Fifth Street Senior Floating Rate's Upcoming Fiscal Q4 2014 Net Asset Value Projection

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Summary

FSFR recently formed a strategic JV partnership with members of the Glick Family to expand the company’s investment portfolio, but needed additional capital to finalize the deal.

As such, on 7/10/2014, FSFR held a special meeting of stockholders where a proposal was approved allowing the company to sell shares of common stock at a price below NAV.

I am projecting FSFR will report a material decrease in NAV during the fiscal fourth quarter of 2014 (NAV per share projection is stated within the article).

A majority of the projected material decrease in NAV is due to the August 2014 equity offering which had a net issuance price that was dilutive to existing shareholders.

While investors could argue there are currently a few positive factors in owning FSFR as an equity investment, I also believe there are several negative factors that readers should consider.

Author's Note: This article provides a detailed analysis with supporting documentation on Fifth Street Senior Floating Rate Corp.'s (FSFR) projected net asset value ("NAV") per share as of 9/30/2014. I perform this detailed analysis for readers who anticipate/want such an analysis performed each quarter. For readers who just want the summarized conclusions/results of the NAV projection analysis, I would suggest to scroll down to the "Conclusions Drawn" section near the bottom of the article.

Focus of Article:

The focus of this article is to provide a detailed projection of FSFR's NAV per share as of 9/30/2014. Prior to results being provided to the public before markets open on 12/10/2014 (via the company's quarterly press release), I would like to analyze FSFR's NAV as of 9/30/2014 and provide readers a general direction on how I believe this recent quarter has panned out. I will also include my quarterly "net investment income" ("NII") and "net increase (decrease) in net assets resulting from operations" (also known as "earnings per share" ("EPS")) projections in this article.

Before we begin the company's NAV projection analysis, I wanted to provide readers my current thoughts in regards to FSFR as a possible equity investment. This should help some readers better understand what is currently occurring within FSFR regarding several key metrics and also assist when reading the NAV projection analysis. My current BUY, SELL, or HOLD recommendation for FSFR will be at the bottom of this section of the article.

I currently believe there are a few positive and negative aspects to FSFR. Let us first discuss the positive factors. First, FSFR continues to trade at a material discount to my projected NAV as of 9/30/2014 (per share figure provided at the end of the analysis below). As of 12/1/2014, FSFR's stock price was $10.90 per share. This calculates to a premium (discount) of ($1.73) per share for a price to NAV ratio of 0.863 (a 13.68% discount). Some investors would see this material discount as an attractive opportunity to currently own FSFR.

Second, FSFR recently announced it has moved forward with the joint venture ("JV") partnership with members of the Glick Family (GF Funding) to expand the company's investment portfolio. This newly created JV partnership is called "FSFR Glick Family JV LLC" (FSFR Glick JV). FSFR's "big brother" Fifth Street Finance Corp. (FSC) recently completed a similar JV partnership with a subsidiary of the Kemper Corporation (NYSE:KMPR) called "Senior Loan Fund JV 1" (SLF JV 1). When FSC's SLF JV 1 is fully funded, management believes investments within this specific portfolio will increase NII and generate higher rates of returns when compared to the rest of the investment portfolio. This is due to the fact that management fees are based on the net assets of SLF JV 1 (not gross assets) which is one strategic advantage. Using JV partnerships allows FSC to circumvent the BDC debt-to-equity leverage ratio threshold of 1.0x (including the notion of remaining a RIC per the IRC). Similar advantages should occur within FSFR Glick JV.

Regarding the FSFR Glick JV, both parties have committed to provide a combined $100 million of debt and equity to the newly created entity. FSFR will provide $87.5 million and GF Funding will provide $12.5 million. This is the same proportional percentages seen within FSC's SLF JV 1. Also, FSFR anticipates an eventual expansion of FSFR Glick JV thus increasing this strategic advantage. Due to the inherent benefits of this type of investment structure, FSFR stated the company will most likely have future discussions with other third parties to create additional JV partnerships. Again, some investors would see the potential future JV partnerships as an attractive opportunity to currently own FSFR.

