PRELIMINARY COPY –
SUBJECT TO COMPLETION, DATED JANUARY 5, 2016
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant x
Filed by a Party other than the Registrant ¨
Check the appropriate box:
| x | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ¨ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §240.14a-12 |
Fifth Street Senior Floating Rate Corp.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| ¨ | Fee paid previously with preliminary materials. |
¨ Check box
if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
PRELIMINARY COPY –
SUBJECT TO COMPLETION, DATED JANUARY 5, 2016
Fifth Street Senior Floating Rate Corp.
777 West Putnam Avenue, 3rd Floor
Greenwich, CT 06830
Dear Stockholders:
You are cordially invited to attend the
2016 Annual Meeting of Stockholders (the “Annual Meeting”) of Fifth Street Senior Floating Rate Corp. (“FSFR,”
the “Company,” “we,” “us” or “our”) to be held at [●] on [●], at [●],
local time. Stockholders of record of FSFR at the close of business on [●] are entitled to notice of, and to vote at, the
Annual Meeting or any adjournment or postponement thereof. Details of the business to be conducted at the Annual Meeting are given
in the accompanying Notice of Annual Meeting and 2016 Proxy Statement. This Proxy Statement was first sent to stockholders on or
about [●].
Your vote will be especially important
at the Annual Meeting. As you may have heard, Ironsides Partners Special Situations Master Fund II L.P. together with certain of
its affiliates (“Ironsides”), has notified the Company that Ironsides intends to nominate two individuals to become
members of the Company’s Board of Directors and introduce a binding proposal to terminate the Investment Advisory Agreement
(the “Investment Advisory Agreement”), dated as of June 27, 2013, by and between the Company and Fifth Street Management
LLC (“Fifth Street Management” or “FSM”) and an advisory proposal that, if the stockholders vote in favor
of terminating the Investment Advisory Agreement pursuant to the binding proposal, neither Fifth Street Management nor any of its
principals or other affiliates should be engaged to manage or advise any of the assets of the Company in any capacity. You may
receive a proxy statement, [color] proxy card and other solicitation materials from Ironsides. The Company is not responsible for
the accuracy or completeness of any information provided by or relating to Ironsides or the Ironsides nominees contained in the
solicitation materials filed or disseminated by or on behalf of Ironsides or any other statements that Ironsides or the Ironsides
nominees for director may make.
Your Board of Directors unanimously
recommends that you vote FOR the election of each of Ivelin M. Dimitrov and Brian S. Dunn, the nominees proposed by your Board
of Directors. Your Board of Directors, including the Independent Directors, strongly urges you NOT to sign or return any proxy
card sent to you by or on behalf of Ironsides. If you have previously submitted a [color] proxy card sent to you by or on behalf
of Ironsides, you can revoke that proxy and vote for your Board of Directors’ nominees and on the other matters to be voted
on at the Annual Meeting by using the enclosed WHITE proxy card or voting by Internet, telephone or mail.
It is very important that your shares be
represented at the Annual Meeting. Whether or not you plan to attend, we hope you will vote as soon as possible. You may vote over
the Internet, as well as by telephone, or by mailing a proxy or voting instruction form. Returning the proxy or voting by Internet
or telephone does not deprive you of your right to attend the Annual Meeting and to vote your shares in person.
We look forward to seeing you at the Annual
Meeting. Your vote and participation, no matter how many or how few shares you own, are very important to us.
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Sincerely, |
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Ivelin M. Dimitrov |
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Chief Executive Officer |
Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting of Stockholders to Be Held on [●].
Our 2016 Proxy Statement and the accompanying
Annual Report on Form 10-K for the fiscal year ended September 30, 2015 are also available at [●].
PRELIMINARY COPY –
SUBJECT TO COMPLETION, DATED JANUARY 5, 2016
FIFTH STREET SENIOR FLOATING RATE CORP.
777 West Putnam Avenue, 3rd Floor
Greenwich, CT 06830
NOTICE OF 2016 ANNUAL MEETING OF STOCKHOLDERS
To be Held at
[●]
Dear Stockholders:
The 2016 Annual Meeting of Stockholders
(the “Annual Meeting”) of Fifth Street Senior Floating Rate Corp., a Delaware corporation (“FSFR” or the
“Company”), will be held at [●] on [●], at [●], local time. At the Annual Meeting, stockholders will
consider and vote on:
| · | the election of two directors, each to serve until the 2019 Annual Meeting of Stockholders or until his successor is duly elected
and qualified (Proposal 1); |
| · | a proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for
the Company for the fiscal year ending September 30, 2016 (Proposal 2); |
| · | a binding proposal put forth by Ironsides Partners Special Situations Master Fund II L.P. together with certain of its
affiliates (“Ironsides”) to terminate the Investment Advisory Agreement (the “Investment Advisory
Agreement”), dated as of June 27, 2013, by and between the Company and with Fifth Street Management LLC (“Fifth
Street Management” or “FSM”) (Proposal 3); |
| · | an advisory proposal put forth by Ironsides that, if the stockholders vote in favor of terminating the Investment Advisory
Agreement pursuant to Proposal 3, neither Fifth Street Management nor any of its principals or other affiliates should be engaged
to manage or advise any of the assets of the Company in any capacity (Proposal 4); and |
| · | such other business as may properly come before the Annual Meeting and any adjournments or postponements. |
THE COMPANY’S BOARD OF DIRECTORS,
INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE COMPANY’S DIRECTOR
NOMINEES DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT (PROPOSAL 1), “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER
30, 2016 (PROPOSAL 2), “AGAINST” THE BINDING PROPOSAL PUT FORTH BY IRONSIDES TO TERMINATE THE INVESTMENT ADVISORY AGREEMENT
WITH FIFTH STREET MANAGEMENT (PROPOSAL 3), AND “AGAINST” THE ADVISORY PROPOSAL PUT FORTH BY IRONSIDES THAT, IF THE
STOCKHOLDERS VOTE IN FAVOR OF TERMINATING THE INVESTMENT ADVISORY AGREEMENT PURSUANT TO PROPOSAL 3, NEITHER FIFTH STREET MANAGEMENT
NOR ANY OF ITS PRINCIPALS OR OTHER AFFILIATES SHOULD BE ENGAGED TO MANAGE OR ADVISE ANY OF THE ASSETS OF THE COMPANY IN ANY CAPACITY
(PROPOSAL 4).
The nominees of the Board for election
as directors of the Company are listed in the accompanying Proxy Statement.
You may receive solicitation materials
from a dissident stockholder, Ironsides, seeking your proxy to vote for two individuals to become members of the Board of Directors,
for a binding proposal to terminate the Investment Advisory Agreement by and between the Company and Fifth Street Management and
for an advisory proposal that, if the stockholders vote in favor of terminating the Investment Advisory Agreement pursuant to the
binding proposal, neither Fifth Street Management nor any of its principals or other affiliates should be engaged to manage or
advise any of the assets of the Company in any capacity. THE BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY [COLOR] PROXY
CARD SENT TO YOU BY OR ON BEHALF OF IRONSIDES.
YOUR VOTE IS EXTREMELY IMPORTANT THIS YEAR
IN LIGHT OF THE PROXY CONTEST BEING CONDUCTED BY IRONSIDES.
Holders of record of Company common stock
as of the close of business on [●], the record date for the Annual Meeting, are entitled to notice of, and to vote at, the
Annual Meeting. Whether or not you plan to attend the meeting, and whatever the number of shares you own, please follow the instructions
on the enclosed WHITE proxy card to vote your shares via the Internet or telephone, or by signing, dating and returning the WHITE
proxy card in the postage-paid envelope provided. Please note, however, that if you wish to vote in person at the meeting and your
shares are held of record by a broker, bank, trustee, or nominee, you must obtain a “legal” proxy issued in your name
from that record holder.
THE BOARD OF DIRECTORS URGES YOU NOT TO
SIGN ANY [COLOR] PROXY CARD SENT TO YOU BY OR ON BEHALF OF IRONSIDES. IF YOU HAVE PREVIOUSLY SIGNED A [COLOR] PROXY CARD SENT TO
YOU BY OR ON BEHALF OF IRONSIDES, YOU CAN REVOKE IT BY SIGNING, DATING AND MAILING THE ENCLOSED WHITE PROXY CARD IN THE ENVELOPE
PROVIDED. ONLY YOUR LATEST DATED PROXY WILL BE COUNTED.
If you have any questions or need assistance
in voting your shares, please call Innisfree M&A Incorporated, the firm assisting us in the solicitation. Stockholders in the
U.S. and Canada may call toll-free at (877) 717-3923. From other locations please call +1 (412) 232-3651.
We are not aware of any other business,
or any other nominees for election as directors, that may properly be brought before the Annual Meeting.
Thank you for your continued support of
Fifth Street Senior Floating Rate Corp.
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By order of the Board of Directors, |
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Bernard D. Berman |
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Chairman |
Greenwich, CT
[●]
This is a very important meeting. To
ensure proper representation at the Annual Meeting, please follow the instructions on the enclosed WHITE proxy card to vote your
shares via the Internet or telephone, or by signing, dating and returning the WHITE proxy card in the postage-paid envelope
provided. Even if you vote your shares prior to the Annual Meeting, if you are a record holder of shares, or a beneficial holder
who obtains “legal” proxy from your broker, bank, trustee, or nominee, you still may attend the Annual Meeting and
vote your shares in person.
TABLE OF CONTENTS
Fifth Street Senior Floating Rate Corp.
777 West Putnam Avenue, 3rd Floor
Greenwich, CT 06830
PROXY STATEMENT
2016 Annual Meeting of Stockholders
General
We are furnishing you this Proxy Statement
in connection with the solicitation of proxies by the Board of Directors (the “Board of Directors” or “Board”)
of Fifth Street Senior Floating Rate Corp. (“FSFR” or the “Company”) for use at the Company’s 2016
Annual Meeting of Stockholders (the “Annual Meeting”). This Proxy Statement and the Company’s Annual Report for
fiscal year 2015 are being provided to stockholders on or about [●]. When we refer to the Company’s fiscal year, we
mean the 12-month period ending September 30 of the stated year (for example, fiscal year 2015 was October 1, 2014 through September
30, 2015).
We encourage you to vote your shares, either
by voting in person at the Annual Meeting or by granting a proxy (i.e., authorizing someone to vote your shares). If you provide
voting instructions, either via the Internet, by telephone or by mail, and the Company receives them in time for the Annual Meeting,
the persons named as proxies will vote your shares in the manner that you specified.
Annual Meeting Information
Date and Location
We will hold the Annual Meeting at [●]
on [●], at [●], local time.
Attendance
You are entitled to attend the Annual Meeting
only if you were a stockholder of FSFR as of the close of business on the record date for the Annual Meeting, or [●] (the
“Record Date”), or you hold a valid proxy for the Annual Meeting. Since seating is limited, admission to the meeting
will be on a first-come, first-served basis. You must present valid photo identification, such as a driver’s license or passport,
for admittance. If you are not a stockholder of record of the Company but hold shares as a beneficial owner in street name, in
order to attend the Annual Meeting you must also provide proof of beneficial ownership, such as your most recent account statement
prior to the Record Date, a copy of the voting instruction form provided by your broker, bank, trustee, or nominee, or other similar
evidence of ownership of shares of the Company.
If you do not provide photo identification
or comply with the other procedures outlined above, you will not be admitted to the Annual Meeting. For security reasons, you and
your bags will be subject to search prior to your admittance to the Annual Meeting.
Availability of Proxy and Annual Meeting Materials
This Proxy Statement and the accompanying
Annual Report on Form 10-K for the fiscal year ended September 30, 2015 are also available at [●].
Purpose of Annual Meeting
At the Annual Meeting, you will be asked
to vote on the following proposals:
Proposal 1 — To elect two directors,
each of whom will serve until the 2019 Annual Meeting of Stockholders or until his successor is duly elected and qualified;
Proposal 2 — To ratify the selection
of PricewaterhouseCoopers LLP (“PwC”) to serve as the Company’s independent registered public accounting firm
for the fiscal year ending September 30, 2016;
Proposal 3 — A binding proposal put
forth by Ironsides Partners Special Situations Master Fund II L.P. together with certain of its affiliates (“Ironsides”)
to terminate the Investment Advisory Agreement (the “Investment Advisory Agreement”), dated as of June 27, 2013, by
and between the Company and with Fifth Street Management LLC (“Fifth Street Management” or “FSM”);
Proposal 4 — An advisory proposal
put forth by Ironsides that, if the stockholders vote in favor of terminating the Investment Advisory Agreement pursuant to Proposal
3, neither Fifth Street Management nor any of its principals or other affiliates should be engaged to manage or advise any of the
assets of the Company in any capacity; and
To transact such other business as may
properly come before the Annual Meeting and any adjournments or postponements.
Voting Information
General
THE COMPANY’S BOARD OF DIRECTORS,
INCLUDING THE INDEPENDENT DIRECTORS, UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE COMPANY’S DIRECTOR
NOMINEES DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT (PROPOSAL 1), “FOR” THE PROPOSAL TO RATIFY THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER
30, 2016 (PROPOSAL 2), “AGAINST” THE BINDING PROPOSAL PUT FORTH BY IRONSIDES TO TERMINATE THE INVESTMENT ADVISORY AGREEMENT
WITH FIFTH STREET MANAGEMENT (PROPOSAL 3), AND “AGAINST” THE ADVISORY PROPOSAL PUT FORTH BY IRONSIDES THAT, IF THE
STOCKHOLDERS VOTE IN FAVOR OF TERMINATING THE INVESTMENT ADVISORY AGREEMENT PURSUANT TO PROPOSAL 3, NEITHER FIFTH STREET MANAGEMENT
NOR ANY OF ITS PRINCIPALS OR OTHER AFFILIATES SHOULD BE ENGAGED TO MANAGE OR ADVISE ANY OF THE ASSETS OF THE COMPANY IN ANY CAPACITY
(PROPOSAL 4).
On December 18, 2015, Ironsides delivered
a letter to the Company in furtherance of the nomination of two individuals for election to the Board at the Annual Meeting and
the submission of (i) a binding proposal to terminate the Investment Advisory Agreement with Fifth Street Management and (ii) an
advisory proposal that, if stockholders vote in favor of terminating the Investment Advisory Agreement with Fifth Street Management,
neither Fifth Street Management nor any of its principals or other affiliates should be engaged to manage or advise any of the
assets of the Company in any capacity. The Board, including the Independent Directors, does not endorse the election of any of
Ironsides’ proposed nominees as a director. Your Board of Directors, including the Independent Directors, is also not endorsing
the binding proposal to terminate the Investment Advisory Agreement. Further, your Board of Directors, including the Independent
Directors, is not endorsing the advisory proposal that, if stockholders vote in favor of terminating the Investment Advisory Agreement
with Fifth Street Management, neither Fifth Street Management nor any of its principals or other affiliates should be engaged to
manage or advise any of the assets of the Company in any capacity.
Approval of Proposal 4 would not in itself
preclude the Company from engaging Fifth Street Management or any of its principals or other affiliates to manage or advise any
of the assets of the Company in any capacity, but rather it would be an advisory recommendation to the Board that, if stockholders
vote in favor of terminating the Investment Advisory Agreement with Fifth Street Management, neither Fifth Street Management nor
any of its principals or other affiliates should be engaged to manage or advise any of the assets of the Company in any capacity.
Record Date and Voting Securities
You may cast one vote for each share of
Company common stock that you owned as of the Record Date. All shares of the Company common stock have equal voting rights and
are the only class of voting securities outstanding. As of the Record Date, [●] shares of Company common stock were outstanding.
Quorum Required
For the Company to conduct business at
the Annual Meeting, a quorum of stockholders of the Company must be present at the Annual Meeting. The presence at the Annual Meeting,
in person or by proxy, of the holders of a majority of the shares of Company common stock outstanding on the Record Date, or [●]
shares of Company common stock, will constitute a quorum. Abstentions will be treated as shares present for quorum purposes. Shares
for which brokers have not received voting instructions from the beneficial owner of the shares and do not have discretionary authority
to vote on any proposal at the 2016 Annual Meeting (which are considered “broker non-votes” with respect to such proposals)
will be treated as shares present for quorum purposes.
If a quorum is not present for the Company,
the Annual Meeting may be adjourned pursuant to the provisions of the Company’s bylaws until a quorum is present. The persons
named as proxies will vote those proxies for such adjournment, unless marked to be voted against any proposal for which an adjournment
is sought, to permit the further solicitation of proxies.
Submitting Voting Instructions for Shares Held Through
a Broker, Bank, Trustee, or Nominee
If you hold shares of Company common stock
through a broker, bank, trustee, or nominee, you must follow the voting instructions you receive from your broker, bank, trustee,
or nominee. If you hold shares of Company common stock through a broker, bank, trustee, or nominee and you want to vote in person
at the Annual Meeting, you must obtain a legal proxy from the record holder of your shares and present it at the Annual Meeting.
Please instruct your broker, bank, trustee, or nominee so your vote can be counted.
