FS Energy & Power Fund - FORM 10-Q

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TABLE OF CONTENTS

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 814-00841

FS Energy and Power Fund
(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		27-6822130 (I.R.S. Employer Identification No.)
201 Rouse Boulevard Philadelphia, Pennsylvania (Address of principal executive office)		19112 (Zip Code)

Registrant's telephone number, including area code: (215) 495-1150

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý.

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

The issuer had 324,189,619 common shares of beneficial interest outstanding as of April 28, 2015.

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TABLE OF CONTENTS



PART I—FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS	1
	Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014	1
	Unaudited Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014	2
	Unaudited Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2015 and 2014	3
	Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	4
	Consolidated Schedules of Investments as of March 31, 2015 (Unaudited) and December 31, 2014	5
	Notes to Unaudited Consolidated Financial Statements	17
ITEM 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	48
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	70
ITEM 4.	CONTROLS AND PROCEDURES	71
PART II—OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	72
ITEM 1A.	RISK FACTORS	72
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	72
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	72
ITEM 4.	MINE SAFETY DISCLOSURES	72
ITEM 5.	OTHER INFORMATION	72
ITEM 6.	EXHIBITS	72
	SIGNATURES	77

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

FS Energy and Power Fund

Consolidated Balance Sheets
(in thousands, except share and per share amounts)

	March 31, 2015 (Unaudited)			December 31, 2014

Assets
Investments, at fair value—unaffiliated (amortized cost—$3,384,320 and $3,375,716, respectively)	$	3,113,790		$	3,089,068
Investments, at fair value—affiliated (amortized cost—$287,608 and $287,334, respectively)		288,851			286,109
Cash		308,118			225,130
Foreign currency, at fair value (cost—$3,964 and $0, respectively)		3,868			—
Receivable for investments sold and repaid		13,654			51,253
Interest receivable		50,047			47,197
Receivable for common shares purchased		83			9,989
Deferred financing costs		4,962			5,575
Prepaid expenses and other assets		262			30

Total assets	$	3,783,635		$	3,714,351

Liabilities
Payable for investments purchased	$	19,849		$	20,094
Credit facilities payable		776,214			901,300
Repurchase agreement payable⁽¹⁾		189,113			189,113
Shareholder distributions payable		21,698			50
Management fees payable		18,745			17,912
Subordinated income incentive fees payable⁽²⁾		2,879			12,142
Administrative services expense payable		1,780			1,653
Interest payable		4,201			2,888
Trustees' fees payable		225			229
Other accrued expenses and liabilities		2,585			3,249

Total liabilities		1,037,289			1,148,630

Commitments and contingencies⁽³⁾
Shareholders' equity
Preferred shares, $0.001 par value, 50,000,000 shares authorized, none issued and outstanding		—			—
Common shares, $0.001 par value, 450,000,000 shares authorized, 320,625,044 and 299,394,371 shares issued and outstanding, respectively		321			299
Capital in excess of par value		3,023,886			2,841,446
Accumulated undistributed net realized gains (losses) on investments and gain/loss on foreign currency⁽⁴⁾		(24,289	)		7,497
Accumulated undistributed net investment income⁽⁴⁾		15,832			4,341
Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency		(269,404	)		(287,862	)

Total shareholders' equity		2,746,346			2,565,721

Total liabilities and shareholders' equity	$	3,783,635		$	3,714,351

Net asset value per common share at period end	$	8.57		$	8.57

(1): See Note 8 for a discussion of the Company's repurchase transaction.
(2): See Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the subordinated income incentive fees.
(3): See Note 9 for a discussion of the Company's commitments and contingencies.
(4): See Note 5 for a discussion of the sources of distributions paid by the Company.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Statements of Operations
(in thousands, except share and per share amounts)

	Three Months Ended March 31,

	2015			2014
Investment income
Interest income—unaffiliated	$	76,202		$	50,967
Interest income—affiliated		4,867			—
Fee income—unaffiliated		4,518			5,589

Total investment income		85,587			56,556

Operating expenses
Management fees		18,745			12,867
Capital gains incentive fees⁽¹⁾		—			5,565
Subordinated income incentive fees⁽¹⁾		2,879			4,610
Administrative services expenses		1,500			935
Share transfer agent fees		794			647
Accounting and administrative fees		360			266
Interest expense		7,316			4,337
Trustees' fees		225			281
Other general and administrative expenses		954			704

Total operating expenses		32,773			30,212
Income taxes		89			56

Total expenses		32,862			30,268

Net investment income		52,725			26,288

Realized and unrealized gain/loss
Net realized gain (loss) on investments—unaffiliated		(17,957	)		2,280
Net realized gain (loss) on foreign currency		(238	)		(538	)
Net change in unrealized appreciation (depreciation) on investments—unaffiliated		16,118			26,021
Net change in unrealized appreciation (depreciation) on investments—affiliated		2,468			—
Net change in unrealized gain (loss) on foreign currency		(128	)		81

Total net realized and unrealized gain (loss) on investments		263			27,844

Net increase (decrease) in net assets resulting from operations	$	52,988		$	54,132



Per share information—basic and diluted
Net increase (decrease) in net assets resulting from operations (Earnings per Share)	$	0.17		$	0.29



Weighted average shares outstanding		310,241,395			188,276,979

(1): See Note 2 and Note 4 for a discussion of the methodology employed by the Company in calculating the capital gains incentive fees and subordinated income incentive fees.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Statements of Changes in Net Assets
(in thousands)

	Three Months Ended March 31,

	2015			2014
Operations
Net investment income	$	52,725		$	26,288
Net realized gain (loss) on investments and foreign currency		(18,195	)		1,742
Net change in unrealized appreciation (depreciation) on investments		18,586			26,021
Net change in unrealized gain (loss) on foreign currency		(128	)		81

Net increase (decrease) in net assets resulting from operations		52,988			54,132

Shareholder distributions⁽¹⁾
Distributions from net investment income		(41,234	)		(28,423	)
Distributions from net realized gain on investments		(13,591	)		—

Net decrease in net assets resulting from shareholder distributions		(54,825	)		(28,423	)

Capital share transactions
Issuance of common shares⁽²⁾		167,767			259,663
Reinvestment of shareholder distributions⁽²⁾		21,167			25,214
Repurchases of common shares⁽²⁾		(3,972	)		(1,693	)
Offering costs		(2,500	)		(1,200	)

Net increase in net assets resulting from capital share transactions		182,462			281,984

Total increase in net assets		180,625			307,693
Net assets at beginning of period		2,565,721			1,676,237

Net assets at end of period	$	2,746,346		$	1,983,930



Accumulated undistributed (distributions in excess of) net investment income⁽¹⁾	$	15,832		$	(10,081	)

(1): See Note 5 for a discussion of the sources of distributions paid by the Company.
(2): See Note 3 for a discussion of transactions with respect to the Company's common shares during the three months ended March 31, 2015 and 2014.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Statements of Cash Flows
(in thousands)

	Three Months Ended March 31,

	2015			2014
Cash flows from operating activities
Net increase (decrease) in net assets resulting from operations	$	52,988		$	54,132
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Purchases of investments		(211,629	)		(344,971	)
Paid-in-kind interest		(7,453	)		(2,600	)
Proceeds from sales and repayments of investments		194,530			103,983
Net realized (gain) loss on investments		17,957			(2,280	)
Net change in unrealized (appreciation) depreciation on investments		(18,586	)		(26,021	)
Accretion of discount		(2,283	)		(1,746	)
Amortization of deferred financing costs		613			391
(Increase) decrease in receivable for investments sold and repaid		37,599			(893	)
(Increase) decrease in interest receivable		(2,850	)		(5,709	)
(Increase) decrease in prepaid expenses and other assets		(232	)		(107	)
Increase (decrease) in payable for investments purchased		(245	)		(31,714	)
Increase (decrease) in management fees payable		833			2,116
Increase (decrease) in accrued capital gains incentive fees		—			2,708
Increase (decrease) in subordinated income incentive fees payable		(9,263	)		(2,176	)
Increase (decrease) in administrative services expense payable		127			769
Increase (decrease) in interest payable		1,313			(149	)
Increase (decrease) in trustees' fees payable		(4	)		50
Increase (decrease) in other accrued expenses and liabilities		(664	)		456

Net cash provided by (used in) operating activities		52,751			(253,761	)

Cash flows from financing activities
Issuance of common shares		177,673			259,798
Reinvestment of shareholder distributions		21,167			25,214
Repurchases of common shares		(3,972	)		(1,693	)
Offering costs		(2,500	)		(1,200	)
Shareholder distributions		(33,177	)		(39,123	)
Borrowings under credit facilities⁽¹⁾		5,000			20,000
Repayments under credit facilities		(130,086	)		—

Net cash provided by financing activities		34,105			262,996

Total increase (decrease) in cash		86,856			9,235
Cash at beginning of period		225,130			91,084

Cash and foreign currency at end of period	$	311,986		$	100,319



Supplemental disclosure
Excise and state taxes paid	$	310		$	225

(1): See Note 8 for a discussion of the Company's credit facilities. During the three months ended March 31, 2015 and 2014, the Company paid $5,390 and $4,095, respectively, in interest expense on the credit facilities.

