Investor Presentation

Fifth Street Finance Corp.

First Fiscal Quarter Ended

December 31, 2011

Filed pursuant to Rule 497(a)

File No. 333-166012

Rule 482ad

Forward Looking Statements

2

This presentation may contain certain forward-looking statements, including statements with regard to the future performance

of Fifth Street Finance Corp. (“Fifth Street Finance Corp.,” “FSC” or “Company”). Words such as “believes,” “expects,”

“projects,” “anticipates” and “future” or similar expressions are intended to identify forward-looking statements. These forward-

looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could

cause actual results to differ materially from those projected in these forward-looking statements, and such factors are

identified from time to time in Fifth Street Finance Corp.’s filings with the Securities and Exchange Commission. Fifth Street

Finance Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new

information, future events or otherwise. 

This presentation is neither an offer to sell nor a solicitation of an offer to purchase securities of Fifth Street Finance Corp.

Such an offer or solicitation can only be made by way of a Company prospectus and otherwise in accordance with applicable

securities laws. 

The summary descriptions and other information included herein and any other materials provided to you by the Company or

its representatives are intended only for informational purposes and convenient reference. The information contained herein is

not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations.

Before making an investment decision with respect to the Company, investors are advised to carefully review an applicable

prospectus to review the risk factors described therein, and to consult with their tax, financial, investment and legal advisors.

These materials do not purport to be complete, and are qualified in their entirety by reference to the more detailed disclosures

contained in an applicable prospectus and the Company’s related documentation.

No representation or warranty, express or implied, is made as to the accuracy or completeness of the information contained

herein, and nothing shall be relied upon as a promise or representation as to the future performance of the Company.

•

Business Development Companies (“BDCs”) are uniquely positioned financing vehicles that provide debt and

equity capital to private and small publicly-owned enterprises

•

BDCs

were

created

by

Congress

in

1980

with

the

stated

mission

of

facilitating

the

flow

of

capital

to

companies

lacking access to public capital markets

•

BDC regulations allow a maximum debt-to-equity ratio of 1:1 which allow BDCs to modestly enhance their return

•

BDCs are required to distribute at least 90% of their taxable income to shareholders annually

•

SEC regulations require BDCs to report the fair value of assets quarterly

BDC Structure and Regulation

3

•

A

specialty

finance

company

providing

first

lien,

second

lien,

mezzanine

and

one-stop

financing

solutions for small to mid-sized companies

•

Operates as an externally managed BDC/RIC

•

Nearly all debt investments are private equity sponsor-backed transactions that are originated in-house

•

Typical investment size: $10 million to $75 million

•

Over

$800

million

market

capitalization

1

•

Disciplined investment process with a proven 13-year track record

1

As

of

February

8,

2012

Fifth Street Overview

4

Fund I

1998

Fund II

2005

Fund III

2007

BDC

Conversion

2008

IPO

June 2008

Wells Fargo

Credit Facility

2009

SBIC License

Granted

2010

ING Capital-led

Credit Facility

2010

Received

Investment

Grade Rating

2011

Convertible

Debt Offering

2011

SMBC Credit

Facility

2011

•

Substantial debt yields with a majority of investments on monthly payment schedules

•

Portfolio target of 70%-80% in first lien investments. As of December 31, 2011, approximately 75% of our

portfolio was in first lien investments

•

Received ‘BBB-’

investment grade rating from Fitch Ratings

•

Releases regular newsletters

•

Discloses leverage ratio for each loan rating category and discloses non-performing assets

•

Investment Adviser permanently waived base management fees on cash and cash equivalents

•

Leonard Tannenbaum, CEO, owns approximately 2.3% (~1.9 million shares) of FSC common stock and

purchased

$2

million

of

convertible

senior

unsecured

debt

•

Pays

a

monthly

dividend

-

$0.0958

per

share

payable

4/30/2012,

5/31/2012

and

6/29/2012

•

FSC’s Board has declared $4.67 in dividends per share since its IPO in June 2008

•

FSC’s amended and restated dividend reinvestment plan (“DRIP”) offers up to a 5% discount on newly issued

shares

purchased

through

the

DRIP

(provided

that

shares

will

not

be

issued

at

less

than

net

asset

value

per

share)