Discretionary Voting
Typically, “non-routine” matters
would include the election of directors (Proposal 1), while “routine” matters would include the ratification of the
appointment of our independent registered public accounting firm (Proposal 2). However, when a matter to be voted on at a stockholders
meeting is the subject of a contested solicitation, brokers, banks, trustees, and nominees do not have discretion to vote your
shares on that matter, to the extent they have provided you with the opposition party’s proxy materials. Because Ironsides
submitted a notice of its intent to nominate directors, the Annual Meeting is expected to be the subject of a contested solicitation
and therefore if you hold your shares in street name (or “nominee name”) and you do not provide your broker, bank,
trustee, or nominee who holds such shares of record with specific instructions regarding how to vote on any proposal to be voted
on at the Annual Meeting, your broker may not be permitted to vote your shares on the proposal for which you have not given instructions.
Please note that to be sure your vote is counted on all of
the proposals to be considered at the Annual Meeting, including the election of directors, you should instruct your broker, bank,
trustee, or nominee how to vote your shares. If you do not provide voting instructions, votes may not be cast on your behalf with
respect to those proposals.
Authorizing a Proxy for Shares Held in Your Name
If you are a record holder of shares of
Company common stock, you may authorize a proxy to vote on your behalf by following the instructions provided on the enclosed WHITE
proxy card. Authorizing your proxy will not limit your right to vote in person at the Annual Meeting. A properly completed and
submitted proxy will be voted in accordance with your instructions, unless you subsequently revoke your instructions. If you authorize
a proxy without indicating your voting instructions, the proxyholder will vote your shares according to the Board’s recommendations.
Internet and telephone voting procedures are designed to authenticate the stockholder’s identity and to allow stockholders
to vote their shares and confirm that their instructions have been properly recorded. Your telephone or Internet vote authorizes
the named proxies to vote your shares in the same manner as if you had marked, signed and returned a WHITE proxy card.
Receipt of Multiple Proxy Cards
Many of our stockholders hold their shares
in more than one account and may receive separate proxy cards or voting instruction forms for each of those accounts. To ensure
that all of your shares are represented at the Annual Meeting, we recommend that you vote every WHITE proxy card you receive.
Your Board unanimously recommends that
you disregard and do not return any [color] proxy card you receive from Ironsides. If you have already voted using Ironsides’
[color] proxy card, you have every right to change your vote and revoke your prior proxy by voting the enclosed WHITE proxy card
by telephone, via the Internet, or by signing, dating and returning it in the postage-paid envelope provided.
Only the latest dated proxy you submit
will be counted. If you withhold your vote on any Ironsides nominee using Ironsides’ [color] proxy card, your vote will not
be counted as a vote for the Board’s nominees and will result in the revocation of any previous vote you may have cast on
our WHITE proxy card. Accordingly, if you wish to vote pursuant to the recommendation of our Board, you should disregard any proxy
card that you receive that is not a WHITE proxy card and do not return any [color] proxy card that you may receive from Ironsides,
even as a protest.
Revoking Your Proxy
If you are a stockholder of record, you
can revoke your proxy at any time before it is exercised by: (i) delivering a written revocation notice that is received prior
to the Annual Meeting to Kerry Acocella, Secretary, Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor,
Greenwich, CT 06830; (ii) submitting a later-dated proxy that we receive no later than the conclusion of voting at the Annual Meeting;
or (iii) voting in person at the Annual Meeting. If you hold shares of Company common stock through a broker, bank, trustee, or
nominee, you must follow the instructions you receive from them in order to revoke your voting instructions. Attending the Annual
Meeting does not revoke your proxy unless you also vote in person at the Annual Meeting.
If you have previously signed a [color]
proxy card sent to you by or on behalf of Ironsides, you may change your vote and revoke your prior proxy by voting the enclosed
WHITE proxy card by telephone, via the Internet, or by signing, dating and returning it in the postage-paid envelope provided.
Submitting an Ironsides [color] proxy card—even if you withhold your vote on the Ironsides nominees—will revoke any
votes you previously made on our WHITE proxy card. Accordingly, if you wish to vote pursuant to the recommendation of our Board,
you should disregard any proxy card that you receive that is not a WHITE proxy card and do not return any [color] proxy card that
you may receive from Ironsides, even as a protest.
Votes Required
Proposal 1 — Election of directors.
The affirmative vote of a plurality of the shares of Company common stock outstanding and entitled to vote thereon at the Annual
Meeting is required to elect each director nominee of the Company (i.e., the candidates receiving the most “for” votes
will win each election). Stockholders may not cumulate their votes. If you “withhold authority” with respect to any
of the Board’s nominees, your shares will not be voted with respect to the person indicated. Because directors are elected
by plurality of the votes and there are more candidates seeking election than there are seats on the Board up for election, a withhold
vote may cause a nominee to receive less votes than one of the other nominees and could have an effect on the election of directors.
Proposal 2 — Ratification of independent
registered public accounting firm. The affirmative vote of a majority of the votes cast at the Annual Meeting is required to
ratify the appointment of PwC to serve as the Company’s independent registered public accounting firm (i.e., the number of
shares voted “for” the ratification of the appointment of PwC exceeds the number of votes “against” the
ratification of the appointment of PwC). Abstentions and broker non-votes, if any, will not be included in determining the number
of votes cast and, as a result, will have no effect on this proposal.
Proposal 3 — Binding proposal put
forth by Ironsides to terminate the Investment Advisory Agreement with Fifth Street Management. The proposal will be approved
if it obtains the affirmative vote of: (i) 67% or more of the voting securities present at the Annual Meeting if the holders of
more than 50% of the outstanding voting securities of the Company are present or represented by proxy; or (ii) more than 50% of
the outstanding voting securities of the Company, whichever is less. Abstentions and broker non-votes, if any, on Proposal 3 will
have the effect of a vote against this proposal.
Proposal 4 – Advisory proposal put
forth by Ironsides that, if the stockholders vote in favor of terminating the Investment Advisory Agreement pursuant to Proposal
3, neither Fifth Street Management nor any of its principals or other affiliates should be engaged to manage or advise any of the
assets of the Company in any capacity. The affirmative vote of a majority of the votes cast at the Annual Meeting is required
to approve Proposal 4 (i.e., the number of votes cast “for” Proposal 4 exceeds the number of votes cast “against”
Proposal 4). Abstentions and broker non-votes, if any, will not be included in determining the number of votes cast and, as a result
will have no effect on this proposal.
Participants in the Solicitation of Proxies
Under applicable Securities and Exchange
Commission (the “SEC”) regulations, the Company, its directors and certain of its executive officers, the directors
and executive officers and employees of Fifth Street Management that provide services to the Company and its subsidiaries pursuant
to the Investment Advisory Agreement, the employees of FSC CT LLC, our administrator (“FSC CT”), and Fifth Street Asset
Management Inc. (“FSAM”), the indirect parent company of FSM and its executive officers may be deemed to be participants
in the solicitation of proxies from FSFR stockholders in connection with the Company’s 2016 Annual Meeting of Stockholders.
Information Regarding This Solicitation
We will bear the cost of the solicitation
of proxies. In addition to mail and e-mail, proxies may be solicited personally, via the Internet or by telephone or facsimile,
by FSC CT’s or Fifth Street Management’s regular employees without additional compensation. We will reimburse brokers
and other persons holding Company common stock in their names, or in the names of nominees, for their expenses for forwarding proxy
materials to principals and beneficial owners and obtaining their proxies. As a result of the potential proxy solicitation by Ironsides
we may incur additional costs in connection with our solicitation of proxies. We have retained Innisfree M&A Incorporated (“Innisfree”),
501 Madison Avenue, 20th Floor, New York, NY 10022 to assist us in the solicitation of proxies for a fee of up to $[●] plus
out-of-pocket expenses. Innisfree expects that approximately [●] of its employees will assist in the solicitation. Because
of Ironsides’ actions, our expenses related to the solicitation of proxies from stockholders this year will significantly
exceed those normally spent for an annual meeting. Such costs are expected to aggregate approximately $[●], exclusive of
any potential litigation costs in connection with the Annual Meeting. These additional solicitation costs are expected to include
the fee payable to our proxy solicitor; fees of outside counsel and other advisors to advise the Company in connection with a contested
solicitation of proxies; increased mailing costs, such as the costs of additional mailings of solicitation material to stockholders,
including printing costs, mailing costs and the reimbursement of reasonable expenses of banks, brokerage houses and other agents
incurred in forwarding solicitation materials to beneficial owners of our common stock, as described above; and possibly the costs
of retaining an independent inspector of election. To date, we have incurred approximately $[●] of these solicitation costs.
BACKGROUND TO THE SOLICITATION
The following is a chronology of the material
contacts and events relating to Ironsides up to the filing of this Proxy Statement.
On December 18, 2015, Ironsides delivered
a letter to the Company (the “Notice”) in furtherance of the nomination of two individuals for election to the Board
at the Annual Meeting and the submission of (i) a binding proposal to terminate the Investment Advisory Agreement with Fifth Street
Management and (ii) an advisory proposal that, if stockholders vote in favor of terminating the Investment Advisory Agreement with
Fifth Street Management, neither Fifth Street Management nor any of its principals or other affiliates should be engaged to manage
or advise any of the assets of the Company in any capacity.
On December 22, 2015, the Company sent
a letter to Ironsides and acknowledged receipt of the Notice. On December 22, 2015, the Company filed a Current Report on Form
8-K announcing that the Company received the Notice and stating that the Board of Directors would review the nominations and proposals
contained therein in due course.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of December
31, 2015,1 the beneficial ownership information of each current director and the nominees for director of the Company,
as well as the Company’s executive officers, each person known to it to beneficially own 5% or more of the outstanding shares
of its common stock, and the executive officers and directors as a group. Percentage of beneficial ownership is based on [●]
shares of Company common stock outstanding as of [●].
Beneficial ownership is determined in accordance
with the rules of the SEC and includes voting or investment power with respect to the securities. Ownership information for those
persons who beneficially own 5% or more of the shares of Company common stock is based upon filings by such persons with the SEC
and other information obtained from such persons, if available.
Unless otherwise indicated, the Company
believes that each beneficial owner set forth in the table below has sole voting and investment power over the shares beneficially
owned by such beneficial owner. The directors are divided into two groups — interested directors and independent directors.
Interested directors are “interested persons” of the Company as defined in Section 2(a)(19) of the Investment Advisers
Act of 1940 (the “1940 Act”). The address of all executive officers and directors is c/o Fifth Street Senior Floating
Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830.
Name | |
Number of Shares Owned Beneficially | | |
Percentage
of
Company Common Stock Outstanding(1) | |
Interested Directors: | |
| | | |
| | |
Bernard D. Berman(2) | |
| 17,000 | | |
| * | |
Ivelin M. Dimitrov | |
| 17,867 | | |
| * | |
Todd G. Owens | |
| 15,000 | | |
| * | |
Independent Directors: | |
| | | |
| | |
Brian S. Dunn(2) | |
| 7,500 | | |
| * | |
Richard P. Dutkiewicz(2) | |
| 4,000 | | |
| * | |
Jeffrey R. Kay(2) | |
| 1,465 | | |
| * | |
Douglas F. Ray | |
| — | | |
| — | |
Executive Officers Who Are Not Directors: | |
| | | |
| | |
Steven M. Noreika | |
| 1,162.10 | | |
| * | |
All Officers and Directors as a Group(3) | |
| 63,994.10 | | |
| * | |
5% Holders: | |
| | | |
| | |
Leonard M. Tannenbaum(2)(4) | |
| 2,753,657 | | |
| 9.3 | % |
RiverNorth Capital Management, LLC(5) | |
| 1,691,619 | | |
| 5.7 | % |
* Represents less than 1%
| 1 | The definitive proxy statement will include an updated table setting forth such ownership as of a more recent date. |
| (1) | Based on the 29,466,768 shares of the Company common stock issued and outstanding as of December 11, 2015, as reported on the
Company’s Annual Report on Form 10-K for the year ended September 30, 2015. |
| (2) | Accounts owned include shares held in a brokerage account that may be pledged as loan collateral on a margin basis. |
| (3) | Amount only includes Section 16(a) reporting persons of the Company. |
| (4) | The address for Leonard M. Tannenbaum is 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830. The number of shares of Company
common stock beneficially owned is based on a Schedule 13D/A filed by Mr. Tannenbaum on December 31, 2015, of which Schedule 13D/A
reflects sole voting and dispositive power over 2,598,929 shares of Company common stock by Mr. Tannenbaum and shared voting and
dispositive power over 154,728 shares of Company common stock by Mr. Tannenbaum and FSAM. The address for FSAM is 777 West Putnam
Avenue, 3rd Floor, Greenwich, CT 06830. |
| | Of the shares of Company common stock over which Mr. Tannebaum
has sole voting and dispositive power, 2,492,305 shares are held by him directly; 95,634
shares are held by the Leonard M. Tannenbaum Foundation, for which Mr. Tannebaum serves
as the president; and 10,875 shares are held as custodian for his three children. The
154,728 shares over which Mr. Tannebaum has shared voting and dispositive power are directly
held by FSAM, for which Mr. Tannenbaum serves as Chairman and Chief Executive Officer. |
| (5) | The address for RiverNorth Capital Management, LLC, a Delaware limited liability company (“RiverNorth”), is 325
N. LaSalle St., Suite 645, Chicago, IL 60654-7030. The number of shares of Company common stock beneficially owned is based on
a Schedule 13D/A filed by RiverNorth on December 24, 2015, which Schedule 13D/A reflects sole voting and dispositive power over
1,691,619 shares of Company common stock by RiverNorth. |
As indicated above, certain of our officers and directors hold
shares in margin accounts. As of [●], except for Mr. Tannenbaum, no shares in such margin accounts were pledged as loan collateral.
Our insider trading policy prohibits share pledges, except in limited cases with the pre-approval of our chief compliance officer.
The following table sets forth, as of [●],2
the dollar range of our equity securities that is beneficially owned by each of our directors.
Name | |
Dollar
Range of Equity Securities Beneficially Owned(1)(2)(3) | |
Interested Directors: | |
| | |
Bernard D. Berman | |
$ | [●] | |
Ivelin M. Dimitrov | |
$ | [●] | |
Todd G. Owens | |
$ | [●] | |
Independent Directors: | |
| | |
Brian S. Dunn | |
$ | [●] | |
Richard P. Dutkiewicz | |
$ | [●] | |
Jeffrey R. Kay | |
$ | [●] | |
Douglas F. Ray | |
| none | |
| (1) | Beneficial ownership has been determined in accordance with Rule 16a-1(a)(2) of the Securities Exchange Act of 1934, as amended. |
2 The definitive
proxy statement will include an updated table setting forth such ownership as of a more recent date.
| (2) | The dollar range of equity securities beneficially owned in us is based on the closing price per share for Company common stock
of $[●] on [●], on the NASDAQ Global Select Market. |
| (3) | The dollar range of equity securities beneficially owned are: none, $1 – $10,000, $10,001 – $50,000, $50,001 –
$100,000, or over $100,000. |
PROPOSAL 1 — ELECTION OF DIRECTORS
The business and affairs of the Company
are managed under the direction of the Board. The Board may modify its number of members in accordance with FSFR’s bylaws,
except that no decrease in the number of directors shall shorten the term of any incumbent director. The Board currently consists
of seven members, of whom four are not “interested persons” of FSFR, as defined in Section 2(a)(19) of the 1940 Act.
The NASDAQ Stock Market (“NASDAQ”) requires that the Company maintain a majority of independent directors on its Board
and provides that a director of a business development company (“BDC”) shall be considered to be independent if he
or she is not an “interested person”, as defined in Section 2(a)(19) of the 1940 Act. Therefore, under both the 1940
Act and applicable NASDAQ rules, a majority of the Board is independent.
The Board, including the Independent Directors,
unanimously recommended that Ivelin M. Dimitrov and Brian S. Dunn be nominated for election to the Board. The Board, including
the Independent Directors, unanimously determined that recommending the nominees put forth by Ironsides for election to the Board
would not be in the best interest of the Company because the Board believes such nominees will support Proposal 3 to terminate
the Investment Advisory Agreement with Fifth Street Management, which the Board has determined is not in the best interest of the
Company for the reasons set forth in the section titled “Proposal 3 — Binding Proposal Put Forth by Ironsides
to Terminate the Investment Advisory Agreement with Fifth Street Management” of this Proxy Statement.
Under FSFR’s amended and restated
certificate of incorporation, directors are divided into three classes. At each annual meeting of stockholders, the successors
to the directors whose terms expire at such meeting will be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of his or her election or until their successors have been duly elected
and qualified or any director’s earlier resignation, death or removal.
Messrs. Dimitrov and Dunn have been nominated
for re-election to the Board of FSFR for three-year terms expiring in 2019.
No person being nominated by the Company
as a director of the Company is being proposed for election pursuant to any agreement or understanding between any such person
and the Company.
Any stockholder of FSFR can vote for or
withhold on each of the director nominees of FSFR. A withhold vote will not be included in determining the number of votes cast
for a nominee. Shares represented by broker non-votes are not considered entitled to vote and thus are not counted for purposes
of determining whether each of the nominees for election as a director has been elected. In the absence of instructions to the
contrary, it is the intention of the persons named as proxies to vote such proxy FOR the election of Ivelin M. Dimitrov and Brian
S. Dunn. If a nominee should decline or be unable to serve as a director, it is intended that the proxy will be voted for the
election of such person nominated by the Board as a replacement. The Board has no reason to believe that any director nominee named
will be unable or unwilling to serve.
