10/3/2021 (8)(13)		$	11,820,000	$	11,421,760	$	6,382,800
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 10/3/2022 (8)		8,000,000		7,605,257		773,360
				19,027,017		7,156,160
Maxor National Pharmacy Services, LLC	Pharmaceuticals
First Lien Term Loan, LIBOR+5.25% (1.25% floor) cash due 1/31/2020 (8)(13)		9,162,870		9,162,870		9,033,850
				9,162,870		9,033,850
NextCare, Inc. (9)	Healthcare services
Senior Term Loan, LIBOR+6% (1% floor) cash due 7/31/2018 (8)(13)		7,029,160		7,029,160		6,744,944
Delayed Draw Term Loan, LIBOR+6% (1% floor) cash due 7/31/2018 (8)		1,407,969		1,407,969		1,330,269
				8,437,129		8,075,213
Aptean, Inc.	Application software
Second Lien Term Loan, LIBOR+7.5% (1% floor) cash due 2/26/2021 (8)		1,250,000		1,240,179		1,232,038
				1,240,179		1,232,038
Stratus Technologies, Inc.	Computer hardware
First Lien Term Loan, LIBOR+5% (1% floor) cash due 4/28/2021 (8)(13)		4,003,658		3,956,802		3,903,567
				3,956,802		3,903,567
TravelCLICK, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+7.75% (1% floor) cash due 11/6/2021 (8)(13)		3,380,000		3,299,165		3,027,128
				3,299,165		3,027,128
GTCR Valor Companies, Inc.	Advertising
First Lien Term Loan, LIBOR+6% (1% floor) cash due 6/16/2023 (8)(13)		12,219,375		11,607,301		11,688,626
				11,607,301		11,688,626
ConvergeOne Holdings Corp.	Integrated telecommunication services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 6/17/2020 (8)(13)		5,343,010		5,316,746		5,322,974
				5,316,746		5,322,974
Verdesian Life Sciences, LLC	Fertilizers & agricultural chemicals
First Lien Term Loan, LIBOR+5% (1% floor) cash due 7/1/2020 (8)(13)		3,554,890		3,522,668		3,377,146
				3,522,668		3,377,146

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016



Portfolio Company/Type of Investment (1)(2)(10)(17)	Industry	Principal (5)		Cost			Fair Value
PR Wireless, Inc.	Wireless telecommunication services
First Lien Term Loan, LIBOR+9% (1% floor) cash due 6/29/2020 (7)(8)		$	5,836,771	$	5,719,729		$	4,111,317
35.5263 Common Stock Warrants (exercise price $0.01) expiration date 6/27/2024 (7)				—			120,342
				5,719,729			4,231,659
TV Borrower US, LLC	Integrated telecommunication services
First Lien Term Loan, LIBOR+5% (1% floor) cash due 1/8/2021 (7)(8)(13)		6,086,385		5,973,885			6,063,561
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 7/8/2021 (7)(8)(13)		3,000,000		2,921,780			2,910,000
				8,895,665			8,973,561
American Dental Partners, Inc.	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 8/30/2021 (8)(13)		5,880,000		5,860,000			5,791,800
				5,860,000			5,791,800
BeyondTrust Software, Inc.	Application software
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/25/2019 (8)(13)		18,381,895		18,136,331			18,309,259
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/25/2019 (8)(11)				(30,304		)	—
500,000 Class A membership interests in BeyondTrust Holdings LLC				500,000			613,869
				18,606,027			18,923,128
Hill International, Inc.	Construction & engineering
First Lien Term Loan, LIBOR+6.75% (1% floor) cash due 9/26/2020 (8)(13)		5,978,000		5,907,850			5,768,770
				5,907,850			5,768,770
Teaching Strategies, LLC	Education services
First Lien Term Loan, LIBOR+5.5% (0.5% floor) cash due 10/1/2019 (8)(13)		15,252,341		15,262,322			15,293,164
First Lien Revolver, LIBOR+5.5% (0.5% floor) cash due 10/1/2019 (8)				—			—
				15,262,322			15,293,164
Dynatect Group Holdings, Inc.	Industrial machinery
First Lien Term Loan, LIBOR+4.5% (1% floor) cash due 9/30/2020 (8)		3,826,203		3,826,203			3,778,376
First Lien Delayed Draw Term Loan, LIBOR+4.5% (1% floor) cash due 9/30/2020 (8)				—			—
				3,826,203			3,778,376
Idera, Inc.	Internet software & services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 4/9/2021 (8)(13)		17,356,053		16,490,668			16,878,761
				16,490,668			16,878,761
Central Security Group, Inc. (9)	Specialized consumer services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 10/6/2020 (8)		2,539,726		2,532,917			2,482,582
				2,532,917			2,482,582

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016



Portfolio Company/Type of Investment (1)(2)(10)(17)	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)(13)		$	5,265,325	$	5,211,587		$	5,081,038
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 4/29/2022 (8)(13)		280,000		280,000			266,000
				5,491,587			5,347,038
GOBP Holdings Inc.	Food retail
Second Lien Term Loan, LIBOR+8.25% (1% floor) cash due 10/21/2022 (8)(13)		3,685,714		3,635,831			3,685,714
				3,635,831			3,685,714
NAVEX Global, Inc.	Internet software & services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 11/19/2021 (8)(13)		3,450,918		3,440,820			3,433,662
Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 11/18/2022 (8)		1,438,468		1,438,468			1,395,314
				4,879,288			4,828,976
Executive Consulting Group, LLC	Healthcare services
First Lien Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2019 (8)(13)		7,000,000		7,000,000			6,960,668
Delayed Draw Term Loan, LIBOR+4.75% (1% floor) cash due 11/21/2019 (8)		4,000,000		4,000,000			3,979,448
				11,000,000			10,940,116
TIBCO Software, Inc.	Internet software & services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/4/2020 (8)		7,919,400		7,590,582			7,823,932
First Lien Revolver, LIBOR+4% cash due 11/25/2020 (8)				—			—
				7,590,582			7,823,932
Metamorph US 3, LLC (9)	Internet software & services
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(13)		14,223,467		14,181,149			11,840,322
First Lien Revolver, LIBOR+5.5% (1% floor) cash due 12/1/2020 (8)(13)		600,000		573,856			600,000
				14,755,005			12,440,322
Compuware Corporation	Internet software & services
First Lien Term Loan B1, LIBOR+5.25% (1% floor) cash due 12/15/2019 (8)(13)		7,825,554		7,720,514			7,854,900
First Lien Term Loan B2, LIBOR+5.25% (1% floor) cash due 12/15/2021 (8)		905,896		889,191			904,198
				8,609,705			8,759,098
AF Borrower, LLC	IT consulting & other services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 1/28/2022 (8)(13)		1,036,642		1,020,406			1,041,612
				1,020,406			1,041,612
TrialCard Incorporated (9)	Healthcare services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 12/31/2019 (8)(13)		9,874,962		9,869,718			9,827,027
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 12/31/2019 (8)(11)				(375		)	—
				9,869,343			9,827,027
Motion Recruitment Partners LLC	Diversified support services
First Lien Term Loan, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(13)		14,235,000		14,224,241			14,250,584
First Lien Revolver, LIBOR+6% (1% floor) cash due 2/13/2020 (8)(11)				(960		)	—
				14,223,281			14,250,584

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016



Portfolio Company/Type of Investment (1)(2)(10)(17)	Industry	Principal (5)		Cost			Fair Value
PowerPlan, Inc. (9)	Internet software & services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 2/23/2022 (8)(13)		$	16,737,833	$	16,710,709		$	16,731,213
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 2/23/2021 (8)				—			—
				16,710,709			16,731,213
Digital River, Inc.	Internet software & services
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 2/12/2021 (8)(13)		4,523,868		4,349,859			4,515,386
				4,349,859			4,515,386
Research Now Group, Inc.	Data processing & outsourced services
Second Lien Term Loan, LIBOR+8.75% (1% floor) cash due 3/18/2022 (8)		4,000,000		3,953,571			3,880,000
				3,953,571			3,880,000
Fineline Technologies, Inc.	Electronic equipment & instruments
First Lien Term Loan, LIBOR+5.5% (1% floor) cash due 5/5/2017 (8)(13)		10,942,464		10,942,464			10,912,302
				10,942,464			10,912,302
My Alarm Center, LLC	Security & alarm services
First Lien Term Loan A, LIBOR+8% (1% floor) cash due 1/9/2019 (8)(13)		16,047,619		16,047,619			16,075,921
First Lien Term Loan B, LIBOR+8% (1% floor) cash due 1/9/2019 (8)		909,936		909,936			911,452
First Lien Term Loan C, LIBOR+8% (1% floor) cash due 1/9/2019 (8)		757,592		757,592			757,750
First Lien Term Revolver, LIBOR+8% (1% floor) cash due 1/9/2019 (8)		120,000		120,000			120,000
				17,835,147			17,865,123
Legalzoom.com, Inc.	Specialized consumer services
First Lien Term Loan, LIBOR+7% (1% floor) cash due 5/13/2020 (8)(13)		19,700,000		19,690,068			19,659,526
First Lien Revolver, LIBOR+7% (1% floor) cash due 5/13/2020 (8)(11)				(17,714		)	—
First Lien Delayed Draw Term Loan, LIBOR+7% (1% floor) cash due 5/13/2020 (8)		400,000		400,000			396,683
				20,072,354			20,056,209
Raley's	Food retail
First Lien Term Loan, LIBOR+6.25% (1% floor) cash due 5/18/2022 (8)(13)		3,319,504		3,254,099			3,325,728
				3,254,099			3,325,728
Aptos, Inc.	Data processing & outsourced services
First Lien Term Loan, LIBOR+6.75% (1% floor) cash due 9/1/2022 (8)(13)		6,000,000		5,881,667			5,940,000
				5,881,667			5,940,000
All Web Leads, Inc.	Advertising
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 6/30/2020 (8)(13)		29,808,067		29,808,066			29,983,454
First Lien Revolver, LIBOR+6.5% (1% floor) cash due 6/30/2020 (8)				—			—
				29,808,066			29,983,454
Too Faced Cosmetics, LLC	Personal products
First Lien Term Loan, LIBOR+5% (1% floor) cash due 7/7/2021 (8)(13)		1,285,383		1,285,383			1,290,310
				1,285,383			1,290,310
Internet Pipeline, Inc.	Internet software & services
First Lien Term Loan, LIBOR+7.25% (1% floor) cash due 8/4/2022 (8)(13)		11,880,000		11,880,000			12,045,801
First Lien Revolver, LIBOR+7.25% (1% floor) cash due 8/4/2021 (8)				—			—
				11,880,000			12,045,801
Poseidon Merger Sub, Inc.	Advertising
Second Lien Term Loan, LIBOR+8.5% (1% floor) cash due 8/15/2023 (8)		7,000,000		6,980,768			7,012,868
				6,980,768			7,012,868

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016



Portfolio Company/Type of Investment (1)(2)(10)(17)	Industry	Principal (5)		Cost			Fair Value
American Seafoods Group LLC	Food distributors
First Lien Term Loan, LIBOR+5% (1% floor) cash due 8/19/2021 (8)(13)		$	2,780,556	$	2,736,111		$	2,773,604
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 2/19/2022 (8)		3,000,000		2,975,385			2,850,000
				5,711,496			5,623,604
CRGT Inc.	IT consulting & other services
First Lien Term Loan, LIBOR+6.5% (1% floor) cash due 12/19/2020 (8)(13)		3,440,713		3,433,096			3,449,315
				3,433,096			3,449,315
Valet Merger Sub, Inc.	Environmental & facilities services
First Lien Term Loan, LIBOR+7% (1% floor) cash due 9/24/2021 (8)(13)		5,940,000		5,905,025			6,040,239
First Lien Revolver, LIBOR+7% (1% floor) cash due 9/24/2021 (8)		500,000		486,811			500,000
				6,391,836			6,540,239
Baart Programs, Inc.	Healthcare services
First Lien Term Loan, LIBOR+7.75% cash due 10/9/2021 (8)(13)		7,661,077		7,377,745			7,647,291
First Lien Revolver, LIBOR+7.75% cash due 10/9/2021 (8)(11)				(12,500		)	—
				7,365,245			7,647,291
DigiCert, Inc.	Internet software & services
Second Lien Term Loan, LIBOR+9% (1% floor) cash due 10/21/2022 (8)		2,000,000		1,982,857			2,032,529
				1,982,857			2,032,529
Lytx, Inc.	Research & consulting services
First Lien Term Loan, LIBOR+8.5% (1% floor) cash due 3/15/2023 (8)		9,951,389		9,951,389			9,951,389
500 Class A Units in Lytx Holdings, LLC				500,000			504,173
				10,451,389			10,455,562
Onvoy, LLC	Integrated telecommunication services
First Lien Term Loan, LIBOR+6.25% (1% floor) cash due 4/29/2021 (8)(13)		10,368,750		10,173,233			10,341,433
				10,173,233			10,341,433
4 Over International, LLC	Commercial printing
First Lien Term Loan, LIBOR+6.0% (1% floor) cash due 6/7/2022 (8)(13)		5,970,000		5,913,333			5,929,733
First Lien Revolver LIBOR+6.0% (1% floor) cash due 6/7/2021 (8)(11)				(639		)	—
				5,912,694			5,929,733
OBHG Management Services, LLC	Healthcare services
First Lien Term Loan, LIBOR+5.25% (1% floor) cash due 6/28/2022 (8)(13)		16,123,227		16,117,309			16,076,397
First Lien Revolver, LIBOR+5.25% (1% floor) cash due 6/28/2021 (8)(11)				(39		)	—
				16,117,270			16,076,397
Ancile Solutions, Inc.	Internet software & services
First Lien Term Loan, LIBOR+7% (1% floor) cash due 6/30/2021 (8)(13)		11,000,000		10,692,000			10,835,000
				10,692,000			10,835,000
Pomeroy Group Holdings, Inc.	IT consulting & other services
First Lien Term Loan, LIBOR+6% (1% floor) cash due 11/30/2021 (8)(13)		4,488,693		4,357,979			4,393,309
				4,357,979			4,393,309
Sailpoint Technologies, Inc.	Application software
First Lien Term Loan, LIBOR+8% (1% floor) cash due 8/16/2021 (8)		12,500,000		12,258,333			12,250,000
First Lien Revolver, LIBOR+8% (1% floor) cash due 8/16/2021 (8)(11)				(3,867		)	—
				12,254,466			12,250,000
California Pizza Kitchen, Inc. (16)	Restaurants
First Lien Term Loan, LIBOR+6% (1% floor) cash due 8/23/2022 (8)		5,000,000		5,000,000			4,985,425
				5,000,000			4,985,425
Total Non-Control/Non-Affiliate Investments (152.6% of net assets)				$	513,397,659		$	497,281,256
Total Portfolio Investments (176.0% of net assets)				$	600,468,963		$	573,604,381

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016



Cash and Cash Equivalents
Wells Fargo Bank Institutional Money Market Fund	$	18,856,559	$	18,856,559
Other cash accounts	922,282		922,282
Total Cash and Cash Equivalents (6.1% of net assets)	$	19,778,841	$	19,778,841
Total Portfolio Investments, Cash and Cash Equivalents (182.1% of net assets)	$	620,247,804	$	593,383,222

See notes to Consolidated Financial Statements.

Fifth Street Senior Floating Rate Corp.

Consolidated Schedule of Investments

September 30, 2016


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


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


(3)	Control Investments generally 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 generally 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 includes accumulated PIK interest and is net of repayments, if any.


(6)	Non-Control/Non-Affiliate Investments are 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. Under the 1940 Act, the Company may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of the Company's total assets. As of September 30, 2016, qualifying assets represented 84.9% of the Company's total assets and non-qualifying assets represented 15.1% of the Company's total assets.

(8)

The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or 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 or the alternate base rate based on each respective credit agreement.

(9)



Portfolio Company	Effective date	Cash interest	PIK interest	Reason
NextCare, Inc.	September 2, 2016	+ 1% on First Lien Term Loan & Delayed	+ 0.5% on First Lien Term Loan & Delayed Draw Term Loan	Tier pricing per loan agreement
PowerPlan, Inc.	May 21, 2016	- 0.5% on First Lien Term Loan		Tier pricing per loan agreement
Metamorph US 3, LLC	March 29, 2016	+ 1.0% on First Lien Term Loan & Revolver		Per loan amendment
Central Security Group, Inc.	February 3, 2016	+ 0.375% on First Lien Term Loan		Per loan amendment
TrialCard Incorporated	November 3, 2015	- 0.75% on Term Loan and Revolver		Tier pricing per loan agreement


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


(11)	Investment has undrawn commitments. Unamortized fees are classified as unearned income which reduces cost basis, which may result in a negative cost basis.


(12)	As defined in the 1940 Act, the Company is deemed to be both an "Affiliated Person" of and to "Control" this portfolio company as the Company owns more than 25% of the portfolio company's outstanding voting securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement).


(13)	Investment pledged as collateral under the Company's 2015 Debt Securitization (as defined in Note 6 — Borrowings), in whole or in part.


(14)	Income producing through payment of dividends or distributions.


(15)	In April 2016, the Company restructured its debt investment in Ameritox Ltd. As a part of the restructuring, the Company exchanged cash and its debt securities for debt and equity securities in the newly restructured entity.

(16)

The sale of this loan does not qualify for true sale accounting under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 860 - Transfers and Servicing ("ASC 860"), and therefore, the entire debt investment remains in the Consolidated Schedule of Investments. Accordingly, the fair value of the Company's debt investments includes $5.0 million related to the Company's secured borrowings. (See Note 6 in the accompanying notes to the Consolidated Financial Statements.)


(17)	Equity ownership may be held in shares or units of companies related to the portfolio companies.


(18)	See Note 3 to the Consolidated Financial Statements for portfolio composition.

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. (together with its consolidated subsidiaries, the "Company") is a specialty finance company that is a closed-end, non-diversified management investment company and has elected to be regulated as a business development company under the 1940 Act. The Company has qualified and elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), for tax purposes.

The Company's investment objective is to maximize its portfolio's total return by generating current income from its debt investments while seeking to preserve its capital. The Company invests primarily in senior secured loans, including first lien, unitranche and second lien debt instruments, that pay interest at rates which are determined periodically on the basis of a floating base lending rate, made to private middle market companies whose debt is rated below investment grade. The Company also has an investment in a joint venture that invests in similar types of loans. The Company may also invest in senior unsecured loans issued by private middle market companies and, to a lesser extent, subordinated loans issued by private middle market companies, senior and subordinated loans issued by public companies and equity investments.

The Company is externally managed by Fifth Street Management LLC (the "Investment Adviser"), an indirect, partially-owned subsidiary of Fifth Street Asset Management Inc. ("FSAM"), a publicly traded alternative asset manager, pursuant to an investment advisory agreement. FSC CT LLC ("FSC CT"), a subsidiary of the Investment Adviser, also provides certain administrative and other services necessary for the Company to operate.

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 pursuant to the requirements for reporting on Form 10-Q 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. All intercompany balances and transactions have been eliminated. The Company is an investment company following the accounting and reporting guidance in FASB ASC Topic 946, Financial Services-Investment Companies ("ASC 946").

Use of Estimates:

The preparation of the 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. Changes in the economic and political environments, financial markets and any other parameters used in determining these estimates could cause actual results to differ and such differences could be material. Significant estimates include the valuation of investments and revenue recognition.

Consolidation:

The accompanying Consolidated Financial Statements include the accounts of Fifth Street Senior Floating Rate Corp. and its consolidated subsidiaries. Each consolidated subsidiary is wholly-owned and, as such, consolidated into the Consolidated Financial Statements. Certain of the subsidiaries that hold investments are treated as pass through entities for tax purposes. The assets of the Company's consolidated subsidiaries are not directly available to satisfy the claims of the creditors of the Company or any of its other subsidiaries. As of June 30, 2017, the Company's consolidated subsidiaries were FS Senior Funding CLO LLC, FS Senior Funding II LLC and FS Senior Funding Ltd.

Since the Company is an investment company, portfolio investments held by the Company are not consolidated into the Consolidated Financial Statements. The portfolio investments held by the Company are included on the Statements of Assets and Liabilities as investments at fair value.

Fair Value Measurements:

The Company values its investments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820"), which 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. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. Where observable prices or inputs are not

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. 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 adjustments for investment-specific factors or restrictions.

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 Investment Adviser'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.

The Investment Adviser 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 may be valued at such market quotations. In order to validate market quotations, the Investment Adviser 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 Investment Adviser does not adjust the prices unless it has a reason to believe any such market quotations are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value 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 Investment Adviser performs a review of the portfolio company to validate the quotes. The review generally includes a quantitative and qualitative assessment of the credit quality and market trends affecting the portfolio company. If the Investment Adviser deems the quote to not be indicative of fair value, 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).

The Company performs detailed valuations of its debt and equity investments for which market quotations are not readily available or are deemed not to represent fair value of the investments. The Company typically uses three different valuation techniques. The first valuation technique is the transaction precedent approach, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine the value of equity investments, to determine if there is credit impairment for debt investments and to determine the value for debt investments that the Company is deemed to control under the 1940 Act. To estimate the enterprise value of a portfolio company, the Investment Adviser analyzes various factors including, but not limited to, the portfolio company’s historical and projected financial results, macroeconomic impacts on the company, and competitive dynamics in the company’s industry. The Investment Adviser also utilizes some or all of the following information based on the individual circumstances of the portfolio company in order to reach its estimate of a portfolio company’s enterprise value, including: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase price multiples as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions), (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. The Company may probability weight potential sale outcomes with respect to a portfolio company due to the uncertainty that exists as of the valuation date. The third valuation technique is a market yield approach, which is typically performed for non-credit impaired debt investments. To determine fair value using a market yield approach, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the market yield approach, the Company considers the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company depends on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.

In accordance with ASC 820-10, certain investments that qualify as investment companies in accordance with ASC 946 may be valued using net asset value as a practical expedient for fair value. Consistent with FASB guidance under ASC 820, these investments are excluded from the hierarchical levels.

The Company estimates the fair value of privately held warrants using a Black Scholes pricing model, which includes an analysis of various factors and subjective assumptions including 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 by the Investment Adviser's valuation team in conjunction with the Investment Adviser's portfolio management and capital markets teams;

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

•

Separately, independent valuation firms engaged by the Board of Directors prepare 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 and provide such reports to the Investment Adviser and the Audit Committee of the Board of Directors;


•	The Investment Adviser compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee of the Board of Directors;


•	The Audit Committee of the Board of Directors reviews the preliminary valuations with the Investment Adviser, and the Investment Adviser responds and supplements the preliminary valuations to reflect any discussions between the Investment Adviser and 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.

The fair value of each of the Company's investments as of June 30, 2017 and September 30, 2016 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. As of June 30, 2017 , 66.0% of the Company's portfolio at fair value was valued either using market quotations or by independent valuation firms. The percentage of our portfolio valued by independent valuation firms may vary from period to period based on the availability of market quotations for our portfolio investments during the respective periods. 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.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Investment Income:

Interest 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. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or applied to principal depending upon management’s judgment. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in management’s judgment, the portfolio company is likely to continue timely payment of its remaining interest.

In connection with its investment, the Company sometimes receives nominal cost equity that is valued as part of the negotiation process with the particular portfolio company. When the Company receives nominal cost equity, the Company allocates its cost basis in its investment between its debt securities and its nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.

For the Company’s secured borrowings, if any, the interest earned on the entire loan balance is recorded within interest income and the interest earned by the buyer from the partial loan sales is recorded within interest expense in the Consolidated Statements of Operations.

PIK Interest Income

The Company has investments in debt securities which contain 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. PIK interest on certain of the Company's debt investments, which represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. The Company generally ceases accruing PIK interest if there is insufficient value to support the accrual or if the Company does not expect the portfolio company to be able to pay all principal and interest due. The Company's decision to cease accruing PIK interest involves 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; the Company's 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 the Company 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, the Company determines whether to cease accruing PIK interest on a loan or debt security. The Company's determination to cease accruing PIK interest on a loan or debt security is generally made well before the Company's full write-down of such loan or debt security.

Fee Income

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

Dividend Income

The Company generally recognizes dividend income on the ex-dividend date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, the Company will not record distributions from equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

During the three and nine months ended June 30, 2017, the Company reversed $0.4 million of dividend income previously recorded in prior periods. The Company determined that such dividend receivable balance may no longer be collectible.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents and Restricted Cash:

Cash and 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 and cash equivalents and restricted cash with financial institutions and, at times, cash held in bank accounts may exceed the Federal Deposit Insurance Corporation ("FDIC") insurance limit. Cash and cash equivalents are classified as Level 1 assets and are included on the Company's Consolidated Schedule of Investments.

As of June 30, 2017 , included in restricted cash was $7.7 million that was held at Wells Fargo Bank, N.A. in connection with the Company's Citibank facility and 2015 Debt Securitization (as defined in Note 6 — Borrowings). Pursuant to the terms of the Citibank facility, the Company was restricted in terms of access to $2.4 million of that amount until such time as the Company submits its required monthly reporting schedules. As of June 30, 2017 , $5.2 million of cash held in connection with the 2015 Debt Securitization was restricted due to the obligation to pay interest on the notes under the terms of the 2015 Debt Securitization.

As of September 30, 2016, included in restricted cash was $9.0 million that was held at Wells Fargo Bank, N.A. in connection with the Company's Citibank facility and 2015 Debt Securitization. Pursuant to the terms of the Citibank facility, the Company was restricted in terms of access to $3.5 million until such time as the Company submits its required monthly reporting schedules. As of September 30, 2016, $5.5 million of cash held in connection with the 2015 Debt Securitization was restricted due to the obligation to pay interest on the notes under the terms of the 2015 Debt Securitization.