•

Strong balance sheet with diversified funding sources

–

$230 million syndicated credit facility led by ING Capital LLC, expandable up to $350 million

–

$200 million credit facility with Sumitomo Mitsui Banking Corporation

–

$100 million credit facility with Wells Fargo Bank, N.A., expandable up to $150 million

–

$125 million 5-year convertible senior unsecured debt

–

$150 million in 10-year SBA debentures issued by SBIC subsidiary

Strong Value Position

High Quality

Portfolio

Diverse

Funding Base

Dividends

Transparency &

Shareholder

Alignment

5

1

As of December 31, 2011

2

As of February 8, 2012

2

1

2

Fifth Street Total Return

6

1

Source: Capital IQ (Assumes the reinvestment of all income dividends and capital gain distributions from a $100 investment made at the

beginning of this period)

•

Since the beginning of 2009, FSC’s cumulative

total returns have outperformed the SPDR

Financial Sector Fund (XLF) by 7.5 times

•

Since the beginning of 2009, FSC’s cumulative

total returns have outperformed the SPDR S&P

500 Fund (SPY) by 41% and have outperformed

in two of the three years (2009 and 2010)

0

50

100

150

200

250

FSC

SPY

XLF

Indexed to 100

68.1

48.1

9.0

0

20

40

60

80

FSC

SPY

XLF

Cumulative Total Return (%)

1

(2009-2011)

Cumulative Total Return (%)

1

1

Source:

Pitchbook

Strong Middle Market Presence

7

•

Closed over $600 million of new investments in 2011

•

Strong relationships with leading middle market sponsors

–

Focus on originating with a core group of sponsors  to enhance origination efficiency and asset performance

•

Reputation for delivering on commitments

•

Mutual benefits of strategic partnerships including:

–

Incremental due diligence

–

Additional layer of monitoring

–

Additional source of operating expertise

TOP

LENDERS

IN

PRIVATE

EQUITY

IN

2011 

-

Debt Financing Agent of the Year

-

Senior Secured Financing Agent of the Year

-

Senior Lender of the Year

-

Dealmaker of the Year, Casey Zmijeski

RECENT INDUSTRY AWARDS

GE Capital

Madison Capital Funding

Bank of America Merrill Lynch

Wells Fargo

JP Morgan

Fifth Street Finance Corp.

Goldman Sachs

Barclays Capital

Deutsche Bank

Golub Capital

Morgan Stanley

Credit Suisse

Fifth Third Bank

1

•

Diverse sources of long-term, cost efficient capital enhance overall shareholder return

•

Target leverage of 0.6x (excluding SBA leverage)

FSC Funding Sources

1

8

1

As of December 31, 2011

Total Facility Size

Maturity

Interest Rate

Key Info.

Syndicated

Credit Facility

led by

ING Capital LLC

$230 million; expandable                          February 2014

up to $350 million                             

(includes 7 lenders in the

syndication)

•

LIBOR+300 with no LIBOR floor

when over 35% drawn on the

facility

•

LIBOR+325 with no LIBOR floor

otherwise

•

Contingent on Investment Grade

rating

Secured by all assets of Fifth Street not held in the SBIC,

Sumitomo or the Wells Fargo SPVs

Sumitomo Mitsui

Banking Corp.

Credit Facility

$200 million

September 2018

LIBOR+225 with no LIBOR floor

•

Non-recourse asset backed SPV

Wells Fargo       

Credit Facility

$100 million; expandable up to

$150 million

February 2014

LIBOR+275 with no LIBOR floor

•

Non-recourse asset backed SPV

Convertible Debt

$125 million

April 2016

5.375% per annum

•

Unsecured

•

Conversion price of $14.76 per share

SBIC Debentures

$75 million Regulatory Capital

$150 million SBA Leverage

$225 million total capital

February 2020

Fixed at a weighted average interest

rate of 3.6% per annum for 10 years

•

Non-recourse asset backed SPV; fully-funded

•

Fifth Street and its first SBIC subsidiary received

an exemptive order that excludes debt of the SBIC

subsidiary from the definition of “senior securities”

under the 200% asset coverage test

•

Fifth Street has applied for a second SBIC license. A

second license, if granted, would give Fifth Street the

capability to issue an additional $75 million of debentures,

subject to receiving a capital commitment from the SBA

Portfolio Growth Since IPO

9

Portfolio

Mix

at

Fair

Value

Since

IPO

1

•

Target of 70% -

80% First Lien investments

Portfolio

Investments

(in

millions)