The Board unanimously recommends a vote
“FOR” each of Ivelin M. Dimitrov and Brian S. Dunn.
Director and Executive Officer Information
Directors
Information regarding the nominees for
election as a director at the Annual Meeting and our continuing directors is as follows:
Name |
|
Age |
|
Length of time served; Term of office |
|
|
|
|
|
Interested Directors |
|
|
|
|
|
|
|
|
|
Bernard D. Berman |
|
45 |
|
Director since 2013; term expires in 2018 |
|
|
|
|
|
Ivelin M. Dimitrov* |
|
37 |
|
Director since 2014; term expires, if elected, in 2019 |
|
|
|
|
|
Todd G. Owens |
|
47 |
|
Director since 2015; term expires in 2017 |
|
|
|
|
|
Independent Directors |
|
|
|
|
|
|
|
|
|
Brian S. Dunn* |
|
44 |
|
Director since 2013; term expires, if elected, in 2019 |
|
|
|
|
|
Richard P. Dutkiewicz |
|
60 |
|
Director since 2013; term expires in 2018 |
|
|
|
|
|
Jeffrey R. Kay |
|
55 |
|
Director since 2013; term expires in 2017 |
|
|
|
|
|
Douglas F. Ray |
|
48 |
|
Director since 2014; term expires in 2017 |
| * | Director nominee of FSFR |
Biographical information regarding our
directors is set forth below. We have divided the directors into two groups — independent directors and interested directors.
Interested directors are “interested persons” of the Company, as defined in Section 2(a)(19) of the 1940 Act.
Officers
The following persons serve as our officers
in the following capacities:
Name |
|
Age |
|
FSFR Position |
Ivelin M. Dimitrov |
|
37 |
|
Chief Executive Officer |
Todd G. Owens |
|
47 |
|
President |
Steven M. Noreika |
|
40 |
|
Chief Financial Officer |
Kerry S. Acocella |
|
35 |
|
Chief Compliance Officer and Secretary |
Biographical Information
Independent Directors
Brian S. Dunn. Mr. Dunn has been
a member of the Board since May 2013. Mr. Dunn has over 19 years of marketing, logistical and entrepreneurial experience. He founded
and turned around direct marketing divisions for several consumer-oriented companies. He currently manages Little White Dog, Inc.,
a strategic consulting firm specializing in the acquisition and integration of consumer product companies that he founded in June
2011. Mr. Dunn was the marketing director and chief operating officer for Lipenwald, Inc., a direct marketing company that markets
collectibles and mass merchandise from June 2006 until May 2011. Lipenwald, Inc. filed for bankruptcy in July 2011. Mr. Dunn has
also been a member of the Fifth Street Finance Corp. (“FSC”) Board of Directors since December 2007. FSC is a specialty
finance company that provides custom-tailored financing solutions to small and mid-sized companies, primarily in connection with
investments by private equity sponsors, and shares an investment advisor with FSFR. Prior to Lipenwald, from February 2001 to June
2006, he was sole proprietor of BSD Trading/Consulting. Mr. Dunn graduated from the Wharton School of the University of Pennsylvania
with a B.S. in Economics.
Mr. Dunn’s executive experience brings
extensive business, entrepreneurial and marketing expertise to the Board. His experience as a marketing executive for several consumer-oriented
companies provides guidance to our investor relations efforts. Mr. Dunn’s many experiences also make him skilled in leading
committees requiring substantive expertise, including his role as chairman of the Board’s Nominating and Corporate Governance
Committee and Compensation Committee. Mr. Dunn’s previous service on the Board also provides him with a specific understanding
of the Company, its operations, and the business and regulatory issues facing BDCs. The foregoing qualifications led to the Board’s
conclusion that Mr. Dunn should serve as a member of the Board.
Richard P. Dutkiewicz. Mr.
Dutkiewicz has been a member of the Board since May 2013. He is an independent financial and operational advisor. Prior to
his current position, he was a managing director at Capital Insight, LLC, a private investment bank, from March 2013 to
November 2013. Previously, he was an independent financial and management consultant affiliated with Exxedus Capital Partners
from September 2012 to March 2013. From May 2010 to April 2013, Mr. Dutkiewicz served on the Board of Directors of Motor
Sport Country Club Holdings, Inc., which sells balancing technology for rotating devices in the automotive industry. Mr.
Dutkiewicz has also been a member of the FSC Board of Directors since February 2010. FSC is a specialty finance company that
provides custom-tailored financing solutions to small and mid-sized companies, primarily in connection with investments by
private equity sponsors, and shares an investment advisor with FSFR. From April 2010 to March 2012, Mr. Dutkiewicz was the
executive vice president and chief financial officer of Real Mex Restaurants, Inc., which filed for bankruptcy in October
2011. Mr. Dutkiewicz previously served as chief financial officer of Einstein Noah Restaurant Group, Inc. from October 2003
to April 2010. From May 2003 to October 2003, Mr. Dutkiewicz was vice president-information technology of Sirenza
Microdevices, Inc. In May 2003, Sirenza Microdevices, Inc. acquired Vari-L Company, Inc. From January 2001 to May 2003, Mr.
Dutkiewicz was vice president-finance, and chief financial officer of Vari-L Company, Inc. From April 1995 to January 2001,
Mr. Dutkiewicz was vice president-finance, chief financial officer, secretary and treasurer of Coleman Natural
Products, Inc., located in Denver, Colorado. Mr. Dutkiewicz’s previous experience includes senior financial management
positions at Tetrad Corporation, MicroLithics Corporation and various divisions of United Technologies Corporation. Mr.
Dutkiewicz began his career as an Audit Manager at KPMG LLP. Mr. Dutkiewicz received a B.B.A. degree from Loyola University
of Chicago and passed the CPA exam in 1978.
Through his prior experiences as a vice
president and chief financial officer at several public companies, including executive vice president and chief financial officer
of Real Mex Restaurants, Inc. and chief financial officer of Einstein Noah Restaurant Group, Inc., Mr. Dutkiewicz brings business
expertise, finance and audit skills to his Board service with the Company. Mr. Dutkiewicz’s expertise, experience and skills
closely align with the Company’s operations, and his prior investment experience with managing public companies facilitates
an in-depth understanding of our investment business. Moreover, due to Mr. Dutkiewicz’s knowledge of and experience in finance
and accounting, the Board determined that Mr. Dutkiewicz is an “audit committee financial expert” as defined under
SEC rules, and that he is qualified to serve as chairman of the Audit Committee of the Board. The foregoing qualifications led
to the Board’s conclusion that Mr. Dutkiewicz should serve as a member of the Board.
Jeffrey R. Kay. Mr. Kay has been
a member of the Board since May 2013. Mr. Kay has over 20 years of marketing and entrepreneurial experience. Over the past ten
years, Mr. Kay has founded and operated two different successful businesses providing marketing services and consulting to Fortune
500 companies. Currently, he is the founder and managing director of Brandfan, Inc., a marketing firm that specializes in working
with consumer-oriented companies to build revenue-generating digital marketing partnerships. From March 2011 to July 2012, Mr.
Kay was the vice president of business development for Fanscape, Inc., a division of Omnicom Group specializing in social media
marketing, during which time he also established and managed the company’s New York office. From March 2003 to December 2010,
Mr. Kay was senior vice president, strategy & concept development at Eastwest Marketing Group, Inc., an independent consumer-oriented
marketing services and consulting firm. Mr. Kay’s previous experience includes founding and operating Performance Marketing
Communications, an independent consumer-oriented marketing services agency, and holding management positions at various marketing
agencies. Mr. Kay graduated from the University of Maryland College of Business and Management with a B.S. in Marketing and Business
Administration.
Mr. Kay’s executive experience brings
extensive business, entrepreneurial and marketing expertise to the Board. His experience as a marketing executive for several
consumer-oriented companies also provides guidance to FSFR’s investor relations efforts. The foregoing qualifications led
to the Board’s conclusion that Mr. Kay should serve as a member of the Board.
Douglas F. Ray. Mr. Ray has been
a member of the Board since September 2014. Since August 1995, Mr. Ray has worked for Seavest Investment Group, a private investment
and wealth management firm based in White Plains, New York. He currently serves as the chief executive officer and president of
Seavest Investment Group. Mr. Ray has more than 15 years of experience acquiring, developing, financing and managing a diverse
portfolio of real estate investments, including three healthcare properties funds. Mr. Ray previously served on the Board of Directors
of Nat Nast, Inc., a luxury men’s apparel company. Mr. Ray has also been a member of the FSC Board of Directors since December
2007. FSC is a specialty finance company that provides custom-tailored financing solutions to small and mid-sized companies, primarily
in connection with investments by private equity sponsors, and shares an investment advisor with FSFR. Prior to joining Seavest
Investment Group, Mr. Ray worked in Washington, D.C. on the staff of U.S. Senator Arlen Specter and as a research analyst with
the Republican National Committee. Mr. Ray holds a B.A. from the University of Pittsburgh.
Through his broad experience as an officer
and director of several companies, in addition to skills acquired with firms engaged in investment banking, banking and financial
services, Mr. Ray brings to FSFR extensive financial and risk assessment abilities. Mr. Ray’s service on the Board also provides
him with a specific understanding of the Company, its operations and the business and regulatory issues facing BDCs. The foregoing
qualifications led to the Board’s conclusion that Mr. Ray should serve as a member of the Board.
Interested Directors
Bernard D. Berman. Mr. Berman has
been a member of the Board since May 2013 and the Chairman of the Board since January 2014. Mr. Berman also served as president
of FSFR from May 2013 to January 2014. Mr. Berman has also been a member of the FSC Board of Directors since February 2009 and
the Chairman of the FSC Board of Directors since September 2014. He was FSC’s president from February 2010 to September 2014,
secretary from October 2007 to September 2014, and chief compliance officer from April 2009 to May 2013. FSC is a specialty finance
company that provides custom-tailored financing solutions to small and mid-sized companies, primarily in connection with investments
by private equity sponsors, and shares an investment advisor with FSFR. Since September 2014, Mr. Berman has served as the co-president,
chief compliance officer and as a director of FSAM, the publicly traded asset manager that indirectly owns our investment advisor.
Mr. Berman resigned from FSAM’s board in June 2015. Mr. Berman has also served as the president of our investment advisor
and has served on its investment committee since its founding in November 2007. Prior to joining the group of affiliated companies,
including our investment advisor (collectively, “Fifth Street”) in 2004, Mr. Berman was a corporate attorney from 1995
to 2004, during which time he negotiated and structured a variety of investment transactions. Mr. Berman received a J.D. from Boston
College Law School and a B.S. in Finance from Lehigh University.
Mr. Berman’s prior position as a
corporate attorney allows him to bring to the Board and Company the benefit of his experience negotiating and structuring various
investment transactions as well as an understanding of the legal, business, compliance and regulatory issues facing BDCs. Mr. Berman’s
previous service on the Board also provides him with a specific understanding of the Company and its operations. The foregoing
qualifications led to the Board’s conclusion that Mr. Berman should serve as a member of the Board.
Ivelin M. Dimitrov, CFA. Mr.
Dimitrov has been a member of the Board since September 2014. Mr. Dimitrov has served as FSFR’s chief executive officer
since September 2014. Previously, he served as FSFR’s chief investment officer from July 2013 to September 2014 and as its
president from January 2014 to September 2014. Mr. Dimitrov sits on the investment committee of our investment advisor and has
served as the chief investment officer of FSAM since September 2014. Mr. Dimitrov has also served as FSC’s president since
January 2015, a member of the FSC Board of Directors since January 2013 and FSC’s chief investment officer and the chief
investment officer of our investment advisor since August 2011, and served as co-chief investment officer for these entities from
November 2010 and June 2010 through August 2011. FSC is a specialty finance company that provides custom-tailored financing solutions
to small and mid-sized companies, primarily in connection with investments by private equity sponsors, and shares an investment
advisor with FSFR. Mr. Dimitrov joined
Fifth Street in May 2005 and is responsible for the credit underwriting of our investment portfolios, overseeing risk analysis
and investment approvals. He served as Head of Structuring of Fifth Street Management from January 2010 to June 2010. Mr. Dimitrov leads the tactical asset allocation decisions for the portfolio, shifting exposures between
asset classes and industries, as well as managing interest rate risk. He is also responsible for the recruitment and development
of our investment advisor’s investment team. Mr. Dimitrov also heads the senior loan product business strategy across Fifth
Street’s platform. He has substantial experience in financial analysis, valuation and investment research. Mr. Dimitrov
graduated from the Carroll Graduate School of Management at Boston College with an M.S. in Finance and has a B.S. in Business
Administration from the University of Maine. He is also a holder of the Chartered Financial Analyst designation and has completed
CFA Institute’s Investment Management Workshop at Harvard Business School.
Mr. Dimitrov brings substantial experience
in financial analysis, underwriting, valuation and investment research. Mr. Dimitrov’s position as FSFR’s chief executive
officer and the chief investment officer of our investment advisor provides the Board with a direct line of communication to, and
direct knowledge of the operations of, the Company and our investment advisor. The foregoing qualifications led to the Board’s
conclusion that Mr. Dimitrov should serve as a member of the Board.
Todd G. Owens. Mr. Owens has served
as FSFR’s president since September 2014 and has been a member of the Board since August 2015. Mr. Owens has served as co-president
of FSAM since September 2014. Mr. Owens has also been a member of the FSC Board of Directors since November 2014 and FSC’s
chief executive officer since January 2015. FSC is a specialty finance company that provides custom-tailored financing solutions
to small and mid-sized companies, primarily in connection with investments by private equity sponsors, and shares an investment
advisor with FSFR. Prior to joining Fifth Street in September 2014, Mr. Owens spent 24 years at Goldman, Sachs & Co, where
he became a managing director in 2001 and a partner in 2008. While at Goldman, Sachs & Co., he also served as Head of the West
Coast Financial Institutions Group (FIG) for 15 years, Head of the Specialty Finance Group for nearly 10 years and was a senior
member of the Bank Group. He holds a B.A. in history and political economy from Williams College. Mr. Owens has previously served
as a trustee for Good Samaritan Hospital in Los Angeles and for City Year Los Angeles.
Mr. Owens brings with him experience in
a broad range of industries including commercial finance, asset management, alternative asset management, commercial banking and
BDCs. The foregoing qualifications led to the Board’s conclusion that Mr. Owens should serve as a member of the Board.
Officers Who Are Not
Directors
Steven M. Noreika. Mr. Noreika
has served as FSFR’s chief financial officer since July 2015 and was previously chief financial officer of FSFR from November
2013 to July 2014 and controller of FSFR from July 2013 to November 2013. Mr. Noreika currently serves as the chief financial
officer of Fifth Street Management, our investment advisor, and the chief financial officer of FSC CT, our administrator. Mr.
Noreika has also served as FSC’s chief financial officer since July 2015 and previously served as controller of FSC from
January 2013 to July 2014. In addition, Mr. Noreika
was the chief accounting officer of FSAM from July 2014 to July 2015. Mr. Noreika joined Fifth Street in September 2008,when he
began serving as chief financial officer of Fifth Street Management, and has held various finance and accounting positions with
such entities. Prior to joining Fifth Street, from 2002 to 2008, Mr. Noreika was a manager of internal financial reporting at
Time Warner Inc., where he was responsible for various aspects of financial reporting, financial systems design and implementation.
Prior to that, he managed audit and tax engagements at Marcum & Kliegman, LLP (now Marcum LLP) for clients in various industries,
predominantly financial services, real estate, new media and entertainment. Mr. Noreika is a Certified Public Accountant and holds
a B.B.A. in Accounting from Pace University. He is also a holder of the Chartered Financial Analyst designation.
Kerry S. Acocella. Ms. Acocella
has served as FSFR’s chief compliance officer and secretary since October 2015. She has served as chief compliance officer
of Fifth Street Management since October 2015. Ms. Acocella has served as FSC’s chief compliance officer and secretary since
October 2015. Ms. Acocella has also served as secretary of FSAM since October 2015. Ms. Acocella serves as Senior Vice President,
Legal for Fifth Street Management and has held positions within the Fifth Street Legal Department since February 2013. Prior to
that Ms. Acocella was Senior Corporate Counsel – Corporate and Securities for Weight Watchers International, Inc. from August
2010 to February 2013. Ms. Acocella began her career as a corporate attorney with Morrison & Foerster LLP where she practiced
in the mergers and acquisitions and securities areas from 2005 to 2010. Ms. Acocella holds a B.S. in Psychology from the University
of Georgia and a J.D. from the Benjamin N. Cardozo School of Law, Yeshiva University.
Board Leadership Structure
The Board monitors and performs oversight
roles with respect to the Company’s business and affairs, including with respect to investment practices and performance,
compliance with regulatory requirements and the services, expenses and performance of service providers. Among other things, the
Board approves the appointment of the Company’s investment advisor and executive officers, reviews and monitors the services
and activities performed by the Company’s investment advisor and executive officers and approves the engagement of, and reviews
the performance of, the independent registered public accounting firm.
