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Fifth Street Finance CEO Discusses F4Q2011 Results - Earnings Call Transcript

We expect to continue to grow this valuable relationship overtime. LIBOR plus 225 seven year money now allows us to cost effectively originate senior middle market assets. Our fourth quarter, net investment income of $0.28 per share was in the middle of the range of previously issued guidance. Going forward, we expect our earnings power to be better realized. As we have increased velocity in the portfolio, are starting to realize some of our equity investments and are collecting pre-payment penalties and exit fees on occasion, we have a much more efficient capital structure.

We also anticipate that part of the additional earnings will come from better matching our targeted leverage of 0.6 times debt-to-equity excluding the debt of the SBA, part will come from better utilization of our credit lines and part will come from re-allocating our 78% first lien, 22% second lien assets towards the more efficient capital lines for those securities whether it be our SBA, Sumitomo, Wells Fargo or ING led facilities. We continue to move into larger securities, which we believe are inherently safer with the typical investment having EBITDA between $10 million and $30 million. We believe that our high first lien exposure, coupled with investing in larger and more stable portfolio companies and our robust diligence in portfolio management process will result in greater portfolio stability should the economy pull back again.

At the same time, we feel comfortable that the decline in our weighted average yield to 12.35% at September 30, 2011 will stabilize now that we have reached our targeted portfolio mix. Alex Frank has been a great addition to our team this past quarter. His 22 years experience at Morgan Stanley culminating the role of Head of Global Operations gives Fifth Street assistance in three important areas; risk management, institutionalization operational growth and investor engagement.

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