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).

Receivables/Payables from Unsettled Transactions:

Receivables/payables from unsettled transactions consists of amounts receivable to or payable by the Company for transactions that have not settled at the reporting date.

Deferred Financing Costs:

In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs which requires debt 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. Additionally, in August 2015, the FASB issued ASU 2015-15, Interest - Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements , which provides further clarification on the same topic and states that the Securities and Exchange Commission ("SEC") would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of the deferred costs over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The Company adopted the guidance for debt arrangements that are not line-of-credit arrangements for the three months ended December 31, 2016 and applied a retrospective approach. As a result of the adoption, the Company reclassified $2.5 million of deferred financing costs assets to a direct deduction from the related debt liability on the Statement of Assets and Liabilities as of September 30, 2016. The adoption of this guidance had no impact on net assets or the Consolidated Statement of Operations.

Deferred financing costs consist of fees and expenses paid in connection with the closing or amending of credit facilities and debt offerings. Deferred financing costs in connection with credit facilities are capitalized as an asset at the time of payment. Deferred financing costs in connection with all other debt arrangements are a direct deduction from the related debt liability at the time of payment. Deferred financing costs are amortized either using the straight line method or effective interest method over the terms of the respective debt arrangement, as appropriate. This amortization expense is included in interest expense in the Company's Consolidated Statements of Operations. Upon early termination of a credit facility, the remaining balance of unamortized fees related to such facility is accelerated into interest expense.

Offering Costs:

Offering costs consist of fees and expenses incurred in connection with the offer and sale of the Company's common stock, including legal, accounting and printing fees. The Company charges offering costs to capital at the time of an offering. There were no offering costs charged to capital during the nine months ended June 30, 2017 and June 30, 2016.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Amounts Payable to Syndication Partners:

The Company acts as administrative agent for certain loans it originates and then syndicates. As administrative agent, the Company receives interest, principal and/or other payments from borrowers that get redistributed to syndication partners. If not redistributed by the reporting date, a payable is recorded to syndication partners on the Consolidated Statements of Assets and Liabilities.

Secured Borrowings:

The Company follows the guidance in ASC 860 when accounting for loan participations and other loan sales. Such guidance provides accounting and reporting standards for transfers and servicing of financial assets and requires a participation or other partial loan sales to meet the definition of a "participating interest," as defined in the guidance, in order for sale treatment to be allowed. Participations or other loan sales which do not meet the definition of a participating interest or which are not eligible for sale accounting remain on the Company's Consolidated Statements of Assets and Liabilities and the proceeds are recorded as secured borrowings until the definition is met. Secured borrowings are carried at fair value to correspond with the related investments, which are carried at fair value. See Note 6 for additional information.

Fair Value Option:

The Company elected the fair value option for its secured borrowings under FASB ASC Topic 825 Financial Instruments - Fair Value Option ("ASC 825"). The Company believes that by electing the fair value option for these financial instruments, it provides consistent measurement of the assets and liabilities which relate to the loan sales mentioned above.

However, the Company has not elected the fair value option to report other selected financial assets and liabilities at fair value. With the exception of the line items entitled "deferred financing costs", "credit facilities payable" and "notes payable," which are reported at amortized cost, all assets and liabilities approximate fair value on the Consolidated Statement of Assets and Liabilities. The carrying value of the line items titled "interest, dividends, and fees receivable," "due from portfolio companies," "receivables from unsettled transactions," "accounts payable, accrued expenses and other liabilities," "base management fee and incentive fee payable," "due to FSC CT," "interest payable," "amounts payable to syndication partners," "director fees payable" and "payables from unsettled transactions" approximate fair value due to their short maturities.

Income Taxes:

The Company has elected to be subject to tax as a RIC under Subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to be subject to tax as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute dividends to its stockholders of an amount generally at least equal to 90% of investment company taxable income, as defined by the Code and determined without regard to any deduction for dividends paid, for each taxable year. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to stockholders as a dividend. Depending on the level of taxable income earned during a taxable year, the Company may choose to retain taxable income in excess of current year dividend distributions and would distribute such taxable income in the next taxable year. The Company would then incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income, determined on a calendar year basis, could exceed estimated current calendar year dividend distributions, the Company accrues excise tax, if any, on estimated excess taxable income as taxable income is earned. The Company anticipates timely distribution of its taxable income in accordance with the tax rules under Subchapter M of the Code. The Company did not incur a U.S. federal excise tax for calendar years 2014 and 2015 and does not expect to incur a U.S. federal excise tax for calendar year 2016. The Company may incur a U.S. federal excise tax in future years.

The Company holds certain portfolio investments through taxable subsidiaries. The purpose of the Company's taxable subsidiaries is to permit the Company to hold equity investments in portfolio companies which are "pass through" entities for U.S. federal income tax purposes in order to comply with the RIC tax requirements. The taxable subsidiaries are consolidated for financial reporting purposes, and portfolio investments held by them are included in the Company’s consolidated financial statements as portfolio investments and recorded at fair value. The taxable subsidiaries are not consolidated with the Company for U.S. federal income tax purposes and may generate income tax expense, or benefit, and the related tax assets and liabilities, as a result of their ownership of certain portfolio investments. This income tax expense, if any, would be reflected in the Company's Consolidated Statements of Operations. The Company uses the asset and liability method to account for its taxable subsidiaries' income taxes. Using this method, the Company recognizes deferred tax assets and liabilities for the estimated future tax effects attributable to temporary differences between financial reporting and tax bases of assets and liabilities. In addition, the Company recognizes deferred tax benefits associated with net operating loss carry forwards that it may use to offset future tax obligations. The Company measures deferred tax

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

assets and liabilities using the enacted tax rates expected to apply to taxable income in the years in which it expects to recover or settle those temporary differences.

FASB ASC Topic 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. Management has analyzed the Company's tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2013, 2014 or 2015. 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 ASU 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes effective. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations . This ASU is intended to clarify revenue recognition accounting when a third party is involved in providing goods or services to a customer. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing . This ASU is intended to clarify two aspects of Topic 606: identifying performance obligations and licensing implementation guidance. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606) - Narrow-Scope Improvements and Practical Expedients . This ASU amends certain aspects of ASU 2014-09, addresses certain implementation issues identified and clarifies the new revenue standards’ core revenue recognition principles. The new standards will be effective for the Company on October 1, 2018 and early adoption is permitted on the original effective date of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company has not yet selected a transition method nor has it determined the effect of this standard on its Consolidated Financial Statements and related disclosures and its ongoing financial reporting.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements - Going Concern, which requires management to evaluate, at each annual and interim reporting period, a company's ability to continue as a going concern within one year of the date the financial statements are issued and provide related disclosures. This accounting guidance is effective for the Company on a prospective basis beginning for the annual fiscal 2017 period and is not expected to have a material effect on its consolidated financial statements.

In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) . The update eliminates the requirement to categorize investments in the fair value hierarchy if their fair value is measured at net asset value (NAV) per share (or its equivalent) using the practical expedient in the FASB’s fair value measurement guidance. Public companies are required to apply ASU 2015-07 retrospectively for interim and annual reporting periods beginning after December 15, 2015. Accordingly, the Company adopted ASU 2015-07 during the three months ended December 31, 2016 and determined that the adoption did not have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall ("ASU 2016-01"), which makes limited amendments to the guidance in GAAP on the classification and measurement of financial instruments. The new standard significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, including interim periods therein. Early adoption is permitted specifically for the amendments pertaining to the presentation of certain fair value changes for financial liabilities measured at fair value. Early adoption of all other amendments is not permitted. Upon adoption, the Company will be required to make a cumulative-effect adjustment to the Consolidated Statement of Assets and Liabilities as of the beginning of the first reporting period in which the guidance is effective. The Company did not early adopt the new guidance during the three months ended June 30, 2017 . The Company is evaluating the effect that ASU 2016-01 will have on its Consolidated Financial Statements and related disclosures.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included within cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The new guidance is effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The amendment should be adopted retrospectively. The Company did not early adopt the new guidance during the three and nine months ended June 30, 2017. The new guidance is not expected to have a material effect on the Company's consolidated financial statements.

Note 3. Portfolio Investments

At June 30, 2017 , 180.2% of net assets at fair value, or $565.2 million , was invested in 68 portfolio investments, including 19.6% of net assets, or $61.6 million , in subordinated notes and limited liability company ("LLC") equity interests of FSFR Glick JV LLC (together with its consolidated subsidiaries, "FSFR Glick JV"), and 8.6% of net assets, or $26.9 million , was invested in cash and cash equivalents (including $7.7 million of restricted cash). In comparison, at September 30, 2016 , 176.0% of net assets at fair value, or $573.6 million , was invested in 63 portfolio investments, including 19.4% of net assets, or $63.3 million, in subordinated notes and LLC equity interests of FSFR Glick JV, and 8.8% of net assets, or $28.8 million, was invested in cash and cash equivalents (including $9.0 million of restricted cash). As of June 30, 2017 , 88.3% of the Company's portfolio at fair value consisted of senior secured debt investments that bore interest at floating rates and that are secured by first or second priority liens on the assets of the portfolio companies, 10.9% consisted of investments in the subordinated notes of FSFR Glick JV and 0.8% consisted of equity investments in other portfolio companies. As of September 30, 2016 , 87.6% of the Company's portfolio at fair value consisted of senior secured debt investments that bore interest at floating rates and that are secured by first or second priority liens on the assets of the portfolio companies, 9.9% consisted of investments in the subordinated notes of FSFR Glick JV, 1.1% consisted of investments in the LLC equity interests of FSFR Glick JV and 1.4% consisted of equity investments in other portfolio companies.

During the three and nine months ended June 30, 2017 , the Company recorded net unrealized appreciation (depreciation) on investments and secured borrowings of $(5.8) million and $2.2 million , respectively. During the three and nine months ended June 30, 2016 , the Company recorded net unrealized appreciation (depreciation) of $3.3 million and $(18.6) million, respectively.

The composition of the Company's investments as of June 30, 2017 and September 30, 2016 at cost and fair value was as follows:



	June 30, 2017				September 30, 2016
	Cost		Fair Value		Cost		Fair Value
Investments in debt securities (senior secured)	$	508,125,501	$	498,945,230	$	518,778,491	$	502,385,158
Investments in equity securities (common stock, preferred stock and warrants)	10,587,709		4,618,617		10,572,966		7,902,556
Debt investment in FSFR Glick JV	64,005,755		61,614,406		64,005,755		56,885,646
Equity investment in FSFR Glick JV	7,111,751		—		7,111,751		6,431,021
Total	$	589,830,716	$	565,178,253	$	600,468,963	$	573,604,381

The following table presents the financial instruments carried at fair value as of June 30, 2017 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		Measured at Net Asset Value (a)		Total
Investments in debt securities (senior secured)	$	—	$	5,836,815	$	493,108,415	$	—	$	498,945,230
Investments in debt securities (subordinated notes of FSFR Glick JV)	—		—		61,614,406		—		61,614,406
Investment in equity securities (common stock, preferred stock and warrants, including LLC equity interests of FSFR Glick JV)	—		—		4,618,617		—		4,618,617
Total investments at fair value	—		5,836,815		559,341,438		—		565,178,253
Cash and cash equivalents	19,258,982		—		—		—		19,258,982
Total assets at fair value	$	19,258,982	$	5,836,815	$	559,341,438	$	—	$	584,437,235

__________


(a)	In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.

The following table presents the financial instruments carried at fair value as of September 30, 2016 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		Measured at Net Asset Value (a)		Total
Investments in debt securities (senior secured)	$	—	$	—	$	502,385,158	$	—	$	502,385,158
Investments in debt securities (subordinated notes of FSFR Glick JV)	—		—		56,885,646		—		56,885,646
Investment in equity securities (common stock, preferred stock and warrants, including LLC equity interests of FSFR Glick JV)	—		—		7,902,556		6,431,021		14,333,577
Total investments at fair value	—		—		567,173,360		6,431,021		573,604,381
Cash and cash equivalents	19,778,841		—		—		—		19,778,841
Total assets at fair value	$	19,778,841	$	—	$	567,173,360	$	6,431,021	$	593,383,222
Secured borrowings	—		—		4,985,425		—		4,985,425
Total liabilities at fair value	$	—	$	—	$	4,985,425	$	—	$	4,985,425

__________

(a)

In accordance with ASC 820-10, certain investments that are measured using the net asset value per share (or its equivalent) as a practical expedient for fair value have not been classified in the fair value hierarchy. These investments are generally not redeemable. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.

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 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 (i.e. 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.

The following table provides a roll-forward in the changes in fair value from March 31, 2017 to June 30, 2017, for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:



	Investments

	Senior Secured Debt			Subordinated notes of FSFR Glick JV		Common stock, preferred stock and warrants			Total
Fair value as of March 31, 2017	$	478,305,810		$	61,510,851	$	6,104,962		$	545,921,623
New investments & net revolver activity	60,962,165			—		—			60,962,165
Redemptions/repayments	(43,405,847		)	—		—			(43,405,847		)
Net accrual of PIK interest income	63,551			—		—			63,551
Accretion of original issue discount	1,449,575			—		—			1,449,575
Net change in unearned income	33,983			—		—			33,983
Net unrealized appreciation (depreciation) on investments	(4,312,357		)	103,555		(1,486,345		)	(5,695,147		)
Net realized gain on investments	11,535			—		—			11,535
Fair value as of June 30, 2017	$	493,108,415		$	61,614,406	$	4,618,617		$	559,341,438
Net unrealized appreciation (depreciation) relating to Level 3 assets and liabilities still held at June 30, 2017 and reported within net unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations for the three months ended June 30, 2017	$	(4,467,057	)	$	103,555	$	(860,902	)	$	(5,224,404	)

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 March 31, 2016 to June 30, 2016 for all investments for which the Company determines fair value using unobservable (Level 3) factors:



	Investments

	Senior Secured Debt			Subordinated notes of FSFR Glick JV			Common stock, preferred stock and warrants			Total
Fair value as of March 31, 2016	$	513,827,239		$	56,327,567		$	5,234,285		$	575,389,091
New investments & net revolver activity	105,313,380			4,291,875			10,049,841			119,655,096
Redemptions/repayments	(91,594,851		)	(154,217		)	—			(91,749,068		)
Net accrual of PIK interest income	(89,962		)	—			—			(89,962		)
Accretion of original issue discount	318,048			—			—			318,048
Net change in unearned income	17,162			—			—			17,162
Net unrealized appreciation (depreciation) on investments	7,087,191			(2,202,775		)	(1,624,938		)	3,259,478
Net realized loss on investments	(8,506,936		)	—			—			(8,506,936		)
Fair value as of June 30, 2016	$	526,371,271		$	58,262,450		$	13,659,188		$	598,292,909
Net unrealized depreciation relating to Level 3 assets still held at June 30, 2016 and reported within net unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations for the three months ended June 30, 2016	$	(1,959,713	)	$	(2,202,775	)	$	(1,624,938	)	$	(5,787,426	)

The following table provides a roll-forward in the changes in fair value from September 30, 2016 to June 30, 2017 , for all investments and secured borrowings for which the Company determined fair value using unobservable (Level 3) factors:



	Investments											Liabilities

	Senior Secured Debt			Subordinated notes of FSFR Glick JV		Common stock, preferred stock and warrants			Total			Secured Borrowings
Fair value as of September 30, 2016	$	502,385,158		$	56,885,646	$	7,902,556		$	567,173,360		$	4,985,425
New investments & net revolver activity	176,224,944			—		14,743			176,239,687			—
Redemptions/repayments	(182,490,619		)	—		—			(182,490,619		)	(5,000,000		)
Net accrual of PIK interest income	185,296			—		—			185,296			—
Accretion of original issue discount	2,834,590			—		—			2,834,590			—
Net change in unearned income	50,302			—		—			50,302			—
Net unrealized appreciation (depreciation) on investments	7,320,719			4,728,760		(3,298,682		)	8,750,797			—
Net unrealized appreciation on secured borrowings	—			—		—			—			14,575
Net realized loss on investments	(13,401,975		)	—		—			(13,401,975		)	—
Fair value as of June 30, 2017	$	493,108,415		$	61,614,406	$	4,618,617		$	559,341,438		$	—
Net unrealized appreciation (depreciation) relating to Level 3 assets and liabilities still held at June 30, 2017 and reported within net unrealized appreciation (depreciation) on investments and net unrealized appreciation on secured borrowings in the Consolidated Statement of Operations for the nine months ended June 30, 2017	$	(7,626,784	)	$	4,728,760	$	(140,318	)	$	(3,038,342	)	$	—

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 September 30, 2015 to June 30, 2016 , for all investments for which the Company determines fair value using unobservable (Level 3) factors:



	Investments

	Senior Secured Debt			Subordinated notes of FSFR Glick JV			Common stock, preferred stock and warrants			Total
Fair value as of September 30, 2015	$	565,526,453		$	52,603,346		$	5,517,675		$	623,647,474
New investments & net revolver activity	250,338,322			10,985,625			11,293,591			272,617,538
Redemptions/repayments	(267,045,164		)	(154,217		)	—			(267,199,381		)
Net accrual of PIK interest income	(48,929		)	—			—			(48,929		)
Accretion of original issue discount	1,281,598			—			—			1,281,598
Net change in unearned income	(4,191		)	—			—			(4,191		)
Net unrealized depreciation on investments	(10,316,152		)	(5,172,304		)	(3,152,078		)	(18,640,534		)
Net realized loss on investments	(13,360,666		)	—			—			(13,360,666		)
Fair value as of June 30, 2016	$	526,371,271		$	58,262,450		$	13,659,188		$	598,292,909
Net unrealized depreciation relating to Level 3 assets still held at June 30, 2016 and reported within net unrealized appreciation (depreciation) on investments in the Consolidated Statement of Operations for the nine months ended June 30, 2016	$	(12,043,738	)	$	(5,172,304	)	$	(3,152,077	)	$	(20,368,119	)

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 June 30, 2017 :

Asset

Fair Value

Valuation Technique

Unobservable Input

Range

Weighted

Average (c)

Senior secured debt

208,426,106

Market yield approach

Capital structure premium

(a)

0.0%

2.0%

0.2%

Tranche specific risk premium / (discount)

(a)

(3.1)%

8.0%

(0.2)%

Size premium

(a)

0.0%

1.5%

0.7%

Industry premium / (discount)

(a)

(1.3)%

2.9%

0.0%

40,719,808

Enterprise value approach

EBITDA/Revenue multiple

(b)

0.9x

42,748,295

Transactions precedent approach

Transaction price

(d)

N/A

201,214,206

Market quotations

Broker quoted price

(e)

N/A

FSFR Glick JV subordinated notes

61,614,406

Enterprise value approach

N/A

(f)

N/A

Preferred & Common Equity

4,618,617

Enterprise value approach

EBITDA/Revenue multiple

(b)

1.0x

17.3x

3.7x

Total

559,341,438

_____________________

(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) Used when there is an observable transaction or pending event for the investment.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

be indicative of fair value. Each quoted price is evaluated by the Audit Committee of the Company's Board of Directors in conjunction with additional information compiled by the Investment Adviser, including financial performance, recent business developments and various other factors.

(f) The Company determined the value based on the total assets less the total liabilities senior to the subordinated notes held at FSFR Glick JV under the enterprise value approach.

The following table provides quantitative information related to the significant unobservable inputs for Level 3 investments and secured borrowings, which are carried at fair value as of September 30, 2016 :



Asset	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average (c)
Senior secured debt	$	270,620,843	Market yield approach	Capital structure premium	(a)	0.0%	-	2.0%	0.1%
				Tranche specific risk premium / (discount)	(a)	(4.5)%	-	5.3%	(1.4)%
				Size premium	(a)	0.0%	-	1.5%	0.8%
				Industry premium / (discount)	(a)	(1.3)%	-	5.4%	0.3%
	12,440,322		Enterprise value approach	Weighted average cost of capital		23.0%	-	23.0%	23.0%
				Company specific risk premium	(a)	15.0%	-	15.0%	15.0%
				Revenue growth rate		6.0%	-	6.0%	6.0%
				Revenue multiple	(b)	1.1x	-	1.1x	1.1x
	33,036,389		Transactions precedent approach	Transaction price	(d)	N/A	-	N/A	N/A
	186,287,604		Market quotations	Broker quoted price	(e)	N/A	-	N/A	N/A
FSFR Glick JV subordinated notes	56,885,646		Market yield approach	Capital structure premium	(a)	2.0%	-	2.0%	2.0%
				Tranche specific risk premium / (discount)	(a)	(1.4)%	-	(1.4)%	(1.4)%
				Size premium	(a)	2.0%	-	2.0%	2.0%
				Industry premium / (discount)	(a)	1.9%	-	1.9%	1.9%
Preferred & Common Equity	7,902,556		Enterprise value approach	Weighted average cost of capital		14.0%	-	18.0%	14.5%
				Company specific risk premium	(a)	1.0%	-	2.0%	1.9%
				Revenue growth rate		(21.6)%	-	57.8%	(12.0)%
				EBITDA/Revenue multiple	(b)	1.0x	-	18.0x	3.1x
Total	$	567,173,360
Liabilities	Fair Value		Valuation Technique	Unobservable Input	Range				Weighted Average
Secured borrowings	$	4,985,425	Market quotations	Broker quoted price	(e)	N/A	-	N/A	N/A
Total	$	4,985,425

_____________________

(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) Used when there is an observable transaction or pending event for the investment.

(e) 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 of the Company's Board of Directors in conjunction with additional information compiled by the Company, including financial performance, recent business developments and various other factors.

Under the market 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

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

premium (discount). Increases or decreases in any of those inputs in isolation may result in a lower or higher fair value measurement, respectively.

Under the enterprise value approach, the significant unobservable input used in the fair value measurement of the Company's investments in debt or equity securities is the EBITDA/Revenue multiple. Increases or decreases in the valuation multiples in isolation may result in a 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 June 30, 2017 and the level of each financial liability within the fair value hierarchy:



	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Citibank facility payable	$	73,656,800	$	73,656,800	$	—	$	—	$	73,656,800
East West Bank facility payable	13,000,000		13,000,000						13,000,000
Notes payable	179,503,342		181,800,000		—		—		181,800,000
Total	$	266,160,142	$	268,456,800	$	—	$	—	$	268,456,800

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 September 30, 2016 and the level of each financial liability within the fair value hierarchy:



	Carrying Value		Fair Value		Level 1		Level 2		Level 3
Citibank facility payable	$	107,426,800	$	107,426,800	$	—	$	—	$	107,426,800
Notes payable	177,485,764		180,000,000		—		—		180,000,000
Total	$	284,912,564	$	287,426,800	$	—	$	—	$	287,426,800

The principal value of the credit facilities payable and notes payable approximate their fair values and are included in Level 3 of the hierarchy.

Portfolio Composition

Summaries of the composition of the Company's investment portfolio at cost and fair value as a percentage of total investments are shown in the following tables:



	June 30, 2017				September 30, 2016
Cost:
Senior secured debt	$	508,125,501	86.14	%	$	518,778,491	86.40	%
Subordinated notes of FSFR Glick JV	64,005,755		10.85		64,005,755		10.66
LLC equity interests of FSFR Glick JV	7,111,751		1.21		7,111,751		1.18
Purchased equity	10,587,709		1.80		10,572,966		1.76
Equity grants	—		—		—		—
Total	$	589,830,716	100.00	%	$	600,468,963	100.00	%
Fair Value:
Senior secured debt	$	498,945,230	88.28	%	$	502,385,158	87.58	%
Subordinated notes of FSFR Glick JV	61,614,406		10.90		56,885,646		9.92
LLC equity interests of FSFR Glick JV	—		—		6,431,021		1.12
Purchased equity	4,618,617		0.82		7,782,214		1.36
Equity grants	—		—		120,342		0.02
Total	$	565,178,253	100.00	%	$	573,604,381	100.00	%

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.