Under FSFR’s bylaws, the Board may
designate a chairman to preside over the meetings of the Board and meetings of the stockholders and to perform such other duties
as may be assigned to him or her by the Board. The Company does not have a fixed policy as to whether the chairman of the Board
should be an independent director; the Company believes that it should maintain the flexibility to select the chairman and reorganize
the leadership structure, from time to time, based on the criteria that is in the Company’s best interests and the best interests
of the Company’s stockholders at such times. Our Board has established corporate governance procedures to guard against,
among other things, an improperly constituted Board. Pursuant to the Company’s Corporate Governance Policy, whenever the
chairman of the Board is not an independent director, the chairman of the Nominating and Corporate Governance Committee will act
as the presiding independent director at meetings of the “Non-Management Directors” (which will include the Independent
Directors and other directors who are not officers of the Company even though they may have another relationship with the Company
or its management that prevents them from being Independent Directors).
Presently, Mr. Berman serves as the chairman
of the Board. Mr. Berman’s history with the Company, familiarity with Fifth Street’s investment platform and extensive
knowledge of the financial services industry qualify him to serve as the chairman of the Company. We believe that we are best served
through this existing leadership structure, as Mr. Berman’s relationship with Fifth Street Management provides an effective
bridge and encourages an open dialogue between Fifth Street Management and the Board.
Our Board does not currently have a designated
lead independent director. We are aware of the potential conflicts that may arise when a non-independent director is chairman of
the Board but believe these potential conflicts are offset by our strong corporate governance practices. Our corporate governance
practices include regular meetings of the Independent Directors in executive session without the presence of interested directors
and management, the establishment of Audit Committees and Nominating and Corporate Governance Committees comprised solely of Independent
Directors and the appointment of a chief compliance officer, with whom the Independent Directors meet with in executive session
at least once a year, for administering our compliance policies and procedures. While certain non-management members of the Board
may participate on the boards of directors of other public companies, we monitor such participation to ensure it is not excessive
and does not interfere with their duties to us.
Board’s Role In Risk Oversight
The Board performs its risk oversight function
primarily through (i) three standing committees, which report to the Board and are comprised solely of Independent Directors, and
(ii) active monitoring of our chief compliance officer and the Company’s compliance policies and procedures.
As described below in more detail, the
Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee assist the Board in fulfilling
its risk oversight responsibilities. The Audit Committee’s risk oversight responsibilities include overseeing the Company’s
accounting and financial reporting processes, systems of internal controls regarding finance and accounting, and audits of the
Company’s financial statements, as well as the establishment of guidelines and making recommendations to the Board regarding
the valuation of the Company’s loans and investments. The Compensation Committee’s risk oversight responsibilities
include reviewing and approving the reimbursement by the Company of the compensation of the chief financial officer and chief compliance
officer and their staffs. The Nominating and Corporate Governance Committee’s risk oversight responsibilities include selecting,
researching and nominating directors for election by the Company’s stockholders, developing and recommending to the Board
a set of corporate governance principles and overseeing the evaluation of our Board and management.
The Board also performs its risk oversight
responsibilities with the assistance of the Company’s chief compliance officer. The Board annually reviews a written report
from the chief compliance officer discussing the adequacy and effectiveness of the compliance policies and procedures of the Company.
The chief compliance officer’s annual report addresses: (i) the operation of the compliance policies and procedures of the
Company since the last report; (ii) any material changes to such policies and procedures since the last report; (iii) any recommendations
for material changes to such policies and procedures as a result of the chief compliance officer’s annual review; and (iv)
any compliance matter that has occurred since the date of the last report about which the Board would reasonably need to know to
oversee compliance activities and risks. In addition, the chief compliance officer meets in executive session with the Independent
Directors at least once a year.
The Company believes that the role of the
Board in risk oversight is effective and appropriate given the extensive regulation to which it is already subject as a BDC. As
a BDC, we are required to comply with certain regulatory requirements that control the levels of risk in our business and operations.
For example, we were substantially limited in our ability to co-invest in privately negotiated transactions with affiliated funds
until we obtained an exemptive order from the SEC on September 9, 2014.
Transactions with Related Persons
The Company has entered into an Investment
Advisory Agreement with Fifth Street Management, our investment advisor. Messrs. Berman, Dimitrov and Owens, interested members
of the Board, have a direct or indirect pecuniary interest in Fifth Street Management. Fifth Street Management is a registered
investment advisor under the 1940 Act, and is partially and indirectly owned by FSAM.
Under FSFR’s Investment Advisory
Agreement, fees payable to Fifth Street Management will be equal to (i) a base management fee of 1.0% of the value of FSFR’s
gross assets, which includes any borrowings for investment purposes and excludes cash and cash equivalents, and (ii) an incentive
fee based on FSFR’s performance. The incentive fee consists of two parts. The first part is calculated and payable quarterly
in arrears and equals 20% of FSFR’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter,
subject to a preferred return, or “hurdle,” and a “catch up” feature. The second part 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 FSFR’s “Incentive Fee Capital Gains,” which equals its realized capital gains on a cumulative basis from inception
through the end of the year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative
basis, less the aggregate amount of any previously paid capital gain incentive fee.
The Investment Advisory Agreement may be
terminated by either party without penalty upon no fewer than 60 days’ written notice to the other. FSFR incurred investment
advisory fees of $[●] million for fiscal year 2015 under the Investment Advisory Agreement.
The Company has entered into an administration
agreement with FSC CT (the “Administration Agreement”), which is a wholly-owned subsidiary of Fifth Street Management.
Pursuant to the Administration Agreement, FSC CT provides administrative services to the Company necessary for the operations of
the Company, which include providing to the Company office facilities, personnel, equipment, clerical, bookkeeping and record keeping
services at such facilities and such other services as FSC CT, subject to review by the Board, shall from time to time deem to
be necessary or useful to perform its obligations under the Administration Agreement. FSC CT also provides to the Company portfolio
collection functions for interest income, fees and warrants and is responsible for the financial and other records that the Company
is required to maintain and prepares, prints and disseminates reports to the Company’s stockholders and reports and all other
materials 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 generally overseeing the payment of the Company’s
expenses and the performance of administrative and professional services rendered to the Company by others. For providing these
services, facilities and personnel, the Company reimburses FSC CT for overhead and other expenses incurred by FSC CT in performing
its obligations under the Administration Agreement, including the rent of the Company’s principal executive offices at market
rates and the costs of compensation and related expenses of the chief financial officer and chief compliance officer and their
staffs. Such reimbursement is at cost, with no profit to, or markup by, FSC CT. FSC CT may also offer to 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. FSFR incurred approximately $[●] million
of administration fees for fiscal year 2015 under the Administration Agreement.
The Company has also entered into a license
agreement with Fifth Street Capital LLC (“Fifth Street Capital”) pursuant to which Fifth Street Capital has agreed
to grant the Company a non-exclusive, royalty-free license to use the name “Fifth Street.” Under this agreement, the
Company has a right to use the “Fifth Street” name for so long as Fifth Street Management or one of its affiliates
remains its investment advisor. Other than with respect to this limited license, the Company does not have a legal right to the
“Fifth Street” name. Fifth Street Capital is controlled by Leonard M. Tannenbaum, the chief executive officer of Fifth
Street Management.
For information about the material adverse
effect the approval of the binding proposal put forth by Ironsides to terminate the Investment Advisory Agreement with Fifth Street
Management would have on the Company, please see the section of this Proxy Statement entitled “Proposal 3 – Binding
Proposal Put Forth by Ironsides to Terminate the Investment Advisory Agreement with Fifth Street Management.” For information
about the material adverse effect on the Company of the approval of the advisory proposal put forth by Ironsides that, if the stockholders
vote in favor of terminating the Investment Advisory Agreement pursuant to the binding proposal, neither Fifth Street Management
nor any of its principals or other affiliates should be engaged to manage or advise any of the assets of the Company in any capacity,
please see the section of this Proxy Statement entitled “Proposal 4 – Advisory Proposal Put Forth by Ironsides,
if the Proposal to Terminate the Investment Advisory Agreement is Successful, Advising the Company’s Board of Directors that
None of Fifth Street Management or any of its Principals or Other Affiliates Should be Engaged to Manage or Advise any of the Assets
of the Company in Any Capacity.”
Review, Approval or Ratification of Transactions with Related
Persons
The Independent Directors are required
to review, approve or ratify any transactions with related persons (as such term is defined in Item 404 of Regulation S-K).
Material Conflicts of Interest
Certain of our executive officers, directors
and/or members of Fifth Street Management serve or may serve as officers, directors or principals of entities that operate in the
same or a related line of business as we do or of investment funds managed by our investment advisor or its affiliates. For example,
Fifth Street Management presently serves as investment advisor to FSFR and FSC and will encounter certain investment opportunities
that satisfy the investment criteria for both FSFR and FSC. FSFR targets private, leveraged, middle-market companies with approximately
$20 million to $100 million of EBITDA and targets investment sizes generally ranging from $3 million to $30 million. FSFR had total
assets of approximately $697.7 million as of September 30, 2015 and invests 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, similar to those that FSC targets
for investment.
FSC is a specialty finance company that
lends to and invests in small and mid-sized companies with annual revenues between $25 million and $250 million, primarily in connection
with investments by private equity sponsors, and targets investment sizes generally ranging from $10 million to $100 million. FSC
had total assets of approximately $2.6 billion as of September 30, 2015. In addition, although not the primary focus of FSC’s
investment portfolio, FSC’s investments also include floating rate senior loans.
In light of the foregoing, there may be
certain investment opportunities that satisfy the investment criteria for both FSFR and FSC. In addition, certain of our executive
officers and Independent Directors serve in substantially similar capacities for FSFR, FSAM and FSC. Fifth Street Management and
its affiliates also manage private investment funds, and may manage other funds in the future, that have investment mandates that
are similar, in whole and in part, with ours. Accordingly, they may have obligations to investors in those entities, the fulfillment
of which might not be in the best interests of us or our stockholders.
In order to address potential conflicts
of interest, Fifth Street Management has adopted an investment allocation policy that governs the allocation of investment opportunities
among the investment funds managed by Fifth Street Management and its affiliates. To the extent an investment opportunity is appropriate
for either or both of FSFR and FSC and/or any other investment fund managed by our affiliates, and co-investment is not possible,
Fifth Street Management will adhere to its investment allocation policy in order to determine to which entity to allocate the opportunity.
The 1940 Act prohibits the Company from making certain negotiated co-investments with affiliates, including with one another, unless
they receive an order from the SEC permitting us to do so. As such, we were substantially limited in our ability to co-invest in
privately negotiated transactions with affiliated funds until we obtained an exemptive order from the SEC on September 9, 2014.
The exemptive relief permits us to participate in negotiated co-investment transactions, subject to the conditions of the relief
granted by the SEC, with certain affiliates, each of whose investment advisor is Fifth Street Management, or an investment advisor
controlling, controlled by or under common control with Fifth Street Management, in a manner consistent with our investment objectives,
positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.
If we are unable to rely on our exemptive
relief for a particular opportunity, such opportunity will be allocated first to the entity whose investment strategy is the most
consistent with the opportunity being allocated, and second, on a rotational basis to those entities for which the terms of the
opportunity are consistent with such entity’s investment strategy. Although our investment professionals will endeavor to
allocate investment opportunities in a fair and equitable manner, the Company and its common stockholders could be adversely affected
to the extent investment opportunities are allocated among us and other investment vehicles managed or sponsored by, or affiliated
with, our executive officers, directors and members of Fifth Street Management.
Fifth Street Management’s investment
allocation policy is also designed to manage and mitigate the conflicts of interest associated with the allocation of investment
opportunities if we are able to co-invest, either pursuant to SEC interpretive positions or our exemptive order, with other accounts
managed by our investment advisor and its affiliates. Generally, under the investment allocation policy, co-investments will be
allocated pursuant to the conditions of the exemptive order. Under the investment allocation policy, a portion of each opportunity
that is appropriate for us and any affiliated fund will be offered to us and such other eligible accounts as determined by Fifth
Street Management generally based on asset class, fund size and liquidity, among other factors. If there is a sufficient amount
of securities to satisfy all participants, the securities will be allocated among the participants in accordance with their order
size and if there is an insufficient amount of securities to satisfy all participants, the securities will be allocated pro rata
based on each participating party’s capital available for investment in the asset class being allocated, up to the amount
proposed to be invested by each. In accordance with Fifth Street Management’s investment allocation policy, we might not
participate in each individual opportunity, but will, on an overall basis, be entitled to participate equitably with other entities
managed by Fifth Street Management and its affiliates. Fifth Street Management seeks to treat all clients fairly and equitably
such that none receive preferential treatment vis-à-vis the others over time, in a manner consistent with its fiduciary
duty to each of them; however, in some instances, especially in instances of limited liquidity, the factors may not result in pro
rata allocations or may result in situations where certain funds receive allocations where others do not.
Pursuant to the Administration Agreement
with FSC CT, which is a wholly-owned subsidiary of Fifth Street Management, FSC CT furnishes the Company with the facilities, including
its principal executive offices, and administrative services necessary to conduct its day-to-day operations. The Company pays FSC
CT for overhead and other expenses incurred by FSC CT in performing its obligations under the Administration Agreement, including
rent at market rates and the compensation of the Company’s chief financial officer and chief compliance officer and their
respective staffs.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934 (the “Exchange Act”) requires the Company’s directors and executive officers, and persons who own
10% or more of the Company common stock, to file reports of ownership and changes in ownership of its equity securities with the
SEC. Directors, executive officers and 10% or more holders are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms they file. Based solely on a review of the copies of those forms furnished to us, or written representations
that no such forms were required, we believe that our directors, executive officers and 10% or more beneficial owners complied
with all Section 16(a) filing requirements during the year ended September 30, 2015.
Corporate Governance
Corporate Governance Documents
We maintain a corporate governance webpage
at the “Corporate Governance” link under the “Investor Relations” link at http://fsfr.fifthstreetfinance.com.
Our Corporate Governance Policies, Code
of Business Conduct and Ethics, Code of Ethics and the Board Committee charters are available at the above website and are also
available to any stockholder who requests them by writing to Kerry S. Acocella, Secretary, Fifth Street Senior Floating Rate Corp.,
777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830.
Director Independence
In accordance with rules of NASDAQ, the
Board annually determines the independence of each director. No director is considered independent unless the Board has determined
that he or she has no material relationship with the Company. The Company monitors the status of its directors and officers through
the activities of the Company’s Nominating and Corporate Governance Committee and through a questionnaire to be completed
by each director no less frequently than annually, with updates periodically if information provided in the most recent questionnaire
has materially changed.
In order to evaluate the materiality of
any such relationship, the Board uses the definition of director independence set forth in the NASDAQ listing rules. Section 5605
provides that a director of a BDC shall be considered to be independent if he or she is not an “interested person”
of the Company, as defined in Section 2(a)(19) of the 1940 Act. Section 2(a)(19) of the 1940 Act defines an “interested person”
to include, among other things, any person who has, or within the last two years had, a material business or professional relationship
with the Company.
The Board has determined that each of the
directors is independent and has no relationship with the Company, except as a director and stockholder of the Company, with the
exception of Messrs. Berman, Dimitrov and Owens. Messrs. Berman, Dimitrov and Owens are interested persons due to their positions
at our investment advisor or at the Company.
Evaluation
The Company’s directors perform an
evaluation, no less frequently than annually, of the effectiveness of the Board and its committees. This evaluation includes Board
and Board committee discussions.
Communications with Directors
Stockholders and other interested parties
may contact any member (or all members) of the Board by mail. To communicate with the Board, any individual director or any group
or committee of directors, correspondence should be addressed to the Board or any such individual director or group or committee
of directors by either name or title. All such correspondence should be sent to Fifth Street Senior Floating Rate Corp., 777 West
Putnam Avenue, 3rd Floor, Greenwich, CT 06830, Attention: Corporate Secretary. Any communication to report potential issues regarding
accounting, internal controls and other auditing matters will be directed to the Company’s Audit Committee. Appropriate personnel
of the Company will review and sort through communications before forwarding them to the addressee(s).
Board Meetings and Committees
The Board met [●] times during fiscal
year 2015. Each director attended at least 75% of the total number of meetings of the Board and committees on which the director
served that were held while the director was a member of the Board or such committee, as applicable. The Board’s standing
committees are described below. Our directors are encouraged to attend each annual meeting of stockholders. [●] of FSFR’s
directors attended FSFR’s 2015 annual meeting of stockholders in person.
Audit Committee
The Company’s Audit Committee is
responsible for selecting, engaging and discharging the Company’s independent accountants, reviewing the plans, scope and
results of the audit engagement with its independent accountants, approving professional services provided by its independent accountants
(including compensation thereof), reviewing the independence of its independent accountants and reviewing the adequacy of its internal
control over financial reporting, as well as establishing guidelines and making recommendations to its Board regarding the valuation
of its loans and investments.