However, let us now discuss several negative factors regarding FSFR. First, FSFR only had an annualized weighted average yield on debt investments of 6.74% as of 3/31/2014. This yield only slightly increased to 7.00% as of 6/30/2014. Since FSFR did not have any collateralized loan obligations ("CLO") or equity investments to potentially help boost yield, at the time this was one of the lower percentages within the BDC sector. I believe FSFR needs to increase the company's annualized weighted average yield on debt investments in the upcoming quarters to help grow NII per share as expenses begin to escalate as the portfolio grows. FSFR has stated the company is confident management can gradually increase this very low annualized weighted average yield on debt investments and did so in the fiscal third quarter of 2014. While the new JV partnership with GF Funding should assist with increasing this metric, readers should also understand this goal will take some time as FSFR Glick JV was only recently created during the fiscal first quarter of 2015 (quarter ending 12/31/2014). In direct comparison, FSC had an annualized weighted average yield on debt investments of 11.1% as of 9/30/2014. I believe this is one factor that currently makes FSC the more attractive investment when compared to FSFR.

Second, as part of the JV partnership agreement with GF Funding, FSFR needed to obtain an additional source of financing/capital to fund the company's 87.5% ownership stake. FSFR had used up all of the equity proceeds in relation to the company's IPO in July 2013 and borrowings at the time through its $100 million Natixis Revolving Credit Facility created in November 2013. As such, to move FSFR Glick JV forward, the company needed to establish additional sources of financing/capital in the debt/equity markets. However, during the summer of 2014 it had remained "non advantageous" for FSFR to perform an additional equity offering due to the fact the stock price was trading at a modest discount to the company's NAV of $15.13 per share as of 6/30/2014.

Not being able to come up with any alternatives, on 7/10/2014, FSFR held a special meeting of stockholders where a proposal was approved allowing the company to sell shares of its common stock at a price up to 25% below CURRENT NAV. Subsequently, in August 2014, FSFR completed an equity offering that was materially dilutive to existing shareholders and (as will be presented in the analysis below) materially decreased CURRENT NAV during the fiscal fourth quarter of 2014. In my opinion, selling shares of common stock at a modest/material discount to CURRENT NAV is an unattractive strategy. To take the August 2014 equity offering a step further, the amount of shares of common stock issued at the time were approximately 3.5x the size of the prior outstanding shares of common stock. Such a large equity offering at a net issuance price that was martially dilutive to existing shareholders was ill-timed in my opinion. As will be discussed in the analysis below, this equity offering lowered FSFR's CURRENT NAV by a projected ($2.40) per share. While I do not believe another equity raise will occur anytime soon, I also believe the August 2014 equity offering should be seen as a fairly important negative factor.

As highlighted in my FSC NAV projection article, FSC has not issued shares of common stock below CURRENT NAV for at least several years. In sharp contrast, in July 2014, FSFR asked shareholders to allow management to issue shares of common stock below NAV. After shareholders approved such a measure, FSFR quickly commenced a material equity offering. I currently believe this is another positive factor for FSC while being another negative factor for FSFR.

Third, FSFR's Board of Directors ("BoD") recently announced an unchanged dividend per share rate for the fiscal second quarter of 2015 when compared to the fiscal fourth quarter of 2014 and fiscal first quarter of 2015. After five consecutive quarters of dividend per share rate increases, this is the second straight quarter of an unchanged dividend per share rate. In the NAV projection analysis below (in particular see Table 6), I am projecting FSFR will only report NII of $0.22 per share for the fiscal fourth quarter of 2014. The weak quarterly NII per share projection is directly attributed to the August 2014 equity offering. While I do not anticipate such a low NII per share figure in future quarters, going forward FSFR will need to continually increase NII/net investment company taxable income ("ICTI") so the current dividend rate of $0.30 per share can be maintained. This may not occur for several quarters and investors should remain cautious regarding FSFR's future dividend sustainability. In the future, I will continue to analyze FSFR's results to see if the company's dividend per share rate can be sustained by matching distributions with NII and more importantly net ICTI.

My BUY, SELL, or HOLD Recommendation:

From the positive and negative factors listed above, I currently recommend potential investors to avoid FSFR for the time being. Before I consider an initial investment in FSFR, I would like to see the following occur: 1) proceeds from the August 2014 equity offering being fully deployed; 2) NII to materially increase when compared to my projection for the fiscal fourth quarter of 2014; and 3) NAV to remain relatively stable or slightly increase. This decision is even after considering FSFR is currently trading at a material discount to CURRENT NAV. I believe FSFR lost the trust of some existing shareholders (and potential shareholders) when the August 2014 equity offering was announced. As implied from the discussion above, I currently believe FSFR is not an attractive equity investment.

Each investor's BUY, SELL, or HOLD decision is based on one's risk tolerance, time horizon, and dividend income goals. My personal recommendation may not fit each investor's current investing strategy.