	June 30, 2017				September 30, 2016
Cost:
Northeast U.S.	$	217,416,392	36.87	%	$	223,662,953	37.25	%
Southwest U.S.	113,948,774		19.32		123,909,372		20.64
Southeast U.S.	92,102,014		15.61		76,201,785		12.69
Midwest U.S.	88,275,609		14.97		77,086,840		12.84
West U.S.	70,908,726		12.02		84,992,619		14.15
Northwest	3,803,844		0.64		—		—
International	3,375,357		0.57		14,615,394		2.43
Total	$	589,830,716	100.00	%	$	600,468,963	100.00	%

Fair Value:
Northeast U.S.	$	193,364,260	34.22	%	$	208,857,837	36.41	%
Southwest U.S.	110,217,888		19.50		124,470,758		21.70
Southeast U.S.	92,196,223		16.31		76,053,964		13.26
Midwest U.S.	90,013,163		15.93		65,672,577		11.45
West U.S.	72,050,785		12.75		85,344,025		14.88
Northwest	3,920,405		0.69		—		—
International	3,415,529		0.60		13,205,220		2.30
Total	$	565,178,253	100.00	%	$	573,604,381	100.00	%

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The composition of the Company's portfolio by industry at cost and fair value as a percentage of total investments as of June 30, 2017 and September 30, 2016 was as follows:



	June 30, 2017				September 30, 2016
Cost:
Internet software & services	$	119,991,520	20.33	%	$	132,462,581	22.07	%
Healthcare services	72,592,348		12.31		88,865,063		14.80
Multi-sector holdings	71,117,506		12.06		71,117,506		11.84
Advertising	57,394,928		9.73		48,396,135		8.06
Diversified support services	36,526,847		6.19		19,714,868		3.28
Application software	33,837,406		5.74		32,100,672		5.35
Security & alarm services	21,697,157		3.68		17,835,147		2.97
IT consulting & other services	20,577,066		3.49		8,811,481		1.47
Research & consulting services	17,033,134		2.89		17,128,420		2.85
Specialized finance	15,341,758		2.60		—		—
Industrial machinery	12,829,633		2.18		3,826,203		0.64
Commercial printing	11,885,584		2.02		5,912,694		0.98
Integrated telecommunication services	11,317,382		1.92		24,385,644		4.06
Food retail	10,084,378		1.71		6,889,930		1.15
Data processing & outsourced services	9,811,928		1.66		9,835,238		1.64
Pharmaceuticals	9,092,205		1.54		9,162,870		1.53
Computer & Electronics Retail	7,427,113		1.26		—		—
Human resources & employment services	6,656,896		1.13		—		—
Personal products	6,546,481		1.11		1,285,383		0.21
Aerospace & defense	6,468,283		1.10		—		—
Environmental & facilities services	6,353,976		1.08		6,391,836		1.06
Food distributors	5,600,780		0.95		5,711,496		0.95
Specialty Stores	5,428,269		0.92		—		—
Casinos & gaming	4,975,301		0.84		—		—
Fertilizers & agricultural chemicals	3,271,743		0.55		3,522,668		0.59
Hypermarkets & super centers	3,003,703		0.51		—		—
Specialized consumer services	1,664,536		0.28		22,605,271		3.76
Computer hardware	1,302,855		0.22		3,956,802		0.66
Construction and engineering	—		—		5,907,850		0.98
Education services	—		—		15,262,322		2.54
Electronic equipment & instruments	—		—		10,942,464		1.82
Diversified capital markets	—		—		8,685,189		1.45
Wireless telecommunication services	—		—		5,719,729		0.95
Restaurants	—		—		5,000,000		0.83
Healthcare technology	—		—		4,856,420		0.81
Oil & gas equipment & services	—		—		4,177,081		0.70
Total	$	589,830,716	100.00	%	$	600,468,963	100.00	%

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	June 30, 2017				September 30, 2016
Fair Value:
Internet software & services	$	115,091,358	20.35	%	$	119,438,318	20.82	%
Healthcare services	63,405,427		11.22		83,972,780		14.64
Multi-sector holdings	61,614,406		10.90		63,316,667		11.04
Advertising	54,581,012		9.66		48,684,948		8.49
Diversified support services	36,965,673		6.54		19,597,622		3.42
Application software	33,552,545		5.94		32,405,166		5.65
Security & alarm services	22,061,646		3.90		17,865,123		3.11
IT consulting & other services	20,641,367		3.65		8,884,236		1.55
Research & consulting services	17,551,922		3.11		17,162,244		2.99
Specialized finance	15,468,031		2.74		—		—
Industrial machinery	12,865,193		2.28		3,778,376		0.66
Commercial printing	12,143,240		2.15		5,929,733		1.03
Integrated telecommunication services	11,435,429		2.02		24,637,968		4.30
Food retail	10,267,090		1.82		7,011,442		1.22
Data processing & outsourced services	9,835,450		1.74		9,820,000		1.71
Pharmaceuticals	9,034,233		1.60		9,033,850		1.57
Computer & Electronics Retail	7,585,950		1.34		—		—
Human resources & employment services	6,656,896		1.18		—		—
Personal products	6,607,003		1.17		1,290,310		0.22
Aerospace & defense	6,581,250		1.16		—		—
Environmental & facilities services	6,454,909		1.14		6,540,239		1.14
Food distributors	5,585,624		0.99		5,623,604		0.98
Specialty Stores	5,443,695		0.96		—		—
Casinos & gaming	5,041,425		0.89		—		—
Hypermarkets & super centers	2,914,995		0.52		—		—
Fertilizers & agricultural chemicals	2,776,762		0.49		3,377,146		0.59
Specialized consumer services	1,673,504		0.30		22,538,791		3.93
Computer hardware	1,342,218		0.24		3,903,567		0.68
Construction and engineering	—		—		5,768,770		1.01
Education services	—		—		15,293,164		2.67
Electronic equipment & instruments	—		—		10,912,302		1.90
Diversified capital markets	—		—		8,763,486		1.53
Restaurants	—		—		4,985,425		0.87
Healthcare technology	—		—		4,747,016		0.83
Wireless telecommunication services	—		—		4,231,659		0.74
Oil & gas equipment & services	—		—		4,090,429		0.71
Total	$	565,178,253	100.00	%	$	573,604,381	100.00	%

The Company's investments are generally in middle market companies in a variety of industries. The Company has one investment that represented greater than 10% of the total investment portfolio at fair value at June 30, 2017 and September 30, 2016, which is as follows:

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. Details of investment income of FSFR Glick JV LLC for the three and nine months ended June 30, 2017 and June 30, 2016 are as follows:



	Three months ended June 30, 2017				Three months ended June 30, 2016
	Investment Income		Percent of Total Investment Income		Investment Income		Percent of Total Investment Income
FSFR Glick JV LLC	$	1,031,956	8.5	%	$	2,051,422	15.6	%



	Nine months ended June 30, 2017				Nine months ended June 30, 2016
	Investment Income		Percent of Total Investment Income		Investment Income		Percent of Total Investment Income
FSFR Glick JV LLC	$	4,018,138	11.6	%	$	5,694,441	14.2	%

FSFR Glick JV LLC

In October 2014, the Company entered into an LLC agreement with GF Equity Funding 2014 LLC ("GF Equity Funding") to form FSFR Glick JV. On April 21, 2015, FSFR Glick JV began investing primarily in senior secured loans of middle market companies. The Company co-invests in these securities with GF Equity Funding through its investment in FSFR Glick JV. FSFR Glick JV is managed by a four person Board of Directors, two of whom are selected by the Company and two of whom are selected by GF Equity Funding. FSFR Glick JV is capitalized as transactions are completed, and portfolio decisions and investment decisions in respect of FSFR Glick JV must be approved by an investment committee of FSFR Glick JV consisting of one representative of the Company and one representative of GF Equity Funding (with approval of each required). The members provide capital to FSFR Glick JV in exchange for LLC equity interests, and the Company and GF Debt Funding 2014 LLC ("GF Debt Funding"), an entity advised by affiliates of GF Equity Funding, provide capital to FSFR Glick JV in exchange for subordinated notes (the "Subordinated Notes"). As of June 30, 2017 and September 30, 2016, the Company and GF Equity Funding owned 87.5% and 12.5% , respectively, of the outstanding LLC equity interests and the Company and GF Debt Funding owned 87.5% and 12.5% , respectively, of the Subordinated Notes. FSFR Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the 1940 Act.

The Company has determined that FSFR Glick JV is an investment company under ASC 946; however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company does not consolidate its noncontrolling interest in FSFR Glick JV.

As of June 30, 2017 and September 30, 2016 , FSFR Glick JV had total assets of $145.2 million and $201.1 million, respectively. As of June 30, 2017 , the Company's investment in FSFR Glick JV consisted of LLC equity interests and Subordinated Notes of $61.6 million in aggregate, at fair value. As of September 30, 2016 , the Company's investment consisted of LLC equity interests and Subordinated Notes of $63.3 million in aggregate, at fair value. The Subordinated Notes are junior in right of payment to the repayment of temporary contributions made by the Company to fund investments of FSFR Glick JV that are repaid when GF Equity Funding and GF Debt Funding make their capital contributions and fund their Subordinated Notes, respectively. FSFR Glick JV's portfolio consisted of middle market and other corporate debt securities of 28 and 36 "eligible portfolio companies" (as defined in Section 2(a)(46) of the 1940 Act) as of June 30, 2017 and September 30, 2016 , respectively. The portfolio companies in FSFR Glick JV are in industries similar to those in which the Company may invest directly.

As of June 30, 2017 and September 30, 2016 , FSFR Glick JV had total capital commitments of $100.0 million , $87.5 million of which was from the Company and the remaining $12.5 million from GF Equity Funding and GF Debt Funding. Approximately $81.3 million in aggregate commitments were funded as of June 30, 2017 and September 30, 2016 , of which $71.1 million was from the Company. As of June 30, 2017 and September 30, 2016 , the Company had commitments to fund Subordinated Notes to FSFR Glick JV of $78.8 million , of which $14.7 million was unfunded. As of June 30, 2017 and September 30, 2016 , the Company had commitments to fund LLC equity interests in FSFR Glick JV of $8.7 million , of which $1.6 million was unfunded.

Additionally, FSFR Glick JV has a senior revolving credit facility with Deutsche Bank AG, New York Branch ("Deutsche Bank facility") with a stated maturity date of April 17, 2023, which permitted up to $200.0 million of borrowings as of both June 30, 2017 and September 30, 2016 . Prior to June 29, 2017, this credit facility was with Credit Suisse AG, Cayman Islands Branch. On June 29, 2017, this credit facility was assigned to Deutsche Bank AG, New York Branch. Borrowings under the Deutsche Bank facility are secured by all of the assets of FSFR Glick JV and all of the equity interests in FSFR Glick JV and bore interest at a rate equal to the 3-

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

month LIBOR plus 2.5% per annum with no LIBOR floor as of June 30, 2017 and September 30, 2016 . Under the Deutsche Bank facility, $71.9 million and $124.6 million of borrowings were outstanding as of June 30, 2017 and September 30, 2016 , respectively.

Below is a summary of FSFR Glick JV's portfolio, followed by a listing of the individual loans in FSFR Glick JV's portfolio as of June 30, 2017 and September 30, 2016 :



	June 30, 2017	September 30, 2016
Senior secured loans (1)	$135,539,080	$194,346,557
Weighted average current interest rate on senior secured loans (2)	6.97%	7.08%
Number of borrowers in FSFR Glick JV	28	36
Largest loan exposure to a single borrower (1)	$11,286,839	$12,641,009
Total of five largest loan exposures to borrowers (1)	$43,022,071	$49,318,344

__________

(1) At principal amount.

(2) Computed using the annual interest rate on accruing senior secured loans.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FSFR Glick JV Portfolio as of June 30, 2017

Portfolio Company

Industry

Investment Type

Maturity Date

Current Interest Rate (1)(4)

Principal

Cost

Fair Value (2)

Ameritox Ltd. (3)

Healthcare services

First Lien Term Loan

4/11/2021

LIBOR+5% (1% floor) cash 3% PIK

$2,392,766

Healthcare services

119,910.76 Class B Preferred Units

119,911

—

Healthcare services

368.96 Class A Common Units

2,174,034

—

Total Ameritox Ltd

2,392,766

4,686,711

2,392,766

Beyond Trust Software, Inc. (3)

Application software

First Lien Term Loan

9/25/2019

LIBOR+7% (1% floor) cash

11,286,839

11,232,878

11,258,621

Compuware Corporation (3)

Internet software & services

First Lien Term Loan B3

12/15/2021

LIBOR+4.25% (1% floor) cash

6,295,858

6,238,542

6,350,947

Metamorph US 3, LLC (3)(5)

Internet software & services

First Lien Term Loan

12/1/2020

LIBOR+6.5% (1% floor) cash 2% PIK

6,844,354

6,647,537

3,924,508

Motion Recruitment Partners LLC (3)

Diversified support services

First Lien Term Loan

2/13/2020

LIBOR+6% (1% floor) cash

8,722,150

8,679,432

NAVEX Global, Inc. (3)

Internet software & services

First Lien Term Loan

11/19/2021

LIBOR+4.75% (1% floor) cash

2,984,694

2,974,579

2,995,886

Air Newco LLC

IT consulting & other services

First Lien Term Loan B

3/20/2022

LIBOR+5.5% (1% floor) cash

8,228,728

8,208,051

8,095,011

TIBCO Software, Inc. (3)

Internet software & services

First Lien Term Loan

12/4/2020

LIBOR+4.5% (1% floor) cash

3,534,319

3,537,504

3,558,300

CM Delaware LLC

Advertising

First Lien Term Loan

3/18/2021

LIBOR+5.25% (1% floor) cash

2,080,538

2,078,879

1,921,897

New Trident Holdcorp, Inc. (3)

Healthcare services

First Lien Term Loan B

7/31/2019

LIBOR+5.25% (1.25% floor) cash

2,023,994

2,004,237

1,696,107

Central Security Group, Inc. (3)

Specialized consumer services

First Lien Term Loan

10/6/2020

LIBOR+5.625% (1% floor) cash

3,886,031

3,890,747

3,894,133

Auction.com, LLC (3)

Internet software & services

First Lien Term Loan

5/12/2019

LIBOR+5% (1% floor) cash

3,910,000

3,900,642

3,949,100

Aptos, Inc. (3)

Data processing & outsourced services

First Lien Term Loan B

9/1/2022

LIBOR+6.75% (1% floor) cash

7,940,000

7,803,303

7,860,600

Vubiquity, Inc.

Application software

First Lien Term Loan

8/12/2021

LIBOR+5.5% (1% floor) cash

4,137,000

4,107,835

4,074,945

American Seafoods Group LLC (3)

Food distributors

First Lien Term Loan

8/19/2021

LIBOR+5% (1% floor) cash

3,683,704

3,670,899

3,708,274

Worley Claims Services, LLC

Internet software & services

First Lien Term Loan

10/31/2020

LIBOR+8% (1% floor) cash

5,199,601

5,182,383

5,147,605

Poseidon Merger Sub, Inc. (3)

Advertising

Second Lien Term Loan

8/15/2023

LIBOR+8.5% (1% floor) cash

3,000,000

2,930,789

3,046,787

Novetta Solutions, LLC

Diversified support services

First Lien Term Loan

10/16/2022

LIBOR+5.75% (1% floor) cash

6,006,223

5,943,606

5,816,036

SHO Holding I Corporation

Footwear

First Lien Term Loan

10/27/2022

LIBOR+5% (1% floor) cash

6,402,500

6,352,245

6,418,506

Valet Merger Sub, Inc. (3)

Environmental & facilities services

First Lien Term Loan

9/24/2021

LIBOR+7% (1% floor) cash

3,930,000

3,884,887

3,964,993

RSC Acquisition, Inc.

Insurance brokers

First Lien Term Loan

11/30/2022

LIBOR+5.25% (1% floor) cash

3,940,204

3,921,350

3,900,802

Integro Parent Inc.

Insurance brokers

First Lien Term Loan

10/31/2022

LIBOR+5.75% (1% floor) cash

4,926,424

4,796,594

4,938,740

TruckPro, LLC

Auto parts & equipment

First Lien Term Loan

8/6/2018

LIBOR+5% (1% floor) cash

1,834,901

1,833,006

1,836,241

Falmouth Group Holdings Corp.

Specialty chemicals

First Lien Term Loan

12/13/2021

LIBOR+6.75% (1% floor) cash

4,925,000

4,882,719

4,885,660

Sundial Group Holdings LLC

Personal products

First Lien Term Loan

10/19/2021

LIBOR+6.25% (1% floor) cash

3,750,000

3,701,693

3,774,781

Ancile Solutions, Inc. (3)

Internet software & services

First Lien Term Loan

6/30/2021

LIBOR+7% (1% floor) cash

4,068,267

4,018,077

4,097,271

California Pizza Kitchen, Inc.

Restaurants

First Lien Term Loan

8/23/2022

LIBOR+6% (1% floor) cash

4,962,500

4,949,937

4,969,745

MHE Intermediate Holdings, LLC

Diversified support services

First Lien Term Loan

3/11/2024

LIBOR+5% (1% floor) cash

4,239,375

4,157,660

4,205,862

Diversified support services

Delayed Draw Term Loan

3/11/2024

LIBOR+5% (1% floor) cash

403,110

369,463

403,110

Total MHE International Holdings, LLC

4,642,485

4,527,123

4,608,972

Total Portfolio Investments

135,539,080

136,628,903

131,766,666

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

__________

(1) Represents the current interest rate as of June 30, 2017 . All interest rates are payable in cash, unless otherwise noted.

(2) Represents the current determination of fair value as of June 30, 2017 utilizing a similar approach as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.

(3) This investment is held by both the Company and FSFR Glick JV as of June 30, 2017 .

(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or 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 or the alternate base rate based on each respective credit agreement.

(5) This investment was on PIK non-accrual status as of June 30, 2017.

FSFR Glick JV Portfolio as of September 30, 2016

Portfolio Company

Industry

Investment Type

Maturity Date

Current Interest Rate (1)(4)

Principal

Cost

Fair Value (2)

Ameritox Ltd. (3)

Healthcare services

First Lien Term Loan

4/11/2021

LIBOR+5% (1% floor) cash 3% PIK

$2,339,146

$2,336,840

$2,322,917

Healthcare services

119,910.76 Class B Preferred Units

—

119,911

131,369

Healthcare services

368.96 Class A Common Units

—

2,174,034

981,348

Total Ameritox Ltd

2,339,146

4,630,785

3,435,634

Answers Corporation (3) (5)

Internet software & services

First Lien Term Loan

10/3/2021

LIBOR+5.25% (1% floor) cash

7,899,749

7,636,708

4,265,865

Beyond Trust Software, Inc. (3)

Application software

First Lien Term Loan

9/25/2019

LIBOR+7% (1% floor) cash

12,641,009

12,554,571

12,538,499

Compuware Corporation (3)

Internet software & services

First Lien Term Loan B1

12/15/2019

LIBOR+5.25% (1% floor) cash

7,392,405

7,306,444

7,420,127

Metamorph US 3, LLC (3)

Internet software & services

First Lien Term Loan

12/1/2020

LIBOR+6.5% (1% floor) cash

6,900,283

6,808,009

5,744,139

Motion Recruitment Partners LLC (3)

Diversified support services

First Lien Term Loan

2/13/2020

LIBOR+6% (1% floor) cash

9,125,000

9,099,254

NAVEX Global, Inc. (3)

Internet software & services

First Lien Term Loan

11/19/2021

LIBOR+4.75% (1% floor) cash

1,793,550

1,779,633

1,784,582

Teaching Strategies, LLC

Education services

First Lien Term Loan (3)

10/1/2019

LIBOR+5.5% (0.5% floor) cash

2,570,471

2,567,575

2,556,891

Education services

First Lien Delayed Draw Term Loan

10/1/2019

LIBOR+5.5% (0.5% floor) cash

6,840,000

6,832,715

6,803,695

Total Teaching Strategies, LLC

9,410,471

9,400,290

9,360,586

TrialCard Incorporated (3)

Healthcare services

First Lien Term Loan

12/31/2019

LIBOR+4.5% (1% floor) cash

7,179,097

7,144,396

7,144,248

Air Newco LLC

IT consulting & other services

First Lien Term Loan B

3/20/2022

LIBOR+5.5% (1% floor) cash

8,291,864

8,267,671

7,960,189

Fineline Technologies, Inc. (3)

Electronic equipment & instruments

First Lien Term Loan

5/5/2017

LIBOR+5.5% (1% floor) cash

7,034,441

7,010,963

7,015,051

LegalZoom.com, Inc. (3)

Specialized consumer services

First Lien Term Loan

5/13/2020

LIBOR+7% (1% floor) cash

9,850,000

9,672,034

9,772,706

GK Holdings, Inc.

IT consulting & other services

First Lien Term Loan

1/20/2021

LIBOR+5.5% (1% floor) cash

3,438,750

3,452,038

3,412,959

Vitera Healthcare Solutions, LLC

Healthcare technology

Second Lien Term Loan

11/4/2021

LIBOR+8.25% (1% floor) cash

3,000,000

2,958,409

2,782,500

TIBCO Software, Inc. (3)

Internet software & services

First Lien Term Loan

12/4/2020

LIBOR+5.5% (1% floor) cash

2,304,900

2,308,815

2,277,114

CM Delaware LLC

Advertising

First Lien Term Loan

3/18/2021

LIBOR+5.25% (1% floor) cash

2,096,666

2,094,658

1,978,729

New Trident Holdcorp, Inc. (3)

Healthcare services

First Lien Term Loan B

7/31/2019

LIBOR+5.25% (1.25% floor) cash

2,041,357

2,014,233

1,755,567

Central Security Group, Inc. (3)

Specialized consumer services

First Lien Term Loan

10/6/2020

LIBOR+5.625% (1% floor) cash

5,909,774

5,915,626

5,776,805

Auction.com, LLC

Internet software & services

First Lien Term Loan

5/12/2019

LIBOR+5% (1% floor) cash

3,940,000

3,926,700

3,959,700

Aptos, Inc. (3)

Data processing & outsourced services

First Lien Term Loan B

9/1/2022

LIBOR+6.75% (1% floor) cash

8,000,000

7,842,222

7,920,000

Vubiquity, Inc.

Application software

First Lien Term Loan

8/12/2021

LIBOR+5.5% (1% floor) cash

4,168,500

4,133,700

4,147,658

Too Faced Cosmetics, LLC (3)

Personal products

First Lien Term Loan B

7/7/2021

LIBOR+5% (1% floor) cash

642,692

581,620

645,155

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Portfolio Company

Industry

Investment Type

Maturity Date

Current Interest Rate (1)(4)

Principal

Cost

Fair Value (2)

American Seafoods Group LLC (3)

Food distributors

First Lien Term Loan

8/19/2021

LIBOR+5% (1% floor) cash

3,853,704

3,837,366

3,844,069

Worley Claims Services, LLC

Internet software & services

First Lien Term Loan

10/31/2020

LIBOR+8% (1% floor) cash

5,730,937

5,707,511

5,702,282

Poseidon Merger Sub, Inc. (3)

Advertising

Second Lien Term Loan

8/15/2023

LIBOR+8.5% (1% floor) cash

3,000,000

2,922,316

3,039,954

AccentCare, Inc.

Healthcare services

First Lien Term Loan

9/3/2021

LIBOR+5.75% (1% floor) cash

7,850,000

7,773,386

7,727,344

Novetta Solutions, LLC

Diversified support services

First Lien Term Loan

10/17/2022

LIBOR+5.75% (1% floor) cash

6,477,948

6,392,100

6,226,928

SHO Holding I Corporation

Footwear

First Lien Term Loan

10/27/2022

LIBOR+5% (1% floor) cash

6,451,250

6,393,472

6,443,186

Valet Merger Sub, Inc. (3)

Environmental & facilities services

First Lien Term Loan

9/24/2021

LIBOR+7% (1% floor) cash

3,960,000

3,906,498

4,026,826

RSC Acquisition, Inc.

Insurance brokers

First Lien Term Loan

11/30/2022

LIBOR+5.25% (1% floor) cash

3,970,390

3,948,754

3,950,538

Integro Parent Inc.

Insurance brokers

First Lien Term Loan

10/31/2022

LIBOR+5.75% (1% floor) cash

4,963,924

4,814,658

4,889,465

TruckPro, LLC

Auto parts & equipment

First Lien Term Loan

8/6/2018

LIBOR+5% (1% floor) cash

1,920,000

1,916,612

1,919,232

Falmouth Group Holdings Corp.

Specialty chemicals

First Lien Term Loan

12/13/2021

LIBOR+6.75% (1% floor) cash

4,962,500

4,912,596

4,967,689

Sundial Group Holdings LLC

Personal products

First Lien Term Loan

10/19/2021

LIBOR+6.25% (1% floor) cash

3,900,000

3,839,938

3,954,402

Onvoy, LLC (3)

Integrated telecommunication services

First Lien Term Loan

4/29/2021

LIBOR+6.25% (1% floor) cash

7,406,250

7,261,422

7,386,738

Ancile Solutions, Inc. (3)

Internet software & services

First Lien Term Loan

6/30/2021

LIBOR+7% (1% floor) cash

4,500,000

4,433,644

4,432,500

Total Portfolio Investments

194,346,557

194,624,798

188,708,220

_________

(1) Represents the current interest rate as of September 30, 2016 . All interest rates are payable in cash, unless otherwise noted.

(2) Represents the current determination of fair value as of September 30, 2016 utilizing a similar approach as the Company in accordance with ASC 820. However, the determination of such fair value is not included in the Company's Board of Directors' valuation process described elsewhere herein.

(3) This investment is held by both the Company and FSFR Glick JV as of September 30, 2016 .

(5) This investment was on cash non-accrual status as of September 30, 2016.