The members of the Audit Committee of FSFR
are Messrs. Dunn, Dutkiewicz, Kay and Ray, each of whom is not an interested person of FSFR as defined in the 1940 Act and is independent
for purposes of the NASDAQ Listing Rules. Mr. Dutkiewicz serves as the chairman of FSFR’s Audit Committee. FSFR’s Board
has determined that Mr. Dutkiewicz is an “audit committee financial expert” as defined under SEC rules. FSFR’s
Audit Committee met [●] times during the 2015 fiscal year.
The charter of FSFR’s Audit Committee
is available in print to any stockholder who requests it and is also available on FSFR’s website at http://fsfr.fifthstreetfinance.com.
Compensation Committee
The Company’s Compensation Committee
is responsible for reviewing and approving the reimbursement by the Company of the compensation of its chief financial officer
and chief compliance officer and their staffs.
The current members of FSFR’s Compensation
Committee are Messrs. Dunn, Dutkiewicz and Kay, each of whom is not an interested person of FSFR as defined in the 1940 Act and
is independent for purposes of the NASDAQ Listing Rules. Mr. Dunn serves as the chairman of FSFR’s Compensation Committee.
As discussed below, none of FSFR’s executive officers are directly compensated by FSFR. FSFR’s Compensation Committee
met [●] during the 2015 fiscal year.
The charter of the Compensation Committee
is available in print to any stockholder who requests it and is also available on FSFR’s website at http://fsfr.fifthstreetfinance.com.
Nominating and Corporate Governance Committee
The Company’s Nominating and Corporate
Governance Committee is responsible for determining criteria for service on the Board, identifying, researching and nominating
directors for election by its stockholders, selecting nominees to fill vacancies on the Board or a committee of the Board, developing
and recommending to the Board a set of corporate governance principles and overseeing the self-evaluation of the Board and its
committees and evaluation of management.
The members of FSFR’s Nominating
and Corporate Governance Committee are Messrs. Dunn, Kay and Ray, each of whom is not an interested person of FSFR as defined in
the 1940 Act and is independent for purposes of the NASDAQ Listing Rules. Mr. Dunn serves as the chairman of FSFR’s Nominating
and Corporate Governance Committee. FSFR’s Nominating and Corporate Governance Committee met [●] during the 2015 fiscal
year.
The charter of FSFR’s Nominating
and Corporate Governance Committee is available in print to any stockholder who requests it and is also available on FSFR’s
website at http://fsfr.fifthstreetfinance.com.
The Company’s Nominating and Corporate
Governance Committee considers qualified director nominees recommended by stockholders when such recommendations are submitted
in accordance with FSFR’s bylaws, and any other applicable law, rule or regulation regarding director nominations. Stockholders
may submit candidates for nomination for the Board by writing to: Board of Directors, Fifth Street Senior Floating Rate Corp.,
777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830. When submitting a nomination for consideration, a stockholder must provide
certain information about each person whom the stockholder proposes to nominate for election as a director, including: (i) the
name, age, business address and residence address of the person; (ii) the principal occupation or employment of the person; (iii)
the class or series and number of shares of Company common stock owned beneficially or of record by the person; and (iv) any other
information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act, and the
rules and regulations promulgated thereunder. Such notice must be accompanied by the proposed nominee’s written consent to
be named as a nominee and to serve as a director if elected.
In evaluating director nominees, the Company’s
Nominating and Corporate Governance Committee considers the following factors:
| · | the appropriate size and composition of the Board; |
| · | its needs with respect to the particular talents and experience of its directors; |
| · | the knowledge, skills and experience of nominees in light of prevailing business conditions and the knowledge, skills and experience
already possessed by other members of the Board; |
| · | the capacity and desire to serve as a member of the Board and to represent the balanced, best interests of its stockholders
as a whole; |
| · | experience with accounting rules and practices; and |
| · | the desire to balance the considerable benefit of continuity with the periodic addition of the fresh perspective provided by
new members. |
The Company’s Nominating and Corporate
Governance Committee’s goal is to assemble a Board that brings it a variety of perspectives and skills derived from high
quality business and professional experience.
Other than the foregoing, there are no
stated minimum criteria for director nominees, although the Company’s Nominating and Corporate Governance Committee may also
consider such other factors as it may deem are in the Company’s best interests and those of its stockholders. The Company’s
Nominating and Corporate Governance Committee also believes it appropriate for certain key members of its management to participate
as members of the Board. The Company’s Nominating and Corporate Governance Committee does not assign specific weights to
particular criteria and no particular criterion is necessarily applicable to all prospective nominees. We believe that the backgrounds
and qualifications of the directors, considered as a group, should provide a significant composite mix of experience, knowledge
and abilities that will allow the Board to fulfill its responsibilities. The Board does not have a specific diversity policy, but
considers diversity of race, religion, national origin, gender, sexual orientation, disability, cultural background and professional
experiences in evaluating candidates for Board membership.
The Company’s Nominating and Corporate
Governance Committee identifies nominees by first evaluating the current members of the Board willing to continue in service. Current
members of the Board with skills and experience that are relevant to the business and who are willing to continue in service are
considered for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining
a new perspective. If any member of the Board does not wish to continue in service or if the Nominating and Corporate Governance
Committee or the Board decides not to re-nominate a member for re-election, the Nominating and Corporate Governance Committee would
identify the desired skills and experience of a new nominee in light of the criteria above. Current members of the Company’s
Nominating and Corporate Governance Committee and Board review and discuss suggestions of individuals meeting the criteria of the
Nominating and Corporate Governance Committee. Research may also be performed to identify qualified individuals. We have not engaged
third parties to identify or evaluate or assist in identifying potential nominees to the Board.
The Board, including the Independent
Directors, unanimously recommended that Ivelin M. Dimitrov and Brian S. Dunn be nominated for election to the Board. The Board,
including the Independent Directors, unanimously determined that recommending the nominees put forth by Ironsides for election
to the Board would not be in the best interest of the Company because the Board believes such nominees will support Proposal 3
to terminate the Investment Advisory Agreement with Fifth Street Management, which the Board has determined is not in the best
interest of the Company for the reasons set forth in the section titled “Proposal 3 — Binding Proposal Put Forth
by Ironsides to Terminate the Investment Advisory Agreement with Fifth Street Management” of this Proxy Statement.
Co-Investment Committee
The Company’s Co-Investment Committee
is responsible for reviewing and approving certain co-investment transactions under the conditions of the exemptive order we received
from the SEC.
The current members of FSFR’s Co-Investment
Committee are Messrs. Dunn, Dutkiewicz, Kay and Ray, each of whom is not an interested person of FSFR as defined in the 1940 Act
and is independent for purposes of the NASDAQ Listing Rules. Mr. Dunn serves as the chairman of the Co-Investment Committee. FSFR’s
Co-Investment Committee met [●] during the 2015 fiscal year.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business
Conduct and Ethics which applies to, among others, executive officers, including the Company’s principal executive officer
and principal financial officer, as well as every officer, director and the investment personnel of the Company. Requests for copies
should be sent in writing to Kerry S. Acocella, Chief Compliance Officer, Fifth Street Senior Floating Rate Corp., 777 West Putnam
Avenue, 3rd Floor, Greenwich, CT 06830. The Code of Business Conduct and Ethics is also available at http://fsfr.fifthstreetfinance.com.
If the Company makes any substantive amendment
to, or grants a waiver from, a provision of the Code of Business Conduct and Ethics, the Company will promptly disclose the nature
of the amendment or waiver on its website at http://fsfr.fifthstreetfinance.com.
Executive Compensation
The Company’s executive officers
do not receive direct compensation from the Company. The compensation of the principals and other investment professionals of our
investment advisor are paid by FSC CT, our administrator. Further, the Company is prohibited under the 1940 Act from issuing equity
incentive compensation, including stock options, stock appreciation rights, restricted stock and stock, to its officers or directors,
or any employees it may have in the future. Compensation paid to the chief financial officer and chief compliance officer and their
staffs and other support personnel is set by our administrator, FSC CT, and is subject to reimbursement by the Company of such
compensation for services rendered to it.
During fiscal year 2015, FSFR reimbursed
FSC CT approximately $[●] million for compensation expenses incurred by FSC CT on behalf of FSFR’s chief financial
officer, chief compliance officer and other support personnel, pursuant to its Administration Agreement.
Director Compensation
The following table sets forth compensation
of the Company’s directors for the year ended September 30, 2015:
Name | |
Fees
Earned or Paid in Cash(1)(2) | | |
Total | |
Interested Directors | |
| | | |
| | |
Bernard D. Berman | |
| — | | |
| — | |
Ivelin M. Dimitrov | |
| — | | |
| — | |
Todd G. Owens | |
| — | | |
| — | |
Independent Directors: | |
| | | |
| | |
Brian S. Dunn | |
$ | 117,000 | | |
$ | 117,000 | |
Richard P. Dutkiewicz | |
$ | 83,800 | | |
$ | 83,800 | |
Jeffrey R. Kay | |
$ | 80,100 | | |
$ | 80,100 | |
Douglas F. Ray | |
$ | 78,800 | | |
$ | 78,800 | |
| (1) | For a discussion of the Company’s Independent Directors’ compensation, see below. |
| (2) | The Company does not maintain a stock or option plan, non-equity incentive plan or pension plan for its directors. |
For
the fiscal year ended September 30, 2015, the Independent Directors received an annual retainer fee of $42,500, payable once
per year to Independent Directors that attend at least 75% of the meetings held the previous year. In addition, the
Independent Directors received $2,000 for each Board meeting in which the director attended in person and $1,000 for each
Board meeting in which the director participated other than in person, and reimbursement of reasonable out-of-pocket expenses
incurred in connection with attending each Board meeting. The Independent Directors also received $1,000 for each Board
committee meeting in which they attended in person and $500 for each Board committee meeting in which they participated other
than in person, plus reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each committee
meeting not held concurrently with a Board meeting. The Independent Directors serving on FSFR’s Co-Investment
Committee, which is responsible for reviewing and approving certain co-investment transactions under the conditions of the
exemptive order we received from the SEC, also received $500 for each Co-Investment Committee meeting in which they attended
in person and $300 for each Co-Investment Committee meeting in which they participated other than in person, plus
reimbursement of reasonable out-of-pocket expenses incurred in connection with attending each Co-Investment Committee meeting
not held concurrently with a Board meeting. Messrs. Berman, Dutkiewicz and Ray are members of the 2016 Annual Meeting
Committee, which is responsible for various administrative matters relating to the Annual Meeting. Messrs. Dutkiewicz and Ray
will each receive a one-time retainer of $5,000 for their service on the 2016 Annual Meeting Committee.
In addition, the chairman of the
Audit Committee of FSFR received an annual retainer of $5,000, the chairman of the Nominating and Corporate Governance
Committee and the Compensation Committee of FSFR each received an annual retainer of $2,500 and the chairman of the Co-Investment Committee received an annual retainer of $25,000. No compensation was paid to
directors who are interested persons of FSFR as defined in the 1940 Act.
PROPOSAL 2 — RATIFY THE APPOINTMENT
OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE 2016 FISCAL YEAR
Upon the recommendation of the Audit Committee
of the Board, the Board has appointed PwC as the Company’s independent registered public accounting firm for the fiscal year
ending September 30, 2016, subject to ratification by the Company’s stockholders.
It is expected that a representative of
PwC will be present at the Annual Meeting and will have an opportunity to make a statement if he or she chooses and will be available
to answer questions.
Independent Auditor’s Fees
The following table presents fees for professional
services rendered by PwC for the fiscal years ended September 30, 2015 and 2014.
| |
2015 | | |
2014 | |
Audit Fees | |
$ | [●] | | |
$ | 227,800 | |
Audit-Related Fees | |
$ | [●] | | |
$ | 150,000 | |
Aggregate Non-Audit Fees: | |
| | | |
| | |
Tax Fees | |
$ | [●] | | |
$ | 35,000 | |
All Other Fees | |
| — | | |
| — | |
Total Aggregate Non-Audit Fees | |
$ | [●] | (1) | |
$ | 35,000 | (2) |
Total Fees | |
$ | [●] | | |
$ | 447,800 | |
| (1) | Non-audit fees represent 2% of total fees. |
| (2) | Non-audit fees represent 8.5% of total fees. |
Audit Fees. Audit fees consist of
fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally
provided by the independent registered public accounting firm in connection with statutory and regulatory filings.
Audit-Related Fees. Audit-related
services consist of fees billed for assurance and related services that are reasonably related to the performance of the audit
or review of our financial statements and are not reported under “Audit Fees.” These services include attest services
that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.
Tax Fees. Tax fees consist of fees
billed for professional services for tax compliance. These services include assistance regarding federal, state and local tax compliance.
All Other Fees. All other fees would
include fees for products and services other than the services reported above.
Required Vote
The affirmative vote of a majority of the
votes cast at the Annual Meeting in person or by proxy is required to approve this proposal. Abstentions and broker non-votes,
if any, will not be included in determining the number of votes cast and, as a result, will have no effect on this proposal.
The Board unanimously recommends a vote
“FOR” the proposal to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting
firm for the Company for the fiscal year ending September 30, 2016.
Audit Committee Report
The following is the report of the Audit
Committee with respect to the Company’s audited financial statements for the year ended September 30, 2015.
As part of its oversight of the Company’s
financial statements, the Company’s Audit Committee reviewed and discussed with both management and its independent registered
public accounting firm all of the Company’s financial statements filed with the SEC for each quarter during fiscal year 2015
and as of and for the year ended September 30, 2015. Company management advised the Audit Committee that all financial statements
were prepared in accordance with U.S. generally accepted accounting principles (GAAP), and reviewed significant accounting issues
with the Audit Committee. The Company’s Audit Committee discussed with its independent registered public accounting firm
the matters required to be discussed by Auditing Standards No. 16, (Communication with Audit Committees), as adopted by the Public
Company Accounting Board in Rule 3200T. The independent registered public accounting firm also provided to the Audit Committee
the written disclosures required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent
registered public accounting firm’s communications with the Audit Committee concerning independence, and the Audit Committee
discussed the subject of independence with the independent registered public accounting firm.
The Company’s Audit Committee has
established a pre-approval policy that describes the permitted audit, audit-related, tax and other services to be provided by PwC,
the Company’s independent registered public accounting firm. Pursuant to the policies, the Audit Committee pre-approves the
audit and non-audit services performed by the independent registered public accounting firm in order to assure that the provision
of such service does not impair the firm’s independence.
Any requests for audit, audit-related,
tax, and other services that have not received general pre-approval must be submitted to the Audit Committee for specific pre-approval,
irrespective of the amount, and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly
scheduled meetings of the Audit Committee. However, the Audit Committee may delegate pre-approval authority to one or more of its
members. The member or members to whom such authority is delegated shall report any pre-approval decisions to the Audit Committee
at its next scheduled meeting. The Audit Committees does not delegate its responsibilities to pre-approve services performed by
the independent registered public accounting firm to management.
The Company’s Audit Committee has
reviewed the audit fees paid by the Company to the independent registered public accounting firm. It has also reviewed non-audit
services and fees to assure compliance with the Company’s and Audit Committee’s policies restricting the independent
registered public accounting firm from performing services that might impair its independence.
Based on the reviews and discussions referred
to above, the Audit Committee recommended to the Board that the financial statements as of and for the year ended September 30,
2015, be included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2015, for filing with the
SEC. The Audit Committee also recommended to the Board the selection of PwC to serve as the independent registered public accounting
firm of the Company for the fiscal year ending September 30, 2016.
|
Richard P. Dutkiewicz, Chairman |
|
Brian S. Dunn, Member |
|
Jeffrey R. Kay, Member |
|
Douglas F. Ray, Member |
PROPOSAL 3 — BINDING
PROPOSAL put forth by IRONSIDES TO TERMINATE THE INVESTMENT ADVISORY AGREEMENT WITH FIFTH STREET MANAGEMENT
Ironsides has notified the Company that
Ironsides intends to present the following binding proposal to stockholders at the Annual Meeting.
RESOLVED, that the Investment Advisory Agreement
between Fifth Street Senior Floating Rate Corp. (the “Company”) and Fifth Street Management LLC (“FSM”),
dated June 27, 2013, be, and it hereby is, terminated effective on the date that is 60 days from the date of the adoption of this
Resolution at the 2016 Annual Stockholders Meeting of the Company (the “Effective Date”).
FSFR’s Opposition Statement Regarding
Proposal 3
The Board unanimously recommends that
FSFR stockholders vote “AGAINST” the binding proposal put forth by Ironsides to terminate the Investment Advisory Agreement
with Fifth Street Management.
Fifth Street Management is a registered
investment advisor under the Investment Advisers Act of 1940, that is partially and indirectly owned by FSAM. The Company has entered
into the Investment Advisory Agreement with Fifth Street Management and Fifth Street Management currently serves as FSFR’s
investment advisor.
FSFR stockholders benefit from a robust
annual review of the investment advisory arrangements with Fifth Street Management under the 1940 Act. In accordance with the requirements
of the 1940 Act, the Board, including its Independent Directors, reviews on an annual basis whether the terms of the Investment
Advisory Agreement are fair in light of the services provided by the investment advisor. Specifically, the 1940 Act does not require
that the Board engage in a request for proposal (RFP) or other similar process in connection with this annual review or to engage
the asset manager that offers the lowest cost fee structure.