Side Note: Predicting certain accounting figures within the business development company ("BDC") sector is usually more difficult when compared to other sectors due to the fair market value ("FMV") adjustments that occur on a company's investment portfolio each quarter. Specifically, the following two FSFR accounts are typically more difficult to project in any given quarter: 1) unrealized appreciation (depreciation) on investments; and 2) realized gain (loss) on investments. As such, there are several assumptions used when performing such an analysis. FSFR's actual reported values may differ materially from my projected values within this article due to unforeseen circumstances. This could occur because management deviates from a company's prior business strategy and pursues a new strategy that was not previously disclosed or anticipated. This could also occur when the company has a "one-time" extraordinary event which was previously unforeseen. Readers should be aware as such. All projections within this article are my personal estimates and should not solely be used for any investor's buying or selling decisions. All actual reported figures that are above my ranges within this article will be deemed a positive sign in my judgment. All actual reported figures that are below my ranges within this article will be deemed a negative sign in my judgment.

Overview of FSFR's Projected NAV as of 9/30/2014:

Due to the fact that several figures needed to project/calculate FSFR's NAV as of 9/30/2014 come directly from the company's consolidated statement of operations, I provide Table 1 below. Table 1 shows FSFR's consolidated statement of operations from a twelve-month ended time frame. Using Table 1 below as a reference, one must add certain account figures from the fiscal first, second, third, and fourth quarters of 2014 for purposes of projecting a suitable NAV as of 9/30/2014.

Table 1 - FSFR Fiscal Twelve Months Ended Consolidated Statement of Operations

(Source: Table created entirely by myself, partially using FSFR data obtained from the SEC's EDGAR Database)

Having provided Table 1 above (in particular FSFR's "Fiscal Twelve Months Ended (ESTIMATE)" column), we can now begin to calculate FSFR's projected NAV as of 9/30/2014. This projection will be calculated using Table 2 below.

Table 2 - FSFR Twelve-Months Ended NAV Projection (NAV as of 9/30/2014)

(Source: Table created entirely by myself, partially using FSFR data obtained from the SEC's EDGAR Database [link provided below Table 1])

Using Table 2 above as a reference, let us take a look at the calculation for FSFR's projected NAV as of 9/30/2014. Unless otherwise noted, all figures below are for the "twelve-month ended" time frame. Let us look at the following figures (in corresponding order to the "Ref." column shown in Table 2 next to the September 30, 2014 column):

A) Operations

B) Stockholder Transactions

C) Capital Share Transactions

A) Operations:

- Net Increase (Decrease) in Net Assets From Operations Estimate of $8.4 million; Range ($1.6) - $18.4 million

- Confidence Within Range = Moderate to High

- See Red Reference "A" in Table 2 Above Next to the September 30, 2014 Column

This "net increase (decrease) in net assets from operations" figure consists of the following three amounts that come directly from FSFR's consolidated statement of operations: 1) net investment income (see blue reference "A" in Tables 1 and 2 above); 2) net unrealized appreciation (depreciation) on investments (see blue reference "B" in Tables 1 and 2 above); and 3) net realized gain (loss) on investments (see blue reference "C" in Tables 1 and 2 above). Since I have refrained from writing a quarterly consolidated statement of operations projection article for FSFR (due to time constraints), I will summarize what I believe will occur within these three amounts during the fiscal fourth quarter of 2014. Let us first discuss FSFR's NII account.

1) Net Investment Income:

- Estimate of $9.2 million; Range $7.2 - $11.2 million

- Confidence Within Range = Moderate to High

- See Blue Reference "A" in Tables 1 and 2 Above Next to the September 30, 2014 Column

FSFR reported NII of $1.5, $1.8, and $1.9 million for the fiscal first, second, and third quarters of 2014, respectively. I am projecting FSFR will report NII of $4.1 million for the fiscal fourth quarter of 2014. Using Tables 1 and 2 above as a reference, when combined this is a projected NII of $9.2 million (rounded) for the twelve months ended 9/30/2014. In recent quarters, the company rotated out of certain assets to "optimize" the investment portfolio. This rotation of investments occurred because FSFR used up most of the company's available borrowings (the $100 million Natixis Revolving Credit Facility) in a prior quarter.

As stated earlier, on 7/10/2014 FSFR held a special meeting of stockholders where a proposal was approved allowing the company to sell shares of its common stock at a price below CURRENT NAV. On 8/13/2014, FSFR announced a 22.8 million common stock offering. The purpose of this material equity raise (proportionately speaking) was to expand FSFR's investment portfolio for the foreseeable future. More specifically, FSFR needed additional capital to finalize a particular JV partnership (as was discussed earlier in the article).