1

Committed

Capital

(in

millions)

1

1

FSC fiscal year end is September 30

(to date)

5%

10%

15%

20%

25%

0%

20%

40%

60%

80%

100%

Equity & LP Interests

Second Lien & Subordinated

Debt

First Lien

Weighted Average Yield

$0

$500

$1,000

$1,500

$2,000

2008

2009

2010

2011

Q1 2012

Capital Markets (equity)

Private Convertible Debt

SBIC

Credit Facilities

$0

$400

$800

$1,200

$1,600

$-

$5

$10

$15

$20

$25

Net Investment Income

Investments at cost

10

Investments in 67 Different Companies

Average Investment Size:

$19.6 million

Weighted Average Yield 

On Debt Investments:

12.3%, with a cash component of 11.2%

Diversified Portfolio

At Fair Value as of December 31, 2011

PORTFOLIO OVERVIEW

Healthcare services, 21%

IT services, 11%

Diversified support services,

7%

Healthcare equipment, 7%

Manufacturing, 7%

Oil & gas equipment &

services, 7%

Retail, 6%

Household products & home

improvement, 5%

Leisure facilities & products,

5%

Pharmaceuticals, 4%

Advertising, 3%

Education services, 3%

Infrastructure, 3%

Logistics, 3%

Diversified financial

services, 2%

Environmental chemicals &

services, 2%

Food & restaurants, 2%

Intense Focus on Managing Credit Risk

Comprehensive Investment Process

FSC

Investment

$20 million

$5-$10 million

$20 million

$20 million

Term Loan A

(5-20% amortization per year)

Term Loan B

(1% amortization per year)

Rollover Equity or Seller Note

Sponsor Equity

•

Substantial excess

enterprise value

•

Significant investment(s)

by private equity sponsor(s)

•

Predictable positive

operating cash flow for at

least 5 years

•

Ongoing and available

liquidity

•

Focus mainly on first  

lien investments

•

Low leverage

•

Strong covenants and

collateral packages

Target Transaction

Characteristics

Structuring

Methodology

Representative Investment

11

Origination

Underwriting

Portfolio Management

•

Deal opportunities are sourced

and screened

•

Comprehensive investment

summary prepared

•

Sponsor underwriting

•

Proprietary deal scoring model

•

Preliminary due diligence

•

Initial Investment Committee review

•

Draft term sheet

•

Term sheet negotiated

•

Ongoing Investment

•

Committee review

•

Thorough due diligence

•

Structuring

•

Closing and funding following final

Investment Committee approval

•

Proactive monthly / quarterly review                  

and monitoring process

–

Covenant compliance

–

Board observation rights

–

Current performance vs. budget

–

Onsite inspection

–

Internal ratings

•

Increased monitoring of problem credits

•

Established and proven 

investment process

•

Dual underwriting  

methodology with stringent

underwriting standards

•

Dedicated portfolio 

management team that

actively manages all

troubled securities

•

Utilize scalable approach to

create portfolio dashboards

and heat mapping

Schedule of Investments

At Fair Value as of December 31, 2011

Top Ten Investments

12

$ in millions

Company

Total Investment

Industry

% of portfolio

Dominion Diagnostics, LLC

$   48.7

Healthcare services

4.35%

CRGT, Inc.

48.3

IT consulting & other services

4.32

Tegra Medical, LLC

46.7

Healthcare equipment

4.17

Welocalize, Inc.

43.5

Internet software & services

3.88

Refac Optical Group

35.3

Specialty stores

3.15

NDSSI Holdings, LLC

35.0

Electronic equipment & instruments

3.12

CCCG, LLC

34.4

Oil & gas equipment & services

3.07

JTC Education, Inc.