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments
As of March 31, 2015
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Senior Secured Loans—First Lien—30.1%
Abaco Energy Technologies LLC	(h)(j)(k)	Service & Equipment	L+700		1.0	%	11/20/20	$	62,109	$	58,590	$	58,693
Allied Wireline Services, LLC	(h)(j)(k)	Service & Equipment	L+800		1.5	%	2/28/19		104,500		103,130		104,500
Alon USA Partners, L.P.	(h)(j)(m)	Downstream	L+800		1.3	%	11/26/18		7,213		7,429		7,177
Altus Power America, Inc.	(k)	Power	L+750		1.5	%	10/10/21		24,280		24,280		24,523
Altus Power America, Inc.	(e)	Power	L+750		1.5	%	10/10/21		60,095		60,095		60,696
AP Exhaust Acquisition, LLC	(h)	Service & Equipment	L+775		1.5	%	1/16/21		14,595		14,595		14,303
Azure Midstream Energy LLC	(j)	Midstream	L+650		1.0	%	11/15/18		10,324		10,206		9,843
BBH Operating LLC		Upstream	Prime+500 PIK (8.25% Max PIK)		3.3	%	8/26/15		21,650		21,650		20,080
BBH Operating LLC	(e)	Upstream	Prime+500 PIK (8.25% Max PIK)		3.3	%	8/26/15		8,500		8,500		7,884
BL Sand Hills Unit, L.P.		Upstream	Prime+650		3.5	%	12/17/17		26,287		22,829		25,367
BL Sand Hills Unit, L.P.	(e)	Upstream	Prime+650		3.5	%	12/17/17		32,070		27,851		30,947
Boomerang Tube, LLC	(f)(g)(r)(y)	Service & Equipment	L+950		1.5	%	10/11/17		18,584		18,443		10,686
Cactus Wellhead, LLC	(g)(h)(j)(k)	Service & Equipment	L+600		1.0	%	7/31/20		52,238		51,293		34,085
Cimarron Energy Inc.	(h)	Service & Equipment	L+775		1.0	%	12/15/19		25,000		25,000		24,750
CITGO Holding, Inc.	(f)	Downstream	L+850		1.0	%	5/12/18		5,358		5,042		5,335
Crestwood Holdings LLC	(h)(k)	Midstream	L+600		1.0	%	6/19/19		31,837		31,980		30,155
EnergySolutions, LLC	(f)(j)	Service & Equipment	L+575		1.0	%	5/29/20		20,462		20,104		20,577
EP Acquisition LLC		Upstream	Prime+500 PIK (8.25% Max PIK)		3.3	%	8/26/15		504		504		470
FR Dixie Acquisition Corp.	(g)	Service & Equipment	L+475		1.0	%	12/18/20		10,147		10,158		8,435
FR Utility Services LLC	(k)	Service & Equipment	L+575		1.0	%	10/18/19		7,490		7,462		7,496
Industrial Group Intermediate Holdings, LLC	(j)	Service & Equipment	L+800		1.3	%	5/31/20		14,848		14,848		14,848
Larchmont Resources, LLC	(g)(j)	Upstream	L+725		1.0	%	8/7/19		9,148		9,218		8,356
MB Precision Holdings LLC	(h)	Service & Equipment	L+725		1.3	%	1/23/20		13,331		13,331		13,065
Moxie Liberty LLC	(h)(k)	Power	L+650		1.0	%	8/21/20		32,432		32,556		32,676
Moxie Patriot LLC	(k)	Power	L+575		1.0	%	12/19/20		2,000		2,038		2,015
Panda Sherman Power, LLC	(g)(h)(k)(l)	Power	L+750		1.5	%	9/14/18		22,815		23,185		22,758
Panda Temple Power, LLC	(k)(l)	Power	L+625		1.0	%	3/6/22		12,000		11,760		12,000
Panda Temple Power II, LLC	(h)(k)	Power	L+600		1.3	%	4/3/19		23,809		24,242		23,452
PeroxyChem LLC	(h)(k)	Service & Equipment	L+650		1.0	%	2/28/20		6,083		6,054		6,121
ProPetro Services, Inc.	(j)	Service & Equipment	L+625		1.0	%	9/30/19		12,103		12,085		11,165
RGL Reservoir Operations Inc.	(g)(m)	Service & Equipment	L+500		1.0	%	8/13/21		9,097		8,847		6,897
Southcross Holdings Borrower LP	(j)(k)	Midstream	L+500		1.0	%	8/4/21		18,905		18,817		18,007
Sprint Industrial Holdings LLC	(h)	Service & Equipment	L+575		1.3	%	11/14/19		14,737		14,723		13,926
Stallion Oilfield Holdings, Inc.	(f)(h)(j)(k)	Service & Equipment	L+675		1.3	%	6/19/18		63,372		63,266		46,262
Stonewall Gas Gathering LLC	(k)	Midstream	L+775		1.0	%	1/28/22		23,174		22,039		23,319
Sunnova Asset Portfolio 5 Holdings, LLC	(k)	Power	12.0% PIK (12.0% Max PIK)				11/14/21		92,301		92,301		93,224
Sunnova Asset Portfolio 5 Holdings, LLC	(e)	Power	12.0% PIK (12.0% Max PIK)				11/14/21		83,182		83,182		84,013

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2015
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity	Principal Amount^(c)		Amortized Cost			Fair Value^(d)
Swift Worldwide Resources US Holdings Corp.	(h)(k)	Service & Equipment	L+800		1.3	%	4/30/19	$	59,509	$	59,509		$	58,617
Total Safety U.S., Inc.	(g)	Service & Equipment	L+450		1.3	%	3/13/20		4,383		4,439			3,836
United Components, Inc.	(h)	Service & Equipment	L+400		1.5	%	7/26/17		4,974		4,964			4,906

Total Senior Secured Loans—First Lien											1,050,545			1,005,465
Unfunded Loan Commitments											(179,628	)		(179,628	)