Directly due to the August 2014 equity offering, I am projecting FSFR had gross loan originations and add-on investments of $130 million during the fiscal fourth quarter of 2014. I am also projecting FSFR had portfolio sales/repayments of ($40) million during the fiscal fourth quarter of 2014. When combining the company's quarterly gross loan originations and add-on investments less portfolio sales/repayments, I am projecting FSFR's total investment portfolio increased (decreased) $90 million for the fiscal fourth quarter of 2014 (prior to all quarterly FMV fluctuations and scheduled principle payments).

The projected increase in quarterly NII ($4.1 million for the fiscal fourth quarter of 2014 versus $1.9 million for the fiscal third quarter of 2014) is mainly attributed to a continued increase in interest and fee income from a growing investment portfolio and a decrease in FSFR's incentive fees and interest expense accounts. The projected decrease within FSFR's interest expense account is due to the fact the company completed an equity offering in August 2014, and I am projecting all proceeds that were not deployed during the quarter were used to pay down the balance of the Natixis Revolving Credit Facility. Furthermore, due to how FSFR's quarterly incentive fees are calculated, I am projecting the company did not pass the "first hurdle" of the "waterfall" calculation. Therefore, I am projecting no incentive fees were owed to Fifth Street Management for fiscal fourth quarter of 2014. Now let us discuss FSFR's net unrealized appreciation (depreciation) on investments account.

2) Net Unrealized Appreciation (Depreciation) on Investments:

- Estimate of ($0.9) million; Range ($7.9) - $6.1 million

- Confidence Within Range = Moderate

- See Blue Reference "B" in Tables 1 and 2 Above Next to the September 30, 2014 Column

FSFR reported a net unrealized appreciation (depreciation) on investments of ($0.3) million, ($0.3) million, and ($13,387) for the fiscal first, second, and third quarters of 2014, respectively. I am projecting FSFR will report a net unrealized appreciation (depreciation) on investments of ($0.3) million for the fiscal fourth quarter of 2014. Once again using Tables 1 and 2 above as a reference, when combined this is a projected net unrealized appreciation (depreciation) on investments of ($0.9) million for the twelve months ended 9/30/2014.

In the prior quarter, the following notable unrealized appreciation (depreciation) FMV fluctuations occurred within this account: 1) $0.2 million on Triple Point Group Holdings, Inc.; 2) $0.2 million on New Trident Holdcorp, Inc.; 3) ($0.1) million on Power Products, LLC and 4) ($0.2) million on Maxor National Pharmacy Services, LLC. The remaining net change to this account consisted of numerous minor unrealized appreciation (depreciation) FMV fluctuations on the rest of FSFR's investment portfolio.

Regarding the fiscal fourth quarter of 2014, I am partially basing my projection of this account on the fact that all of FSFR's investments are still relatively new (oldest investments are still only several quarters old). Based on this notion (and several other analytical factors), I am projecting the net change to this account consisted of numerous minor to modest unrealized appreciation (depreciation) FMV fluctuations on FSFR's investment portfolio. Now let us discuss FSFR's net realized gain (loss) on investments account.

3) Net Realized Gain (Loss) on Investments:

- Estimate of $0.1 million; Range ($0.9) - $1.1 million

- Confidence Within Range = Moderate

- See Blue Reference "C" in Tables 1 and 2 Above Next to the September 30, 2014 Column

FSFR reported a net realized gain (loss) on investments of $22,625, $0.2 million, and ($56,332) for the fiscal first, second, and third quarters of 2014, respectively. I am projecting FSFR will report a net realized gain (loss) on investments of ($0.1) million for the fiscal fourth quarter of 2014. Still using Tables 1 and 2 above as a reference, when combined this is a projected net realized gain (loss) on investments of $0.1 million for the twelve months ended 9/30/2014. This projection assumes a portion of the portfolio exits during the quarter were debt investments sold in the open market which either slightly appreciated or depreciated in value. As such, I'm anticipating several minor to modest net realized gains and losses associated with these types of sales to market participants.

Let us now combine the three amounts described above to come up with a proper net increase (decrease) in net assets from operations figure for the twelve-months ended 9/30/2014. When combining NII of $9.2 million, a net unrealized appreciation (depreciation) on investments of ($0.9) million, and a net realized gain (loss) on investments of $0.1 million, I am projecting FSFR had an increase (decrease) in net assets from operations of $8.4 million for the twelve-months ended 9/30/2014 (see red reference "A" in Table 2 above).