32.5

Education Services

2.90

Miche Bag, LLC

32.4

Apparel, accessories & luxury goods

2.90

Titan Fitness, LLC

30.8

Leisure facilities

2.75

Other investments

Other investments

$ 732.3

Total Portfolio

$1.1 Billion

1 

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

•

Portfolio investments are assessed and rated quarterly on a scale from 1 to 5 based on underlying

credit and performance statistics

•

Approximately 90% of securities were externally valued by independent valuation firms

•

Over 98% of the portfolio has an investment rating of 1 or 2

Asset Quality

At Fair Value as of December 31, 2011

Investment

Rating

Description

Investment

($ in millions)

% of Total

Portfolio

Debt/EBITDA

Leverage Ratio

1

Investment is performing above expectations and/or a capital gain is expected.

$ 157.5

14.1%

2.7x

2

Investment is performing substantially within our expectations, and whose risks

remain neutral or favorable compared to the potential risks at the time of the original

investment. All new investments are initially rated 2.

941.3

84.1

4.0x 

3

Investment

is

performing

below

our

expectations

and

that

require

closer

monitoring,

but

where

we

expect

no

loss

of

investment

return

(interest

and/or

dividends)

or

principal.

Companies

with

a

rating

of

3

may

be

out

of compliance with financial covenants.

---

---

---

4

Investment is performing below our expectations and for which risk has increased

materially

since

the

original

investment.

We

expect

some

loss

of

investment

return, but no loss of principal.

10.9

1.0

5

Investment is performing substantially below our expectations and whose risks have

increased substantially since the original investment. Investments with a rating of 5

are those for which some loss of principal is expected.

10.2

0.9

Total

$1,119.9

100%

3.9x

13

NM

1

NM

1

Investment

Rating

1

—

Investment

is

performing

above

expectations

and/or

a

capital

gain

is

expected.

Investment

Rating

2

—

Investment

is

performing

substantially

within

our

expectations,

and

whose

risks

remain

neutral

or

favorable

compared

to the potential risks at the time of the original investment. All new investments are initially rated 2.

Investment

Rating

3

—

Investment

is

performing

below

our

expectations

and

that

require

closer

monitoring,

but

where

we

expect

no

loss

of

Investment

Rating

4

—

Investment

is

performing

below

our

expectations

and

for

which

risk

has

increased

materially

since

the

original

investment. We expect some loss of investment return, but no loss of principal.

Investment

Rating

5

—

Investment

is

performing

substantially

below

our

expectations

and

whose

risks

have

increased

substantially

since

the

original investment. Investments with a rating of 5 are those for which some loss of principal is expected.

Rated 1 & 2 securities,

over 98% at Fair Value

Note: FSC fiscal year end

is September 30

Investment Ratings at Fair Value

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Investment Rating 3, 4 & 5

Investment Rating 2

Investment Rating 1

investment return (interest and/or dividends) or principal. Companies with a rating of 3 may be out of compliance with financial covenants.

$ in thousands (except per share data)

Statement of Operations Data

Total investment income

$ 39,497

Base management fee

5,741

Incentive fee

5,247

All other expenses

8,825

Gain on extinguishment of convertible senior notes

1,305

Net investment income

20,989

Net unrealized appreciation on investments

5,833

Net realized loss on investments

(16,638)

Net increase in net assets resulting from operations

10,184

Statement of Assets and Liabilities Data

Total investments at fair value

$ 1,119,898

Cash and cash equivalents

70,336

Other assets

28,238

Total assets

1,218,472

Credit facilities payable

209,269

SBA debentures payable

150,000

Convertible senior notes payable

124,500

Other liabilities

19,038

Total liabilities

502,807

Total net assets

715,665

Per Share Data

Net investment income

$ 0.29

NAV per share at end of period

$ 9.89

Summary Financials

At and for the quarter ended December 31, 2011

15

1

Source: Pitchbook

2

Source: Intex, Wells Fargo Securities LLC

3

Source: LCD 4Q 2011 High-End Middle Market Lending Review

Opportunity in Target Market is Significant

MIDDLE

MARKET

DEBT

TYPES

MIDDLE

MARKET

DEALS

CLOSED

(UNDER

$500M)

16

DEBT

MULTIPLES

OF

SPONSORED

MIDDLE

MARKET

LOANS

CLO

Reinvestment

Conclusion

$, in billions

0

50

100

150

200

$0

$5

$10

$15

$20

Capital Invested ($B)