The cost and fair value of the Company's aggregate investment in FSFR Glick JV was $71.1 million and $61.6 million , respectively, as of June 30, 2017 and $71.1 million and $63.3 million, respectively, as of September 30, 2016 . The Subordinated Notes pay a weighted average interest rate of LIBOR plus 8.0% per annum. For the three and nine months ended June 30, 2017 , the Company earned interest income of $1.5 million and $4.3 million on its investment in the Subordinated Notes, respectively. For the three and nine months ended June 30, 2016, the Company earned interest income of $1.4 million and $3.7 million on its investment in the Subordinated Notes, respectively. The Company did not earn dividend income for the three months ended June 30, 2017 with respect to its LLC equity interests. The Company earned dividend income of $0.2 million for the nine months ended June 30, 2017 with respect to its LLC equity interests. In addition, the Company reversed $0.4 million of dividend income previously recorded in prior periods during the three and nine months ended June 30, 2017 with respect to its LLC equity interests since the Company determined that such dividend receivable balance may no longer be collectible. The Company earned dividend income of $0.7 million and $2.0 million, respectively, for the three and nine months ended June 30, 2016 with respect to its LLC equity interests. The LLC equity interests are dividend producing to the extent there is residual cash to be distributed on a quarterly basis.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Below is certain summarized financial information for FSFR Glick JV as of June 30, 2017 and September 30, 2016 and for the three and nine months ended June 30, 2017 and June 30, 2016:



	June 30, 2017		September 30, 2016
Selected Balance Sheet Information:
Investments in loans at fair value (cost June 30, 2017: $136,628,903; cost September 30, 2016: $194,624,798)	$	131,766,666	$	188,708,220
Receivable from secured financing arrangement at fair value (September 30, 2016 cost: $5,000,000)	—		4,985,425
Cash and cash equivalents	7,257,936		980,605
Restricted cash	2,314,937		3,343,303
Receivable from unsettled transactions	1,968,738		952,591
Due from portfolio companies	22,500		—
Other assets	1,862,916		2,162,942
Total assets	$	145,193,693	$	201,133,086

Senior credit facility payable	$	71,881,939	$	124,615,636
Subordinated notes payable at fair value (proceeds June 30, 2017 and September 30, 2016: $73,149,434)	70,416,214		65,012,167
Other liabilities	2,895,540		4,196,688
Total liabilities	$	145,193,693	$	193,824,491
Members' equity	—		7,308,595
Total liabilities and members' equity	$	145,193,693	$	201,133,086



	Three months ended June 30, 2017			Three months ended June 30, 2016			Nine months ended June 30, 2017			Nine months ended June 30, 2016
Selected Statements of Operations Information:
Interest income	$	2,490,873		$	3,732,459		$	8,824,724		$	10,606,543
PIK interest income	18,010			15,373			53,620			15,373
Fee income	31,496			5,687			150,328			93,028
Total investment income	2,540,379			3,753,519			9,028,672			10,714,944
Interest expense	2,722,468			2,850,832			8,274,454			7,895,486
Other expenses	47,636			58,600			181,656			182,177
Total expenses (1)	2,770,104			2,909,432			8,456,110			8,077,663
Net unrealized appreciation (depreciation)	(726,406		)	4,030,887			(4,349,628		)	2,170,718
Realized loss on investments	(9,893		)	(3,098,475		)	(3,873,454		)	(3,098,475		)
Net income (loss)	$	(966,024	)	$	1,776,499		$	(7,650,520	)	$	1,709,524

__________

(1) There are no management fees or incentive fees charged at FSFR Glick JV.

FSFR Glick JV has elected to fair value the Subordinated Notes issued to the Company and GF Debt Funding under ASC 825. The Subordinated Notes are valued based on the total assets less the liabilities senior to the subordinated notes of FSFR Glick JV under the enterprise value approach.

During the three and nine months ended June 30, 2017 , the Company did not sell any senior secured debt investments to FSFR Glick JV. During the three months ended June 30, 2016, the Company sold $18.2 million of senior secured debt investments at fair value to FSFR Glick JV in exchange for $18.2 million cash consideration. The Company realized a loss of $0.1 million on these transactions. During the nine months ended June 30, 2016, the Company sold $41.2 million of senior secured debt investments at fair value to FSFR Glick JV in exchange for $40.0 million cash consideration, $1.1 million of subordinated notes and $0.1 million of LLC equity interests. The Company realized a loss of $0.4 million on these transactions.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. Fee Income

The Company receives a variety of fees in the ordinary course of business including servicing, advisory, amendment, structuring and prepayment fees, which are classified as fee income and recognized as they are earned. The majority of fee income is comprised of advisory fees which are recognized at investment close and are non-recurring in nature.

For the three and nine months ended June 30, 2017 , the Company recorded total fee income of $0.5 million , $0.1 million of which was recurring in nature, and $1.2 million , $0.4 million of which was recurring in nature, respectively. For the three and nine months ended June 30, 2016, the Company recorded total fee income of $0.8 million , $0.2 million of which was recurring in nature, and $2.9 million , $0.5 million of which was recurring in nature, respectively.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5. Share Data and Distributions

Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share, pursuant to FASB ASC Topic 260-10, Earnings per Share , for the three and nine months ended June 30, 2017 and June 30, 2016:



	Three months ended June 30, 2017		Three months ended June 30, 2016		Nine months ended June 30, 2017		Nine months ended June 30, 2016
Earnings (loss) per common share — basic and diluted:
Net increase (decrease) in net assets resulting from operations	$	139,198	$	916,059	$	5,696,300	$	(13,050,566	)
Weighted average common shares outstanding	29,466,768		29,466,768		29,466,768		29,466,768
Earnings (loss) per common share — basic and diluted	$ 0.00		$	0.03	$	0.19	$	(0.44	)

Distributions

Distributions to common stockholders are recorded on the ex-dividend date. The Company is required to distribute dividends each taxable year to its stockholders of an amount generally at least equal to 90% of its investment company taxable income, determined without regard to any deduction for dividend paid, in order to be eligible for tax benefits allowed to a RIC under Subchapter M of the Code. The Company anticipates paying out as a distribution 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. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such net realized capital gains for investment.

The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for reinvestment of any distributions the Company declares in cash on behalf of its stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board of Directors authorizes, and the Company declares, a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s DRIP will have their cash distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution. If the Company’s shares are trading at a premium to net asset value, the Company typically issues new shares to implement the DRIP. If the Company’s shares are trading at a discount to net asset value, the Company typically purchases shares in the open market in connection with the Company’s obligations under the DRIP.

For income tax purposes, the Company estimates that its distributions for the 2017 calendar year will be composed primarily of ordinary income and the actual character of such distributions will be appropriately reported to the Internal Revenue Service and stockholders for the 2017 calendar year. To the extent that the Company’s taxable earnings fall below the amount of distributions paid, a portion of the total amount of the Company’s distributions for the fiscal year may be deemed a return of capital for tax purposes to the Company’s stockholders.

The following table reflects the dividend distributions per share that our Board of Directors has paid, including shares issued under our DRIP on our common stock during the nine months ended June 30, 2017 and June 30, 2016:



Frequency	Date Declared	Record Date	Payment Date	Amount per Share		Cash Distribution		DRIP Shares Issued (1)	DRIP Shares Value
Monthly	August 4, 2016	October 14, 2016	October 31, 2016	$	0.075	$	2,183,023	3,146	$	26,985
Monthly	August 4, 2016	November 15, 2016	November 30, 2016	0.075		2,183,100		2,986	26,908
Monthly	October 19, 2016	December 15, 2016	December 30, 2016	0.075		2,179,421		3,438	30,586
Monthly	October 19, 2016	January 31, 2017	January 31, 2017	0.075		2,180,645		2,905	29,363
Monthly	October 19, 2016	February 15, 2017	February 28, 2017	0.075		2,183,581		2,969	26,427
Monthly	February 6, 2017	March 15, 2017	March 31, 2017	0.04		1,165,417		1,508	13,253
Quarterly	February 6, 2017	June 15, 2017	June 30, 2017	0.19		5,543,465		6,840	55,221
Total for the nine months ended June 30, 2017				$	0.605	$	17,618,653	23,792	$	208,742

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



Frequency	Date Declared	Record Date	Payment Date	Amount per Share		Cash Distribution		DRIP Shares Issued (1)	DRIP Shares Value (2)
Monthly	July 10, 2015	October 6, 2015	October 15, 2015	$	0.075	$	2,101,445	12,080	$	108,563
Monthly	July 10, 2015	November 5, 2015	November 16, 2015	0.075		2,093,278		13,269	116,730
Monthly	November 30, 2015	December 11, 2015	December 22, 2015	0.075		2,115,444		11,103	94,563
Monthly	November 30, 2015	January 4, 2016	January 15, 2016	0.075		2,148,928		8,627	61,079
Monthly	November 30, 2015	February 5, 2016	February 16, 2016	0.075		2,177,085		4,542	32,923
Monthly	February 8, 2016	March 15, 2016	March 31, 2016	0.075		2,175,431		4,383	34,577
Monthly	February 8, 2016	April 15, 2016	April 29, 2016	0.075		2,174,974		4,452	35,033
Monthly	February 8, 2016	May 13, 2016	May 31, 2016	0.075		2,176,513		4,256	33,494
Monthly	May 6, 2016	June 15, 2016	June 30, 2016	0.075		2,163,126		5,822	46,881
Total for the nine months ended June 30, 2016				$	0.675	$	19,326,224	68,534	$	563,844

__________

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

(2) Totals do not sum due to rounding

Common Stock Offering

There were no common stock offerings during the three and nine months ended June 30, 2017 and June 30, 2016 .

Note 6. Borrowings

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 (as amended, 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 accrued 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, and rates equal to LIBOR plus 3.50% per annum and LIBOR plus 4.00% per annum during the subsequent two years, respectively. In addition, there is a commitment fee payable on the undrawn amount under the Citibank facility of either 0.50% per annum on the unused amount of the Citibank facility (if the advances outstanding on the Citibank 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 Citibank 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 Citibank facility ends January 15, 2018 and the Citibank facility will mature on January 15, 2020. See "Note 14 - Subsequent Events." The Citibank facility requires the Company to comply with certain affirmative and negative covenants and other customary requirements for similar credit facilities.

On March 23, 2017, FS Senior Funding II LLC entered into an amendment to the documents governing the Citibank facility. The amendment was effective as of March 23, 2017 and, among other things, decreased the size of the Citibank facility from $175 million to $125 million. The interest rate, reinvestment period and maturity date were not modified as part of this amendment. The Company accelerated deferred financing costs of $406,230 in connection with the amendment.

As of June 30, 2017 and September 30, 2016, the Company had $73.7 million and $107.4 outstanding under the Citibank facility, respectively. 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 interests 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 3.447% and 2.770% for the nine months ended June 30, 2017 and June 30, 2016, respectively. For the three and nine months ended June 30, 2017 , the Company recorded interest expense of $0.9 million and $3.3 million , respectively, related to the Citibank facility. For the three and nine months ended June 30, 2016, the Company recorded interest expense of $1.0 million and $3.1 million, respectively, related to the Citibank facility.

East West Bank Facility

On January 6, 2016, the Company entered into a five-year $25 million senior secured revolving credit facility with the lenders referenced therein, U.S. Bank National Association, as Custodian, and East West Bank as Secured Lender (the "East West Bank facility"). The East West Bank facility bears an interest rate of either (i) LIBOR plus 3.75% per annum for borrowings in year one,

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.50% per annum for borrowings in year two, 3.25% per annum for borrowings in years three and four and 3.00% per annum for borrowings in year five, or (ii) East West Bank’s prime rate plus 0.75% per annum for borrowings in year one, 0.50% per annum for borrowings in year two, 0.25% per annum for borrowings in years three and four, and 0.00% per annum for borrowings in year five. The East West Bank facility matures on January 6, 2021. The East West Bank facility requires the Company to comply with certain affirmative and negative covenants and other customary requirements for similar credit facilities.

As of June 30, 2017 , the Company had $13.0 million outstanding under the East West Bank facility. As of September 30, 2016, the Company had no borrowings outstanding under the East West Bank facility. Borrowings under the East West Bank facility are secured by the loans pledged as collateral thereunder from time to time as well as certain other assets of the Company. The Company may use the East West Bank facility to fund a portion of its loan origination activities and for general corporate purposes. The Company’s borrowings under the East West Bank facility bore interest at a weighted average interest rate of 4.579% for the nine months ended June 30, 2017 . The Company’s borrowings under the East West Bank facility bore interest at a weighted average interest rate of 4.202% for the period from January 6, 2016 through June 30, 2016. For the three and nine months ended June 30, 2017 , the Company recorded interest expense of $0.2 million and $0.3 million, respectively, related to the East West Bank facility. For the three and nine months ended June 30, 2016, the Company recorded interest expense of $0.2 million and $0.3 million, respectively, related to the East West Bank Facility.

2015 Debt Securitization

On May 28, 2015, the Company completed its $309.0 million debt securitization ("2015 Debt Securitization") consisting of $222.6 million in senior secured notes ("2015 Notes") and $86.4 million of unsecured subordinated notes ("Subordinated 2015 Notes"). The notes offered in the 2015 Debt Securitization were issued by FS Senior Funding Ltd. (the "2015 Issuer"), a wholly-owned subsidiary of the Company, through a private placement. The 2015 Notes are secured by the assets held by the 2015 Issuer. The 2015 Debt Securitization consists of $126.0 million Class A-T Senior Secured 2015 Notes which bear interest at three-month LIBOR plus 1.80% per annum; $29.0 million Class A-S Senior Secured 2015 Notes which bore interest at a rate of three-month LIBOR plus 1.55% per annum, until a step-up in spread to 2.10% occurred in October 2016; $20.0 million Class A-R Senior Secured Revolving 2015 Notes which bear interest at a rate of Commercial Paper ("CP") plus 1.80% per annum, collectively, the "Class A Notes;" and $25.0 million Class B Senior Secured 2015 Notes which bear interest at a rate of three-month LIBOR plus 2.65% per annum (the "Class B Notes"). In partial consideration for the loans transferred to the 2015 Issuer as part of the 2015 Debt Securitization, the Company currently retains the entire $22.6 million of the Class C Senior Secured 2015 Notes (which the Company purchased at 98.0% of par value) (the "Class C Notes") and the entire $86.4 million of the Subordinated 2015 Notes. The Class A Notes and Class B Notes are included in the Company's June 30, 2017 Consolidated Statements of Assets and Liabilities as notes payable. As of June 30, 2017 , the Class C Notes and the Subordinated 2015 Notes were eliminated in consolidation.

The Company serves as collateral manager to the 2015 Issuer under a collateral management agreement. The Company is entitled

to a fee for its services as collateral manager. The Company has retained Fifth Street Management LLC, the Company’s investment adviser, to furnish collateral management sub-advisory services to the Company pursuant to a sub-collateral management agreement. Fifth Street Management LLC has irrevocably waived and intends to continue to irrevocably waive its right to such sub-collateral management fees in respect of the 2015 Debt Securitization.

The collateral management agreement does not include any incentive fee payable to the Company as collateral manager or payable to Fifth Street Management LLC as sub-advisor under the sub-collateral management agreement.

Through May 28, 2019, all principal collections received on the underlying collateral may be used by the 2015 Issuer to purchase new collateral under the direction of the Investment Adviser in its capacity as sub-collateral manager of the 2015 Issuer and in accordance with the Company's investment strategy. All 2015 Notes are scheduled to mature on May 28, 2025.

As of June 30, 2017 , there were 56 investments in portfolio companies with a total fair value of $275.9 million , securing the 2015 Notes. The pool of loans in the 2015 Debt Securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

For the three and nine months ended June 30, 2017 and June 30, 2016, the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the 2015 Debt Securitization were as follows:

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	Three months ended June 30, 2017			Three months ended June 30, 2016			Nine months ended June 30, 2017			Nine months ended June 30, 2016
Interest expense	$	1,472,696		$	1,179,015		$	4,200,225		$	3,448,626
Loan administration fees	16,992			17,488			51,480			61,941
Amortization of debt issuance costs	72,526			72,526			217,578			217,578
Total interest and other debt financing expenses	$	1,562,214		$	1,269,029		$	4,469,283		$	3,728,145
Cash paid for interest expense	$	1,394,676		$	1,188,596		$	3,976,651		$	3,891,220
Annualized average interest rate	3.138		%	2.528		%	2.992		%	2.528		%
Average outstanding balance	$	181,300,000		$	182,380,887		$	180,433,333		$	182,380,887

The classes, interest rates, spread over LIBOR, cash paid for interest and interest expense of each of the Class A-T, A-S, A-R, B and C 2015 Notes for the three and nine months ended June 30, 2017 is as follows:



				Three months ended June 30, 2017				Nine months ended June 30, 2017
	Stated Interest Rate	LIBOR Spread (basis points)		Cash Paid for Interest		Interest Expense		Cash Paid for Interest		Interest Expense
Class A-T Notes	2.9551%	180		$	888,861	$	935,602	$	2,546,066	$	2,671,836
Class A-S Notes	3.2551%	210	(1)	226,329		237,329		611,455		675,598
Class A-R Notes	2.9551%	180	(2)	50,000		60,414		152,222		161,525
Class B Notes	3.8051%	265		229,486		239,351		666,908		691,266
Class C Notes	4.4051%	325	(3)	—		—		—		—
Total				$	1,394,676	$	1,472,696	$	3,976,651	$	4,200,225

_______________________

(1) Spread increased to 2.10% in October 2016 from 1.55%.

(2) Interest expense includes 1.0% undrawn fee.

(3) The Company holds all Class C Notes outstanding and thus has not recorded any related interest expense as they are eliminated in consolidation.

The classes, amounts, ratings and interest rates (expressed as a spread to three-month LIBOR) of the Class A, B, C and Subordinated 2015 Notes are as follows:

Description

Class A-T Notes

Class A-S Notes

Class A-R
Notes

Class B Notes

Class C Notes

Subordinated Notes

Type

Senior Secured Floating Rate Term Debt

Senior Secured Floating Rate Revolver

Senior Secured Floating Rate Term Debt

Subordinated Term Notes

Amount Outstanding

$126,000,000

$29,000,000

$1,800,000

$25,000,000

$22,575,680

$86,400,000

Moody's Rating

"Aaa"

"Aa2"

S&P Rating

"AAA"

Interest Rate

LIBOR + 1.80%

LIBOR + 2.10%*

CP + 1.80% **

LIBOR + 2.65%

LIBOR + 3.25%

Stated Maturity

May 28, 2025

_______________________

* Spread increased to 2.10% in October 2016 from 1.55%.

** Carries a 1.0% undrawn fee.

The proceeds of the private placement of the Class A Notes and the Class B Notes of the 2015 Issuer, net of debt issuance costs, were used to fund a portion of the 2015 Issuer's loan origination activities and for general corporate purposes. The creditors of the 2015 Issuer have received security interests in the assets owned by the 2015 Issuer and such assets are not intended to be available to the creditors of the Company (or any other affiliate of the Company). As part of the 2015 Debt Securitization, the Company entered into master loan sale agreements under which the Company agreed to directly or indirectly sell or contribute certain senior secured debt investments (or participation interests therein) to the 2015 Issuer, and to purchase or otherwise acquire the Subordinated 2015 Notes, as applicable. The 2015 Notes are the secured obligations of the 2015 Issuer and the indenture governing the 2015 Notes includes customary covenants and events of default. The 2015 Debt Securitization requires the Company to comply with certain monthly financial covenants, including overcollateralization and interest coverage tests.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Secured Borrowings

See Note 2 "Secured Borrowings" for a description of the Company's accounting treatment of secured borrowings.

As of September 30, 2016, secured borrowings at fair value totaled $5.0 million and the fair value of the investment that is associated with these secured borrowings was $5.0 million. These secured borrowings were the result of the Company's completion of a loan sale of a senior secured debt investment that did not meet the definition of a participating interest. As a result, sale treatment was not allowed and this loan sale was treated as a secured borrowing. No secured borrowings were outstanding as of June 30, 2017.

During the three months ended December 31, 2016, the Company repaid the $5.0 million of secured borrowings in connection with the sale of the investment associated with these secured borrowings.

Note 7. Interest and Dividend Income

See Note 2 "Investment Income" for a description of the Company's accounting treatment of investment income.

Accumulated PIK interest activity for the nine months ended June 30, 2017 and June 30, 2016 was as follows:



	Nine months ended June 30, 2017			Nine months ended June 30, 2016
PIK balance at beginning of period	$	88,839		$	—
Gross PIK interest accrued	400,785			105,288
PIK income reserves (1)	(215,489		)	—
PIK interest received in cash	—			—
Loan exits and other PIK adjustments	—			—
PIK balance at end of period	$	274,135		$	105,288

___________________


(1)	PIK income is generally reserved for when a loan is placed on PIK non-accrual status.

As of each of June 30, 2017 , September 30, 2016 and June 30, 2016, there was one investment on which the Company stopped accruing cash and/or PIK interest or OID income.

The percentages of the Company's debt investments at cost and fair value by accrual status as of June 30, 2017 , September 30, 2016 and June 30, 2016 were as follows:



	June 30, 2017								September 30, 2016								June 30, 2016
	Cost		% of Debt Portfolio		Fair Value		% of Debt Portfolio		Cost		% of Debt Portfolio		Fair Value		% of Debt Portfolio		Cost		% of Debt Portfolio		Fair Value		% of Debt Portfolio
Accrual	$	557,719,818	97.48	%	$	552,637,962	98.59	%	$	563,757,229	96.74	%	$	552,114,644	98.72	%	$	601,521,703	98.75	%	$	583,433,721	99.79	%
PIK non-accrual (paying) (1)	14,411,438		2.52		7,921,674		1.41		—		—		—		—		7,605,257		1.25		1,200,000		0.21
Cash non-accrual (nonpaying) (2)	—		—		—		—		19,027,017		3.26		7,156,160		1.28		—		—		—		—
Total	$	572,131,256	100.00	%	$	560,559,636	100.00	%	$	582,784,246	100.00	%	$	559,270,804	100.00	%	$	609,126,960	100.00	%	$	584,633,721	100.00	%

__________________


(1)	PIK non-accrual status is inclusive of other noncash income, where applicable.


(2)	Cash non-accrual status is inclusive of PIK and other noncash income, where applicable.

The non-accrual status of the Company's portfolio investments as of June 30, 2017 , September 30, 2016 and June 30, 2016 was as follows:



	June 30, 2017	September 30, 2016	June 30, 2016
Answers Corporation (2)	—	Cash non-accrual (1)	PIK non-accrual (1)
Metamorph US 3, LLC	PIK non-accrual (1)	—	—

__________________


(1)	PIK non-accrual status is inclusive of other noncash income, where applicable. Cash non-accrual status is inclusive of PIK and other noncash income, where applicable.


(2)	As of June 30, 2017, the Company no longer held the first and second lien term loans in this investment. As of September 30, 2016, the Company's investments in both the first and second lien term loans of the Answers Corporation were on cash non-accrual status. As of June 30, 2016, only the Company's investment in the second lien term loan of the Answers Corporation was on PIK non-accrual status.

Income non-accrual amounts for the three and nine months ended June 30, 2017 and June 30, 2016 are presented in the following table.



	Three months ended June 30, 2017		Three months ended June 30, 2016		Nine months ended June 30, 2017		Nine months ended June 30, 2016
Cash interest income	$	36,512	$	50,277	$	871,220	$	1,008,423
PIK interest income	71,636		—		215,489		—
OID income	3,814		13,816		83,979		41,447
Total	$	111,962	$	64,093	$	1,170,688	$	1,049,870

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: (1) unrealized appreciation (depreciation) on investments and secured borrowings, as gains and losses are not included in taxable income until they are realized; (2) origination fees received in connection with investments in portfolio companies; (3) recognition of interest income on certain loans; and (4) income or loss recognition on exited investments.

Listed below is a reconciliation of net increase in net assets resulting from operations to taxable income for the three and nine months ended June 30, 2017 :



	Three months ended June 30, 2017			Nine months ended June 30, 2017
Net increase in net assets resulting from operations	$	139,198		$	5,696,300
Net unrealized appreciation (depreciation) on investments and secured borrowings	5,802,804			(2,197,544		)
Book/tax difference due to deferred loan fees	(239,305		)	(239,305		)
Book/tax difference due to capital losses not recognized	(11,535		)	13,401,975
Other book/tax differences	420,192			232,722
Taxable/Distributable Income (1)	$	6,111,354		$	16,894,148

__________________


(1)	The Company's taxable income for the three and nine months ended June 30, 2017 is an estimate and will not be finally determined until the Company files its tax return for the fiscal and taxable year ending September 30, 2017. Therefore, the final taxable income may be different than the estimate.

As of September 30, 2016, the components of accumulated undistributed income on a tax basis were as follows:



Undistributed ordinary income, net	$	2,459,655
Net realized capital losses	(12,690,311		)
Unrealized losses, net	(16,980,523		)

The effect of the permanent book/tax reclassifications during the fiscal year ended September 30, 2016 resulted in an increase (decrease) to the components of net assets on the Consolidated Statements of Assets and Liabilities as of September 30, 2016 as follows:



Undistributed net investment income	$	2,640,496
Accumulated net realized loss on investments	(3,755,949		)
Additional paid-in capital	(1,115,453		)

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company is permitted to carry forward net capital losses, if any, incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during such taxable years will be required to be utilized prior to the capital losses incurred in taxable years ended prior to the Company's tax year ended September 30, 2011, which are subject to an expiration date. As a result of this ordering rule, capital loss carryforwards from the Company's tax year ended prior to its tax year ended September 30, 2011 may be more likely to expire unused.

As a RIC, the Company is also subject to a federal excise tax based on distribution requirements of its taxable income on a calendar year basis. The Company anticipates timely distribution of its taxable income in accordance with tax rules. The Company did not incur a U.S. federal excise tax for calendar years 2014 and 2015 and does not expect to incur a U.S. federal excise tax for calendar year 2016.

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 include 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.

A summary of the Company's recorded investment realization events during the nine months ended June 30, 2017 is shown in the table below:

Date

Portfolio Company

Investment Type

Consideration at Exit

Realized Gain (Loss)

Transaction

October 2016

TrialCard Incorporated

Debt

$ 9.9 million

—

Full payoff

November 2016

Blackhawk Specialty Tools, LLC

Debt

4.2 million

—

Full payoff

November 2016

NXT Capital, LLC

Debt

8.7 million

—

Full payoff

November 2016

The Active Network, Inc. (a)

Debt

2.4 million

—

Full payoff

November 2016

Fineline Technologies, Inc.

Debt

10.5 million

—

Full payoff

November 2016

Legalzoom.com, Inc. (a)

Debt

20.1 million

—

Full payoff

December 2016

Aptean, Inc.