Net Senior Secured Loans—First Lien											870,917			825,837

Senior Secured Loans—Second Lien—39.5%
Alison US LLC	(f)(k)(m)	Service & Equipment	L+850		1.0	%	8/29/22		22,222		21,390			20,148
American Energy—Marcellus, LLC	(g)	Upstream	L+750		1.0	%	8/4/21		10,000		9,863			7,467
American Energy—Utica, LLC	(h)(k)	Upstream	L+950		1.5	%	9/30/18		124,352		124,352			124,041
American Energy—Utica, LLC		Upstream	L+950		1.5	%	9/30/18		84,468		84,468			84,256
Ameriforge Group Inc.	(f)(h)(k)	Service & Equipment	L+750		1.3	%	12/21/20		35,950		36,496			33,703
Atlas Resource Partners, L.P.	(j)(m)	Upstream	L+900		1.0	%	2/23/20		100,000		97,058			98,540
BlackBrush Oil & Gas, L.P.	(f)(j)	Upstream	L+650		1.0	%	7/30/21		37,519		35,551			30,484
Brock Holdings III, Inc.	(f)(h)(k)	Service & Equipment	L+825		1.8	%	3/16/18		29,605		29,814			28,051
Callon Petroleum Co.	(j)(m)	Upstream	L+750		1.0	%	10/8/21		10,000		9,811			9,788
Chief Exploration & Development LLC	(j)(k)	Upstream	L+650		1.0	%	5/16/21		19,576		19,497			18,245
Consolidated Precision Products Corp.	(h)(k)	Service & Equipment	L+775		1.0	%	4/30/21		23,500		23,400			23,382
Drew Marine Group Inc.	(k)(m)	Service & Equipment	L+700		1.0	%	5/19/21		8,000		7,983			7,880
Emerald Performance Materials, LLC	(k)	Downstream	L+675		1.0	%	8/1/22		5,319		5,295			5,239
Extraction Oil & Gas Holdings, LLC	(j)(k)	Upstream	11.0%				5/29/19		74,186		74,186			75,299
Extraction Oil & Gas Holdings, LLC	(j)(k)	Upstream	10.0%				5/29/19		32,462		32,462			32,300
Fieldwood Energy LLC	(f)(j)(k)	Upstream	L+713		1.3	%	9/30/20		41,047		42,056			30,243
Filtration Group Corp.	(k)	Service & Equipment	L+725		1.0	%	11/21/21		2,632		2,609			2,648
Granite Intermediate Holdings, Inc.	(f)(k)	Power	L+725		1.0	%	10/15/22		10,150		10,052			10,322
Horn Intermediate Holdings, Inc.	(h)	Service & Equipment	L+775		1.3	%	10/2/18		57,750		57,750			56,595
Husky Injection Molding Systems Ltd.	(f)(m)	Service & Equipment	L+625		1.0	%	6/30/22		4,000		4,046			3,933
Jonah Energy LLC	(j)(k)	Upstream	L+650		1.0	%	5/12/21		26,185		25,821			23,457
Magnum Hunter Resources Corp.	(j)(m)	Upstream	L+750		1.0	%	10/17/19		6,965		6,773			6,885
MD America Energy, LLC	(f)(h)(k)	Upstream	L+850		1.0	%	8/4/19		75,000		71,825			72,769
Neff Rental LLC	(f)(k)	Service & Equipment	L+625		1.0	%	6/9/21		17,989		18,018			17,696
Oxbow Carbon LLC	(h)	Midstream	L+700		1.0	%	1/19/20		15,000		14,879			12,413
P2 Upstream Acquisition Co.	(f)(h)(k)	Service & Equipment	L+800		1.0	%	4/30/21		32,599		32,891			30,154
Templar Energy LLC	(f)(h)(j)(k)	Upstream	L+750		1.0	%	11/25/20		89,923		88,267			61,579
Total Safety U.S., Inc.	(h)(k)	Service & Equipment	L+800		1.3	%	9/13/20		14,795		15,004			13,612
UTEX Industries, Inc.	(k)	Service & Equipment	L+725		1.0	%	5/20/22		39,192		39,223			31,941
Vantage Energy II, LLC	(j)(k)	Upstream	L+750		1.0	%	5/8/17		85,000		85,000			84,575
Vantage Energy, LLC	(j)(k)	Upstream	L+750		1.0	%	12/20/18		30,309		30,132			26,975

Total Senior Secured Loans—Second Lien											1,155,972			1,084,620

See notes to unaudited consolidated financial statements.

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FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2015
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)		Amortized Cost			Fair Value^(d)
Senior Secured Bonds—10.2%
Comstock Resources, Inc.	(i)(o)	Upstream	10.0%		3/15/20	$	2,500	$	2,500		$	2,437
FourPoint Energy, LLC	(j)(k)(p)	Upstream	8.0%		12/31/20		222,750		213,432			199,361
FourPoint Energy, LLC	(e)(p)	Upstream	8.0%		12/31/20		86,625		86,192			77,529
Gastar Exploration USA, Inc.	(f)(i)	Upstream	8.6%		5/15/18		26,750		25,972			25,178
Light Tower Rentals, Inc.	(j)	Service & Equipment	8.1%		8/1/19		17,500		17,282			13,038
Mirant Mid-Atlantic Trust	(f)(i)	Power	10.1%		12/30/28		33,087		37,025			36,313
Prince Mineral Holding Corp.	(i)(o)	Service & Equipment	11.5%		12/15/19		13,697		15,054			13,320

Total Senior Secured Bonds									397,457			367,176
Unfunded Bond Commitment									(86,192	)		(86,192	)

Net Senior Secured Bonds									311,265			280,984

Subordinated Debt—32.5%
Alta Mesa Holdings, LP	(i)	Upstream	9.6%		10/15/18		27,451		27,398			21,001
American Energy—Woodford, LLC	(i)	Upstream	9.0%		9/15/22		10,500		10,089			6,077
Atlas Energy Holdings Operating Co., LLC	(f)(i)(l)(m)	Upstream	7.8%		1/15/21		24,060		22,514			16,361
Atlas Energy Holdings Operating Co., LLC	(f)(i)(l)(m)	Upstream	9.3%		8/15/21		20,213		20,348			14,326
Brand Energy & Infrastructure Services, Inc.	(f)	Service & Equipment	8.5%		12/1/21		25,000		25,000			23,563
BWAY Holding Co.	(f)	Service & Equipment	9.1%		8/15/21		3,100		3,081			3,224
Calpine Corp.	(f)(m)	Power	5.8%		1/15/25		7,100		7,100			7,224
Canbriam Energy Inc.	(f)(i)(k)(m)	Upstream	9.8%		11/15/19		88,200		83,195			88,862
Chaparral Energy Inc.	(i)	Upstream	8.3%		9/1/21		2,000		2,051			1,375
Chaparral Energy Inc.	(g)(i)	Upstream	7.6%		11/15/22		15,225		16,228			10,277
CHC Helicopter S.A.	(f)(m)	Service & Equipment	9.4%		6/1/21		2,785		2,853			1,685
Compressco Partners, LP	(f)(i)(m)	Service & Equipment	7.3%		8/15/22		20,000		19,834			17,488
Comstock Resources, Inc.	(i)	Upstream	9.5%		6/15/20		5,000		4,826			2,144
Crestwood Midstream Partners L.P.	(f)(m)	Midstream	6.1%		3/1/22		5,500		5,500			5,553
Crew Energy Inc.	(i)(m)(v)	Upstream	8.4%		10/21/20	C$	7,000		6,690			5,485
CrownRock, L.P.	(f)(i)	Upstream	7.1%		4/15/21	$	37,500		37,500			37,406
CrownRock, L.P.	(i)	Upstream	7.8%		2/15/23		2,800		2,759			2,821
Dynegy Finance I/II Inc.	(f)(m)	Power	7.4%		11/1/22		1,950		1,950			2,057
Dynegy Finance I/II Inc.	(f)(m)	Power	6.8%		11/1/19		950		950			988
Dynegy Finance I/II Inc.	(f)(m)	Power	7.6%		11/1/24		8,680		8,710			9,223
Eco Services Operations LLC	(f)	Service & Equipment	8.5%		11/1/22		5,000		5,000			5,087
Energy XXI Gulf Coast, Inc.	(i)(m)(o)	Upstream	7.5%		12/15/21		4,000		3,983			1,480
Energy XXI Gulf Coast, Inc.	(i)(m)(o)	Upstream	9.3%		12/5/17		5,000		5,133			3,500
EV Energy Partners, L.P.	(f)(i)(m)	Upstream	8.0%		4/15/19		2,000		1,822			1,835
Everest Acquisition LLC	(f)	Upstream	9.4%		5/1/20		14,250		14,250			14,987