B) Stockholder Transactions:

- Net Increase (Decrease) in Net Assets From Stockholder Transactions Estimate of ($13.6) million; Range ($14.6) - ($12.6) million

- Confidence Within Range = High

- See Red Reference "B" and Blue Reference "D" in Table 2 Above Next to the September 30, 2014 Column

- See Blue Reference "D" in Table 3 Below

Side Note: As shown in Table 2 above, FSFR's "net increase (decrease) in net assets from stockholder transactions" figure is the equivalent to the company's "distributions to stockholders from net ICTI" figure. Since this is the only amount within this specific classification, both figures will be the same.

This is a fairly simple calculation. This is FSFR's dividend distributions for the fiscal first, second, and third quarters of 2014 and payable for the fiscal fourth quarter of 2014.

Table 3 - FSFR Twelve-Months Ended Distributions to Common Stockholders Projection

(Source: Table created entirely by myself, partially using FSFR data obtained from the SEC's EDGAR Database [link provided below Table 1])

Using Table 3 above as a reference, the number of outstanding shares of common stock as of 6/26/2014 is projected to be 29.5 million. This figure is an increase of 22.8 million from FSFR's outstanding shares of common stock as of 6/30/2014. Initially discussed above, these additional shares of common stock were issued via FSFR's August 2014 equity offering. I am also projecting no shares of common stock were issued as part of FSFR's dividend reinvestment plan for the fiscal fourth quarter of 2014.

Since the common stock dividend declared for the fiscal fourth quarter of 2014 was $0.30 per share, I am projecting a dividend distribution payable of ($8.8) million. When this dividend distribution is combined with the nine-month ended dividend distributions of ($4.7) million, I am projecting FSFR had an increase (decrease) in net assets from stockholder transactions of ($13.6) million (rounded) for the twelve-months ended 9/30/2014 (see red reference "B" in Table 2 above and blue reference "D" in Tables 2 and 3 above).

C) Capital Share Transactions:

- Net Increase (Decrease) in Net Assets From Capital Share Transactions Estimate of $276.4 million; Range $275.0 - $321.5 million

- Confidence Within Range = High

- See Red Reference "C" in Table 2 Above Next to the September 30, 2014 Column

This "net increase (decrease) in net assets from capital share transactions" figure consists of the following three amounts: 1) issuance of common stock, net (see blue reference "E" in Table 2 above and Table 4 below); 2) issuance of common stock under dividend reinvestment plan, net (see blue reference "F" in Table 2 above and Table 5 below); and 3) repurchases of common stock.

1) Issuance of Common Stock, Net:

- Estimate of $276.4 Million; Range $275.0 - $321.4 million

- Confidence Within Range = High

- See Blue Reference "E" in Table 2 Above Next to the September 30, 2014 Column

- See Blue Reference "E" in Table 4 Below

This is a more complex calculation. This is FSFR's issuance of common stock, net of underwriting fees and offering costs for the fiscal first, second, third, and fourth quarters of 2015.

Table 4 - FSFR Twelve-Months Ended Issuance of Common Stock, Net Projection

(Source: Table created entirely by myself, partially using FSFR data obtained from the SEC's EDGAR Database [link provided below Table 1])

Originally discussed within FSFR's distributions to stockholders from net ICTI figure, I projected 22.8 million shares of common stock were issued under the company's August 2014 equity offering. When broken out, this consists of 22.8 million and 0 shares of common stock issued to the public and the underwriters' exercise of the over-allotment option, respectively. Using Table 4 above as a reference, when calculated this is projected gross proceeds of $294.3 million and $0, respectively. When excluding ($17.7) million of quarterly underwriting fees and ($0.3) million of offering costs, I am projecting FSFR will report an issuance of common stock, net figure of $276.4 million (rounded) for the fiscal fourth quarter of 2014 and twelve months ended 9/30/2014 (see blue reference "E" in Tables 2 and 4 above).

2) Issuance of Common Stock Under Dividend Reinvestment Plan:

- Estimate of $0; Range $0 - $0.1 million

- Confidence Within Range = High

- See Blue Reference "F" in Table 2 Above Next to the September 30, 2014 Column

- See Blue Reference "F" in Table 5 Below

This is a simple calculation. This is FSFR's issuance of common stock under the company's dividend reinvestment plan for the fiscal first, second, third, and fourth quarters of 2014.