# of deals

0%

20%

40%

60%

80%

100%

2005

2006

2007

2008

2009

2010

2011

Senior

Subordinated

Mezzanine

Revolving Credit Line

Other

4.4x

4.4x

5.2x

4.6x

3.8x

3.9x

4.2x

4.8x

0x

2x

4x

6x

2005

2006

2007

2008

2009

2010

2011

4Q 2011

FLD/EBITDA

SLD/EBITDA

Other Sr Debt/EBITDA

Sub Debt/EBITDA

$5.3

$4.9

$15.5

$31.2

$47.1

$64.9

$49.8

$3.5

0

20

40

60

80

100

$-

$15

$30

$45

$60

$75

2008

2009

2010

2011

2012

2013

2014

2015

$, CLO Balance Ending Reinvestment

%, Cumulative CLO Balance Ending Reinvestment

1

1

2

3

1

At fair value as of December 31, 2011

Key Investment Highlights

17

•

Strong risk adjusted returns

–

High-quality investments with substantial cash yields

•

Focus on safer investments

–

Target of 70% -

80% first lien investments

•

As of December 31, 2011, approximately 75% of portfolio consisted of first lien investments

–

Invests primarily in established small and mid-sized companies with a history of positive operating cash flow

–

Intense focus on managing credit risk

–

Over

98%

of

portfolio

has

an

investment

rating

of

1

or

2

•

Transparency

–

Releases regular newsletters

–

Discloses leverage ratios

–

Discloses non-performing assets

•

Relationships

–

Strong relationships with private equity sponsors focused on small and mid-sized companies that drive new

deal flow

•

Multiple sources of capital to manage liquidity and provide lower cost of capital

•

Experienced, cohesive management team that is aligned with investors

1

Corporate Information

18

Board of Directors

Independent Audit Firm

Independent

PricewaterhouseCoopers LLP

Leonard M. Tannenbaum

Alexander C. Frank

Brian S. Dunn

Chairman & CEO

Chief Financial Officer

Richard P. Dutkiewicz

Byron J. Haney

Independent Valuation Firms

Bernard D. Berman

Ivelin M. Dimitrov

Frank C. Meyer

Murray, Devine & Co.

President, CCO & Secretary

Chief Investment Officer

Douglas F. Ray

Lincoln Partners Advisors LLC

Interested

Bernard D. Berman

BMO Capital Markets

Morgan Keegan

Leonard M. Tannenbaum

Corporate Counsel

David Chiaverini, (212) 885-4115

Robert Dodd, (901) 579-4560

Sutherland Asbill & Brennan LLP

FBR Capital Markets

RBC Capital Markets

Corporate Headquarters

Gabe Poggi, (703) 469-1141

Jason Arnold, (415) 633-8594

10 Bank Street, 12    floor

Transfer Agent

White Plains, NY 10606

American Stock Transfer & Trust Company, LLC

Fitch Ratings

Stifel Nicolaus

Tel: (914) 286-6800

Tel: (212) 936-5100

Sadia Nabi, (212) 908-0327

Greg Mason, (314) 342-2194

Fax: (914) 328-4214

www.amstock.com

Troy Ward, (314) 342-2714

Gilford Securities

Casey Alexander, (212) 940-9276

UBS

Other Offices

Securities Listing

Dean Choksi, (212) 713-2382

Chicago

Nasdaq, ticker FSC

Janney Montgomery Scott

Los Angeles

John T.G. Rogers, (202) 955-4316

Wells Fargo

Joel Houck, (443) 263-6521

Corporate Website

Investor Relations Contact

Ladenburg Thalmann

Jonathan Bock, (443) 263-6410

www.fifthstreetfinance.com

Stacey L. Thorne

Mickey Schlein, (305) 572-4131

Fifth Street Finance Corp.

Tel: (914) 286-6811

Macquarie

Fiscal Year End

ir@fifthstreetfinance.com

Matthew Howlett, (212) 231-8063

September 30

Jasper Burch, (212) 231-8060

Research Coverage

Corporate Officers

th

1

As of December 31, 2011, equity investments account for approximately 2% of the entire portfolio at fair value

FSC Portfolio Debt & Equity Investments

1

As of December 31, 2011

19