Debt

1.2 million

—

Full payoff

December 2016

Too Faced Cosmetics, LLC

Debt

1.3 million

—

Full payoff

February 2017

Vitera Healthcare Solutions, LLC

Debt

4.7 million

—

Full payoff

February 2017

TV Borrower US, LLC (a)

Debt

9.1 million

—

Full payoff

February 2017

Teaching Strategies, LLC

Debt

15.1 million

—

Full payoff

February 2017

AF Borrower, LLC

Debt

1.1 million

0.1 million

Full payoff

February 2017

CRGT Inc.

Debt

3.2 million

—

Full payoff

February 2017

Onvoy Merger Sub, LLC

Debt

10.2 million

—

Full payoff

March 2017

NAVEX Global, Inc.

Debt

5.0 million

—

Full payoff

May 2017

Hill International, Inc.

Debt

5.9 million

—

Full payoff

May 2017

Baart Programs, Inc. (a)

Debt

8.3 million

—

Full payoff

June 2017

ConvergeOne Holdings Corp. (a)

Debt

5.3 million

—

Full payoff

June 2017

Idera, Inc.

Debt

17.3 million

—

Full payoff

$ 0.1 million

__________


(a)	The Company also received prepayment fees in connection with the exit of these portfolio investments.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the nine months ended June 30, 2017 , the Company received cash payments of $26.9 million in connection with syndications and sales of debt investments and recorded a net realized loss of $13.5 million, including a realized loss of $13.4 million from the sale of the Company's investment in the first and second lien term loans of Answers Corporation.

A summary of the Company's recorded investment realization events during the nine months ended June 30, 2016 is shown in the table below:

Date

Portfolio Company

Investment Type

Consideration at Exit

Realized Gain (Loss)

Transaction

October 2015

Reliant Hospital Partners, LLC

Debt

$ 7.4 million

—

Full payoff

October 2015

Idera, Inc.

Debt

16.8 million

—

Full payoff

October 2015

Novetta Solutions, LLC

Debt

5.7 million

—

Full payoff

December 2015

All Web Leads, Inc.

Debt

17.6 million

—

Full payoff

January 2016

TWCC Holding Corp.

Debt

6.4 million

—

Full payoff

February 2016

B&H Education Inc.

Debt

1.4 million

(4.3 million)

Partial payoff

March 2016

Pacific Architects and Engineers Incorporated

Debt

3.4 million

—

Full payoff

April 2016

Ameritox Ltd.

Debt

12.6 million

(8.7 million)

Restructuring

May 2016

Accruent, LLC

Debt

20.8 million

—

Full payoff

June 2016

GTCR Valor Companies, Inc.

Debt

13.3 million

—

Partial payoff

$ (13.0 million)

During the nine months ended June 30, 2016, the Company received cash payments of $139.3 million in connection with syndications and sales of debt investments and recorded a net realized loss of $0.4 million.

For the nine months ended June 30, 2017 and June 30, 2016, the Company recorded net unrealized appreciation ( depreciation ) of $2.2 million and $(18.6) million, respectively. For the nine months ended June 30, 2017, this consisted of $11.7 million of net reclassifications to realized loss (resulting in unrealized appreciation), offset by $3.0 million of net unrealized depreciation on debt investments and $6.5 million of net unrealized depreciation on equity investments.

For the nine months ended June 30, 2016, this consisted of $17.2 million of net unrealized depreciation on debt investments and $3.1 million of net unrealized depreciation on equity investments, offset by $1.7 million of net reclassifications to realized loss (resulting in unrealized appreciation).

Note 10. Concentration of Credit Risks

The Company deposits its cash with financial institutions and at times such balances may be in excess of the FDIC insurance 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.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended June 30, 2017 , base management fees (net of waivers, if any) were $1.4 million and $4.2 million , respectively. For the three and nine months ended June 30, 2016, base management fees (net of waivers, if any) were $1.5 million and $4.6 million, respectively.

Incentive Fee

The incentive fee portion of the investment advisory agreement has two parts. The first part ("Part I 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 OID, 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 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, 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 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 is payable to the Investment Adviser once the hurdle is reached and the catch-up is achieved.

There is no accumulation of amounts on the hurdle rate from quarter to quarter and accordingly there is no clawback of amounts previously paid if subsequent quarters are below the quarterly hurdle and there is no delay of payment if prior quarters are below the quarterly hurdle.

For the three and nine months ended June 30, 2017 , the Part I incentive fee was $1.1 million and $2.4 million , respectively. For the three and nine months ended June 30, 2016, the Part I incentive fee was $1.2 million and $3.7 million, respectively.

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. For the nine months ended June 30, 2017 and June 30, 2016, there was no Part II incentive fee. From inception to date, the Company has paid aggregate Part II incentive fees of approximately $0.1 million.

GAAP requires the Company to accrue for the theoretical capital gain incentive fee that would be payable after giving effect to the net unrealized capital appreciation. A fee so calculated and accrued would not be payable under the investment advisory agreement, and may never be paid based upon the computation of capital gain incentive fees in subsequent periods. Amounts ultimately paid under the investment advisory agreement will be consistent with the formula reflected in the investment advisory agreement. The Company does not currently accrue for capital gain incentive fees due to the accumulated realized and unrealized losses in the portfolio.

As of June 30, 2017 and September 30, 2016 , the Company had a liability on its Consolidated Statements of Assets and Liabilities in the amount of $2.2 million and $3.0 million , respectively, reflecting the unpaid portion of the base management fee and incentive fees payable to the Investment Adviser.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Investment Adviser and its officers, managers, partners, members (and their members, including the owners of their members), agents, employees, controlling persons 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 Investment Adviser.

Administration Agreement

On January 1, 2015, the Company entered into an administration agreement with its administrator, FSC CT LLC, a wholly-owned subsidiary of the Investment Adviser ("FSC CT"), under substantially similar terms as its prior administration agreement with FSC CT, Inc. Under the administration agreement, FSC CT provides administrative services for the Company, including providing the Company with office facilities, including its principal executive offices, 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. FSC CT may also provide, on behalf of the Company, managerial assistance to its portfolio companies. For providing these services, facilities and personnel, the Company reimburses FSC CT the allocable portion of overhead and other expenses incurred by FSC CT in performing its obligations under the administration agreement, including rent, 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. The Company utilizes office space in Greenwich, CT that is leased by FSC CT from an affiliate controlled by the chief executive officer of the Investment Adviser and FSC CT, Mr. Leonard M. Tannenbaum. The Company also utilizes additional office space that is leased by affiliates of the Investment Adviser and FSC CT in Chicago, IL. Any reimbursement for a portion of the rent at this location 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 nine months ended June 30, 2017 , the Company accrued administrative expenses of $0.4 million and $1.4 million , respectively, including $0.3 million and $0.9 million of general and administrative expenses, respectively. For the three and nine months ended June 30, 2016, the Company accrued administrative expenses of $0.3 million , including $0.2 million of general and administrative expenses, and $0.9 million , including $0.5 million of general and administrative expenses, respectively. As of each of June 30, 2017 and September 30, 2016 , $0.4 million was included in Due to FSC CT in the Consolidated Statements of Assets and Liabilities.

Common stock held by FSAM and Principals

As of June 30, 2017, a subsidiary of FSAM held 2,677,519 shares of the Company's common stock, which represents approximately 9.1% of the Company's common stock outstanding. As of June 30, 2017, Mr. Tannenbaum directly and indirectly held 5,249,026 shares of the Company's common stock, which represents approximately 17.8% of the Company's common stock outstanding.

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12. Financial Highlights



	Three months ended June 30, 2017			Three months ended June 30, 2016			Nine months ended June 30, 2017			Nine months ended June 30, 2016
Net asset value at beginning of period	$	10.83		$	11.18		$	11.06		$	12.11
Net investment income (5)	0.20			0.21			0.57			0.64
Net unrealized appreciation (depreciation) on investments and secured borrowings (5)	(0.20		)	0.12			0.07			(0.63		)
Net realized gain (loss) on investments (5)	0.01			(0.29		)	(0.44		)	(0.45		)
Distributions to stockholders (5)	(0.19		)	(0.23		)	(0.61		)	(0.68		)
Net asset value at end of period	$	10.65		$	10.99		$	10.65		$	10.99
Per share market value at beginning of period	$	8.82		$	7.93		$	8.56		$	8.73
Per share market value at end of period	$	8.15		$	7.96		$	8.15		$	7.96
Total return (1)	(5.42		)%	3.25		%	2.01		%	(0.82		)%
Common shares outstanding at beginning of period	29,466,768			29,466,768			29,466,768			29,466,768
Common shares outstanding at end of period	29,466,768			29,466,768			29,466,768			29,466,768
Net assets at beginning of period	$	319,157,787		$	329,580,431		$	325,829,394		$	356,807,103
Net assets at end of period	$	313,698,299		$	323,866,469		$	313,698,299		$	323,866,469
Average net assets (2)	$	318,305,291		$	326,522,054		$	320,109,788		$	335,051,091
Ratio of net investment income to average net assets (3)	7.47		%	7.57		%	7.06		%	7.53		%
Ratio of total expenses to average net assets (excluding base management fee waiver and insurance recovery) (3)	7.86		%	8.54		%	7.56		%	8.46		%
Ratio of net expenses to average net assets (3)	7.86		%	8.54		%	7.46		%	8.46		%
Ratio of portfolio turnover to average investments at fair value	7.39		%	8.12		%	26.60		%	23.12		%
Weighted average outstanding debt (4)	$	275,584,273		$	297,089,437		$	269,448,668		$	304,125,103
Average debt per share (5)	$	9.35		$	10.08		$	9.14		$	10.32

_______________



(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 DRIP. Total return is not annualized during interim periods.
(2)	Calculated based upon the weighted average net assets for the period.
(3)	Periods less than twelve months 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.

Note 13. Commitments and Contingencies

SEC Examination and Investigation

On March 23, 2016, the Division of Enforcement of the Securities and Exchange Commission (the “SEC”) sent document subpoenas and document-preservation notices to the Company, FSAM, FSCO GP LLC - General Partner of Fifth Street Opportunities Fund, L.P. (“FSOF”), and Fifth Street Finance Corp. (“FSC”). The subpoenas sought production of documents relating to a variety of issues, including those raised in an ordinary-course examination of the Investment Adviser by the SEC’s Office of Compliance Inspections and Examinations that began in October 2015, and in certain previously disclosed FSC and FSAM securities class actions and FSC derivative actions. The subpoenas were issued pursuant to a formal order of private investigation captioned In the Matter of the Fifth Street Group of Companies, No. HO-12925, dated March 23, 2016, which addresses (among other things) (i) the valuation of the Company's portfolio companies and investments, (ii) the expenses allocated or charged to the Company and FSC, (iii) FSOF’s trading in the securities of publicly traded business-development companies, (iv) statements to the board of directors, other representatives of pooled investment vehicles, investors, or prospective investors concerning the fair value of the Company's portfolio companies or investments as well as expenses allocated or charged to the Company and FSC, (v) various issues relating to adoption and implementation of policies and procedures under the Investment Advisers Act of 1940 (the “Advisers Act”), (vi) statements and/or

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

potential omissions in the entities’ SEC filings, (vii) the entities’ books, records, and accounts and whether they fairly and accurately reflected the entities’ transactions and dispositions of assets, and (viii) several other issues relating to corporate books and records. The formal order cites various provisions of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the Advisers Act, as well as rules promulgated under those Acts, as the bases of the investigation. The subpoenaed Fifth Street entities are cooperating with the Division of Enforcement investigation, have produced requested documents, and have been communicating with Division of Enforcement personnel.

During the three months ended December 31, 2016, the Company received insurance reimbursements related to previously incurred legal professional fees of approximately $0.3 million.

Off-Balance Sheet Arrangements

The Company may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its portfolio companies. As of June 30, 2017 and September 30, 2016 , off-balance sheet arrangements consisted of $47.4 million and $52.8 million, respectively, of unfunded commitments to provide debt and equity financing to certain of the Company's portfolio companies. Such commitments are subject to the portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Statements of Assets and Liabilities.

A summary of the composition of unfunded commitments (consisting of revolvers, term loans and FSFR Glick JV Subordinated Notes and LLC equity interests) as of June 30, 2017 and September 30, 2016 is shown in the table below:



	June 30, 2017		September 30, 2016
FSFR Glick JV LLC	$	16,382,494	$	16,382,494
MHE Intermediate Holdings	8,190,816		—
Triple Point Group Holdings, Inc.	4,968,590		4,968,590
BeyondTrust Software, Inc.	3,605,000		3,605,000
All Web Leads, Inc.	3,458,537		3,458,537
Motion Recruitment Partners LLC	2,900,000		2,900,000
PowerPlan, Inc.	2,100,000		2,100,000
Metamorph US 3, LLC	1,200,000		1,800,000
Impact Sales, LLC	1,078,125		—
Executive Consulting Group, Inc.	800,000		800,000
Internet Pipeline, Inc.	800,000		800,000
Systems Inc.	600,000		—
My Alarm Center, LLC	372,599		1,212,472
Valet Merger Sub, Inc.	333,333		333,333
Sailpoint Technologies, Inc.	300,000		200,000
OBHG Management Services, LLC	100,000		100,000
Ministry Brands, LLC	100,000		—
Accruent, LLC	85,000		85,000
4 Over International, LLC	68,452		68,452
TIBCO Software, Inc.	—		5,300,000
Baart Programs, Inc.	—		1,000,000
Legalzoom.com, Inc.	—		2,607,018
Teaching Strategies, LLC	—		2,400,000
Dynatect Group Holdings, Inc.	—		1,800,000
TrialCard Incorporated	—		850,000
Total	$	47,442,946	$	52,770,896

Note 14. 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 nine months ended June 30, 2017 .

Asset Purchase Agreement

FIFTH STREET SENIOR FLOATING RATE CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 13, 2017, the Investment Adviser entered into an asset purchase agreement (the “Purchase Agreement”), with Oaktree Capital Management, L.P. (“Oaktree”) and, for certain limited purposes, FSAM, and Fifth Street Holdings L.P. Upon closing of the transactions contemplated by the Purchase Agreement (the “Transaction”), Oaktree would become the investment adviser to each of the Company and Fifth Street Finance Corp. (“FSC”) and Oaktree would pay gross cash consideration of $320 million to the Investment Adviser. The closing of the Transaction would result in an assignment for purposes of the 1940 Act of the current investment advisory agreement between the Company and the Investment Adviser and, as a result, its immediate termination.

The closing of the Transaction is conditioned on, among other things: (i) the approval of a new investment advisory agreement between the Company and Oaktree by the Company’s stockholders; (ii) the approval of a new investment advisory agreement by the stockholders of FSC; (iii) the election to the Company’s Board of Directors of five new directors by the Company’s stockholders; (iv) the election to the board of directors of FSC of five new directors by FSC’s stockholders; (v) the approval of the Transaction by the stockholders of FSAM; and (vi) the receipt of any required regulatory and other approvals. The Company has scheduled a special meeting of its stockholders for September 7, 2017 to consider a proposal to approve a new investment advisory agreement between the Company and Oaktree and, contingent upon approval of such proposal, the election of five new director nominees to the Company’s board of directors. Beneficial owners holding approximately 26.9% of the Company’s outstanding stock, including Leonard M. Tannenbaum, the chief executive officer of the Investment Adviser, and a subsidiary of FSAM have agreed to vote in favor of the proposals at the special meeting and take certain other actions at the direction of Oaktree.

In connection with the Transaction and due to a closing condition related to the election of five new directors, on July 13, 2017, each of Messrs. Bernard D. Berman, James Castro-Blanco, Richard P. Dutkiewicz, Alexander C. Frank and Jeffrey R. Kay executed resignation letters pursuant to which each will resign as a member of the Company’s Board of Directors contingent upon and effective as of the closing of the Transaction. In addition, each of Mr. Berman, the Company’s Chief Executive Officer, Mr. Steven Noreika, the Company’s Chief Financial Officer, and Ms. Kerry Acocella, the Company’s Secretary and Chief Compliance Officer, is expected to resign from his or her respective roles as officers of the Company effective upon closing of the Transaction.

In connection with the Transaction, each of the Company and GF Equity Funding, in their capacity as members of Glick JV, consented to the assignment by FSC CT of the administrative and loan services agreement between Glick JV and FSC CT to Oaktree Fund Administration, LLC, an affiliate of Oaktree, effective upon the closing of the Transaction.

Citibank Amendment

In connection with the Transaction, on July 13, 2017, the Company entered into an amendment (the “Citibank Amendment”) to its revolving credit facility (the “Citibank facility”) that amends the Loan and Security Agreement, dated as of January 15, 2015, by and among the Company, as the collateral manager and as the seller, FS Senior Funding II LLC, as the borrower, Citibank, N.A., as administrative agent, and Citibank, N.A., as the sole lender (as amended, the “Citibank Agreement”). Under the Citibank Amendment, certain events of default that would result from the closing of the Transaction are waived and the ability to borrow amounts under the Citibank facility for investment was revised to require the consent of the lenders prior to the closing of the Transaction and completion of satisfactory due diligence by the lenders on Oaktree. In addition, the Citibank Amendment provides that if the closing of the Transaction does not occur by December 31, 2017, the reinvestment period for the Citibank facility would terminate and the Company would be required to pay down any amounts outstanding under the Citibank facility as set forth in the Citibank Amendment.

Schedule 12-14

Fifth Street Senior Floating Rate Corp.

Schedule of Investments in and Advances to Affiliates

Nine months ended June 30, 2017



Portfolio Company/Type of Investment (1)	Amount of Interest, Fees or Dividends Credited in Income (2)			Fair Value at October 1, 2016		Gross Additions (3)		Gross Reductions (4)			Fair Value at June 30, 2017
Control Investments
FSFR Glick JV LLC
Subordinated Note, LIBOR+8% cash due 10/20/2021	$	4,250,910		$	56,885,646	$	4,963,382	$	(234,622	)	$	61,614,406
87.5% LLC equity interest (5)	(232,772		)	6,431,021		—		(6,431,021		)	—
Total Control Investments	$	4,018,138		$	63,316,667	$	4,963,382	$	(6,665,643	)	$	61,614,406

Affiliate Investments
Ameritox Ltd.
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021	$	505,782		$	6,342,286	$	2,118,168	$	(16,553	)	$	8,443,901
3,309,873.6 Class A Preferred Units	—			3,626,150		169,172		(460,951		)	3,334,371
327,393.6 Class B Preferred Units	—			358,679		198,597		(557,276		)	—
1,007.36 Class A Units	—			2,679,343		—		(2,679,343		)	—
Total Affiliate Investments	$	505,782		$	13,006,458	$	2,485,937	$	(3,714,123	)	$	11,778,272

Total Control & Affiliate Investments	$	4,523,920		$	76,323,125	$	7,449,319	$	(10,379,766	)	$	73,392,678

This schedule should be read in connection with the Company's Consolidated Financial Statements, including the Consolidated Schedules of Investments and Notes to the Consolidated Financial Statements.

______________________


(1)	The principal amount and ownership detail as shown in the Company's Consolidated Schedules of Investments.


(2)	Represents the total amount of interest, fees and dividends credited to income for the portion of the year an investment was included in the Control or Affiliate categories.

(3)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.

(4)

Gross reductions include decreases in the cost basis of investment resulting from principal payments or sales and exchanges of one or more existing securities for one or more new securities. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.


(5)	Together with GF Equity Funding, the Company co-invests through FSFR Glick JV. FSFR Glick JV is capitalized as transactions are completed and all portfolio and investment decisions in respect to FSFR Glick JV must be approved by the FSFR Glick JV investment committee consisting of representatives of the Company and GF Equity Funding (with approval from a representative of each required).

Schedule 12-14

Fifth Street Senior Floating Rate Corp.

Schedule of Investments in and Advances to Affiliates

Nine months ended June 30, 2016



Portfolio Company/Type of Investment (1)	Amount of Interest, Fees or Dividends Credited in Income (2)		Fair Value at October 1, 2015		Gross Additions (3)		Gross Reductions (4)			Fair Value at June 30, 2016
Control Investments
FSFR Glick JV LLC
Subordinated Note, LIBOR+8% cash due 10/20/2021	$	3,681,941	$	52,603,346	$	10,831,408	$	(5,172,304	)	$	58,262,450
87.5% equity interest (5)	2,012,500		4,553,575		3,651,781		(3,024,574		)	5,180,782
Total Control Investments	$	5,694,441	$	57,156,921	$	14,483,189	$	(8,196,878	)	$	63,443,232

Affiliate Investments
Ameritox Ltd.
First Lien Term Loan, LIBOR+5% (1% floor) cash 3% PIK due 4/11/2021	$	130,653	$	—	$	6,351,124	$	(12,592	)	$	6,338,532
3,309,873.6 Class A Preferred Units	—		—		3,456,979		—			3,456,979
327,393.6 Class B Preferred Units	—		—		341,945		—			341,945
1,007.36 Class A Units	—		—		5,935,698		(2,551,834		)	3,383,864
Total Affiliate Investments	$	130,653	$	—	$	16,085,746	$	(2,564,426	)	$	13,521,320

Total Control & Affiliate Investments	$	5,825,094	$	57,156,921	$	30,568,935	$	(10,761,304	)	$	76,964,552

______________________


(1)	The principal amount and ownership detail as shown in the Company's Consolidated Schedules of Investments.


(2)	Represents the total amount of interest, fees and dividends credited to income for the portion of the year an investment was included in the Control or Affiliate categories.

(3)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on Investments and accrued interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation as well as the movement of an existing portfolio company into this category or out of a different category.

(4)


(5)	Together with GF Equity Funding, the Company co-invests through FSFR Glick JV. FSFR Glick JV is capitalized as transactions are completed and all portfolio and investment decisions in respect to FSFR Glick JV must be approved by the FSFR Glick JV investment committee consisting of representatives of the Company and GF Equity Funding (with approval from a representative of each required).

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;


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


•	the cost or potential outcome of any litigation to which we may be a party.

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 "Item 1A. Risk Factors" in our annual report on Form 10-K for the year ended September 30, 2016 and elsewhere in this quarterly report on Form 10-Q. Other factors that could cause actual results to differ materially include:


•	changes in the economy, financial markets and political environment;


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


•	the timing of any assignment of the current investment advisory agreement with Fifth Street Management LLC, or the Investment Adviser, and whether and when the new investment advisory agreement with Oaktree Capital Management, L.P., or Oaktree, will become effective;


•	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 regulated investment 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 quarterly 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. and its consolidated subsidiaries.

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

Overview

We are a specialty finance company that is a closed-end, non-diversified management investment company. We have elected to be regulated as a business development company under the Investment Company Act of 1940, as amended, or the 1940 Act. We have qualified and elected to be treated as a RIC under the Internal Revenue Code of 1986, or the Code, for tax purposes.

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 invest primarily in senior secured loans, including first lien, unitranche and second lien debt instruments, that pay interest at rates which are determined periodically on the basis of a floating base lending rate, made to private middle market companies whose debt is rated below investment grade by rating agencies or that

would be rated below investment grade if they were rated. Below investment grade securities, which are often referred to as “high yield” and “junk,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal. We also have an investment in a joint venture that invests in similar types of loans. We may also invest in senior unsecured loans issued by private middle market companies and, to a lesser extent, subordinated loans issued by private middle market companies, senior and subordinated loans issued by public companies and equity investments.

We are externally managed by the investment adviser, a subsidiary of Fifth Street Asset Management Inc., or FSAM, a publicly traded alternative asset manager, pursuant to an investment advisory agreement. FSC CT LLC, or FSC CT, a subsidiary of our investment adviser, also provides certain administrative and other services necessary for us to operate.

Asset Purchase Agreement

On July 13, 2017, the Investment Adviser, entered into an asset purchase agreement, or the Purchase Agreement, with Oaktree and, for certain limited purposes, FSAM, the indirect, partial owner of the Investment Adviser, and Fifth Street Holdings L.P. Upon closing of the transactions contemplated by the Purchase Agreement, or the Transaction, Oaktree would become the investment adviser to each of us and Fifth Street Finance Corp., or FSC, and Oaktree would pay gross cash consideration of $320 million to the Investment Adviser. The closing of the Transaction would result in an assignment for purposes of the 1940 Act of the current investment advisory agreement between us and the Investment Adviser and, as a result, its immediate termination.

The closing of the Transaction is conditioned on, among other things: (i) the approval of a new investment advisory agreement between us and Oaktree by our stockholders; (ii) the approval of a new investment advisory agreement by the stockholders of FSC; (iii) the election to our Board of Directors of five new directors by our stockholders; (iv) the election to the board of directors of FSC of five new directors by FSC’s stockholders; (v) the approval of the Transaction by the stockholders of FSAM; and (vi) the receipt of any required regulatory and other approvals. We have scheduled a special meeting of our stockholders for September 7, 2017 to consider a proposal to approve a new investment advisory agreement between us and Oaktree and, contingent upon approval of such proposal, the election of five new director nominees to our board of directors. Beneficial owners holding approximately 26.9% of the Company’s outstanding stock, including Leonard M. Tannenbaum, the chief executive officer of the Investment Adviser, and a subsidiary of FSAM have agreed to vote in favor of the proposals at the special meeting and take certain other actions at the direction of Oaktree.

In connection with the Transaction and due to a closing condition related to the election of five new directors, on July 13, 2017, each of Messrs. Bernard D. Berman, James Castro-Blanco, Richard P. Dutkiewicz, Alexander C. Frank and Jeffrey R. Kay executed resignation letters pursuant to which each will resign as a member of our Board of Directors contingent upon and effective as of the closing of the Transaction. In addition, each of Mr. Berman, our Chief Executive Officer, Mr. Steven Noreika, our Chief Financial Officer, and Ms. Kerry Acocella, our Secretary and Chief Compliance Officer, is expected to resign from his or her respective roles as officers of us effective upon closing of the Transaction.