Table 5 - FSFR Twelve-Month Ended Issuance of Common Stock Under Dividend Reinvestment Plan Projection

(Source: Table created entirely by myself, partially using FSFR data obtained from the SEC's EDGAR Database [link provided below Table 1])

Using Table 5 above as a reference, I am assuming management will repurchase outstanding shares of common stock in the open market for the fiscal fourth quarter of 2014. This is due to the fact that FSFR's stock price, at the time of the dividend distribution for the quarter, was below the company's NAV of $15.13 per share as of 6/30/2014 (including below the August 2014 equity offering gross issuance price of $12.91 per share). FSC repurchases outstanding shares of common stock in the open market to distribute as part of the company's dividend reinvestment plan (net effect of 0 additional outstanding shares of common stock issued). This strategy is implemented when FSC's stock price, at the time of distribution, is priced at a discount to NAV. During the fiscal second and third quarters of 2014, FSFR had implemented a similar strategy. As such, I am not projecting any additional capital proceeds from the issuance of new shares of common stock under FSFR's dividend reinvestment plan for the fiscal fourth quarter of 2014.

Therefore, I am projecting FSFR will report an issuance of common stock under the company's dividend reinvestment plan figure of $0 for the twelve-months ended 9/30/2014 (see blue reference "F" in Tables 2 and 5 above).

3) Repurchases of Common Stock:

- Estimate of $0; Range ($5.0) million - $0

- Confidence Within Range = High

- See Table 2 Above Next to the September 30, 2014 Column for Reference

Management may intend to repurchase outstanding shares of common stock when FSFR's stock price is at a material discount to the company's NAV. Even though FSFR's stock price continued to trade throughout the quarter below the company's NAV of $15.13 per share as of 6/30/2014 (including below the August 2014 equity offering gross issuance price of $12.91 per share), I am assuming management did not initiate any share buybacks during the fiscal fourth quarter of 2014. In my opinion, it would not make too much sense to repurchase outstanding shares of common stock at a material discount when in August 2014 the company just issued new shares of common stock at a material discount to NAV as of 6/30/2014. Do not get me wrong, issuing shares at a net issuance price of $12.19 per share and then repurchasing a portion of these proceeds at a projected weighted average price of $11.00 per share would be net accretive to FSFR's NAV. However, I do not believe management would pursue such a strategy due to the fact the company wanted to use the net proceeds from the August 2014 equity offering to expand its investment portfolio and reduce borrowings on the Natixis Revolving Credit Facility. Therefore, I am projecting FSFR will report a repurchases of common stock figure of $0 for the twelve months ended 9/30/2014 (see Table 2 above).

When combining net equity proceeds in common stock issuances of $276.4 million, net equity proceeds in relation to the company's dividend reinvestment plan of $0, and equity in relation to repurchases of common stock of $0, I am projecting FSFR had an increase (decrease) in net assets from capital share transactions of $276.4 million for the twelve-months ended 9/30/2014 (see red reference "C" in Table 2 above).

Conclusions Drawn:

To sum up all the information discussed above, I am projecting FSFR will report the following NAV per share as of 9/30/2014:

FSFR's Projected NAV as of 9/30/2014 = $12.63 Per Share

FSFR's Projected NAV Range as of 9/30/2014 = $12.43 - $12.83 Per Share

This projection is an increase (decrease) of ($2.50) per share from FSFR's NAV as of 6/30/2014. This material decrease in NAV can be attributed to the following quarterly per share changes:

Table 6 - FSFR Quarterly NAV Per Share Changes

(Source: Table created entirely by myself, including all calculated figures and projected valuations)

Using Table 6 above as a reference, I am projecting FSFR's net increase (decrease) in net assets resulting from operations (also known as EPS) will be $0.20 per share for the fiscal fourth quarter of 2014 (rounded to the nearest cent). In comparison, I am projecting FSFR had dividend distributions of ($0.30) per share for the fiscal fourth quarter of 2014 (also rounded to the nearest cent). I am also projecting FSFR's August 2014 equity offering had a dilutive effect of ($2.40) per share. After adding these three amounts together, an increase (decrease) of ($2.50) per share for the fiscal fourth quarter of 2014 is obtained.

Final Note: For readers who have grown accustom to the format of most of my prior articles (introduction, analysis, conclusion, recommendation) and quickly scrolled down to the end of the article, please see the "Focus of Article" and "My BUY, SELL, or HOLD Recommendation" sections near the top of the article for my thoughts in regards to FSFR as a possible equity investment.

Disclosure: The author is long FSC.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I currently have no position in FSFR, KMPR.