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2015
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Gardner Denver, Inc.	(f)	Service & Equipment	6.9%				8/15/21	$	8,948	$	9,411	$	8,120
GenOn Energy, Inc.	(f)(i)(o)	Power	9.9%				10/15/20		40,698		42,854		41,817
Global Jet Capital Inc.		Service & Equipment	15.0%				1/30/25		401		401		401
Global Partners L.P.	(f)(i)(m)	Midstream	6.3%				7/15/22		68,350		68,350		67,325
The Hillman Group, Inc.	(f)	Service & Equipment	6.4%				7/15/22		5,000		5,023		5,038
Ithaca Energy Inc.	(i)(m)(o)	Upstream	8.1%				7/1/19		2,000		2,000		1,568
Jones Energy, Inc.	(i)	Upstream	6.8%				4/1/22		8,000		8,000		7,530
Jupiter Resources Inc.	(f)(i)(m)	Upstream	8.5%				10/1/22		71,125		67,023		58,678
The Kenan Advantage Group, Inc.	(f)	Service & Equipment	8.4%				12/15/18		18,000		18,421		18,878
Legacy Reserves LP	(f)(m)	Upstream	8.0%				12/1/20		16,750		16,468		13,894
Legacy Reserves LP	(f)(i)(m)	Upstream	6.6%				12/1/21		14,000		13,832		11,150
Lightstream Resources Ltd.	(i)(m)(o)	Upstream	8.6%				2/1/20		48,745		49,100		35,333
Lonestar Resources America Inc.	(i)	Upstream	8.8%				4/15/19		21,500		21,610		16,636
Martin Midstream Partners L.P.	(f)(m)	Midstream	7.3%				2/15/21		18,607		19,152		17,956
Memorial Production Partners L.P.	(i)(m)	Upstream	7.6%				5/1/21		7,000		6,821		6,423
Memorial Production Partners L.P.	(i)(m)	Upstream	6.9%				8/1/22		12,500		12,289		11,031
Resolute Energy Corp.	(i)(o)	Upstream	8.5%				5/1/20		6,230		6,538		2,656
RKI Exploration & Production, LLC	(f)(i)(o)	Upstream	8.5%				8/1/21		58,704		58,652		55,916
Samson Investment Co.	(i)	Upstream	9.8%				2/15/20		56,300		52,988		15,764
Sanchez Energy Corp.	(i)(m)(o)	Upstream	7.8%				6/15/21		3,000		2,962		2,933
SandRidge Energy, Inc.	(i)(m)(o)	Upstream	8.8%				1/15/20		22,075		20,483		14,956
SandRidge Energy, Inc.	(i)(m)(o)	Upstream	8.1%				10/15/22		3,500		3,319		2,204
SandRidge Energy, Inc.	(i)(m)(o)	Upstream	7.5%				3/15/21		5,000		4,503		3,125
SandRidge Energy, Inc.	(i)(m)(o)	Upstream	7.5%				2/15/23		2,500		2,374		1,546
Silver II US Holdings, LLC	(f)	Service & Equipment	7.8%				12/15/20		1,835		1,963		1,661
Swift Energy Co.	(i)(o)	Upstream	7.9%				3/1/22		20,000		20,045		8,217
Talos Production LLC	(f)(i)(o)	Upstream	9.8%				2/15/18		43,250		43,265		35,681
Teine Energy Ltd.	(i)(m)	Upstream	6.9%				9/30/22		12,900		12,807		11,820
Tenrgys, LLC	(j)(k)	Upstream	L+900		2.5	%	12/23/18		75,000		75,000		74,625
Warren Resources, Inc.	(f)(i)	Upstream	9.0%				8/1/22		38,900		38,385		23,051
Zachry Holdings, Inc.	(f)	Service & Equipment	7.5%				2/1/20		14,300		14,388		13,585

Total Subordinated Debt											1,057,191		893,547

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2015
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Number of Shares		Amortized Cost		Fair Value^(d)
Equity/Other—11.6%⁽ⁿ⁾
Abaco Energy Technologies LLC, Common Equity	(r)	Service & Equipment		6,944,444	$	6,944	$	6,250
Allied Downhole Technologies, LLC, Common Equity	(q)(r)	Service & Equipment		6,600,000		6,600		10,890
Allied Downhole Technologies, LLC, Warrants	(q)(r)	Service & Equipment		5,344,680		1,865		4,810
Altus Power America Holdings, LLC, Preferred Equity	(r)	Power		8,093,478		8,093		12,950
American Energy Appalachia Holdings, LLC, Common Equity	(r)(s)	Upstream		15,657,194		14,900		15,657
AP Exhaust Holdings, LLC, Common Equity	(q)(r)	Service & Equipment		811		811		600
BBH Operating LLC, Common Equity	(r)(t)	Upstream		1,000		1,000		820
BL Sand Hills Unit, L.P., Net Profits Interest	(r)(u)	Upstream		N/A		3,215		3,681
BL Sand Hills Unit, L.P., Overriding Royalty Interest	(u)	Upstream		N/A		459		370
Cimarron Energy Inc., Common Equity	(r)	Service & Equipment		2,500,000		2,500		2,000
Extraction Oil & Gas Holdings, LLC, Common Equity	(q)(r)	Upstream		4,191,800		11,250		11,318
Fortune Creek Co-Invest I L.P., LP Interest	(m)(v)	Midstream		N/A		16,877		13,955
FourPoint Energy, LLC, Common Equity, Class C Units	(p)(q)(r)	Upstream		66,000		66,000		82,500
FourPoint Energy, LLC, Common Equity, Class D Units	(p)(q)(r)	Upstream		12,374		8,176		15,653
Global Jet Capital Holdings, LP, Preferred Equity	(r)	Service & Equipment		171,832		172		172
Industrial Group Intermediate Holdings, LLC, Common Equity	(q)(r)	Service & Equipment		371,901		372		576
MB Precision Holdings LLC, Common Equity	(r)	Service & Equipment		490,213		490		417
Plains Offshore Operations Inc., Preferred Equity	(f)	Upstream		21,067		25,071		30,935
Plains Offshore Operations Inc., Warrants	(f)(r)	Upstream		427,005		689		2,135
Summit Midstream Partners, LLC, Preferred Equity		Midstream		38,115		38,115		37,924
Swift Worldwide Resources Holdco Limited, Common Equity	(m)(r)(w)	Service & Equipment		3,750,000		6,029		5,290
Synergy Offshore LLC, Preferred Equity	(x)	Upstream		50,000		56,955		58,750

Total Equity/Other						276,583		317,653

TOTAL INVESTMENTS—123.9%					$	3,671,928		3,402,641



LIABILITIES IN EXCESS OF OTHER ASSETS—(23.9%)								(656,295	)

NET ASSETS—100.0%							$	2,746,346

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Unaudited Consolidated Schedule of Investments (Continued)
As of March 31, 2015
(in thousands, except share amounts)

(a): Security may be an obligation of one or more entities affiliated with the named company.
(b): Certain variable rate securities in the Company's portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of March 31, 2015, the three-month London Interbank Offered Rate was 0.27% and the U.S. Prime Lending Rate was 3.25%.
(c): Denominated in U.S. dollars, unless otherwise noted.
(d): Fair value determined by the Company's board of trustees (see Note 7).
(e): Security is an unfunded commitment.
(f): Security or portion thereof held within FSEP Term Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
(g): Security or portion thereof held within EP Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8).
(h): Security or portion thereof held within Energy Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Natixis, New York Branch (see Note 8).
(i): Security or portion thereof held within Berwyn Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility with BNP Paribas Prime Brokerage, Inc., or BNP. Securities held within Berwyn Funding LLC may be rehypothecated from time to time as permitted under Rule 15c-1(a)(1) of the Securities Exchange Act of 1934, as amended, subject to the terms and conditions governing the prime brokerage facility with BNP (see Note 8).
(j): Security or portion thereof held within Wayne Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Wells Fargo Securities, LLC (see Note 8).
(k): Security or portion thereof held within Gladwyne Funding LLC and is pledged as collateral supporting the obligations outstanding under the repurchase transaction with Goldman Sachs Bank USA (see Note 8).
(l): Position or portion thereof unsettled as of March 31, 2015.
(m): The investment is not a qualifying asset under the Investment Company Act of 1940, as amended, or the 1940 Act. A business development company may not acquire any asset other than a qualifying asset, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development company's total assets. As of March 31, 2015, 83.7% of the Company's total assets represented qualifying assets.
(n): Listed investments may be treated as debt for GAAP or tax purposes.
(o): Security or portion thereof held within Berwyn Funding LLC has been rehypothecated under Rule 15c-1(a)(1) of the Securities Exchange Act of 1934, as amended, subject to the terms and conditions governing the prime brokerage facility with BNP (see Note 8). As of March 31, 2015, the fair value of securities rehypothecated by BNP was $81,544.
(p): Under the 1940 Act, the Company generally is deemed to be an "affiliated person" of a portfolio company if it owns 5% or more of the portfolio company's voting securities and generally is deemed to "control" a portfolio company if it owns 25% or more of the portfolio company's voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of March 31, 2015, the Company held investments in a portfolio company of which it is deemed to be an "affiliated person" but is not deemed to "control." The following table presents certain information with respect to such portfolio company for the three months ended March 31, 2015:

Portfolio Company			Interest Income				Net Change in Unrealized Appreciation (Depreciation)

Senior Secured Bonds
FourPoint Energy, LLC	—	—	$	4,867	—	—	$	4,366
Equity/Other
FourPoint Energy, LLC, Common Equity, Class C Units	—	—		—	—	—	$	(1,650	)
FourPoint Energy, LLC, Common Equity, Class D Units	—	—		—	—	—	$	(248	)

(q): Security held within FSEP Investments, Inc., a wholly-owned subsidiary of the Company.
(r): Security is non-income producing.
(s): Security held within EP American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
(t): Security held within FSEP-BBH, Inc., a wholly-owned subsidiary of the Company.
(u): Security held within EP Burnett Investments, Inc., a wholly-owned subsidiary of the Company.
(v): Investment denominated in Canadian dollars. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2015.
(w): Investment denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of March 31, 2015.
(x): Security held within EP Synergy Investments, Inc., a wholly-owned subsidiary of the Company.
(y): Security was on non-accrual status as of March 31, 2015.