The review by the Board of the Investment
Advisory Agreement, which was most recently completed in the third calendar quarter of 2015, included a robust evaluation of:
| · | the nature, extent and quality of services to be performed by Fifth Street Management; |
| · | the investment performance of FSFR and other investment portfolios managed by its portfolio managers with similar strategies
to FSFR; |
| · | the anticipated costs of providing services to FSFR; |
| · | the anticipated profitability to Fifth Street Management of its relationship with FSFR; |
| · | comparative information on fees and expenses borne by other comparable BDCs; |
| · | comparative BDC performance and other competitive factors; |
| · | the extent to which economies of scale have been realized as FSFR has grown; and |
| · | whether proposed fee levels reflect these economies of scale for the benefit of FSFR’s investors. |
The Board, including its Independent Directors,
unanimously approved renewal of the Investment Advisory Agreement. Consistent with applicable law and guidance from the federal
courts, the Board based its determination to approve the continuation of the Investment Advisory Agreement on the total mix of
information available to it and not on any single factor.
Material Adverse Effects of Ironsides’
Binding Proposal
Event of Default Under Citibank Credit
Facility
A termination of the Investment
Advisory Agreement could lead to the termination of the Administration Agreement. If the Administration Agreement is
terminated, certain current FSFR principals (i.e., Bernard Berman and Ivelin Dimitrov) would no longer be actively involved
in FSFR’s operations, which would constitute an event of default under the Loan and Security Agreement entered into by
the Company, acting as the investment manager (in such capacity, the “Collateral Manager”), and FS Senior Funding
II LLC, the Company’s wholly-owned, special purpose financing subsidiary (“FS LLC”), with the lenders
referred to therein, Citibank, N.A., as administrative agent, and Wells Fargo Bank, N.A., as collateral agent and custodian
(the “Citibank Facility”). As of September 30, 2015, the Company had $136.7 million outstanding under the
Citibank Facility. Absent obtaining a valid consent, waiver or amendment from the counterparties to the Citibank Facility, an
event of default under the Citibank Facility would result in material adverse effects on FS LLC and the Company, including
(i) reducing or eliminating the ability of FS LLC to draw any additional amounts under such facility, which would reduce or
eliminate the availability of such amounts for distribution to the Company and for funding future investments, and (ii)
causing amounts due under such facility to become due and payable prior to the maturity thereof. There can be no assurance
that FS LLC would be able to obtain the necessary consent, waiver or amendment to avoid an event of default under the
Citibank Facility, that the cost of such consent, waiver or amendment would not be material and adverse to the business of FS
LLC and the Company or that FS LLC would be able to re-finance or repay the amounts that would become due if the amounts
under such facility become due and payable. For information about the material adverse effects on the Company of the
termination of the Administration Agreement, please see the section of this Proxy Statement entitled “Material
Adverse Effects of Ironsides’ Binding Proposal – Loss of Administrative Services and Fifth Street
Name.”
The Company had approximately $52.7 million
in cash, cash equivalents and restricted cash as of September 30, 2015.
Negative Effect on 2015 Debt
Securitization
The Company acts as Collateral Manager
for FS Senior Funding Ltd., the Company’s wholly-owned, special purpose financing subsidiary (“FS Senior Funding”)
in a debt securitization transaction (the “2015 Debt Securitization”) that was completed on May 28, 2015 and engages
Fifth Street Management to perform on its behalf its duties as Collateral Manager pursuant to a Sub-Advisory Agreement (the “Sub-Advisory
Agreement”). If the Investment Advisory Agreement were terminated (and the Administration Agreement were then terminated
as a result thereof), the Company may exercise its right to terminate the Sub-Advisory Agreement with Fifth Street Management,
as the Company is entitled to do upon 30 days’ written notice, a new sub-advisor would need to be engaged, which could have
material adverse effects on the performance of the portfolio of investments held by FS Senior Funding and the value of the Company’s
investment in FS Senior Funding. The ensuing disruption in investment advisory services as a result of, among other factors,
(i) a new advisor’s lack of familiarity with the investments in the 2015 Debt Securitization portfolio, (ii) the complicated
terms of the governing documents for the 2015 Debt Securitization, which contain extensive limitations on, and criteria for the
ongoing monitoring of, the Collateral Manager’s investment advisory activities, with which a new advisor would need to become
familiar and (iii) the pursuit of a new investment strategy different from the one designed and pursued by Fifth Street Management
during the acquisition of FS Senior Funding’s portfolio could materially and adversely affect the performance of the portfolio
and thus could have a material adverse effect on the value of the collateral loan obligation notes including the equity value of
FS Senior Funding.
In addition, during the “reinvestment
period” for the 2015 Debt Securitization, which is scheduled to last until May of 2019, the Collateral Manager may sell up
to 30% of the existing portfolio, but must reinvest the proceeds in new investments that satisfy specified reinvestment criteria.
Further, additional debt may be issued by FS Senior Funding, but only if investments meeting the specified criteria can be identified.
Without the loans originated by Fifth Street Management and its affiliates as a potential source of investments, FS Senior Funding
may not be able to identify investments it would be permitted to acquire, which would adversely affect the value of its portfolio.
Finally, the governing documents for the 2015 Debt Securitization permit its refinancing if certain conditions are met, including
that portfolio investments can be sold to one or more purchasers at a purchase price that is sufficient to pay off all existing
debt issued in the 2015 Debt Securitization. However, this refinancing option is less likely to be available without Fifth Street
Management’s expertise and familiarity with the portfolio.
The implementation of Proposal 3 could
also lead to a removal of the Company as the Collateral Manager. The following events both constitute “for cause” termination
events under the Collateral Management Agreement (the “Collateral Management Agreement”), dated as of May 28, 2015,
by and between the Collateral Manager and FS Senior Funding for the 2015 Debt Securitization: (i) any termination of the Sub-Advisory
Agreement and the resulting inability of the Company to perform its obligations as Collateral Manager and (ii) certain “key
persons” (i.e., Bernard Berman, Ivelin Dimitrov and Leonard Tannenbaum) no longer being actively involved in the management
of the Company (which would occur, as described herein, if the Administration Agreement was terminated as a result of the termination
of the Investment Advisory Agreement). If either or both events occurred following the termination of the Investment Advisory Agreement,
either a majority of the holders of the subordinated notes issued in the 2015 Debt Securitization or a majority of its most senior
class of notes (referred to as the “Controlling Class”) would have the right to terminate the Company for “cause”
as Collateral Manager. The Class A Notes, which are held by unaffiliated, third-party investors are currently the Controlling Class.
Replacing the Collateral Manager under the Collateral Management Agreement in the 2015 Debt Securitization is a complicated process
which must be initiated at the direction of a majority of the subordinated notes and approved by a majority of the Controlling
Class. If the various noteholder constituencies are unable to decide upon a replacement manager within 90 days of the termination
of the current Collateral Manager, a court of competent jurisdiction may be petitioned to appoint a successor. Any termination
and replacement process could be lengthy and disruptive and could adversely affect the performance of FS Senior Funding’s
portfolio and the equity value of FS Senior Funding.
Loss of Co-Investment Opportunities
FSFR received exemptive relief on September
9, 2014 from the SEC allowing it to participate in negotiated co-investment transactions, subject to the conditions of the relief
granted by the SEC, with certain affiliates, each of whose investment advisor is Fifth Street Management, or an investment advisor
controlling, controlled by or under common control with Fifth Street Management, in a manner consistent with FSFR’s investment
objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, and
pursuant to the conditions to the exemptive relief. Such exemptive relief to dispose of investments made pursuant to the order
is predicated on Fifth Street Management, or an investment advisor controlling, controlled by or under common control with Fifth
Street Management, being the investment advisor to FSFR.
If FSFR is not able to rely on the exemptive
relief, in the absence of obtaining further relief from the SEC: (i) FSFR likely would not be able to dispose of investments made
pursuant to the order, (ii) FSFR could lose some investment opportunities if its investment advisor cannot provide “one-stop”
financing to a potential portfolio company; (iii) portfolio companies may reject an offer of funding arranged by an investment
advisor due to FSFR’s inability to commit the full amount of financing required by the portfolio company in a timely manner
(i.e., without the delay that typically would be associated with obtaining single-transaction exemptive relief from the SEC); (iv)
FSFR will likely be required to forego suitable investment opportunities because its individual or aggregate investment limits
would require the investment advisor to arrange a syndication with unaffiliated entities; and (v) without the assets of the other
co-investment affiliates available for a co-investment, there will likely be a decrease in the number of opportunities accessible
to FSFR.
Loss of Administrative Services and
Fifth Street Name
The termination of the Investment Advisory
Agreement could lead to the termination of the Administration Agreement, including the loss of access to all administrative personnel,
which would cause substantial disruption to the Company’s business and operations. In addition, the termination of the Investment
Advisory Agreement would result in termination of the Company’s non-exclusive, royalty-free license to use the name “Fifth
Street.” Under this license agreement, the Company has a right to use the “Fifth Street” name for so long as
Fifth Street Management or one of its affiliates remains its investment advisor. Other than with respect to this limited license,
the Company has no legal right to the “Fifth Street” name. Changing the name of FSFR would (i) require a rebranding
of the Company with the attendant potential to lose brand recognition and market confidence and (ii) require the Company to hold
a meeting of stockholders to change the name, which would be disruptive and costly.
Negative Effect on Joint Venture
with GF Equity Funding 2014 LLC
The Company and GF Equity Funding 2014
LLC (“GF Equity Funding”) co-invest through FSFR Glick JV LLC (“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 the
FSFR Glick JV must be approved by an investment committee of the FSFR Glick JV consisting of one representative of the Company
and one representative of GF Equity Funding (with approval of each required). Although GF Equity Funding has no affirmative right
to terminate FSFR Glick JV solely upon a termination of the Investment Advisory Agreement, the Company believes there is a material
risk FSFR Glick JV could be adversely affected upon any such termination because GF Equity Funding may determine not to pursue
future investment opportunities through FSFR Glick JV in the event that Fifth Street Management is no longer the investment advisor
to FSFR. In the event that the Investment Advisory Agreement was terminated, such termination could lead to an event of default
under certain indebtedness of the FSFR Glick JV, which in such case would cause such indebtedness to accelerate and become immediately
due and payable. In such circumstances, the FSFR Glick JV may be unable to re-finance or repay such amounts.
Negative Effect on Day-to-Day Operations
If Ironsides’ binding proposal is
approved, the Company would be required to provide 60 days’ advance notice to Fifth Street Management of termination. Any
new advisory contract to be entered into by the Company requires the approval of (i) the Board (including a majority of the Independent
Directors) and (ii) a majority of the Company common stock. For these purposes, as required by the 1940 Act, the vote of a “majority”
of the outstanding Company common stock means the affirmative vote of (a) 67% or more of the shares of Company common stock present
at such meeting, if the holders of more than 50% of the outstanding shares of Company common stock are present or represented by
proxy or (b) more than 50% of the outstanding shares of Company common stock, whichever is less.
The 1940 Act provides a temporary exemption
to the approval requirements in the event a prior advisory contract is terminated which allows the Board (including a majority
of the Independent Directors) to approve an interim contract. Such an interim contract is required to be approved within 10 business
days after the termination of the prior advisory contract becomes effective, with the compensation to be received under the interim
contract no greater than the compensation the advisor would have received under the previous contract. The interim contract could
be with Fifth Street Management or a new investment advisor. The Board would then have 150 days to obtain stockholder approval
for that investment advisory contact. If the Board either does not adopt an interim contract, or fails to obtain all required approvals
for an investment advisory contract within the 150-day period, the Board must either manage the Company itself or hire individuals
to manage the Company, which would be very difficult to do. If this occurred, the Company would be forced to become an internally
managed fund. The Board believes this process would cause significant distraction to the Board, is likely to disrupt the business
and operations of the Company and could be detrimental to the value of the Company common stock. Further, Ironsides has put forth
an advisory proposal that, if the stockholders vote in favor of terminating the Investment Advisory Agreement pursuant to Proposal
3, neither Fifth Street Management nor any of its principals or other affiliates should be engaged to manage or advise any of the
assets of the Company in any capacity. Although Proposal 4 is not binding on the Board, we believe that precluding the Company
from entering into any future management arrangements with Fifth Street Management to manage or advise any of the assets of the
Company in any capacity would limit the Board’s flexibility and constrain its ability to exercise its business judgment in
choosing an interim or long-term investment advisor, subject to stockholder approval.
Benefits of the Investment Advisory
Agreement
FSAM, through Fifth Street Management,
has a strong 17-year track record of creating value as a leading middle market credit-focused asset manager with proprietary origination
capabilities, strong underwriting and portfolio management expertise. Fifth Street Management nationwide origination strategy
and established platform are supported by nearly 100 professionals across locations in Greenwich, CT, Chicago, IL and San Francisco,
CA. The Board firmly believes that Fifth Street Management is the right investment advisor for FSFR and has shown itself to be
a prudent credit manager through multiple cycles. For example, Fifth Street Management:
| · | has invested over $7 billion through FSM’s history with only a 1.09% cumulative total loss rate; |
| · | proactively limited FSFR’s exposure to energy, with the result that FSFR’s energy exposure at September 30, 2015
was only 0.7% (at fair market value) in one portfolio company — one of the lowest among peers; |
| · | carefully ramped FSFR’s portfolio over the last several quarters – weighted average cash yield on debt investments
(including the return on FSFR Glick JV) is 8.1% as of September 30, 2015 with 100% of the underlying portfolio company investments
in floating rate, senior secured loans; and |
| · | maintains active involvement with the credits in FSFR’s portfolio, including direct relationships with the private equity
owners and the management teams, and exercising FSFR’s rights to attend board meetings where applicable. |
FSFR is the largest senior floating
rate BDC (by assets)3 and maintains one of the lowest fee structures in the industry with a 1% base management fee
on gross assets (excluding cash) and a 50% catchup on its incentive fee. FSFR also benefits from:
| · | having 100% of its portfolio comprised of loans that pay cash interest with no loans on cash non-accrual; |
| · | being a party to the FSFR Glick JV, which is accretive to FSFR stockholders and expects to generate a low-teens return on FSFR’s
investment; and |
| · | having a diversified and low-cost liability structure. |
For the fiscal year ended September
30, 2015, FSFR generated a return on equity4 that is above the median for all senior floating rate
BDCs.5 In addition, during the fiscal year ended September 30, 2015, to improve operating flexibility, Fifth
Street Management recommended to the Board and the Board approved a decision to reset FSFR’s dividend to a level that
it is expected to meet or exceed on a quarterly basis. The Board is confident that Fifth Street Management has a clear
strategic plan to enhance FSFR stockholder value.
| 3 | Peer group includes PFLT (PennantPark Floating Rate Capital Ltd.), SUNS (Solar Senior Capital Ltd.) and ACSF (American Capital
Senior Floating, Ltd.). |
| 4 | Return on equity is the net investment income divided by average net asset value. |
| 5 | Peer group includes PFLT (PennantPark Floating Rate Capital Ltd.), SUNS (Solar Senior Capital Ltd.) and ACSF (American Capital
Senior Floating, Ltd.). |
Not only does FSAM, through Fifth Street
Management, have a strong 17-year track record of creating value, but FSM’s Investment Advisory Agreement with the Company
has fee terms that are reasonable to the Company, especially when such terms are compared to peer companies’ investment
advisory agreements.
In reviewing comparative fees charged by
competitor firms in connection with their respective investment advisory contracts, the Board considered information regarding
the base management and incentive fees paid by 18 other externally managed BDCs determined by the officers of FSFR to be comparable
to FSFR based on a number of factors, including market capitalization and investment objectives. The Board also considered information
on the expense and efficiency ratios for FSFR as compared with a more limited set of floating rate peers. The floating rate peer
group consisted of PFLT (PennantPark Floating Rate Capital Ltd.), SUNS (Solar Senior Capital Ltd.), and ACSF (American Capital
Senior Floating, Ltd.). The broader peer group also included externally-managed BDCs with current market capitalization between
$100 million and $400 million: GAIN (Gladstone Investment Corporation), HRZN (Horizon Technology Finance Corporation), TICC (TICC
Capital Corp.), WHF (WhiteHorse Finance, Inc.), ABDC (Alcentra Capital Corporation), CPTA (Capitala Finance Corp.), CMFN (CM Finance
Inc), FDUS (Fidus Investment Corporation), GARS (Garrison Capital Inc.), GLAD (Gladstone Capital Corporation), MRCC (Monroe Capital
Corporation), OFS (OFS Capital Corporation), SCM (Stellus Capital Investment Corp.), TPVG (TriplePoint Venture Growth BDC Corp.),
and TCRD (THL Credit, Inc.). The floating rate oriented BDCs are included in the broader peer group and MVC (MVC Capital, Inc.)
was excluded. As part of its review, the Board considered that as of September 30, 2015:
| · | FSFR’s base management fee of 1.00% (excluding cash and cash equivalents) fell within the range of 0.80% to 2.00% paid
to the investment advisors of this peer group, with 15 of the 18 peer companies paying a base management fee of more than 1.00%
and two of the 18 peer companies also paying a base management of 1.00%; |
| · | For the quarter ending September 30, 2015, FSFR’s expense ratio of total non-interest expenses to average assets was
only 2.5%, below the 3.5% median for its 18 peer companies and higher than only three of its 18 peer companies; and |
| · | For the quarter ending September 30, 2015, FSFR’s efficiency ratio of total non-interest expenses to total investment
income was 37.6%, below the 40.2% median for its 18 peer companies and higher than seven of its 18 peer companies. |
After taking the foregoing considerations
into account, the Board, including all of the Independent Directors, believes that Proposal 3 is contrary to the best interests
of FSFR and its stockholders.