In connection with the Transaction, we and GF Equity Funding, in their capacity as members of Glick JV, consented to the assignment by FSC CT of the administrative and loan services agreement between Glick JV and FSC CT to Oaktree Fund Administration, LLC, an affiliate of Oaktree, effective upon the closing of the Transaction.

Critical Accounting Policies

Basis of Presentation

Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, and pursuant to the requirements for reporting on Form 10-Q 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. All intercompany balances and transactions have been eliminated. We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 946, Financial Services-Investment Companies, or ASC 946.

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.

We value our investments in accordance with FASB ASC Topic 820, Fair Value Measurements and Disclosures , or ASC 820, which 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. ASC 820 prioritizes the use of observable market prices derived from such prices over entity-specific inputs. 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.

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.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy established by ASC 820. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. This includes investment securities that are valued using "bid" and "ask" prices obtained from independent third party pricing services or directly from brokers. 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 adjustments for investment-specific factors or restrictions.

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 investment adviser's 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.

Our investment adviser 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 may be valued at such market quotations. In order to validate market quotations, our investment adviser looks at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Our investment adviser does not adjust the prices unless it has a reason to believe any such market quotations are not reflective of the fair value of an investment. Examples of events that would cause market quotations to not reflect fair value 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 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, we perform additional procedures to corroborate such information, which may include the market yield approach discussed below and a quantitative and qualitative assessment of the credit quality and market trends affecting the portfolio company.

We perform detailed valuations of our debt and equity investments for which market quotations are not readily available or are deemed not to represent fair value of the investments. We typically use three different valuation techniques. The first valuation technique is the transaction precedent approach, which utilizes recent or expected future transactions of the investment to determine fair value, to the extent applicable. The second valuation technique is an analysis of the enterprise value, or EV, of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The EV analysis is typically performed to determine the value of equity investments, to determine if there is credit impairment for debt investments and to determine the value for debt investments that we are deemed to control under the 1940 Act. To estimate the enterprise value of a portfolio company, the investment adviser analyzes various factors including, but not limited to, the portfolio company’s historical and projected financial results, macroeconomic impacts on the company, and competitive dynamics in the company’s industry. The investment adviser also utilizes some or all of the following information based on the individual circumstances of the portfolio company in order to reach its estimate of a portfolio company’s enterprise value,

including: (i) valuations of comparable public companies, (ii) recent sales of private and public comparable companies in similar industries or having similar business or earnings characteristics, (iii) purchase price multiples as a multiple of their earnings or cash flow, (iv) the portfolio company’s ability to meet its forecasts and its business prospects, (v) a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions), (vi) estimated liquidation or collateral value of the portfolio company's assets and (vii) offers from third parties to buy the portfolio company. We may probability weight potential sale outcomes with respect to a portfolio company due to the uncertainty that exists as of the valuation date. The third valuation technique is a market yield approach, which is typically performed for non-credit impaired debt investments. To determine fair value using a market yield approach, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the market yield approach, we consider the current contractual interest rate, the capital structure and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded transactions and industry specific market movements, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.

We estimate the fair value of privately held warrants using a Black Scholes pricing model, which includes 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 by our investment adviser's valuation team in conjunction with the investment adviser's portfolio management and capital markets teams;

• Preliminary valuations are then reviewed and discussed with management of our investment adviser;

•

Separately, independent valuation firms engaged by our Board of Directors prepare 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 and provide such reports to our investment adviser and the Audit Committee of our Board of Directors;


•	The investment adviser compares and contrasts its preliminary valuations to the valuations of the independent valuation firms and prepares a valuation report for the Audit Committee of our Board of Directors;


•	The Audit Committee of our Board of Directors reviews the preliminary valuations with the portfolio managers of the investment adviser, and our investment adviser responds and supplements the preliminary valuations to reflect any discussions between our investment adviser and 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.

The fair value of our investments at June 30, 2017 and September 30, 2016 was determined in good faith by our Board of Directors. Our Board of Directors has authorized the engagement of independent valuation firms to provide valuation assistance. We will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of a portion of our 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. As of June 30, 2017 , 29.4% of our portfolio at fair value was valued by independent valuation firms. The percentage of our portfolio valued by independent valuation firms may vary from period to period based on the availability of market quotations for our portfolio investments during the respective periods. However, our 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 our valuation policy and a consistently applied valuation process.

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



As of December 31, 2014	54.1	%
As of March 31, 2015 (1)	32.1	%
As of June 30, 2015	23.8	%
As of September 30, 2015 (2)	76.5	%
As of December 31, 2015	29.3	%
As of March 31, 2016	25.0	%
As of June 30, 2016	32.0	%
As of September 30, 2016 (2)	73.5	%
As of December 31, 2016	29.6	%
As of March 31, 2017	30.1	%
As of June 30, 2017	29.4	%

__________

(1) The decrease from prior quarters is primarily related to the increased use of market quotations to value certain of our portfolio investments beginning in the quarter ended March 31, 2015.

(2) Valuations performed by independent valuation firms as of September 30, 2016 and 2015 were higher primarily due to additional year-end procedures related to portfolio investments that were valued using market quotations based on only one source.

As of June 30, 2017 and September 30, 2016 , approximately 94.5% and 92.2% , respectively, of our total assets represented investments in portfolio companies valued at prices equal to 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. Investments that are expected to pay regularly scheduled interest in cash are generally placed on non-accrual status when there is reasonable doubt that principal or interest cash payments will be collected. Cash interest payments received on investments may be recognized as income or applied to principal depending upon management’s judgment. Such non-accrual investments are restored to accrual status if past due principal and interest are paid in cash, and in management’s judgment, the portfolio company is likely to continue timely payment of its remaining interest. As of June 30, 2017 , there was one investment on which we stopped accruing cash and/or payment in kind, or PIK, interest or OID income.

In connection with our investment, we sometimes receive nominal cost equity that is valued as part of the negotiation process with the particular portfolio company. When we receive nominal cost equity, we allocate our cost basis in the investment between debt securities and the nominal cost equity at the time of origination. Any resulting discount from recording the loan, or otherwise purchasing a security at a discount, is accreted into interest income over the life of the loan.

We generally recognize dividend income on the ex-dividend date. Distributions received from equity investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. Generally, we will not record distributions from equity investments as dividend income unless there are sufficient earnings at the portfolio company prior to the distribution. Distributions that are classified as a return of capital are recorded as a reduction in the cost basis of the investment.

Fee Income

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

PIK Interest Income

Our loans may contain contractual PIK interest provisions. The PIK interest, which represents contractually deferred interest added to the loan balance that is generally due at the end of the loan term, is generally recorded on the accrual basis to the extent such amounts are expected to be collected. We 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 involves 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 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 is generally made well before our full write-down of such loan or debt security when it is determined that PIK interest is no longer collectible. 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 increases the recorded cost basis of these investments in our Consolidated Financial Statements and, as a result, increases the cost basis of these investments for purposes of computing the capital gains incentive fee payable by us to our investment adviser.

For a discussion of risks we are subject to as a result of our use of PIK interest in connection with our investments, see "Risk Factors — Risks Relating to Our Business and Structure — We may have difficulty paying our required distributions if we are required to recognize income for U.S. federal income tax purposes before or without receiving cash representing such income," "— We may in the future choose to pay distributions partly in our own stock, in which case you may be subject to 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, 2016. 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 increases the recorded cost basis of these investments both in our Consolidated Financial Statements and for purposes of computing the capital gains incentive fee payable by us to our investment adviser.

To maintain our status as a RIC, income from PIK interest must be paid out to our stockholders as distributions even though we have not yet collected the cash and may never collect the cash relating to the PIK interest. Accumulated PIK interest was $0.3 million and $0.1 million as of June 30, 2017 and September 30, 2016 , respectively. The net increases in loan balances as a result of contractual PIK arrangements are separately identified in our Consolidated Statements of Cash Flows.

Portfolio Composition

Our investments principally consist of senior loans in private middle market companies and investments in FSFR Glick JV LLC, or together with its consolidated subsidiaries, FSFR Glick JV. Our senior 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 attractive 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.

A summary of the composition of our investment portfolio at cost and fair value as a percentage of total investments is shown in the following tables:



	June 30, 2017		September 30, 2016
Cost:
Senior secured debt	86.14	%	86.40	%
Subordinated notes of FSFR Glick JV	10.85		10.66
LLC equity interests of FSFR Glick JV	1.21		1.18
Purchased equity	1.80		1.76
Equity grants	—		—
Total	100.00	%	100.00	%



	June 30, 2017		September 30, 2016
Fair value:
Senior secured debt	88.28	%	87.58	%
Subordinated notes of FSFR Glick JV	10.90		9.92
LLC equity interests of FSFR Glick JV	—		1.12
Purchased equity	0.82		1.36
Equity grants	—		0.02
Total	100.00	%	100.00	%

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



	June 30, 2017		September 30, 2016
Cost:
Internet software & services	20.33	%	22.07	%
Healthcare services	12.31		14.80
Multi-sector holdings	12.06		11.84
Advertising	9.73		8.06
Diversified support services	6.19		3.28
Application software	5.74		5.35
Security & alarm services	3.68		2.97
IT consulting & other services	3.49		1.47
Research & consulting services	2.89		2.85
Specialized finance	2.60		—
Industrial machinery	2.18		0.64
Commercial printing	2.02		0.98
Integrated telecommunication services	1.92		4.06
Food retail	1.71		1.15
Data processing & outsourced services	1.66		1.64
Pharmaceuticals	1.54		1.53
Computer & Electronics Retail	1.26		—
Human resources & employment services	1.13		—
Personal products	1.11		0.21
Aerospace & defense	1.10		—
Environmental & facilities services	1.08		1.06
Food distributors	0.95		0.95
Specialty Stores	0.92		—
Casinos & gaming	0.84		—
Fertilizers & agricultural chemicals	0.55		0.59
Hypermarkets & super centers	0.51		—
Specialized consumer services	0.28		3.76
Computer hardware	0.22		0.66
Construction and engineering	—		0.98
Education services	—		2.54
Electronic equipment & instruments	—		1.82
Diversified capital markets	—		1.45
Wireless telecommunication services	—		0.95
Restaurants	—		0.83
Healthcare technology	—		0.81
Oil & gas equipment & services	—		0.70
	100.00	%	100.00	%



	June 30, 2017		September 30, 2016
Fair value:
Internet software & services	20.35	%	20.82	%
Healthcare services	11.22		14.64
Multi-sector holdings	10.90		11.04
Advertising	9.66		8.49
Diversified support services	6.54		3.42
Application software	5.94		5.65
Security & alarm services	3.90		3.11
IT consulting & other services	3.65		1.55
Research & consulting services	3.11		2.99
Specialized finance	2.74		—
Industrial machinery	2.28		0.66
Commercial printing	2.15		1.03
Integrated telecommunication services	2.02		4.30
Food retail	1.82		1.22
Data processing & outsourced services	1.74		1.71
Pharmaceuticals	1.60		1.57
Computer & Electronics Retail	1.34		—
Human resources & employment services	1.18		—
Personal products	1.17		0.22
Aerospace & defense	1.16		—
Environmental & facilities services	1.14		1.14
Food distributors	0.99		0.98
Specialty Stores	0.96		—
Casinos & gaming	0.89		—
Hypermarkets & super centers	0.52		—
Fertilizers & agricultural chemicals	0.49		0.59
Specialized consumer services	0.30		3.93
Computer hardware	0.24		0.68
Construction and engineering	—		1.01
Education services	—		2.67
Electronic equipment & instruments	—		1.90
Diversified capital markets	—		1.53
Restaurants	—		0.87
Healthcare technology	—		0.83
Wireless telecommunication services	—		0.74
Oil & gas equipment & services	—		0.71
	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 debt 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 debt investments that are performing above expectations and/or capital gains are expected.


•	Investment Ranking 2 is used for debt 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 debt investments are initially ranked 2.

•

Investment Ranking 3 is used for debt 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, debt investments with a ranking of 3 are generally those on which we are not accruing PIK interest.


•	Investment Ranking 4 is used for debt investments that are performing substantially below our expectations and for which risk has increased substantially since the original or restructured investment. Debt 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 June 30, 2017 and September 30, 2016 :



Investment Ranking	June 30, 2017						September 30, 2016(2)
Investment Ranking	Fair Value		% of Portfolio		Leverage Ratio		Fair Value		% of Portfolio		Leverage Ratio
1	$	19,048,520	3.40	%	2.33		$	20,056,209	3.59	%	3.80
2	492,886,292		87.93		4.00		519,618,113		92.91		4.20
3	40,703,150		7.26		NM	(1)	12,440,322		2.22		NM	(1)
4	7,921,674		1.41		NM	(1)	7,156,160		1.28		NM	(1)
Total	$	560,559,636	100.00	%	3.94		$	559,270,804	100.00	%	4.18

________________


(1)	Due to operating performance this ratio is not measurable and, as a result, is excluded from the total portfolio calculation.


(2)	Beginning as of December 31, 2016, we have revised our investment ranking scale to include only debt investments. Accordingly, in order to make the table comparative, we revised the investment ranking table as of September 30, 2016 to exclude equity investments.

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 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 each of June 30, 2017 and September 30, 2016 , we had modified the payment terms of our investments in five portfolio companies.

Loans and Debt Securities on Non-Accrual Status

As of each of June 30, 2017 , September 30, 2016 and June 30, 2016, there was one investment on which we stopped accruing cash and/or PIK interest or OID income.

The percentages of our debt investments at cost and fair value by accrual status as of June 30, 2017 , September 30, 2016 and June 30, 2016 were as follows:



	June 30, 2017								September 30, 2016								June 30, 2016
	Cost		% of Debt Portfolio		Fair Value		% of Debt Portfolio		Cost		% of Debt Portfolio		Fair Value		% of Debt Portfolio		Cost		% of Debt Portfolio		Fair Value		% of Debt Portfolio
Accrual	$	557,719,818	97.48	%	$	552,637,962	98.59	%	$	563,757,229	96.74	%	$	552,114,644	98.72	%	$	601,521,703	98.75	%	$	583,433,721	99.79	%
PIK non-accrual (paying) (1)	14,411,438		2.52		7,921,674		1.41		—		—		—		—		7,605,257		1.25		1,200,000		0.21
Cash non-accrual (nonpaying) (2)	—		—		—		—		19,027,017		3.26		7,156,160		1.28		—		—		—		—
Total	$	572,131,256	100.00	%	$	560,559,636	100.00	%	$	582,784,246	100.00	%	$	559,270,804	100.00	%	$	609,126,960	100.00	%	$	584,633,721	100.00	%

__________________


(1)	PIK non-accrual status is inclusive of other non-cash income, where applicable.


(2)	Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.

The non-accrual status of our portfolio investments as of June 30, 2017 , September 30, 2016 and June 30, 2016 was as follows:



	June 30, 2017	September 30, 2016	June 30, 2016
Answers Corporation (2)	—	Cash non-accrual (1)	PIK non-accrual (1)
Metamorph US 3, LLC	PIK non-accrual (1)	—	—

__________________


(1)	PIK non-accrual status is inclusive of other non-cash income, where applicable. Cash non-accrual status is inclusive of PIK and other non-cash income, where applicable.


(2)	As of June 30, 2017, we no longer held the first and second lien term loans in this investment. As of September 30, 2016, our investments in both the first and second lien term loans of the Answers Corporation were on cash non-accrual status. As of June 30, 2016, only our investment in the second lien term loan of the Answers Corporation was on PIK non-accrual status.

Income non-accrual amounts for the three and nine months ended June 30, 2017 and June 30, 2016 are presented in the following table.



	Three months ended June 30, 2017		Three months ended June 30, 2016		Nine months ended June 30, 2017		Nine months ended June 30, 2016
Cash interest income	$	36,512	$	50,277	$	871,220	$	1,008,423
PIK interest income	71,636		—		215,489		—
OID income	3,814		13,816		83,979		41,447
Total	$	111,962	$	64,093	$	1,170,688	$	1,049,870

FSFR Glick JV LLC

In October 2014, we entered into a limited liability company, or LLC, agreement with GF Equity Funding 2014 LLC, or GF Equity Funding, to form FSFR Glick JV. On April 21, 2015, FSFR Glick JV began investing in senior secured loans of middle market companies. We co-invest in these securities with GF Equity Funding through FSFR Glick JV. FSFR Glick JV is managed by a four person Board of Directors, two of whom are selected by us and two of whom are selected by GF Equity Funding. FSFR Glick JV is capitalized as transactions are completed, and portfolio decisions and investment decisions in respect of FSFR Glick JV must be approved by an investment committee of FSFR Glick JV consisting of one representative of us and one representative of GF Equity Funding (with approval of each required). The members provide capital to FSFR Glick JV in exchange for LLC equity interests, and we and GF Debt Funding 2014 LLC, or GF Debt Funding, an entity advised by affiliates of GF Equity Funding, provide capital to FSFR Glick JV in exchange for the Subordinated Notes. As of June 30, 2017 and September 30, 2016, we and GF Equity Funding owned 87.5% and 12.5% , respectively, of the outstanding LLC interests, and we and GF Debt Funding owned 87.5% and 12.5%, respectively, of the Subordinated Notes. FSFR Glick JV is not an "eligible portfolio company" as defined in section 2(a)(46) of the 1940 Act.

We have determined that FSFR Glick JV is an investment company under ASC 946; however, in accordance with such guidance, we will generally not consolidate our investment in a company other than a wholly-owned investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we do not consolidate our noncontrolling interest in FSFR Glick JV.

As of June 30, 2017 and September 30, 2016 , FSFR Glick JV had total assets of $145.2 million and $201.1 million, respectively. Our investment in FSFR Glick JV consisted of LLC equity interests and Subordinated Notes of $61.6 million in aggregate, at fair value as of June 30, 2017 . As of September 30, 2016 , our investment consisted of LLC equity interests and Subordinated Notes of $63.3 million in aggregate, at fair value. The Subordinated Notes are junior in right of payment to the repayment of temporary contributions made by us to fund investments of FSFR Glick JV that are repaid when GF Equity Funding and GF Debt Funding make their capital contributions and fund their Subordinated Notes, respectively. FSFR Glick JV's portfolio consisted of middle market and other corporate debt securities of 28 and 36 "eligible portfolio companies" (as defined in section 2(a)(46) of the 1940 Act) as of June 30, 2017 and September 30, 2016 , respectively. The portfolio companies in FSFR Glick JV are in industries similar to those in which we may invest directly.

As of June 30, 2017 and September 30, 2016 , FSFR Glick JV had total capital commitments of $100.0 million . $87.5 million of which was from us and the remaining $12.5 million from GF Equity Funding and GF Debt Funding. Approximately $81.3 million in aggregate commitments was funded as of June 30, 2017 and September 30, 2016 , of which $71.1 million was from us. As of June 30, 2017 and September 30, 2016 , we had commitments to fund Subordinated Notes to FSFR Glick JV of

$78.8 million , of which $14.7 million was unfunded. As of June 30, 2017 and September 30, 2016 , we had commitments to fund LLC equity interests in FSFR Glick JV of $8.7 million , of which $1.6 million was unfunded.

Additionally, FSFR Glick JV has a senior revolving credit facility with Deutsche Bank AG, New York Branch, or the Deutsche Bank facility, with a stated maturity date of April 17, 2023, which permitted up to $200.0 million of borrowings as of both June 30, 2017 and September 30, 2016 . Prior to June 29, 2017, this credit facility was with Credit Suisse AG, Cayman Islands Branch. On June 29, 2017, this credit facility was assigned to Deutsche Bank AG, New York Branch. Borrowings under the Deutsche Bank facility are secured by all of the assets of FSFR Glick JV and all of the equity interests in FSFR Glick JV and bore interest at a rate equal to the 3-month LIBOR plus 2.5% per annum with no LIBOR floor as of June 30, 2017 and September 30, 2016 . Under the Deutsche Bank facility, $71.9 million and $124.6 million in borrowings were outstanding as of June 30, 2017 and September 30, 2016 , respectively.

Below is a summary of FSFR Glick JV's portfolio, followed by a listing of the individual loans in FSFR Glick JV's portfolio as of June 30, 2017 and September 30, 2016 :



	June 30, 2017	September 30, 2016
Senior secured loans (1)	$135,539,080	$194,346,557
Weighted average current interest rate on senior secured loans (2)	6.97%	7.08%
Number of borrowers in FSFR Glick JV	28	36
Largest loan exposure to a single borrower (1)	$11,286,839	$12,641,009
Total of five largest loan exposures to borrowers (1)	$43,022,071	$49,318,344

__________

(1) At principal amount.

(2) Computed using the annual interest rate on accruing senior secured loans.



Portfolio Company	Industry	Investment Type	Maturity Date	Current Interest Rate (1)(4)	Principal		Cost		Fair Value (2)
Ameritox Ltd. (3)	Healthcare services	First Lien Term Loan	4/11/2021	LIBOR+5% (1% floor) cash 3% PIK	$	2,392,766	$	2,392,766	$	2,392,766
	Healthcare services	119,910.76 Class B Preferred Units					119,911		—
	Healthcare services	368.96 Class A Common Units					2,174,034		—
Total Ameritox Ltd.					2,392,766		4,686,711		2,392,766
Beyond Trust Software, Inc. (3)	Application software	First Lien Term Loan	9/25/2019	LIBOR+7% (1% floor) cash	11,286,839		11,232,878		11,258,621
Compuware Corporation (3)	Internet software & services	First Lien Term Loan B3	12/15/2021	LIBOR+4.25% (1% floor) cash	6,295,858		6,238,542		6,350,947
Metamorph US 3, LLC (3)(5)	Internet software & services	First Lien Term Loan	12/1/2020	LIBOR+6.5% (1% floor) cash 2% PIK	6,844,354		6,647,537		3,924,508
Motion Recruitment Partners LLC (3)	Diversified support services	First Lien Term Loan	2/13/2020	LIBOR+6% (1% floor) cash	8,722,150		8,722,150		8,679,432
NAVEX Global, Inc. (3)	Internet software & services	First Lien Term Loan	11/19/2021	LIBOR+4.75% (1% floor) cash	2,984,694		2,974,579		2,995,886
Air Newco LLC	IT consulting & other services	First Lien Term Loan B	3/20/2022	LIBOR+5.5% (1% floor) cash	8,228,728		8,208,051		8,095,011
TIBCO Software, Inc. (3)	Internet software & services	First Lien Term Loan	12/4/2020	LIBOR+4.5% (1% floor) cash	3,534,319		3,537,504		3,558,300
CM Delaware LLC	Advertising	First Lien Term Loan	3/18/2021	LIBOR+5.25% (1% floor) cash	2,080,538		2,078,879		1,921,897
New Trident Holdcorp, Inc. (3)	Healthcare services	First Lien Term Loan B	7/31/2019	LIBOR+5.25% (1.25% floor) cash	2,023,994		2,004,237		1,696,107
Central Security Group, Inc. (3)	Specialized consumer services	First Lien Term Loan	10/6/2020	LIBOR+5.625% (1% floor) cash	3,886,031		3,890,747		3,894,133
Auction.com, LLC (3)	Internet software & services	First Lien Term Loan	5/12/2019	LIBOR+5% (1% floor) cash	3,910,000		3,900,642		3,949,100
Aptos, Inc. (3)	Data processing & outsourced services	First Lien Term Loan B	9/1/2022	LIBOR+6.75% (1% floor) cash	7,940,000		7,803,303		7,860,600
Vubiquity, Inc.	Application software	First Lien Term Loan	8/12/2021	LIBOR+5.5% (1% floor) cash	4,137,000		4,107,835		4,074,945
American Seafoods Group LLC (3)	Food distributors	First Lien Term Loan	8/19/2021	LIBOR+5% (1% floor) cash	3,683,704		3,670,899		3,708,274
Worley Claims Services, LLC	Internet software & services	First Lien Term Loan	10/31/2020	LIBOR+8% (1% floor) cash	5,199,601		5,182,383		5,147,605
Poseidon Merger Sub, Inc. (3)	Advertising	Second Lien Term Loan	8/15/2023	LIBOR+8.5% (1% floor) cash	3,000,000		2,930,789		3,046,787
Novetta Solutions, LLC	Diversified support services	First Lien Term Loan	10/16/2022	LIBOR+5.75% (1% floor) cash	6,006,223		5,943,606		5,816,036
SHO Holding I Corporation	Footwear	First Lien Term Loan	10/27/2022	LIBOR+5% (1% floor) cash	6,402,500		6,352,245		6,418,506
Valet Merger Sub, Inc. (3)	Environmental & facilities services	First Lien Term Loan	9/24/2021	LIBOR+7% (1% floor) cash	3,930,000		3,884,887		3,964,993
RSC Acquisition, Inc.	Insurance brokers	First Lien Term Loan	11/30/2022	LIBOR+5.25% (1% floor) cash	3,940,204		3,921,350		3,900,802
Integro Parent Inc.	Insurance brokers	First Lien Term Loan	10/31/2022	LIBOR+5.75% (1% floor) cash	4,926,424		4,796,594		4,938,740
TruckPro, LLC	Auto parts & equipment	First Lien Term Loan	8/6/2018	LIBOR+5% (1% floor) cash	1,834,901		1,833,006		1,836,241
Falmouth Group Holdings Corp.	Specialty chemicals	First Lien Term Loan	12/13/2021	LIBOR+6.75% (1% floor) cash	4,925,000		4,882,719		4,885,660
Sundial Group Holdings LLC	Personal products	First Lien Term Loan	10/19/2021	LIBOR+6.25% (1% floor) cash	3,750,000		3,701,693		3,774,781
Ancile Solutions, Inc. (3)	Internet software & services	First Lien Term Loan	6/30/2021	LIBOR+7% (1% floor) cash	4,068,267		4,018,077		4,097,271
California Pizza Kitchen, Inc.	Restaurants	First Lien Term Loan	8/23/2022	LIBOR+6% (1% floor) cash	4,962,500		4,949,937		4,969,745
MHE Intermediate Holdings, LLC	Diversified support services	First Lien Term Loan	3/11/2024	LIBOR+5% (1% floor) cash	4,239,375		4,157,660		4,205,862
	Diversified support services	Delayed Draw Term Loan	3/11/2024	LIBOR+5% (1% floor) cash	403,110		369,463		403,110
Total MHE International Holdings, LLC					4,642,485		4,527,123		4,608,972
Total Portfolio Investments					$	135,539,080	$	136,628,903	$	131,766,666

__________

(1) Represents the current interest rate as of June 30, 2017 . All interest rates are payable in cash, unless otherwise noted.