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments
As of December 31, 2014
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Senior Secured Loans—First Lien—33.3%
Abaco Energy Technologies LLC	(h)(j)(k)	Service & Equipment	L+700		1.0	%	11/20/20	$	62,500	$	58,795	$	59,063
Allied Wireline Services, LLC	(h)(j)(k)	Service & Equipment	L+800		1.5	%	2/28/19		105,875		104,405		105,081
Alon USA Partners, L.P.	(h)(j)(m)	Downstream	L+800		1.3	%	11/26/18		7,231		7,468		7,308
Altus Power America, Inc.	(k)	Power	L+750		1.5	%	10/10/21		20,568		20,568		20,568
Altus Power America, Inc.	(e)	Power	L+750		1.5	%	10/10/21		63,807		63,807		63,807
AP Exhaust Acquisition, LLC	(h)	Service & Equipment	L+775		1.5	%	1/16/21		14,595		14,595		14,157
Atlas Energy, L.P.	(g)(m)	Midstream	L+550		1.0	%	7/31/19		5,486		5,443		5,404
Azure Midstream Energy LLC	(g)	Midstream	L+550		1.0	%	11/15/18		12,825		12,669		11,543
BBH Operating LLC		Upstream	Prime+500		3.3	%	2/26/15		19,850		19,850		18,957
BBH Operating LLC	(e)	Upstream	Prime+500		3.3	%	2/26/15		10,150		10,150		9,693
BL Sand Hills Unit, L.P.		Upstream	Prime+650		3.5	%	12/17/17		20,206		17,548		19,423
BL Sand Hills Unit, L.P.	(e)	Upstream	Prime+650		3.5	%	12/17/17		38,292		33,254		36,808
Boomerang Tube, LLC	(f)(g)	Service & Equipment	L+950		1.5	%	10/11/17		18,584		18,441		16,122
Cactus Wellhead, LLC	(g)(h)(j)(k)	Service & Equipment	L+600		1.0	%	7/31/20		52,369		51,384		42,550
Cimarron Energy Inc.	(h)	Service & Equipment	L+775		1.0	%	12/15/19		25,000		25,000		25,000
Crestwood Holdings LLC	(g)(h)(k)	Midstream	L+600		1.0	%	6/19/19		32,255		32,406		30,622
EnergySolutions, LLC	(f)(j)	Service & Equipment	L+575		1.0	%	5/29/20		21,709		21,314		21,702
EP Acquisition LLC		Upstream	Prime+500		3.3	%	3/31/15		750		750		720
FR Dixie Acquisition Corp.	(g)	Service & Equipment	L+475		1.0	%	12/18/20		10,173		10,184		8,443
FR Utility Services LLC	(g)	Service & Equipment	L+575		1.0	%	10/18/19		15,009		14,919		14,952
Harvey Gulf International Marine, LLC	(g)	Service & Equipment	L+450		1.0	%	6/18/20		1,910		1,893		1,551
Hudson Products Holdings Inc.	(g)	Service & Equipment	L+400		1.0	%	3/15/19		1,773		1,769		1,720
Industrial Group Intermediate Holdings, LLC	(j)	Service & Equipment	L+800		1.3	%	5/31/20		14,886		14,886		14,886
Larchmont Resources, LLC	(g)(j)	Upstream	L+725		1.0	%	8/7/19		20,370		20,379		19,809
MB Precision Holdings LLC	(h)	Service & Equipment	L+725		1.3	%	1/23/20		13,365		13,365		13,231
Moxie Liberty LLC	(g)(h)(k)	Power	L+650		1.0	%	8/21/20		32,432		32,562		32,270
Moxie Patriot LLC	(k)	Power	L+575		1.0	%	12/19/20		2,000		2,041		1,990
Panda Sherman Power, LLC	(g)(h)	Power	L+750		1.5	%	9/14/18		19,872		20,258		19,773
Panda Temple Power, LLC (TLA)	(k)	Power	L+700		1.5	%	7/17/18		13,949		13,799		14,141
Panda Temple Power, LLC (TLB)	(g)(h)(k)	Power	L+1000		1.5	%	7/17/18		40,000		39,447		40,600
Panda Temple Power II, LLC	(g)(h)	Power	L+600		1.3	%	4/3/19		23,809		24,274		23,452
PeroxyChem LLC	(h)(k)	Service & Equipment	L+650		1.0	%	2/28/20		11,900		11,793		11,781
ProPetro Services, Inc.	(j)(l)	Service & Equipment	L+625		1.0	%	9/30/19		12,267		12,246		11,899
RGL Reservoir Operations Inc.	(g)(m)	Service & Equipment	L+500		1.0	%	8/13/21		9,120		8,859		7,357
Southcross Holdings Borrower LP	(g)(j)	Midstream	L+500		1.0	%	8/4/21		18,952		18,862		16,962
Sprint Industrial Holdings LLC	(h)	Service & Equipment	L+575		1.3	%	11/14/19		14,775		14,760		14,110
Stallion Oilfield Holdings, Inc.	(f)(g)(h)(j)(k)	Service & Equipment	L+675		1.3	%	6/19/18		63,538		63,425		54,404
Sunnova Asset Portfolio 5 Holdings, LLC	(k)	Power	12.0% PIK (12.0% Max PIK)				11/14/21		62,502		62,502		62,502
Sunnova Asset Portfolio 5 Holdings, LLC	(e)	Power	12.0% PIK (12.0% Max PIK)				11/14/21		110,909		110,909		110,909

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2014
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity	Principal Amount^(c)		Amortized Cost			Fair Value^(d)
Swift Worldwide Resources US Holdings Corp.	(h)(k)	Service & Equipment	L+800		1.3	%	4/30/19	$	59,660	$	59,660		$	58,467
Total Safety U.S., Inc.	(g)	Service & Equipment	L+450		1.3	%	3/13/20		4,394		4,451			4,240
United Components, Inc.	(h)(l)	Service & Equipment	L+400		1.5	%	7/26/17		4,987		4,975			4,968

Total Senior Secured Loans—First Lien											1,100,065			1,072,945
Unfunded Loan Commitments											(218,120	)		(218,120	)