For
the reasons discussed above, FSFR stockholders strongly benefit from the services, experiences and resources of the current investment
advisor, Fifth Street Management, and there is an important continuing service to be provided to FSFR stockholders by maintaining
Fifth Street Management as the Company’s investment advisor, subject to continued 1940 Act annual reviews.
The Board unanimously recommends that
you vote “AGAINST” the binding proposal put forth by Ironsides to terminate the Investment Advisory Agreement with
Fifth Street Management.
Required Vote
The proposal will be approved if it obtains
the affirmative vote of: (i) 67% or more of the voting securities present at a meeting if the holders of more than 50% of the outstanding
Company common stock are present or represented by proxy; or (ii) 50% of the outstanding Company common stock, whichever is the
less. Abstentions and broker non-votes, if any, on Proposal 3 will have the effect of a vote against this proposal.
PROPOSAL 4 — ADVISORY
PROPOSAL put forth by IRONSIDES, if the proposal to terminate the Investment Advisory Agreement is successful, advising the company’s
Board of Directors that none of FIFTH STREET MANAGEMENT or any of its principals or other affiliates should be engaged to manage
or advise any of the assets of the Company in any capacity
Ironsides has notified the Company that
Ironsides intends to present the following advisory proposal to stockholders at the Annual Meeting.
RESOLVED, that the stockholders hereby advise the Board of Directors
of the Company that, if the stockholders vote in favor of terminating the Investment Advisory Agreement between the Company and
FSM, following the Effective Date neither FSM nor any of its principals or other affiliates should be engaged to manage or advise
any of the assets of the Company in any capacity, whether as a service provider to the Company or its affiliates, as an employee,
officer, director, consultant of the Company or its affiliates, or otherwise.
FSFR’s Opposition Statement Regarding
Proposal 4
The Board unanimously recommends that
FSFR stockholders vote “AGAINST” the advisory proposal put forth by Ironsides that, if the stockholders vote in favor
of terminating the Investment Advisory Agreement pursuant to Proposal 3, neither Fifth Street Management nor any of its principals
or other affiliates should be engaged to manage or advise any of the assets of the Company in any capacity.
As discussed above in the Company’s
opposition statement to Proposal 3, Fifth Street Management is a registered investment advisor under the Investment Advisers Act
of 1940, that is partially and indirectly owned by FSAM. The Company has entered into the Investment Advisory Agreement with Fifth
Street Management and Fifth Street Management currently serves as FSFR’s investment advisor.
Event of Default under Citibank Credit
Agreement
As discussed above in the Company’s
opposition statement to Proposal 3, an event of default under the Citibank Facility would occur if certain current FSFR principals
(i.e., Bernard Berman and Ivelin Dimitrov) are no longer actively involved in FSFR’s operations. Proposal 4 would preclude
the Company from continuing to engage these current FSFR principals from active involvement in FSFR’s operations, and therefore
result in the occurrence of an immediate event of default under the Citibank Facility. As discussed above in the Company’s
opposition statement to Proposal 3, there can be no assurance that FS LLC would be able to obtain the necessary consent, waiver
or amendment to avoid an event of default under the Citibank Facility if Proposal 4 is implemented and the occurrence of any such
event of default would result in material adverse effects on FS LLC and the Company.
Negative Effect on 2015 Debt Securitization
As described in the Company’s opposition
statement to Proposal 3, the Company acts as Collateral Manager for FS Senior Funding, the Company’s wholly-owned, special
purpose financing subsidiary, in the 2015 Debt Securitization and engages Fifth Street Management to perform on its behalf its
duties as Collateral Manager pursuant to the Sub-Advisory Agreement. If the Investment Advisory Agreement were terminated
(and the Administration Agreement were then terminated as a result thereof) in connection with the implementation of Proposal 3,
the Company could then elect to exercise its right to terminate the Sub-Advisory Agreement with Fifth Street Management, as the
Company is entitled to do upon 30 days’ written notice. A new sub-advisor would need to be engaged, which could have
material adverse effects on the performance of the portfolio of investments held by FS Senior Funding and the value of the Company’s
investment in FS Senior Funding for all of the reasons described in the Company’s opposition statement to Proposal 3.
We believe these material adverse effects would only be exacerbated by the adoption of Proposal 4, which would ensure that the
replacement sub-advisor, who could not be affiliated with Fifth Street Management or any of its principals or other affiliates,
would have none of Fifth Street Management’s institutional knowledge, expertise or experience with the 2015 Debt Securitization
portfolio.
The implementation of Proposal 3 and the
adoption of Proposal 4 could also lead to a removal of the Company as the Collateral Manager for the 2015 Debt Securitization.
As described above in the Company’s opposition statement to Proposal 3, (i) any termination of the Sub-Advisory Agreement
and the resulting inability of the Company to perform its obligations as Collateral Manager and (ii) certain “key persons”
no longer being actively involved in the management of the Company could both result in a “for cause” termination of
the Company as Collateral Manager. If the Investment Advisory Agreement and the Administration Agreement were terminated
in connection with the implementation of Proposal 3 and the administration of the Company were then taken over by an entity not
affiliated with Fifth Street Management or any of its principals or other affiliates in connection with the adoption of Proposal
4, the required “key persons” would no longer be actively involved in the management of the Company and the Company
could be terminated for cause as Collateral Manager. As described in the Company’s opposition statement to Proposal
3, replacing the Collateral Manager in the 2015 Debt Securitization is a complicated process that could become lengthy and disruptive
and could adversely affect the performance of FS Senior Funding’s portfolio and the value of the Company’s equity stake
in FS Senior Funding.
Negative Effect on Day-to-Day Operations
As discussed above in the Company’s
opposition statement to Proposal 3, not only is there a statutory process for terminating an investment advisor, but there is also
an established statutory process to select an investment advisor or interim investment advisor. Should the Company be compelled
to terminate its Investment Advisory Agreement pursuant to the passage of Proposal 3, the Board (including a majority of the Independent
Directors) may approve an interim investment advisory contract within 10 business days after the effective termination of the Investment
Advisory Agreement. Notwithstanding the stockholder vote on Proposal 3, any such interim investment advisory contract could be
with Fifth Street Management or a new investment advisor. Following the Board’s approval of such interim investment advisory
contract, the Board would then have 150 days to obtain stockholder approval for such contact. If the Board either does not adopt
an interim contract within 10 days of terminating the Investment Advisory Agreement, or fails to obtain all required approvals
for such interim investment advisory contract within the 150-day period, the Board must either manage the Company itself or hire
individuals to manage the Company, which would be very difficult to do. If this occurred, the Company would be forced to become
an internally managed fund and entirely change its structure. The Board believes this process would cause significant distraction
to the Board, is likely to disrupt the business and operations of the Company and could be detrimental to the value of the Company
common stock.
Limits the Board’s Exercise
of its Fiduciary Duties
The Board has carefully considered Proposal
4 in light of the requirements of the 1940 Act and determined that precluding the Company from entering into any future management
arrangements with Fifth Street Management or any of its principals or other affiliates to manage or advise any of the assets of
the Company in any capacity would limit the Board’s flexibility and constrain its ability to exercise its business judgment
in choosing an interim or long-term investment advisor, subject to stockholder approval. If Proposal 3 passes with the required
stockholder vote, compelling the Company to terminate the Investment Advisory Agreement with Fifth Street Management, the Board
will have to (i) identify an interim investment advisor that can be approved by the Board within 10 business days after the effective
termination of the Investment Advisory Agreement or (ii) become self-managed. As stated above, such interim investment manager
could be Fifth Street Management. Indeed, based on the swift statutory deadlines, statutory limits on compensation of an interim
investment advisor and their past experience and knowledge of the Company, Fifth Street Management may be the best positioned interim
investment advisor for the Company. If Proposal 3 passes with the required stockholder vote, the Board should not be restricted
in its determination of the Company’s interim investment advisor, so that such decision can be based on the relevant experience
of potential asset management firms at such time. Proposal 4, which would constrain the Board from choosing Fifth Street Management
or any of its principals or other affiliates as the Company’s interim investment advisor, limits the Board’s ability
to choose the most suitable interim investment advisor at a future date. In order for the Board to exercise its fiduciary duties
and make the best decision for the Company and its stockholders, all options need to be available to the Board. Precluding the
selection of a particular future investment advisor is not in the best interest of the Company, as such important decision should
be made at the appropriate time with all available information. Proposal 4, which would preclude the Board from choosing what it
may in the future determine to be the most suitable interim and/or long-term investment advisor, prevents the Board from exercising
its business judgment and needlessly limits the options available to the Company in the future, and limiting the Company’s
options in no way benefits the Company or its stockholders. Of course, when and if the Board must identify a new investment advisor,
the Board will take the stockholders’ votes on Proposal 3 into account, but Proposal 4’s resolution to limit the Board’s
choices before any decision is presented for action is counterproductive and contrary to the Board’s exercise of its fiduciary
duties to Company stockholders.
For the reasons discussed above, it is
important for FSFR stockholders that the Board have all options from which to choose an interim investment advisor if stockholders
vote to terminate the Investment Advisory Agreement. By voting down Proposal 4 and ensuring that Fifth Street Management remains
one of the choices for the Company’s interim investment advisor, stockholders will ensure that the Board can exercise its
fiduciary duties, consider all options and choose the best interim investment advisor at the appropriate time.
The Board unanimously recommends that
you vote “AGAINST” the advisory proposal put forth by Ironsides that, if the stockholders vote in favor of terminating
the Investment Advisory Agreement pursuant to Proposal 3, neither Fifth Street Management nor any of its principals or other affiliates
should be engaged to manage or advise any of the assets of the Company in any capacity.
Required
Vote
The affirmative vote of a majority of the
votes cast at the Annual Meeting in person or by proxy is required to approve this proposal. Abstentions and broker non-votes,
if any, will not be included in determining the number of votes cast and, as a result, will have no effect on this proposal.
OTHER MATTERS
Stockholder Proposals
Any stockholder proposals submitted pursuant
to the SEC’s Rule 14a-8 for inclusion in the Company’s proxy statement and form of proxy for the 2017 annual meeting
of stockholders must be received by the Company on or before [●]. Such proposals must also comply with the requirements as
to form and substance established by the SEC if such proposals are to be included in the proxy statement and form of proxy. Any
such proposal should be mailed to: Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830,
Attention: Corporate Secretary. In order for any proposal by an FSFR stockholder made outside of Rule 14a-8 under the Exchange
Act to be considered “timely” within the meaning of Rule 14a-4(c) of the Exchange Act, it must be received by us not
later than [●]. If your proposal is not “timely” within the meaning of Rule 14a-4(c), then proxies solicited
by us for the 2017 annual meeting of stockholders may confer discretionary authority to us to vote on that proposal.
Stockholder proposals or director nominations
for the Company to be presented at the 2017 annual meeting of stockholders, other than stockholder proposals submitted pursuant
to the SEC’s Rule 14a-8, must be delivered to, or mailed and received at, the principal executive offices of the Company
not less than ninety (90) days prior to the date of the anniversary of the previous year’s annual meeting of stockholders.
For the 2017 annual meeting of stockholders, the Company must receive such proposals and nominations no later than [●]. If
the annual meeting of stockholders is scheduled to be held on a date more than thirty (30) days prior to or delayed by more than
sixty (60) days after such anniversary date, stockholder proposals or director nominations must be received no later than the close
of business ninety (90) days prior to such annual meeting or the tenth (10th) day following the day on which such notice of the
date of the 2017 annual meeting of stockholders was mailed or such public disclosure of the date of the annual meeting was made.
Proposals must also comply with the other requirements contained in FSFR’s bylaws, including supporting documentation and
other information.
Other Business
The Board does not presently intend to
bring any other business before the Annual Meeting. As to any other business that may properly come before the Annual Meeting,
however, the proxies, in the form enclosed, will be voted in respect thereof in accordance with the discretion of the proxyholders.
* * *
Whether or not you expect to attend the
Annual Meeting, please follow the instructions on your WHITE proxy card or the enclosed voting instruction form to vote via the
Internet or telephone, or sign, date and return a WHITE proxy card in the postage-paid envelope provided so that you may be represented
at the Annual Meeting.
Delivery of Proxy Materials
Please note that only one copy of the 2016
Proxy Statement, the 2015 Annual Report or Notice of Annual Meeting may be delivered to two or more stockholders of record of FSFR
who share an address unless we have received contrary instructions from one or more of such stockholders. We will deliver promptly,
upon request, a separate copy of any of these documents to stockholders of record of FSFR at a shared address to which a single
copy of such document(s) was delivered. Stockholders who wish to receive a separate copy of any of these documents, or to receive
a single copy of such documents if multiple copies were delivered, now or in the future, should submit their request by calling
us collect at (203) 681-3600 or by writing to Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich,
CT 06830, Attention: Corporate Secretary.
ANNEX A TO 2016 PROXY STATEMENT
ADDITIONAL INFORMATION REGARDING PARTICIPANTS
IN THE SOLICITATION
Under applicable SEC rules and regulations,
members of the Board of Directors and certain executive officers and other employees (if applicable) of the Company, FSC CT and
FSAM are “participants” with respect to the Company’s solicitation of proxies in connection with the Annual Meeting.
The following sets forth certain information about the persons who are “participants.”
Entities
The following table sets forth the name
and business address of FSAM, an entity which may be deemed to be a “participant” with respect to the Company’s
solicitation of proxies in connection with the Annual Meeting.
Name |
|
Business Name and Address |
|
|
|
Fifth Street Asset Management Inc. |
|
Fifth Street Asset Management Inc., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
Directors and Nominees
The following table sets forth the names
and business addresses of the directors of the Company, as well as the names and principal business addresses of the corporation
or other organization in which the principal occupations or employment of the directors is carried on. The principal occupations
or employment of the Company’s directors are set forth under the heading “Proposal 1: Election of Directors”
in this Proxy Statement.
Name |
|
Business Address |
|
|
|
Ivelin M. Dimitrov |
|
c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
|
|
|
Bernard D. Berman |
|
c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
|
|
|
Brian S. Dunn |
|
c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
|
|
|
Richard P. Dutkiewicz |
|
c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
|
|
|
Jeffrey R. Kay |
|
c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
|
|
|
Todd G. Owens |
|
c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
|
|
|
Douglas F. Ray |
|
c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830 |
Certain Officers and Other Employees
The following table sets forth the name
and principal occupation of the officers and employees of the Company, FSC CT and FSAM who are “participants.” The
principal occupation refers to such person’s position with the applicable entity, and the principal business address of each
such person is c/o Fifth Street Senior Floating Rate Corp., 777 West Putnam Avenue, 3rd Floor, Greenwich, CT 06830.
Name |
|
Principal Occupation |
|
|
|
Ivelin M. Dimitrov |
|
Chief Executive Officer of the Company; Chief Investment Officer of FSAM; President and Chief Investment Officer of FSC |
Todd G. Owens |
|
President of the Company; Co-President of FSAM; Chief Executive Officer of FSC |
Bernard D. Berman |
|
Chairman of the Company; Co-President and Chief Compliance Officer of FSAM; Chairman of FSC |
Steven M. Noreika |
|
Chief Financial Officer of the Company; Chief Financial Officer of FSC; Chief Financial Officer of Fifth Street Management |
Kerry S. Acocella |
|
Chief Compliance Officer and Secretary of the Company; Chief Compliance Officer and Secretary of FSC; Chief Compliance Officer and Senior Vice President, Legal of Fifth Street Management; Secretary of FSAM |
Robyn E. Friedman |
|
Senior Vice President, Head of Investor Relations of the Company, FSAM and FSC |
Alexander C. Frank |
|
Chief Operating Officer and Chief Financial Officer of FSAM |
Leonard M. Tannenbaum |
|
Chairman and Chief Executive Officer of FSAM |
David A. Heilbrunn |
|
Managing Director of FSAM |
James F. Velgot |
|
Chief of Staff of FSAM |
Information Regarding Ownership of the Company’s
Securities by Participants
Except as described in this Annex A
or in this Proxy Statement, none of the persons listed above under “Directors and Nominees” or “Certain
Officers and Other Employees” owns any Company securities of record that they do not own beneficially. The number of
Company securities beneficially owned by directors and named executive officers as of [●] is set forth under the
heading “Security Ownership of Certain Beneficial Owners and Management” in this Proxy Statement. The number of
Company securities beneficially owned by the Company’s other officers and employees who are “participants”
as of December 31, 20156 is set forth below.