(2) Represents the current determination of fair value as of June 30, 2017 utilizing a similar approach as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.

(3) This investment is held by both us and FSFR Glick JV at June 30, 2017 .

(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or 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, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement.

(5) This investment was on PIK non-accrual status as of June 30, 2017.

FSFR Glick JV Portfolio as of September 30, 2016

Portfolio Company

Industry

Investment Type

Maturity Date

Current Interest Rate (1)(4)

Principal

Cost

Fair Value (2)

Ameritox Ltd. (3)

Healthcare services

First Lien Term Loan

4/11/2021

LIBOR+5% (1% floor) cash 3% PIK

2,339,146

2,336,840

2,322,917

Healthcare services

119,910.76 Class B Preferred Units

—

119,911

131,369

Healthcare services

368.96 Class A Common Units

—

2,174,034

981,348

Total Ameritox Ltd.

2,339,146

4,630,785

3,435,634

Answers Corporation (3) (5)

Internet software & services

First Lien Term Loan

10/3/2021

LIBOR+5.25% (1% floor) cash

7,899,749

7,636,708

4,265,865

Beyond Trust Software, Inc. (3)

Application software

First Lien Term Loan

9/25/2019

LIBOR+7% (1% floor) cash

12,641,009

12,554,571

12,538,499

Compuware Corporation (3)

Internet software & services

First Lien Term Loan B1

12/15/2019

LIBOR+5.25% (1% floor) cash

7,392,405

7,306,444

7,420,127

Metamorph US 3, LLC (3)

Internet software & services

First Lien Term Loan

12/1/2020

LIBOR+6.5% (1% floor) cash

6,900,283

6,808,009

5,744,139

Motion Recruitment Partners LLC (3)

Diversified support services

First Lien Term Loan

2/13/2020

LIBOR+6% (1% floor) cash

9,125,000

9,099,254

NAVEX Global, Inc. (3)

Internet software & services

First Lien Term Loan

11/19/2021

LIBOR+4.75% (1% floor) cash

1,793,550

1,779,633

1,784,582

Teaching Strategies, LLC

Education services

First Lien Term Loan (3)

10/1/2019

LIBOR+5.5% (0.5% floor) cash

2,570,471

2,567,575

2,556,891

Education services

First Lien Delayed Draw Term Loan

10/1/2019

LIBOR+5.5% (0.5% floor) cash

6,840,000

6,832,715

6,803,695

Total Teaching Strategies, LLC

9,410,471

9,400,290

9,360,586

TrialCard Incorporated (3)

Healthcare services

First Lien Term Loan

12/31/2019

LIBOR+4.5% (1% floor) cash

7,179,097

7,144,396

7,144,248

Air Newco LLC

IT consulting & other services

First Lien Term Loan B

3/20/2022

LIBOR+5.5% (1% floor) cash

8,291,864

8,267,671

7,960,189

Fineline Technologies, Inc. (3)

Electronic equipment & instruments

First Lien Term Loan

5/5/2017

LIBOR+5.5% (1% floor) cash

7,034,441

7,010,963

7,015,051

LegalZoom.com, Inc. (3)

Specialized consumer services

First Lien Term Loan

5/13/2020

LIBOR+7% (1% floor) cash

9,850,000

9,672,034

9,772,706

GK Holdings, Inc.

IT consulting & other services

First Lien Term Loan

1/20/2021

LIBOR+5.5% (1% floor) cash

3,438,750

3,452,038

3,412,959

Vitera Healthcare Solutions, LLC

Healthcare technology

Second Lien Term Loan

11/4/2021

LIBOR+8.25% (1% floor) cash

3,000,000

2,958,409

2,782,500

TIBCO Software, Inc. (3)

Internet software & services

First Lien Term Loan

12/4/2020

LIBOR+5.5% (1% floor) cash

2,304,900

2,308,815

2,277,114

CM Delaware LLC

Advertising

First Lien Term Loan

3/18/2021

LIBOR+5.25% (1% floor) cash

2,096,666

2,094,658

1,978,729

New Trident Holdcorp, Inc. (3)

Healthcare services

First Lien Term Loan B

7/31/2019

LIBOR+5.25% (1.25% floor) cash

2,041,357

2,014,233

1,755,567

Central Security Group, Inc. (3)

Specialized consumer services

First Lien Term Loan

10/6/2020

LIBOR+5.625% (1% floor) cash

5,909,774

5,915,626

5,776,805

Auction.com, LLC

Internet software & services

First Lien Term Loan

5/12/2019

LIBOR+5% (1% floor) cash

3,940,000

3,926,700

3,959,700

Aptos, Inc. (3)

Data processing & outsourced services

First Lien Term Loan B

9/1/2022

LIBOR+6.75% (1% floor) cash

8,000,000

7,842,222

7,920,000

Vubiquity, Inc.

Application software

First Lien Term Loan

8/12/2021

LIBOR+5.5% (1% floor) cash

4,168,500

4,133,700

4,147,658

Portfolio Company

Industry

Investment Type

Maturity Date

Current Interest Rate (1)(4)

Principal

Cost

Fair Value (2)

Too Faced Cosmetics, LLC (3)

Personal products

First Lien Term Loan B

7/7/2021

LIBOR+5% (1% floor) cash

642,692

581,620

645,155

American Seafoods Group LLC (3)

Food distributors

First Lien Term Loan

8/19/2021

LIBOR+5% (1% floor) cash

3,853,704

3,837,366

3,844,069

Worley Claims Services, LLC

Internet software & services

First Lien Term Loan

10/31/2020

LIBOR+8% (1% floor) cash

5,730,937

5,707,511

5,702,282

Poseidon Merger Sub, Inc. (3)

Advertising

Second Lien Term Loan

8/15/2023

LIBOR+8.5% (1% floor) cash

3,000,000

2,922,316

3,039,954

AccentCare, Inc.

Healthcare services

First Lien Term Loan

9/3/2021

LIBOR+5.75% (1% floor) cash

7,850,000

7,773,386

7,727,344

Novetta Solutions, LLC

Diversified support services

First Lien Term Loan

10/17/2022

LIBOR+5.75% (1% floor) cash

6,477,948

6,392,100

6,226,928

SHO Holding I Corporation

Footwear

First Lien Term Loan

10/27/2022

LIBOR+5% (1% floor) cash

6,451,250

6,393,472

6,443,186

Valet Merger Sub, Inc. (3)

Environmental & facilities services

First Lien Term Loan

9/24/2021

LIBOR+7% (1% floor) cash

3,960,000

3,906,498

4,026,826

RSC Acquisition, Inc.

Insurance brokers

First Lien Term Loan

11/30/2022

LIBOR+5.25% (1% floor) cash

3,970,390

3,948,754

3,950,538

Integro Parent Inc.

Insurance brokers

First Lien Term Loan

10/31/2022

LIBOR+5.75% (1% floor) cash

4,963,924

4,814,658

4,889,465

TruckPro, LLC

Auto parts & equipment

First Lien Term Loan

8/6/2018

LIBOR+5% (1% floor) cash

1,920,000

1,916,612

1,919,232

Falmouth Group Holdings Corp.

Specialty chemicals

First Lien Term Loan

12/13/2021

LIBOR+6.75% (1% floor) cash

4,962,500

4,912,596

4,967,689

Sundial Group Holdings LLC

Personal products

First Lien Term Loan

10/19/2021

LIBOR+6.25% (1% floor) cash

3,900,000

3,839,938

3,954,402

Onvoy, LLC (3)

Integrated telecommunication services

First Lien Term Loan

4/29/2021

LIBOR+6.25% (1% floor) cash

7,406,250

7,261,422

7,386,738

Ancile Solutions, Inc. (3)

Internet software & services

First Lien Term Loan

6/30/2021

LIBOR+7% (1% floor) cash

4,500,000

4,433,644

4,432,500

Total Portfolio Investments

194,346,557

194,624,798

188,708,220

__________

(1) Represents the current interest rate as of September 30, 2016 . All interest rates are payable in cash, unless otherwise noted.

(2) Represents the current determination of fair value as of September 30, 2016 utilizing a similar approach as us in accordance with ASC 820. However, the determination of such fair value is not included in our Board of Directors' valuation process described elsewhere herein.

(3) This investment is held by both us and FSFR Glick JV at September 30, 2016 .

(4) The interest rate on the principal balance outstanding for all floating rate loans is indexed to LIBOR and/or 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, we have provided the applicable margin over LIBOR or the alternate base rate based on each respective credit agreement.

(5) This investment was on cash non-accrual status as of September 30, 2016.

The cost and fair value of our aggregate investment in FSFR Glick JV held by us was $71.1 million and $61.6 million , respectively, as of June 30, 2017 and $71.1 million and $63.3 million, respectively, as of September 30, 2016 . The Subordinated Notes pay a weighted average interest rate of LIBOR plus 8.0% per annum. For the three and nine months ended June 30, 2017 , we earned interest income of $1.5 million and $4.3 million on our investment in the Subordinated Notes, respectively. For the three and nine months ended June 30, 2016, we earned interest income of $1.4 million and $3.7 million on our investment in the Subordinated Notes, respectively. We did not earn dividend income for the three months ended June 30, 2017 with respect to our LLC equity interests. We earned dividend income of $0.2 million for the nine months ended June 30, 2017 with respect to our LLC equity interests. In addition, we reversed $0.4 million of dividend income previously recorded in prior periods during the three and nine months ended June 30, 2017 with respect to our LLC equity interests since we determined that such dividend payments may no longer be collectible. We earned dividend income of $0.7 million and $2.0 million, respectively, for the three and nine months ended June 30, 2016 with respect to our LLC equity interests. The LLC equity interests are dividend producing to the extent there is residual cash to be distributed on a quarterly basis.

Below is certain summarized financial information for FSFR Glick JV as of June 30, 2017 and September 30, 2016 and for the three and nine months ended June 30, 2017 and June 30, 2016:



	June 30, 2017		September 30, 2016
Selected Balance Sheet Information:
Investments in loans at fair value (cost June 30, 2017: $136,628,903; cost September 30, 2016: $194,624,798)	$	131,766,666	$	188,708,220
Receivable from secured financing arrangement at fair value (September 30, 2016 cost: $5,000,000)	—		4,985,425
Cash and cash equivalents	7,257,936		980,605
Restricted cash	2,314,937		3,343,303
Receivable from unsettled transactions	1,968,738		952,591
Due from portfolio companies	22,500		—
Other assets	1,862,916		2,162,942
Total assets	$	145,193,693	$	201,133,086

Senior credit facility payable	$	71,881,939	$	124,615,636
Subordinated notes payable at fair value (proceeds June 30, 2017 and September 30, 2016: $73,149,434)	70,416,214		65,012,167
Other liabilities	2,895,540		4,196,688
Total liabilities	$	145,193,693	$	193,824,491
Members' equity	—		7,308,595
Total liabilities and members' equity	$	145,193,693	$	201,133,086



	Three months ended June 30, 2017			Three months ended June 30, 2016			Nine months ended June 30, 2017			Nine months ended June 30, 2016
Selected Statements of Operations Information:
Interest income	$	2,490,873		$	3,732,459		$	8,824,724		$	10,606,543
PIK interest income	18,010			15,373			53,620			15,373
Fee income	31,496			5,687			150,328			93,028
Total investment income	2,540,379			3,753,519			9,028,672			10,714,944
Interest expense	$	2,722,468		$	2,850,832		$	8,274,454		$	7,895,486
Other expenses	47,636			58,600			181,656			182,177
Total expenses (1)	2,770,104			2,909,432			8,456,110			8,077,663
Net unrealized appreciation (depreciation)	$	(726,406	)	$	4,030,887		$	(4,349,628	)	$	2,170,718
Realized loss on investments	(9,893		)	(3,098,475		)	(3,873,454		)	(3,098,475		)
Net income (loss)	$	(966,024	)	$	1,776,499		$	(7,650,520	)	$	1,709,524

__________

(1) There are no management fees or incentive fees charged at FSFR Glick JV.

FSFR Glick JV has elected to fair value the Subordinated Notes issued to the Company and GF Debt Funding under FASB ASC Topic 825 — Financial Instruments. The subordinated notes are valued based on the total assets less the liabilities senior to the subordinated notes of FSFR Glick JV under the enterprise value approach.

During the three and nine months ended June 30, 2017 , we did not sell any senior secured debt investments to FSFR Glick JV. During the three months ended June 30, 2016, we sold $18.2 million of senior secured debt investments at fair value to FSFR Glick JV in exchange for $18.2 million cash consideration. We realized a loss of $0.1 million on these transactions. During the nine months ended June 30, 2016, we sold $41.2 million of senior secured debt investments at fair value to FSFR Glick JV in exchange for $40.0 million cash consideration, $1.1 million of subordinated notes and $0.1 million of LLC equity interests. We realized a loss of $0.4 million on these transactions.

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 or other realizations of portfolio investments and their stated costs. Net unrealized appreciation (depreciation) is the net change in the fair value of our investment portfolio and secured borrowings during the reporting period, including the reversal of previously recorded unrealized appreciation (depreciation) when gains or losses are realized.

Comparison of the three and nine months ended June 30, 2017 and June 30, 2016

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, amendment and prepayment fees that we receive in connection with our debt investments. These fees are recognized as earned. Other investment income consists primarily of dividend income received from certain of our equity investments.

Total investment income for the three months ended June 30, 2017 and June 30, 2016 was $12.2 million and $13.1 million , respectively. For the three months ended June 30, 2017 , this amount primarily consisted of $12.1 million of interest income from portfolio investments (which included $0.1 million of PIK interest) and $0.5 million of fee income, offset by a $0.4 million reversal of dividend income. For the three months ended June 30, 2016, this amount primarily consisted of $11.6 million of interest income from portfolio investments (which included $0.1 million of PIK interest), $0.8 million of fee income and $0.7 million of dividend income. The decrease of $0.9 million in our total investment income for the three months ended June 30, 2017, as compared to the three months ended June 30, 2016, was primarily attributable to lower average levels of outstanding debt investments.

Total investment income for the nine months ended June 30, 2017 and June 30, 2016 was $34.8 million and $40.2 million , respectively. For the nine months ended June 30, 2017 , this amount primarily consisted of $33.8 million of interest income from portfolio investments (which included $0.2 million of PIK interest) and $1.2 million of fee income. For the nine months ended June 30, 2016, this amount primarily consisted of $35.3 million of interest income from portfolio investments, $2.9 million of fee income and $2.0 million of dividend income. The decrease of $5.5 million in our total investment income for the nine months ended June 30, 2017, as compared to the nine months ended June 30, 2016, was primarily attributable to lower average levels of outstanding debt investments.

Expenses

Net expenses for the three months ended June 30, 2017 and June 30, 2016 were $6.2 million and $7.0 million , respectively. The decrease of $0.7 million in our net expenses for the three months ended June 30, 2017 , as compared to the three months ended June 30, 2016, was primarily due to a $0.6 million decrease in professional fees due to proxy-related matters.

Net expenses (expenses net of base management fee waivers and insurance recoveries) for the nine months ended June 30, 2017 and June 30, 2016 were $17.9 million and $21.3 million , respectively. The decrease of $3.4 million in our net expenses for the nine months ended June 30, 2017 , as compared to the nine months ended June 30, 2016, was primarily due to a $1.3 million decrease in Part I incentive fees payable to our investment adviser, which was attributable to a reduction of our interest-generating portfolio, and a $2.8 million decrease in professional fees (net of insurance recoveries) due to proxy-related matters, partially offset by a $1.1 million increase in interest expense attributable to lower levels of outstanding debt in the current period.

Net Investment Income

As a result of the $0.9 million decrease in total investment income, offset by the $0.7 million decrease in net expenses, net investment income for the three months ended June 30, 2017 reflected an approximate $0.2 million decrease, as compared to the three months ended June 30, 2016.

As a result of the $5.5 million decrease in total investment income, offset by the $3.4 million decrease in net expenses, net investment income for the nine months ended June 30, 2017 reflected an approximate $2.0 million decrease, as compared to the nine months ended June 30, 2016.

Realized Gain (Loss) on Investments

Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of portfolio investments 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.

See Note 9 in the consolidated financial statements for more details regarding investment realization events for the nine months ended June 30, 2017 and June 30, 2016.

Net Unrealized Appreciation (Depreciation) on Investments and Secured Borrowings

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

See Note 9 in the consolidated financial statements for more details regarding unrealized appreciation (depreciation) on investments and secured borrowings for the three and nine months ended June 30, 2017 and June 30, 2016.

Financial Condition, Liquidity and Capital Resources

Cash Flows

We have a number of alternatives available to fund our investment portfolio and our operations, including raising equity, increasing debt and funding from operational cash flow. Additionally, to generate liquidity 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 credit facilities, as we deem appropriate.

For the nine months ended June 30, 2017 , we experienced a net decrease in cash and cash equivalents of $0.5 million . During that period, $41.4 million of cash was provided by operating activities, primarily consisting of $182.5 million of principal payments and proceeds from the sale of investments and cash activities related to $16.9 million of net investment income, partially offset by cash used to fund $182.2 million of investments and net revolvers. During the same period, cash used by financing activities was $41.9 million , primarily consisting of $20.8 million of net repayments under our credit facilities, $17.6 million of cash distributions paid to our stockholders and $5.0 million of repayments of secured borrowings.

For the nine months ended June 30, 2016, we experienced a net decrease in cash and cash equivalents of $26.4 million. During that period, $21.2 million of cash was provided by operating activities, primarily consisting of $254.8 million of principal payments, PIK payments and proceeds from the sale of investments and cash activities related to $19.0 million of net investment income, partially offset by cash used to fund $260.1 million of investments and net revolvers. During the same period, cash used by financing activities was $47.5 million, primarily consisting of $20.8 million of net repayments under our credit facilities, $19.3 million of cash distributions paid to our shareholders and $6.4 million of net repayments of notes payable.

As of June 30, 2017 , we had $26.9 million of cash and cash equivalents (including $7.7 million of restricted cash), portfolio investments (at fair value) of $565.2 million , $2.9 million of interest, dividends and fees receivable, $12.0 million of net payables from unsettled transactions, $86.7 million of borrowings outstanding under our revolving credit facilities, $179.5 million of borrowings outstanding under our 2015 Debt Securitization (net of unamortized financing costs) and unfunded commitments of $47.4 million . Pursuant to the terms of the Citibank facility, we are restricted in terms of access to $2.4 million until such time as we submit required monthly reporting schedules. As of June 30, 2017 , $5.2 million of cash held in connection with the 2015 Debt Securitization was restricted.

As of September 30, 2016, we had $28.8 million of cash and cash equivalents (including $9.0 million of restricted cash), portfolio investments (at fair value) of $573.6 million, $4.6 million of interest, dividends and fees receivable, $12.9 million receivables from unsettled transactions, $107.4 million of borrowings outstanding under our revolving credit facilities, $177.5 million of borrowings outstanding under our 2015 Debt Securitization (net of unamortized financing costs) and unfunded commitments of $52.8 million. Pursuant to the terms of the Citibank facility, we are restricted in terms of access to $3.5 million until such time as we submit required monthly reporting schedules. As of September 30, 2016, $5.5 million of cash held in connection with the 2015 Debt Securitization was restricted.

Other Sources of Liquidity

We intend to continue to generate cash primarily from cash flows from operations, including interest earned and future borrowings. We may also from time to time issue securities pursuant to a shelf registration statement or otherwise pursuant to private offerings. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful. In the future, we may also securitize a portion of our investments to the extent permitted by applicable law and regulation. To securitize investments, we would likely create a wholly-owned subsidiary and contribute a pool of loans to the subsidiary. We would then sell interests in the subsidiary on a non-recourse basis to purchasers and we would retain all or a portion of the equity in the subsidiary. Our primary uses of funds are 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 (which has primarily been the case for several years) 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 at least 90% of our taxable income as dividends to our stockholders each taxable year in connection with satisfying the requirements applicable to entities subject to tax as RICs under Subchapter M of the Code. See "Regulated Investment Company Status and Distributions" 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.

As a business development company, under the 1940 Act, we generally are not permitted to incur indebtedness unless immediately after such borrowing we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). This requirement limits the amount that we may borrow. As of June 30, 2017 , we were in compliance with this asset coverage 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 the extent we anticipate needing to raise additional capital from various sources, including the equity markets and the securitization or other debt-related markets, we cannot assure you that we will be able to do so on favorable terms, if at all.

Significant Capital Transactions

The following table reflects the distributions per share that our Board of Directors has declared, including shares issued under our dividend reinvestment plan, or DRIP, on our common stock since October 1, 2015:



Frequency	Date Declared	Record Date	Payment Date	Amount per Share		Cash Distribution		DRIP Shares Issued (1)	DRIP Shares Value
Monthly	July 10, 2015	October 6, 2015	October 15, 2015	$	0.075	$	2,101,445	12,080	$	108,563
Monthly	July 10, 2015	November 5, 2015	November 16, 2015	0.075		2,093,278		13,269	116,730
Monthly	November 30, 2015	December 11, 2015	December 22, 2015	0.075		2,115,444		11,103	94,563
Monthly	November 30, 2015	January 4, 2016	January 15, 2016	0.075		2,148,928		8,627	61,079
Monthly	November 30, 2015	February 5, 2016	February 16, 2016	0.075		2,177,085		4,542	32,923
Monthly	February 8, 2016	March 15, 2016	March 31, 2016	0.075		2,175,431		4,383	34,577
Monthly	February 8, 2016	April 15, 2016	April 29, 2016	0.075		2,174,974		4,452	35,033
Monthly	February 8, 2016	May 13, 2016	May 31, 2016	0.075		2,176,513		4,256	33,494
Monthly	May 6, 2016	June 15, 2016	June 30, 2016	0.075		2,163,126		5,822	46,881
Monthly	May 6, 2016	July 15, 2016	July 29, 2016	0.075		2,179,263		3,627	30,745
Monthly	May 6, 2016	August 15, 2016	August 31, 2016	0.075		2,181,006		3,260	29,002
Monthly	August 4, 2016	September 15, 2016	September 30, 2016	0.075		2,183,197		3,078	26,811
Monthly	August 4, 2016	October 14, 2016	October 31, 2016	0.075		2,183,023		3,146	26,985
Monthly	August 4, 2016	November 15, 2016	November 30, 2016	0.075		2,183,100		2,986	26,908
Monthly	October 19, 2016	December 15, 2016	December 30, 2016	0.075		2,179,421		3,438	30,586
Monthly	October 19, 2016	January 31, 2017	January 31, 2017	0.075		2,180,645		2,905	29,363
Monthly	October 19, 2016	February 15, 2017	February 28, 2017	0.075		2,183,581		2,969	26,427
Monthly	February 6, 2017	March 15, 2017	March 31, 2017	0.04		1,165,417		1,508	13,253
Quarterly	February 6, 2017	June 15, 2017	June 30, 2017	0.19		5,543,465		6,840	55,221
Quarterly	August 7, 2017	September 15, 2017	September 29, 2017	0.19
Quarterly	August 7, 2017	December 15, 2017	December 29, 2017	0.19

______________

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

Borrowings

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, or, as amended, 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, and rates equal to LIBOR plus 3.50% per annum and LIBOR plus 4.00% per annum during the subsequent two years, respectively. In addition, there is a commitment fee payable on the undrawn amount under the Citibank facility of either 0.50% per annum on the unused amount of the Citibank facility (if the advances outstanding on the Citibank 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 Citibank facility (if the advances outstanding on the Citibank 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 Citibank facility ends January 15, 2018 and the credit facility will mature on January 15, 2020. The Citibank facility requires us to comply with certain affirmative and negative covenants and other customary requirements for similar credit facilities.

On March 23, 2017, FS Senior Funding II LLC entered into an amendment to the documents governing the Citibank facility. The amendment was effective as of March 23, 2017 and, among other things, decreased the size of the Citibank facility from $175 million to $125 million. The interest rate, reinvestment period and maturity date were not modified as part of this amendment. We accelerated deferred financing costs of $406,230 in connection with the amendment.

As of June 30, 2017 and September 30, 2016, the Company had $73.7 million and $107.4 million outstanding under the Citibank facility, respectively. 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 interests 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. Our borrowings under the Citibank facility bore interest at a weighted average interest rate of 3.447% and 2.770% for the nine months ended June 30, 2017 and June 30, 2016, respectively. For the three and nine months ended June 30, 2017 , we recorded interest expense of $0.9 million and $3.3 million , respectively, related to the Citibank facility. For the three and nine months ended June 30, 2016, we recorded interest expense of $1.0 million and $3.1 million, respectively, related to the Citibank facility.