Net Senior Secured Loans—First Lien											881,945			854,825

Senior Secured Loans—Second Lien—38.6%
Alison US LLC	(f)(m)	Service & Equipment	L+850		1.0	%	8/29/22		22,222		21,363			20,806
American Energy—Marcellus, LLC	(g)	Upstream	L+750		1.0	%	8/4/21		10,000		9,858			9,200
American Energy—Utica, LLC	(h)(k)	Upstream	L+400, 5.5% PIK (5.5% Max PIK)		1.5	%	9/30/18		122,646		122,646			120,194
American Energy—Utica, LLC		Upstream	L+400, 5.5% PIK (5.5% Max PIK)		1.5	%	9/30/18		83,297		83,297			81,631
Ameriforge Group Inc.	(f)(h)(k)	Service & Equipment	L+750		1.3	%	12/21/20		35,950		36,516			35,478
BlackBrush Oil & Gas, L.P.	(f)(j)	Upstream	L+650		1.0	%	7/30/21		27,500		27,286			22,825
Brock Holdings III, Inc.	(f)(h)(k)	Service & Equipment	L+825		1.8	%	3/16/18		29,605		29,829			23,832
Callon Petroleum Co.	(j)(m)	Upstream	L+750		1.0	%	8/29/21		10,000		9,804			9,475
Chief Exploration & Development LLC	(j)(k)	Upstream	L+650		1.0	%	5/16/21		19,576		19,494			17,717
Consolidated Precision Products Corp.	(f)(g)(h)(k)	Service & Equipment	L+775		1.0	%	4/30/21		28,500		28,375			27,218
Drew Marine Group Inc.	(k)(m)	Service & Equipment	L+700		1.0	%	5/19/21		10,000		9,978			9,950
Emerald Performance Materials, LLC	(k)	Downstream	L+675		1.0	%	8/1/22		5,319		5,294			5,186
Extraction Oil & Gas Holdings, LLC	(j)(k)	Upstream	11.0%				5/29/19		74,186		74,186			74,928
Extraction Oil & Gas Holdings, LLC	(j)(k)	Upstream	10.0%				5/29/19		32,462		32,462			32,137
Fieldwood Energy LLC	(f)(j)(k)	Upstream	L+713		1.3	%	9/30/20		41,047		42,100			30,298
Filtration Group Corp.	(g)	Service & Equipment	L+725		1.0	%	11/21/21		2,632		2,608			2,635
Granite Intermediate Holdings, Inc.	(f)(k)(l)	Power	L+725		1.0	%	10/15/22		10,150		10,049			10,254
Horn Intermediate Holdings, Inc.	(h)	Service & Equipment	L+775		1.3	%	10/2/18		57,750		57,750			56,306
Husky Injection Molding Systems Ltd.	(f)(m)	Service & Equipment	L+625		1.0	%	6/30/22		4,000		4,048			3,850
Jonah Energy LLC	(j)(k)	Upstream	L+650		1.0	%	5/8/21		26,185		25,808			22,650
Magnum Hunter Resources Corp.	(j)(m)	Upstream	L+750		1.0	%	10/17/19		6,983		6,780			6,878
MD America Energy, LLC	(f)(g)(h)(k)	Upstream	L+850		1.0	%	8/4/19		78,000		74,506			74,879
Neff Rental LLC	(f)(k)	Service & Equipment	L+625		1.0	%	6/9/21		17,989		18,019			18,068
Oxbow Carbon LLC	(h)	Midstream	L+700		1.0	%	1/19/20		15,000		14,874			13,325
P2 Upstream Acquisition Co.	(f)(h)(k)	Service & Equipment	L+800		1.0	%	4/30/21		32,599		32,901			31,377
Power Buyer, LLC	(g)	Service & Equipment	L+725		1.0	%	11/6/20		2,500		2,520			2,422
Templar Energy LLC	(f)(h)(j)(k)	Upstream	L+750		1.0	%	11/25/20		89,923		88,196			65,014
Total Safety U.S., Inc.	(g)(h)	Service & Equipment	L+800		1.3	%	9/13/20		14,795		15,013			14,352
UTEX Industries, Inc.	(g)(k)	Service & Equipment	L+725		1.0	%	5/20/22		39,192		39,224			35,469
Vantage Energy II, LLC	(j)(k)	Upstream	L+750		1.0	%	5/8/17		85,000		85,000			84,575
Vantage Energy, LLC	(j)(k)	Upstream	L+750		1.0	%	12/20/18		30,385		30,197			27,043

Total Senior Secured Loans—Second Lien											1,059,981			989,972

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2014
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor	Maturity	Principal Amount^(c)		Amortized Cost			Fair Value^(d)
Senior Secured Bonds—11.1%
FourPoint Energy, LLC	(j)(k)(p)	Upstream	8.0%		12/31/20	$	222,750	$	213,158		$	196,020
FourPoint Energy, LLC	(e)(p)	Upstream	8.0%		12/31/20		86,625		86,192			76,230
Gastar Exploration USA, Inc.	(i)	Upstream	8.6%		5/15/18		22,000		21,548			18,855
Globe Luxembourg SCA	(f)(m)	Service & Equipment	9.6%		5/1/18		10,000		9,706			7,748
Light Tower Rentals, Inc.	(j)	Service & Equipment	8.1%		8/1/19		17,500		17,273			14,000
Mirant Mid-Atlantic Trust	(f)(i)	Power	10.1%		12/30/28		33,087		37,072			34,990
Permian Tank & Manufacturing, Inc.	(g)	Service & Equipment	10.5%		1/15/18		3,499		3,562			2,712
Prince Mineral Holding Corp.	(i)(o)	Service & Equipment	11.5%		12/15/19		15,345		16,748			15,671
Ryerson Inc.	(f)(g)	Service & Equipment	9.0%		10/15/17		2,300		2,362			2,371
Tervita Corp.	(i)(m)	Service & Equipment	8.0%		11/15/18		3,500		3,534			3,080

Total Senior Secured Bonds									411,155			371,677
Unfunded Bond Commitment									(86,192	)		(86,192	)

Net Senior Secured Bonds									324,963			285,485

Subordinated Debt—36.6%
Alta Mesa Holdings, L.P.	(f)(i)	Upstream	9.6%		10/15/18		34,951		34,870			29,637
American Energy—Woodford, LLC	(i)	Upstream	9.0%		9/15/22		10,500		10,078			6,602
Atlas Energy Holdings Operating Co., LLC	(f)(i)(m)	Upstream	7.8%		1/15/21		21,450		20,713			15,551
Atlas Energy Holdings Operating Co., LLC	(f)(i)(m)	Upstream	9.3%		8/15/21		19,763		20,040			15,193
Brand Energy & Infrastructure Services, Inc.	(f)(i)(o)	Service & Equipment	8.5%		12/1/21		25,000		25,000			22,625
BWAY Holding Co.	(f)	Service & Equipment	9.1%		8/15/21		3,100		3,080			3,116
Calpine Corp.	(f)(m)	Power	5.8%		1/15/25		7,100		7,100			7,224
Canbriam Energy Inc.	(f)(i)(m)	Upstream	9.8%		11/15/19		88,200		82,990			83,349
Chaparral Energy Inc.	(f)	Upstream	8.3%		9/1/21		2,000		2,053			1,319
Chaparral Energy Inc.	(f)(g)	Upstream	7.6%		11/15/22		15,225		16,254			10,011
CHC Helicopter S.A.	(f)(i)(m)(o)	Service & Equipment	9.4%		6/1/21		8,125		8,276			7,698
Clayton Williams Energy, Inc.	(i)(m)	Upstream	7.8%		4/1/19		9,300		9,288			7,797
Compressco Partners, LP	(f)(i)(m)	Service & Equipment	7.3%		8/15/22		20,000		19,830			17,338
Comstock Resources, Inc.	(f)(m)	Upstream	9.5%		6/15/20		5,000		4,821			3,375
Crestwood Midstream Partners L.P.	(i)(m)	Midstream	6.1%		3/1/22		5,500		5,500			5,207
Crew Energy Inc.	(i)(m)(v)	Upstream	8.4%		10/21/20	C$	10,343		11,502			10,085
CrownRock, L.P.	(f)(i)	Upstream	7.1%		4/15/21	$	37,500		37,500			35,257
Dynegy Finance I/II Inc.	(f)(m)	Power	7.4%		11/1/22		1,950		1,950			1,999
Dynegy Finance I/II Inc.	(f)(m)	Power	6.8%		11/1/19		950		950			969
Dynegy Finance I/II Inc.	(f)(m)	Power	7.6%		11/1/24		8,680		8,710			8,886
Eco Services Operations LLC	(f)	Service & Equipment	8.5%		11/1/22		5,000		5,000			5,075
Energy XXI Gulf Coast, Inc.	(i)(m)(o)	Upstream	7.5%		12/15/21		4,000		3,983			2,200
Energy XXI Gulf Coast, Inc.	(i)(m)	Upstream	9.3%		12/5/17		5,000		5,145			3,325
Era Group Inc.	(f)(m)	Service & Equipment	7.8%		12/15/22		7,750		7,638			8,060
Everest Acquisition LLC	(f)	Upstream	9.4%		5/1/20		14,250		14,250			14,468