Name |
|
Company Securities Owned |
Kerry S. Acocella |
|
0 |
Alexander C. Frank |
|
3,000 |
Robyn E. Friedman |
|
300 |
David A. Heilbrunn |
|
2,562 |
Leonard M. Tannenbaum(1) |
|
2,598,929 |
James F. Velgot |
|
0 |
FSAM(2) |
|
154,728 |
(1) Of the shares of
Company common stock over which Mr. Tannebaum has sole voting and dispositive power, Mr. Tannenbaum holds 2,492,305 shares
directly and Mr. Tannenbaum is the record holder of 95,634 shares of Company common stock beneficially owned by the Leonard
M. Tannenbaum Foundation and 10,875 shares of Company common stock beneficially owned by his three children. Mr. Tannenbaum
holds some of the shares in a margin account pursuant to a brokerage agreement. The number of shares of Company common stock
beneficially owned is based on a Schedule 13D/A filed by Mr. Tannenbaum on December 31, 2015.
(2) FSAM is the record holder of 154,728
shares of Company common stock beneficially owned by Leonard M. Tannebaum. The number of shares of Company common stock beneficially
owned is based on a Schedule 13D/A filed by Mr. Tannenbaum on December 31, 2015.
6 The definitive
proxy statement will include an updated chart setting forth such ownership as of a more recent date.
Information Regarding Transactions in the Company’s
Securities by Participants
The following table sets forth
purchases and sales of the Company’s securities during the past two years7 by the persons listed above under
“Directors and Nominees” and “Certain Officers and Other Employees.” To the extent the purchase price
or market value of the securities listed below is represented by funds borrowed or otherwise obtained for the purpose of
acquiring or holding such securities, it is noted below along with the amount of indebtedness as of [●] (the latest
practicable date).
Company Securities Purchased or Sold
(1/1/14 through 12/31/15)
Name |
|
Date |
|
Number of Shares, Non-Qualified
Options and Deferred Units
Acquired or (Disposed of) |
|
Transaction
Description |
Bernard D. Berman |
|
2/26/2014 |
|
900 |
|
1 |
|
|
2/26/2014 |
|
1,100 |
|
1 |
|
|
12/11/2014 |
|
5,000 |
|
1 |
|
|
12/12/2014 |
|
2,000 |
|
1 |
|
|
2/10/2015 |
|
1,000 |
|
1 |
|
|
5/20/2015 |
|
2,000 |
|
1 |
|
|
8/12/2015 |
|
2,000 |
|
1 |
|
|
|
|
|
|
|
Ivelin M. Dimitrov |
|
2/20/2014 |
|
800 |
|
1 |
|
|
2/21/2014 |
|
200 |
|
1 |
|
|
8/20/2014 |
|
1,000 |
|
1 |
|
|
12/11/2014 |
|
5,500 |
|
1 |
|
|
12/12/2014 |
|
200 |
|
1 |
|
|
1/16/2015 |
|
200.26 |
|
2 |
|
|
8/12/2015 |
|
1,100 |
|
1 |
|
|
8/13/2015 |
|
3,900 |
|
1 |
|
|
|
|
|
|
|
Brian S. Dunn |
|
2/20/2014 |
|
1,000 |
|
1 |
|
|
12/16/2015 |
|
5,500 |
|
1 |
|
|
|
|
|
|
|
Richard P. Dutkiewicz |
|
9/25/2014 |
|
1,000 |
|
1 |
|
|
9/18/2015 |
|
1,000 |
|
1 |
|
|
12/16/2015 |
|
1,000 |
|
1 |
|
|
|
|
|
|
|
Alexander C. Frank |
|
11/25/2014 |
|
1,000 |
|
1 |
|
|
12/11/2014 |
|
2,000 |
|
1 |
7 This preliminary
proxy statement includes a two year trading history period from January 1, 2014 through and including December 31, 2015. The definitive
proxy statement will include an updated two year trading history.
Name |
|
Date |
|
Number of Shares, Non-Qualified
Options and Deferred Units
Acquired or (Disposed of) |
|
Transaction
Description |
David A. Heilbrunn |
|
8/13/2015 |
|
2,562 |
|
1 |
|
|
|
|
|
|
|
Robyn E. Friedman |
|
12/11/2014 |
|
200 |
|
1 |
|
|
12/21/2015 |
|
100 |
|
1 |
|
|
|
|
|
|
|
Steven M. Noreika |
|
12/31/2013 |
|
500 |
|
1 |
|
|
04/15/2014 |
|
7.98 |
|
2 |
|
|
7/15/2014 |
|
9.77 |
|
2 |
|
|
10/15/2014 |
|
14.20 |
|
2 |
|
|
12/11/2014 |
|
500 |
|
1 |
|
|
1/15/2015 |
|
15.45 |
|
2 |
|
|
4/15/2015 |
|
29.37 |
|
2 |
|
|
5/15/2015 |
|
10.71 |
|
2 |
|
|
6/15/2015 |
|
10.79 |
|
2 |
|
|
7/15/2015 |
|
11.68 |
|
2 |
|
|
8/17/2015 |
|
12.16 |
|
2 |
|
|
9/15/2015 |
|
9.53 |
|
2 |
|
|
10/15/2015 |
|
9.51 |
|
2 |
|
|
11/16/2015 |
|
9.96 |
|
2 |
|
|
12/22/2015 |
|
11.01 |
|
2 |
|
|
|
|
|
|
|
Todd G. Owens |
|
12/16/2014 |
|
15,000 |
|
1 |
|
|
|
|
|
|
|
Leonard M. Tannenbaum |
|
1/30/2014 |
|
1 |
|
2 |
|
|
2/18/2014 |
|
10,000 |
|
1 |
|
|
2/19/2014 |
|
20,000 |
|
1 |
|
|
2/20/2014 |
|
16,500 |
|
1 |
|
|
2/21/2014 |
|
116 |
|
1 |
|
|
2/24/2014 |
|
4,150 |
|
1 |
|
|
2/25/2014 |
|
10,000 |
|
1 |
|
|
2/27/2014 |
|
18,500 |
|
1 |
|
|
2/28/2014 |
|
55,571 |
|
1 |
|
|
3/20/2014 |
|
85,870 |
|
1 |
Name |
|
Date |
|
Number of Shares, Non-Qualified
Options and Deferred Units
Acquired or (Disposed of) |
|
Transaction
Description |
|
|
4/15/2014 |
|
2 |
|
2 |
|
|
7/15/2014 |
|
2 |
|
2 |
|
|
8/14/2014 |
|
154,918 |
|
1 |
|
|
8/15/2014 |
|
519 |
|
1 |
|
|
8/18/2014 |
|
45,000 |
|
1 |
|
|
8/19/2014 |
|
25,000 |
|
1 |
|
|
9/9/2014 |
|
32,049 |
|
1 |
|
|
9/16/2014 |
|
40,000 |
|
1 |
|
|
9/17/2014 |
|
10,000 |
|
1 |
|
|
9/24/2014 |
|
20,000 |
|
1 |
|
|
9/23/2014 |
|
40,206 |
|
1 |
|
|
10/15/2014 |
|
3 |
|
2 |
|
|
12/11/2014 |
|
350,000 |
|
1 |
|
|
12/12/2014 |
|
145,265 |
|
1 |
|
|
12/15/2014 |
|
233,098 |
|
1 |
|
|
12/16/2014 |
|
170,000 |
|
1 |
|
|
12/17/2014 |
|
7,500 |
|
1 |
|
|
12/18/2014 |
|
2,000 |
|
1 |
|
|
12/23/2014 |
|
16,484 |
|
1 |
|
|
12/26/2014 |
|
10,000 |
|
1 |
|
|
12/30/2014 |
|
25,000 |
|
1 |
|
|
12/31/2014 |
|
15,000 |
|
1 |
|
|
1/15/2015 |
|
3 |
|
2 |
|
|
2/10/2015 |
|
10,000 |
|
1 |
|
|
2/12/2015 |
|
3,400 |
|
1 |
|
|
4/15/2015 |
|
3 |
|
2 |
|
|
5/13/2015 |
|
60,000 |
|
1 |
|
|
5/14/2015 |
|
48,925 |
|
1 |
|
|
5/15/2015 |
|
6,816 |
|
1 |
|
|
5/15/2015 |
|
1 |
|
2 |
|
|
5/18/2015 |
|
70,000 |
|
1 |
|
|
5/19/2015 |
|
20,000 |
|
1 |
|
|
5/20/2015 |
|
20,100 |
|
1 |
|
|
6/4/2015 |
|
1,375 |
|
1 |
|
|
6/8/2015 |
|
5,978 |
|
1 |
|
|
6/9/2015 |
|
5,400 |
|
1 |
|
|
6/11/2015 |
|
101 |
|
1 |
|
|
6/26/2015 |
|
26,574 |
|
1 |
|
|
8/12/2015 |
|
64,052 |
|
1 |
Name |
|
Date |
|
Number of Shares, Non-Qualified
Options and Deferred Units
Acquired or (Disposed of) |
|
Transaction
Description |
|
|
8/13/2015 |
|
27,379 |
|
1 |
|
|
8/18/2015 |
|
10,000 |
|
1 |
|
|
8/21/2015 |
|
8,200 |
|
1 |
|
|
9/2/2015 |
|
40,000 |
|
1 |
|
|
12/16/2015 |
|
33,912 |
|
1 |
|
|
12/17/2015 |
|
33,912 |
|
1 |
|
|
12/18/2015 |
|
30,000 |
|
1 |
|
|
12/22/2015 |
|
52,758 |
|
1 |
|
|
12/23/2015 |
|
26,006 |
|
1 |
|
|
12/24/2015 |
|
23,600 |
|
1 |
|
|
12/28/2015 |
|
50,491 |
|
1 |
|
|
12/29/2015 |
|
50,491 |
|
1 |
|
|
12/30/2015 |
|
50,491 |
|
1 |
|
|
12/31/2015 |
|
50,491 |
|
1 |
|
|
|
|
|
|
|
FSAM |
|
9/21/2015 |
|
25,005 |
|
1 |
|
|
9/22/2015 |
|
16,204 |
|
1 |
|
|
9/23/2015 |
|
4,577 |
|
1 |
|
|
9/24/2015 |
|
28,400 |
|
1 |
|
|
9/25/2015 |
|
25,204 |
|
1 |
|
|
9/28/2015 |
|
19,017 |
|
1 |
|
|
9/29/2015 |
|
19,017 |
|
1 |
|
|
9/30/2015 |
|
17,304 |
|
1 |
| (1) | Open market acquisition. |
| (2) | Reflects shares issued under the Company’s dividend reinvestment plan. |
Miscellaneous Information Concerning Participants
Except as described in this Annex A or
in this Proxy Statement, neither any participant nor any of their respective associates or affiliates (together, the “Participant
Affiliates”) is either a party to any transaction or series of transactions since October 1, 2013 or has knowledge of any
current proposed transaction or series of proposed transactions (i) to which the Company or any of its subsidiaries was or is to
be a participant, (ii) in which the amount involved exceeds $120,000 and (iii) in which any participant or Participant Affiliate
had, or will have, a direct or indirect material interest. Furthermore, except as described in this Annex A or in this Proxy Statement,
(a) no participant or Participant Affiliate, directly or indirectly, beneficially owns any securities of the Company or any securities
of any subsidiary of the Company, and (b) no participant owns any securities of the Company of record but not beneficially.
Except as described in this Annex A or
in this Proxy Statement, no participant or Participant Affiliate has entered into any agreement or understanding with any person
with respect to any future employment by the Company or any of its affiliates or any future transactions to which the Company or
any of its affiliates will or may be a party.
Except as described in this Annex A or
in this Proxy Statement, there are no contracts, arrangements or understandings by any participant or Participant Affiliate since
October 1, 2013 with any person with respect to any securities of the Company, including, but not limited to, joint ventures, loan
or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving
or withholding of proxies.
Except as described in this Annex A or
in this Proxy Statement, and excluding any director or executive officer of the Company or FSAM acting solely in that capacity,
no person who is a party to an arrangement or understanding pursuant to which a nominee for election as director is proposed to
be elected has any substantial interest, direct or indirect, by security holdings or otherwise, in any matter to be acted upon
at the Annual Meeting.
PRELIMINARY COPY –
SUBJECT TO COMPLETION, DATED JANUARY 5, 2016
YOUR VOTE
IS IMPORTANT
Please take a moment now
to vote your shares of Fifth Street Senior Floating
Rate Corp. common stock for the upcoming Annual Meeting of Stockholders.
PLEASE REVIEW THE PROXY
STATEMENT AND VOTE TODAY IN ONE OF THREE WAYS:
| 1. | Vote by Telephone—Please call toll-free in the U.S. or Canada at [1-###-###-####],
on a touch-tone phone. If outside the U.S. or Canada, call [1-###-###-####]. Please follow the simple instructions. You
will be required to provide the unique control number printed below. |
OR
| 2. | Vote by Internet—Please access https://www.proxyvotenow.com/fsfr and follow the simple
instructions. Please note you must type an “s” after http. You will be required to provide the unique control number
printed below. |
CONTROL
NUMBER: |
|
|
You may vote by telephone or Internet 24 hours a day, 7 days a week. Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned a WHITE proxy card. |
OR
| 3. | Vote by Mail—If you do not wish to vote by telephone or over the Internet, please
complete, sign, date and return the WHITE proxy card in the postage-paid envelope provided, or mail to: Fifth Street Senior Floating
Rate Corp, c/o Innisfree M&A Incorporated, FDR Station, P.O. Box 5155, New York, NY 10150-5155. |
¨TO
VOTE BY MAIL, PLEASE DETACH WHITE PROXY CARD HERE AND SIGN, DATE AND RETURN IN THE POSTAGE-PAID ENVELOPE PROVIDED¨
x |
Please mark
your vote as in
this example |
|
|
The
Board of Directors recommends you vote “FOR”
all
the nominees listed in Proposal 1 and “FOR” Proposal 2. |
|
|
Proposal
1 To
elect the directors of the Company to hold office until the Company’s 2019 Annual Meeting of Stockholders or until
their successors are duly elected and qualified. |
|
The
Board of Directors recommends that you vote AGAINST Proposal 3. |
Nominees:
(01) Ivelin M. Dimitrov; (02) Brian S. Dunn |
|
Proposal
3 To approve the binding stockholder proposal put forth by Ironsides to terminate the Investment Advisory Agreement
with Fifth Street Management LLC. |
FOR
¨ |
AGAINST
¨ |
ABSTAIN
¨ |
FOR
ALL
¨ |
WITHHOLD
ALL
¨ |
FOR
ALL EXCEPT
¨ |
|
The
Board of Directors recommends that you vote AGAINST Proposal 4. |
(INSTRUCTION:
To withhold authority to vote for any individual nominee, mark “For All Except” box above and write the name of
nominee on the line provided below). |
|
Proposal
4 To
approve the advisory proposal put forth by Ironsides regarding Fifth Street Management LLC, as described in the Proxy Statement. |
FOR
¨ |
AGAINST
¨ |
ABSTAIN
¨ |
|
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Proposal
2 To
ratify the appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accountants for
the fiscal year ending September 2016. |
FOR
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AGAINST
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ABSTAIN
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To transact
such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof.
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Date:
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(Signature) |
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(Signature,
Joint Owner) |
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Title(s) |
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NOTE:
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, trustee or other
fiduciary, please give full title as such. Joint owners should each sign personally. All
holders must sign. If a corporation or partnership, please sign in full corporate
or partnership name by authorized officer. |
YOUR
VOTE IS IMPORTANT!
PLEASE
VOTE TODAY.
SEE
REVERSE SIDE FOR THREE EASY WAYS TO VOTE.
¨TO
VOTE BY MAIL, PLEASE DETACH WHITE PROXY CARD HERE AND SIGN, DATE AND RETURN IN THE POSTAGE-PAID ENVELOPE PROVIDED¨
WHITE PROXY CARD
FIFTH STREET SENIOR
FLOATING
RATE CORP. ANNUAL MEETING OF
STOCKHOLDERS
THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby
appoints Kerry Acocella and Robyn Friedman, and each of them, as proxies of the undersigned, with full power of substitution in
each of them, to the 2016 Annual Meeting of Stockholders (the “Annual Meeting”) of Fifth Street Senior Floating Rate
Corp., a Delaware corporation (the “Company”), to be held at [•], on [•] at [•], local time and at any
adjournments or postponements thereof, to cast on behalf of the undersigned all votes that the undersigned is entitled to cast
and to otherwise represent the undersigned with all powers that the undersigned would possess if personally present at the Annual
Meeting. The undersigned hereby revokes any proxy heretofore given with respect to the Annual Meeting.
THIS PROXY IS REVOCABLE.
UNLESS A CONTRARY DIRECTION IS INDICATED, VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST FOR THE NOMINEES LISTED
IN PROPOSAL 1, FOR PROPOSAL 2, AGAINST PROPOSAL 3 AND AGAINST PROPOSAL 4. IF SPECIFIC INSTRUCTIONS ARE INDICATED,
VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST IN ACCORDANCE THEREWITH. THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED
WILL BE CAST IN THE DISCRETION OF THE PROXYHOLDER ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
(continued and to be signed
on the reverse side)
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