East West Bank Facility

On January 6, 2016, we entered into a five-year $25 million senior secured revolving credit facility with the lenders referenced therein, U.S. Bank National Association, as Custodian, and East West Bank as Secured Lender, or the East West Bank Facility. The East West Bank Facility bears an interest rate of either (i) LIBOR plus 3.75% per annum for borrowings in year one, 3.50% per annum for borrowings in year two, 3.25% per annum for borrowings in years three and four and 3.00% per annum for borrowings in year five, or (ii) East West Bank’s prime rate plus 0.75% per annum for borrowings in year one, 0.50% per annum for borrowings in year two, 0.25% per annum for borrowings in years three and four, and 0.00% per annum for borrowings in year five. The East West Bank Facility matures on January 6, 2021. The East West Bank Facility requires us to comply with certain affirmative and negative covenants and other customary requirements for similar credit facilities.

As of June 30, 2017 , the Company had $13.0 million outstanding under the East West Bank facility. As of September 30, 2016, we had no borrowings outstanding under the East West Bank facility. Borrowings under the East West Bank facility are secured by the loans pledged as collateral thereunder from time to time as well as certain of our other assets. We may use the East West Bank facility to fund a portion of its loan origination activities and for general corporate purposes. Our borrowings under the East West Bank facility bore interest at a weighted average interest rate of 4.579% for the nine months ended June 30, 2017 . Our borrowings under the East West Bank facility bore interest at a weighted average interest rate of 4.202% for the period from January 6, 2016 through June 30, 2016. For the three and nine months ended June 30, 2017 , we recorded interest expense of $0.2 million and $0.3 million, respectively, related to the East West Bank facility. For the three and nine months ended June 30, 2016, we recorded interest expense of $0.2 million and $0.3 million related to the East West Bank Facility, respectively.

Debt Securitization

On May 28, 2015, we completed our $309.0 million 2015 Debt Securitization consisting of $222.6 million in senior secured notes, or the 2015 Notes, and $86.4 million of unsecured subordinated notes, or the 2015 Subordinated Notes. The notes offered in the 2015 Debt Securitization were issued by FS Senior Funding Ltd., or the 2015 Issuer, a wholly-owned subsidiary of us, through a private placement. The 2015 Notes are secured by the assets held by the 2015 Issuer. The 2015 Debt Securitization consists of $126.0 million Class A-T Senior Secured 2015 Notes which bore interest at three-month LIBOR plus 1.80%; $29.0 million Class A-S Senior Secured 2015 Notes which bore interest at a rate of three-month LIBOR plus 1.55%, until a step-up in spread to 2.10% occurred in October 2016; $20.0 million Class A-R Senior Secured Revolving 2015 Notes which bear interest at a rate of commercial paper, or CP, plus 1.80%, or, collectively, the Class A 2015 Notes; and $25.0 million Class B Senior Secured 2015 Notes which bear interest at a rate of three-month LIBOR plus 2.65% per annum. In partial consideration for the loans transferred to the 2015 Issuer as part of the 2015 Debt Securitization, we currently retain the entire $22.6 million of the Class C Senior Secured 2015 Notes (which we purchased at 98.0% of par value) and the entire $86.4 million of the 2015 Subordinated Notes. The Class A 2015 Notes and Class B 2015 Notes are included in our June 30, 2017 Consolidated Statement of Assets and Liabilities as notes payable. As of June 30, 2017 , the Class C 2015 Notes and the 2015 Subordinated Notes were eliminated in consolidation.

We serve as collateral manager to the 2015 Issuer under a collateral management agreement. We are entitled to a fee for our services as collateral manager. The collateral management fee is eliminated in consolidation. We have retained Fifth Street Management LLC, our investment adviser, to furnish collateral management sub-advisory services to us pursuant to a sub-collateral management agreement. Our investment adviser has waived, and intends to continue to waive, its right to such sub-collateral management fees in respect of the 2015 Debt Securitization.

The collateral management agreement does not include any incentive fee payable to us as collateral manager or payable to our investment adviser as sub-advisor under the sub-collateral management agreement.

Through May 28, 2019, all principal collections received on the underlying collateral may be used by the 2015 Issuer to purchase new collateral under the direction of the investment adviser in its capacity as sub-collateral manager of the 2015 Issuer and in accordance with our investment strategy. All classes of 2015 Notes are scheduled to mature on May 28, 2025.

As of June 30, 2017 , there were 56 in portfolio companies with a total fair value of $275.9 million , securing the 2015 Notes. The pool of loans in the 2015 Debt Securitization must meet certain requirements, including asset mix and concentration, collateral coverage, term, agency rating, minimum coupon, minimum spread and sector diversity requirements.

For the three and nine months ended June 30, 2017 , the components of interest expense, cash paid for interest, average interest rates and average outstanding balances for the 2015 Debt Securitization were as follows:



	Three months ended June 30, 2017			Three months ended June 30, 2016			Nine months ended June 30, 2017			Nine months ended June 30, 2016
Interest expense	$	1,472,696		$	1,179,015		$	4,200,225		$	3,448,626
Loan administration fees	16,992			17,488			51,480			61,941
Amortization of debt issuance costs	72,526			72,526			217,578			217,578
Total interest and other debt financing expenses	$	1,562,214		$	1,269,029		$	4,469,283		$	3,728,145
Cash paid for interest expense	$	1,394,676		$	1,188,596		$	3,976,651		$	3,891,220
Annualized average interest rate	3.138		%	2.528		%	2.992		%	2.528		%
Average outstanding balance	$	181,300,000		$	182,380,887		$	180,433,333		$	182,380,887

The classes, interest rates, spread over LIBOR, cash paid for interest, stated interest expense and note discount expense of each of the Class A-T, A-S, A-R, B and C 2015 Notes for the three and nine months ended June 30, 2017 is as follows:



				Three months ended June 30, 2017				Nine months ended June 30, 2017
	Stated Interest Rate	LIBOR Spread (basis points)		Cash Paid for Interest		Interest Expense		Cash Paid for Interest		Interest Expense
Class A-T Notes	2.9551%	180		$	888,861	$	935,602	$	2,546,066	$	2,671,836
Class A-S Notes	3.2551%	210	(1)	226,329		237,329		611,455		675,598
Class A-R Notes	2.9551%	180	(2)	50,000		60,414		152,222		161,525
Class B Notes	3.8051%	265		229,486		239,351		666,908		691,266
Class C Notes	4.4051%	325	(3)	—		—		—		—
Total				$	1,394,676	$	1,472,696	$	3,976,651	$	4,200,225

_______________________

(1) Spread increased to 2.10% in October 2016 from 1.55%.

(2) Interest expense includes 1.0% undrawn fee. Class A-R 2015 Notes were not drawn during the three months ended June 30, 2017 .

(3) We hold all Class C Notes outstanding and thus have not recorded any related interest expense as it is eliminated in consolidation.

The classes, amounts, ratings and interest rates (expressed as a spread to three-month LIBOR) of the Class A, B, C and Subordinated 2015 Notes as of June 30, 2017 are as follows:

Description

Class A-T Notes

Class A-S Notes

Class A-R
Notes

Class B Notes

Class C Notes

Subordinated Notes

Type

Senior Secured Floating Rate Term Debt

Senior Secured Floating Rate Revolver

Senior Secured Floating Rate Term Debt

Subordinated Term Notes

Amount Outstanding

$126,000,000

$29,000,000

$1,800,000

$25,000,000

$22,575,680

$86,400,000

Moody's Rating

"Aaa"

"Aa2"

S&P Rating

"AAA"

Interest Rate

LIBOR + 1.80%

LIBOR + 2.10%*

CP + 1.80% **

LIBOR + 2.65%

LIBOR + 3.25%

Stated Maturity

May 28, 2025

_______________________

* Spread increased to 2.10% in October 2016 from 1.55%.

** Carries a 1.0% undrawn fee.

The proceeds of the private placement of the Class A 2015 Notes and the Class B 2015 Notes, net of debt issuance costs, may be used to fund a portion of the 2015 Issuer's loan origination activities and for general corporate purposes. The creditors of the 2015 Issuer have received security interests in the assets owned by the 2015 Issuer and such assets are not intended to be available to our creditors (or any of our other affiliates). As part of the 2015 Debt Securitization, we entered into master loan sale agreements under which we agreed to directly or indirectly sell or contribute certain senior secured debt investments (or participation interests therein) to the 2015 Issuer, and to purchase or otherwise acquire the 2015 Subordinated Notes of the 2015

Issuer, as applicable. The 2015 Notes (other than the Class C 2015 Notes) are the secured obligations of the 2015 Issuer and indentures governing the 2015 Notes include customary covenants and events of default. The 2015 Debt Securitization requires us to comply with certain monthly financial covenants, including overcollateralization and interest coverage tests.

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 June 30, 2017 and September 30, 2016 , off-balance sheet arrangements consisted of $47.4 million and $52.8 million, respectively, of unfunded commitments to provide debt and equity financing to certain of our portfolio companies. Such commitments are subject to our portfolio companies' satisfaction of certain financial and nonfinancial covenants and may involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Consolidated Statements of Assets and Liabilities.



	June 30, 2017		September 30, 2016
FSFR Glick JV LLC	$	16,382,494	$	16,382,494
MHE Intermediate Holdings	8,190,816		—
Triple Point Group Holdings, Inc.	4,968,590		4,968,590
BeyondTrust Software, Inc.	3,605,000		3,605,000
All Web Leads, Inc.	3,458,537		3,458,537
Motion Recruitment Partners LLC	2,900,000		2,900,000
PowerPlan, Inc.	2,100,000		2,100,000
Metamorph US 3, LLC	1,200,000		1,800,000
Impact Sales, LLC	1,078,125		—
Executive Consulting Group, Inc.	800,000		800,000
Internet Pipeline, Inc.	800,000		800,000
Systems Inc.	600,000		—
My Alarm Center, LLC	372,599		1,212,472
Valet Merger Sub, Inc.	333,333		333,333
Sailpoint Technologies, Inc.	300,000		200,000
OBHG Management Services, LLC	100,000		100,000
Ministry Brands, LLC	100,000		—
Accruent, LLC	85,000		85,000
4 Over International, LLC	68,452		68,452
TIBCO Software, Inc.	—		5,300,000
Baart Programs, Inc.	—		1,000,000
Legalzoom.com, Inc.	—		2,607,018
Teaching Strategies, LLC	—		2,400,000
Dynatect Group Holdings, Inc.	—		1,800,000
TrialCard Incorporated	—		850,000
Total	$	47,442,946	$	52,770,896

Contractual Obligations

The following table reflects information pertaining to our debt outstanding under the Citibank facility, the East West Bank Facility, the 2015 Debt Securitization and our secured borrowings:



	Debt Outstanding as of September 30, 2016		Debt Outstanding as of June 30, 2017		Weighted average debt outstanding for the nine months ended June 30, 2017		Maximum debt outstanding for the nine months ended June 30, 2017
Citibank facility	$	107,426,800	$	73,656,800	$	82,356,727	$	107,426,800
2015 Debt Securitization	180,000,000		181,800,000		180,433,333		187,500,000
East West Bank Facility	—		13,000,000		6,585,348		16,600,000
Secured borrowings	5,000,000		—		73,260		5,000,000
Total debt	$	292,426,800	$	268,456,800	$	269,448,668

The following table reflects our contractual obligations arising from the Citibank facility, 2015 Debt Securitization and East West Bank Facility:



	Payments due by period as of June 30, 2017
	Total		< 1 year		1-3 years		3-5 years		> 5 years
Citibank facility (1)	$	73,656,800	$	—	$	73,656,800	$	—	$	—
Interest due on Citibank facility	6,760,885		2,656,322		4,104,563		—		—
2015 Debt Securitization	181,800,000		—		—		—		181,800,000
Interest due on 2015 Debt Securitization	44,893,398		5,671,891		11,343,782		11,343,782		16,533,943
East West Bank Facility	13,000,000		—		—		13,000,000		—
Interest due on East West Bank Facility	2,089,750		593,125		1,186,250		310,375		—
Total	$	322,200,833	$	8,921,338	$	90,291,395	$	24,654,157	$	198,333,943

___________

(1) In connection with the Transaction, on July 13, 2017, we entered into an amendment (the “Citibank Amendment”) to the Citibank facility. The Citibank Amendment provides that if the closing of the Transaction does not occur by December 31, 2017, the reinvestment period for the Citibank facility would terminate and we would be required to pay down any amounts outstanding under the Citibank facility as set forth in the Citibank Amendment. See "Recent Developments."

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 subject to tax on our investment company taxable income (determined without regard to any deduction for dividends paid) or realized net capital gains, to the extent that such taxable income or gains is distributed, or deemed to be distributed as dividends, 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. Distributions declared and paid by us in a taxable year may differ from taxable income for that taxable year as such distributions may include the distribution of taxable income derived from the current taxable year or the distribution of taxable income derived from the prior taxable year carried forward into and distributed in the current taxable year. Distributions also may include returns of capital.

To maintain RIC tax treatment, we must, among other things, distribute dividends, with respect to each taxable year, of an amount generally at least equal to 90% of our investment company 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) determined without regard to any deduction for dividends paid. As a RIC, we are also subject to a federal excise tax, based on distribution requirements of our taxable income on a calendar year basis. We anticipate timely distribution of our taxable income in accordance with tax rules; however, we incurred a de minimis U.S. federal excise tax for calendar year 2013. We did not incur a U.S. federal excise tax for calendar years 2014 and 2015 and do not expect to incur a federal excise tax for calendar year 2016. We may incur a U.S. federal excise tax in future years.

We intend to distribute to our stockholders at least 90% 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 and taxable year fall below the total amount of our dividend distributions for that fiscal and taxable year, a portion of those 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 Citibank facility, the East West Bank Facility and the 2015 Debt Securitization. If we do not distribute a certain percentage of our taxable income annually, we will suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.

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 certain limitations regarding the aggregate amount of cash to be distributed to all stockholders. 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 guidelines.

We may generate qualified net interest income or qualified net short-term capital gains that may be exempt from United States withholding tax when distributed to foreign stockholders. A RIC is permitted to designate distributions of qualified net interest income and qualified short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. The following table, which may be subject to change as we finalize our annual tax filings, lists the percentage of qualified net interest income and qualified short-term capital gains for the three months ended December 31, 2016, March 31, 2017 and June 30, 2017.



Three Months Ended	Qualified Net Interest Income		Qualified Short-Term Capital Gains
December 31, 2016	84.1	%	—
March 31, 2017	88.8	%	—
June 30, 2017	84.8	%	—

Related Party Transactions

We have entered into an investment advisory agreement with Fifth Street Management LLC, or Fifth Street Management. Messrs. Berman and Frank, 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 Advisers Act of 1940, as amended, that is partially and indirectly owned by FSAM. Pursuant to the investment advisory agreement, fees payable to our investment adviser are 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 Part I 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 Part II 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 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 Part II incentive fee. From inception to date, the Company has paid aggregate Part II incentive fees of approximately $0.1 million. 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 nine months ended June 30, 2017 , we accrued fees of $2.6 million and $6.7 million , respectively, under the investment advisory agreement. During the three and nine months ended June 30, 2016, we incurred fees of $2.7 million and $8.4 million, respectively, under the investment advisory agreement.

We serve as collateral manager to the 2015 Issuer under a collateral management agreement in connection with the 2015 Debt Securitization and receive a fee for providing these services. We have retained Fifth Street Management to furnish collateral management sub-advisory services to us pursuant to a sub-collateral management agreement. Fifth Street Management is entitled to receive 100% of the collateral management fees paid to us under the collateral management agreement, but has irrevocably waived and intends to continue to irrevocably waive its right to such sub-collateral management fees in respect of the 2015 Debt Securitization.

We have also entered into an administration agreement with FSC CT, a wholly-owned subsidiary of our investment adviser, under which FSC CT provides administrative services for us, including facilities, including our principal executive offices, and equipment and clerical, bookkeeping and recordkeeping services at such facilities. Under the administration agreement, FSC CT also performs, or oversees the performance of, our required administrative services, which includes being responsible for the financial records which we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, FSC CT assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders , and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. FSC CT may also provide on our behalf managerial assistance to our portfolio companies. For providing these services, facilities and personnel, we reimburse FSC CT the allocable portion of overhead and other expenses incurred by FSC CT in performing its obligations under the administration agreement, including our allocable portion of rent at market rates and the costs of compensation and related expenses of our chief financial officer and chief compliance officer and their respective staffs. Such

reimbursement is at cost, with no profit to, or markup by, FSC CT. Our allocable portion of FSC CT’s costs is determined based upon costs attributable to our operations versus costs attributable to the operations of other entities for which FSC CT provides administrative services. We utilize office space in Greenwich, CT that is leased by our administrator from an affiliate controlled by the chief executive officer of our investment adviser and administrator, Mr. Tannenbaum. We also utilize additional office space that is leased by affiliates of our investment adviser and administrator in Chicago, IL. Any reimbursement for a portion of the rent at these locations is at cost with no profit to, or markup by, FSC CT.

The administration agreement may be terminated by either party without penalty upon no fewer than 60 days' written notice to the other. For the three and nine months ended June 30, 2017 , we accrued administrative expenses of $0.4 million and $1.4 million , respectively, including $0.3 million and $0.9 million of general and administrative expenses, respectively. For the three and nine months ended June 30, 2016, we accrued administrative expenses of $0.3 million , including $0.2 million of general and administrative expenses, and $0.9 million , including $0.5 million of general and administrative expenses, respectively. At June 30, 2017 and September 30, 2016 , $0.4 million was included in Due to FSC CT in the Consolidated Statements of Assets and Liabilities.

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 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.

Common stock held by FSAM and Principals

As of June 30, 2017, a subsidiary of FSAM held 2,677,519 shares of our common stock, which represents approximately 9.1% of our common stock outstanding. As of June 30, 2017, Mr. Tannenbaum directly and indirectly held 5,249,026 shares of our common stock, which represents approximately 17.8% of our common stock outstanding.

Recent Developments

On August 7, 2017, our Board of Directors declared the following distributions:


•	$0.19 per share, payable on September 29, 2017 to stockholders of record on September 15, 2017;


•	$0.19 per share, payable on December 29, 2017 to stockholders of record on September 15, 2017.

Citibank Amendment

In connection with the Transaction, on July 13, 2017, we entered into the Citibank Amendment to the Citibank facility that amends the Loan and Security Agreement, dated as of January 15, 2015, by and among us, as the collateral manager and as the seller, FS Senior Funding II LLC, as the borrower, Citibank, N.A., as administrative agent, and Citibank, N.A., as the sole lender (as amended, the “Citibank Agreement”). Under the Citibank Amendment, certain events of default that would result from the closing of the Transaction are waived and the ability to borrow amounts under the Citibank facility for investment was revised to require the consent of the lenders prior to the closing of the Transaction and completion of satisfactory due diligence by the lenders on Oaktree. In addition, the Citibank Amendment provides that if the closing of the Transaction does not occur by December 31, 2017, the reinvestment period for the Citibank facility would terminate and we would be required to pay down any amounts outstanding under the Citibank facility as set forth in the Citibank Amendment.

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 addition, our investments are carried at fair value as determined in good faith by our Board of Directors in accordance with the 1940 Act. 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 June 30, 2017 , 100% of our debt investment portfolio (at cost and fair value) bore interest at floating rates and had interest rate floors between 0% and 2%.

Based on our Consolidated Statement of Assets and Liabilities as of June 30, 2017 , the following table shows the approximate annualized increase in net interest income from 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	$	26,555,582	$	(13,422,840	)	13,132,742
400	21,229,671		(10,738,272		)	10,491,399
300	15,903,761		(8,053,704		)	7,850,057
200	10,577,850		(5,369,136		)	5,208,714
100	5,325,911		(2,684,568		)	2,641,343

__________________


(1)	A decline in interest rates would not have a material impact on our 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 June 30, 2017 and September 30, 2016 .



	June 30, 2017				September 30, 2016
	Interest Bearing Cash and Investments		Borrowings		Interest Bearing Cash and Investments		Borrowings
Money market rate	$	26,910,860	$	—	$	28,815,679	$	—
Prime rate	442,479		—		543,445		—
LIBOR:
30 day	43,987,247		13,000,000		—		—
60 day	—		—		—		—
90 day	533,056,005		255,456,800		588,697,358		287,426,800
180 day	—		—		—		—
Fixed rate	—		—		—		—
Total	$	604,396,591	$	268,456,800	$	618,056,482	$	287,426,800

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2017 . The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives. Based on the evaluation of our disclosure controls and procedures as of June 30, 2017 , our Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weakness in internal control over financial reporting that is described below, our disclosure controls and procedures were not effective.

(b) Management's Report on Internal Control Over Financial Reporting

As of September 30, 2016, management has determined that the Company did not design or maintain effective controls to internally communicate current accounting policies and procedures including the nature of supporting documentation required to validate certain portfolio company data. This material weakness remained as of June 30, 2017 primarily because the remediation actions described below remain in process.

During the fiscal year ended September 30, 2016, we took a number of steps to remediate the aggregated material weakness including formalizing policies and procedures relating to fee income recognition and the communication of these policies and procedures throughout the organization. Further, we added senior experienced accounting and financial reporting personnel with higher levels of experience, outsourced a number of accounting and operation activities, engaged a public accounting firm to assist on technical accounting matters and reallocated existing internal resources. During the fiscal year ending September 30, 2017, we have and will continue to take a number of additional steps to remediate this material weakness, including the formalization of policies and procedures in other significant areas and the implementation of controls over the validation of portfolio company data. Management is committed to improving our internal control processes and believes that the measures described above should be sufficient to remediate the identified material weakness and strengthen our internal control over financial reporting. Based on the steps we have taken to date and the anticipated timing of additional remediation measures and appropriate test work, we expect that the remediation of this material weakness will be completed prior to the end of calendar year 2017. We cannot assure you, however, that the steps taken will remediate such weakness, nor can we be certain of whether additional actions will be required or the costs of any such actions.

(d) Changes in Internal Control over Financial Reporting

Other than the remediation efforts described above, there were no changes in our internal control over financial reporting that occurred during the third fiscal quarter of 2017 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 except as described below.

SEC Examination and Investigation

On March 23, 2016, the Division of Enforcement of the SEC sent document subpoenas and document-preservation notices to us, FSAM, FSCO GP LLC - General Partner of Fifth Street Opportunities Fund, L.P., or FSOF, and Fifth Street Finance Corp., or FSC. The subpoenas sought production of documents relating to a variety of issues, including those raised in an ordinary-course examination of Fifth Street Management by the SEC’s Office of Compliance Inspections and Examinations that began in October 2015, and in the previously disclosed FSC and FSAM securities class actions and FSC derivative actions.

The subpoenas were issued pursuant to a formal order of private investigation captioned In the Matter of the Fifth Street Group of Companies, No. HO-12925, dated March 23, 2016, which addresses (among other things) (i) the valuation of our portfolio companies and investments, (ii) the expenses allocated or charged to us and FSC, (iii) FSOF’s trading in the securities of publicly traded business-development companies, (iv) statements to our board of directors, other representatives of pooled investment vehicles, investors, or prospective investors concerning the fair value of our portfolio companies or investments as well as expenses allocated or charged to us and FSC, (v) various issues relating to adoption and implementation of policies and procedures under the Advisers Act, (vi) statements and/or potential omissions in the entities’ SEC filings, (vii) the entities’ books, records, and accounts and whether they fairly and accurately reflected the entities’ transactions and dispositions of assets, and (viii) several other issues relating to corporate books and records. The formal order cites various provisions of the Securities Act, the Exchange Act, and the Advisers Act, as well as rules promulgated under those acts, as the bases of the investigation. The subpoenaed Fifth Street entities are cooperating with the Division of Enforcement investigation, have produced requested documents, and have been communicating with Division of Enforcement personnel.

Item 1A. Risk Factors

Except as described below, there have been no material changes during the three months ended June 30, 2017 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 30, 2016.

We cannot assure you the Transaction will close.

On July 13, 2017, Fifth Street Management LLC, the Company’s investment adviser (the "Investment Adviser"), entered into an asset purchase agreement (the “Purchase Agreement”) with Oaktree Capital Management, L.P. (“Oaktree”) and, for certain limited purposes, Fifth Street Asset Management Inc. ("FSAM") and Fifth Street Holdings L.P. Upon closing of the transactions contemplated by the Purchase Agreement (the “Transaction”), Oaktree would become the investment adviser to each of the Company and Fifth Street Finance Corp. ("FSC") and Oaktree would pay gross cash consideration of $320 million to the Investment Adviser. The closing of the Transaction would result in an assignment for purposes of the Investment Company Act of 1940, as amended, of the current investment advisory agreement between the Company and the Investment Adviser and, as a result, its immediate termination. The closing of the Transaction is conditioned on, among other things: (i) the approval of a new investment advisory agreement between the Company and Oaktree by the Company’s stockholders; (ii) the approval of a new investment advisory agreement by the stockholders of FSC; (iii) the election to the Company’s Board of Directors of five new directors by the Company’s stockholders; (iv) the election to the board of directors of FSC of five new directors by FSC’s stockholders; (v) the approval of the Transaction by the stockholders of FSAM; and (vi) the receipt of any required regulatory and other approvals. We cannot assure you of the timing of any assignment of the current investment advisory agreement with the Investment Adviser and whether and when the new investment advisory agreement with Oaktree will be effective. Any failure of the Transaction to close could have a material adverse effect on the Company's business, financial condition and results of operations.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits.



Exhibit Number		Description of Exhibit

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/ Bernard D. Berman
		Bernard D. Berman
		Chief Executive Officer

By:		/s/ Steven M. Noreika
		Steven M. Noreika
		Chief Financial Officer

Date: August 9, 2017

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