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2014
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Rate^(b)	Floor			Maturity	Principal Amount^(c)		Amortized Cost		Fair Value^(d)
Gardner Denver, Inc.	(f)	Service & Equipment	6.9%				8/15/21	$	8,948	$	9,426	$	8,501
GenOn Energy, Inc.	(f)(i)(o)	Power	9.9%				10/15/20		40,698		42,923		40,299
Global Jet Capital, Inc.		Service & Equipment	8.0% PIK (8.0% Max PIK)				1/30/15		313		313		313
Global Partners L.P.	(f)(i)(m)	Midstream	6.3%				7/15/22		83,350		83,350		81,266
The Hillman Group, Inc.	(f)	Service & Equipment	6.4%				7/15/22		5,000		5,024		4,825
Ithaca Energy Inc.	(i)(m)	Upstream	8.1%				7/1/19		2,000		2,000		1,518
Jones Energy, Inc.	(i)	Upstream	6.8%				4/1/22		8,000		8,000		6,120
Jupiter Resources Inc.	(f)(i)(m)	Upstream	8.5%				10/1/22		67,125		63,660		50,344
The Kenan Advantage Group, Inc.	(f)(i)	Service & Equipment	8.4%				12/15/18		18,000		18,447		18,585
Legacy Reserves L.P.	(f)(m)	Upstream	8.0%				12/1/20		16,750		16,460		13,999
Legacy Reserves L.P.	(f)(i)(m)	Upstream	6.6%				12/1/21		14,000		13,827		11,486
Lightstream Resources Ltd.	(f)(i)(m)(o)	Upstream	8.6%				2/1/20		48,745		49,119		34,358
Lonestar Resources America Inc.	(i)	Upstream	8.8%				4/15/19		21,500		21,615		16,206
Martin Midstream Partners L.P.	(f)(m)	Midstream	7.3%				2/15/21		18,607		19,172		17,486
Memorial Production Partners L.P.	(i)(m)	Upstream	7.6%				5/1/21		7,000		6,815		5,653
Memorial Production Partners L.P.	(i)(m)	Upstream	6.9%				8/1/22		12,500		12,284		9,469
The Pantry Inc.	(f)(m)	Service & Equipment	8.4%				8/1/20		250		270		275
Resolute Energy Corp.	(i)(o)	Upstream	8.5%				5/1/20		6,230		6,550		2,951
RKI Exploration & Production, LLC	(f)(i)(o)	Upstream	8.5%				8/1/21		58,704		58,655		47,848
Samson Investment Co.	(i)	Upstream	9.8%				2/15/20		56,300		52,952		23,646
Sanchez Energy Corp.	(i)(m)	Upstream	7.8%				6/15/21		14,500		14,265		13,731
SandRidge Energy, Inc.	(i)(m)	Upstream	8.8%				1/5/20		22,075		20,428		15,066
SandRidge Energy, Inc.	(i)(m)	Upstream	8.1%				10/15/22		3,500		3,314		2,301
SandRidge Energy, Inc.	(i)(m)	Upstream	7.5%				3/15/21		5,000		4,487		3,244
SandRidge Energy, Inc.	(i)(m)	Upstream	7.5%				2/15/23		2,500		2,371		1,597
Sidewinder Drilling Inc.	(i)	Service & Equipment	9.8%				11/15/19		18,700		18,783		10,940
Silver II US Holdings, LLC	(f)	Service & Equipment	7.8%				12/15/20		1,835		1,968		1,743
Swift Energy Co.	(f)(i)(o)	Upstream	7.9%				3/1/22		20,000		20,045		10,253
Talos Production LLC	(f)(i)(o)	Upstream	9.8%				2/15/18		43,250		43,267		39,140
Teine Energy Ltd.	(i)(m)	Upstream	6.9%				9/30/22		12,900		12,802		10,303
Tenrgys, LLC	(j)(k)	Upstream	L+900		2.5	%	12/23/18		75,000		75,000		74,250
Warren Resources, Inc.	(f)(i)	Upstream	9.0%				8/1/22		38,900		38,377		24,313
Zachry Holdings, Inc.	(f)	Service & Equipment	7.5%				2/1/20		11,800		12,022		11,918

Total Subordinated Debt											1,124,512		940,313

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2014
(in thousands, except share amounts)



Portfolio Company^(a)	Footnotes	Industry	Number of Shares		Amortized Cost		Fair Value^(d)
Equity/Other—11.9%⁽ⁿ⁾
Abaco Energy Technologies LLC, Common Equity	(r)	Service & Equipment		6,944,444	$	6,944	$	6,944
Allied Downhole Technologies, LLC, Common Equity	(q)(r)	Service & Equipment		6,600,000		6,600		10,890
Allied Downhole Technologies, LLC, Warrants	(q)(r)	Service & Equipment		5,344,680		1,865		4,810
Altus Power America Holdings, LLC, Preferred Equity	(r)	Power		6,855,978		6,856		6,856
American Energy Appalachia Holdings, LLC, Common Equity	(r)(s)	Upstream		15,657,194		14,900		15,657
AP Exhaust Holdings, LLC, Common Equity	(q)(r)	Service & Equipment		811		811		580
BBH Operating LLC, Common Equity	(r)(t)	Upstream		1,000		1,000		931
BL Sand Hills Unit, L.P., Net Profits Interest	(r)(u)	Upstream		N/A		2,499		2,614
BL Sand Hills Unit, L.P., Overriding Royalty Interest	(u)	Upstream		N/A		357		322
Cimarron Energy Inc., Common Equity	(r)	Service & Equipment		2,500,000		2,500		2,500
Extraction Oil & Gas Holdings, LLC, Common Equity	(q)(r)	Upstream		4,191,800		11,250		10,480
Fortune Creek Co-Invest I L.P., LP Interest	(m)(v)	Midstream		N/A		16,904		15,111
FourPoint Energy, LLC, Common Equity, Class C Units	(p)(q)(r)	Upstream		66,000		66,000		84,150
FourPoint Energy, LLC, Common Equity, Class D Units	(p)(q)(r)	Upstream		12,374		8,176		15,901
Industrial Group Intermediate Holdings, LLC, Common Equity	(q)(r)	Service & Equipment		371,901		372		521
MB Precision Holdings LLC, Common Equity	(r)	Service & Equipment		490,213		490		490
Plains Offshore Operations Inc., Preferred Equity	(f)	Upstream		21,067		24,689		26,712
Plains Offshore Operations Inc., Warrants	(f)(r)	Upstream		427,005		689		811
Summit Midstream Partners, LLC, Preferred Equity		Midstream		37,095		37,095		36,910
Swift Worldwide Resources Holdco Limited, Common Equity	(m)(r)(w)	Service & Equipment		3,750,000		6,029		5,842
Synergy Offshore LLC, Preferred Equity	(x)	Upstream		50,000		55,623		55,550

Total Equity/Other						271,649		304,582

TOTAL INVESTMENTS—131.5%					$	3,663,050		3,375,177



LIABILITIES IN EXCESS OF OTHER ASSETS—(31.5%)								(809,456	)

NET ASSETS—100.0%							$	2,565,721

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Consolidated Schedule of Investments (Continued)
As of December 31, 2014
(in thousands, except share amounts)

(a): Security may be an obligation of one or more entities affiliated with the named company.
(b): Certain variable rate securities in the Company's portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. As of December 31, 2014, the three-month London Interbank Offered Rate was 0.26% and the U.S. Prime Lending Rate was 3.25%.
(c): Denominated in U.S. dollars, unless otherwise noted.
(d): Fair value determined by the Company's board of trustees (see Note 7).
(e): Security is an unfunded commitment.
(f): Security or portion thereof held within FSEP Term Funding, LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Deutsche Bank AG, New York Branch (see Note 8).
(g): Security or portion thereof held within EP Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Citibank, N.A. (see Note 8).
(h): Security or portion thereof held within Energy Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Natixis, New York Branch (see Note 8).
(i): Security or portion thereof held within Berwyn Funding LLC and is pledged as collateral supporting the amounts outstanding under the prime brokerage facility with BNP. Securities held within Berwyn Funding LLC may be rehypothecated from time to time as permitted under Rule 15c-1(a)(1) of the Securities Exchange Act of 1934, as amended, subject to the terms and conditions governing the prime brokerage facility with BNP (see Note 8).
(j): Security or portion thereof held within Wayne Funding LLC and is pledged as collateral supporting the amounts outstanding under the revolving credit facility with Wells Fargo Securities, LLC (see Note 8).
(k): Security or portion thereof held within Gladwyne Funding LLC and is pledged as collateral supporting the obligations outstanding under the repurchase transaction with Goldman Sachs Bank USA (see Note 8).
(l): Position or portion thereof unsettled as of December 31, 2014.
(m): The investment is not a qualifying asset under the 1940 Act. A business development company may not acquire any asset other than a qualifying asset, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the business development company's total assets. As of December 31, 2014, 84.5% of the Company's total assets represented qualifying assets.
(n): Listed investments may be treated as debt for GAAP or tax purposes.
(o): Security or portion thereof held within Berwyn Funding LLC has been rehypothecated under Rule 15c-1(a)(1) of the Securities Exchange Act of 1934, as amended, subject to the terms and conditions governing the prime brokerage facility with BNP. (see Note 8). As of December 31, 2014, the fair value of securities rehypothecated by BNP was $68,487.
(p): Under the 1940 Act, the Company generally is deemed to be an "affiliated person" of a portfolio company if it owns 5% or more of the portfolio company's voting securities and generally is deemed to "control" a portfolio company if it owns 25% or more of the portfolio company's voting securities or it has the power to exercise control over the management or policies of such portfolio company. During the year ended December 31, 2014, the Company made an investment in and, in connection with such investment is deemed to be an "affiliated person" of (but would not be deemed to "control"), the following portfolio company:

Portfolio Company	Purchases			Interest Income		Fee Income			Net Change in Unrealized Appreciation (Depreciation)

Senior Secured Bonds
FourPoint Energy, LLC	$	212,346	—	$	6,254	$	2,228	—	$	(27,100	)
Equity/Other
FourPoint Energy, LLC, Common Equity, Class C Units	$	66,000	—		—		—	—	$	18,150
FourPoint Energy, LLC, Common Equity, Class D Units	$	8,176	—		—		—	—	$	7,725

(q): Security held within FSEP Investments, Inc., a wholly-owned subsidiary of the Company.
(r): Security is non-income producing.
(s): Security held within EP American Energy Investments, Inc., a wholly-owned subsidiary of the Company.
(t): Security held within FSEP-BBH, Inc., a wholly-owned subsidiary of the Company.
(u): Security held within EP Burnett Investments, Inc., a wholly-owned subsidiary of the Company.
(v): Investment denominated in Canadian dollars. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2014.
(w): Investment denominated in British pounds. Amortized cost and fair value are converted into U.S. dollars as of December 31, 2014.
(x): Security held within EP Synergy Investments, Inc., a wholly-owned subsidiary of the Company.

See notes to unaudited consolidated financial statements.

Table of Contents

FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements
(in thousands, except share and per share amounts)

Note 1. Principal Business and Organization

FS Energy and Power Fund, or the Company, was formed as a Delaware statutory trust under the Delaware Statutory Trust Act on September 16, 2010 and formally commenced investment operations on July 18, 2011 upon raising gross proceeds in excess of $2,500, or the minimum offering requirement, from sales of its common shares of beneficial interest, or common shares, in its continuous public offering to persons who were not affiliated with the Company or the Company's investment adviser, FS Investment Advisor, LLC, or FS Advisor, a private investment firm that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended, or the Advisers Act, and an affiliate of the Company.

The Company has elected to be regulated as a business development company, or BDC, under the Investment Company Act of 1940, as amended, or the 1940 Act. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a regulated investment company, or RIC, as defined under Subchapter M of the Internal Revenue Code of 1986, as amended, or the Code. As of March 31, 2015, the Company had seven wholly-owned financing subsidiaries and six wholly-owned subsidiaries through which it holds interests in certain non-controlled portfolio companies. The unaudited consolidated financial statements include both the Company's accounts and the accounts of its wholly-owned subsidiaries as of March 31, 2015. All significant intercompany transactions have been eliminated in consolidation. Certain of the Company's consolidated subsidiaries are subject to U.S. federal and state income taxes.

The Company's investment objective is to generate current income and long-term capital appreciation by investing primarily in privately-held U.S. companies in the energy and power industry. The Company's investment policy is to invest, under normal circumstances, at least 80% of its total assets in securities of energy and power related, or Energy, companies. The Company considers Energy companies to be those companies that engage in the exploration, development, production, gathering, transportation, processing, storage, refining, distribution, mining, generation or marketing of natural gas, natural gas liquids, crude oil, refined products, coal or power, including those companies that provide equipment or services to companies engaged in any of the foregoing.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For a more complete discussion of significant accounting policies and certain other information, the Company's interim unaudited consolidated financial statements should be read in conjunction with its audited consolidated financial statements as of and for the year ended December 31, 2014 included in the Company's annual report on Form 10-K. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. The December 31, 2014 consolidated balance sheet and consolidated schedule of investments are derived from the Company's audited consolidated financial statements as of and for the year ended December 31, 2014. The Company is considered an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies. The Company has evaluated the impact of subsequent events through the date the consolidated financial statements were issued and filed with the Securities and Exchange Commission, or the SEC.

Table of Contents

FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 2. Summary of Significant Accounting Policies (Continued)

Use of Estimates: The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Many of the amounts have been rounded, and all amounts are in thousands, except share and per share amounts.

Capital Gains Incentive Fee: The Company entered into an investment advisory and administrative services agreement with FS Advisor, dated as of April 28, 2011, which was amended on August 10, 2012, and which, as amended, is referred to herein as the investment advisory and administrative services agreement. Pursuant to the terms of the investment advisory and administrative services agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of such agreement). Such fee will equal 20.0% of the Company's incentive fee capital gains (i.e., the Company's realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

While the investment advisory and administrative services agreement neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of an American Institute of Certified Public Accountants, or AICPA, Technical Practice Aid for investment companies, the Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to FS Advisor if the Company's entire portfolio were liquidated at its fair value as of the balance sheet date even though FS Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

Subordinated Income Incentive Fee: Pursuant to the investment advisory and administrative services agreement, FS Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income, which is calculated and payable quarterly in arrears, equals 20.0% of the Company's "pre-incentive fee net investment income" for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital, as defined in the investment advisory and administrative services agreement, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FS Advisor will not earn this incentive fee for any quarter until the Company's pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.625%. Once the Company's pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FS Advisor will be entitled to a "catch-up" fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until the Company's pre-incentive fee net investment income for such quarter equals 2.031%, or 8.125% annually, of adjusted capital. Thereafter, FS Advisor will be entitled to receive 20.0% of pre-incentive fee net investment income.

Reclassifications: Certain amounts in the unaudited consolidated financial statements for the three months ended March 31, 2014 may have been reclassified to conform to the classifications used to prepare the unaudited consolidated financial statements for the three months ended March 31, 2015. These reclassifications had no material impact on the Company's consolidated financial position, results of operations or cash flows as previously reported.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 3. Share Transactions

Below is a summary of transactions with respect to the Company's common shares during the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,

	2015						2014
	Shares			Amount			Shares			Amount
Gross Proceeds from Offering		19,243,929		$	184,430			26,640,958		$	285,620
Reinvestment of Distributions		2,437,037			21,167			2,585,121			25,214

Total Gross Proceeds		21,680,966			205,597			29,226,079			310,834
Commissions and Dealer Manager Fees		—			(16,663	)		—			(25,957	)

Net Proceeds to Company		21,680,966			188,934			29,226,079			284,877
Share Repurchase Program		(450,293	)		(3,972	)		(174,181	)		(1,693	)

Net Proceeds from Share Transactions		21,230,673		$	184,962			29,051,898		$	283,184

Status of Continuous Public Offering

Since commencing its continuous public offering and through April 28, 2015, the Company has sold 324,515,063 common shares (as adjusted for share distributions) for gross proceeds of $3,371,717, including common shares issued under its distribution reinvestment plan. As of April 28, 2015, the Company had raised total gross proceeds of $3,391,921, including $200 of seed capital contributed by the principals of FS Advisor in December 2010 and $20,004 in proceeds raised from the principals of FS Advisor, other individuals and entities affiliated with FS Advisor, certain members of the Company's board of trustees and certain individuals and entities affiliated with GSO Capital Partners LP, or GSO, the Company's investment sub-adviser, in a private placement conducted in April 2011 (see Note 4).

During the three months ended March 31, 2015 and 2014, the Company sold 21,680,966 and 29,226,079 common shares for gross proceeds of $205,597 and $310,834, respectively, at an average price per share of $9.48 and $10.64, respectively. The gross proceeds received during the three months ended March 31, 2015 and 2014 include reinvested shareholder distributions of $21,167 and $25,214, respectively, for which the Company issued 2,437,037 and 2,585,121 common shares, respectively. During the period from April 1, 2015 to April 28, 2015, the Company sold 4,281,432 common shares for gross proceeds of $39,384 at an average price per share of $9.20.

The proceeds from the issuance of common shares as presented on the Company's unaudited consolidated statements of changes in net assets and unaudited consolidated statements of cash flows are presented net of selling commissions and dealer manager fees of $16,663 and $25,957 for the three months ended March 31, 2015 and 2014, respectively.

Share Repurchase Program

The Company intends to conduct quarterly tender offers pursuant to its share repurchase program. The Company's board of trustees will consider the following factors, among others, in making its determination regarding whether to cause the Company to offer to repurchase common shares and under what terms:

•: the effect of such repurchases on the Company's qualification as a RIC (including the consequences of any necessary asset sales);
•: the liquidity of the Company's assets (including fees and costs associated with disposing of assets);

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 3. Share Transactions (Continued)

•: the Company's investment plans and working capital requirements;
•: the relative economies of scale with respect to the Company's size;
•: the Company's history in repurchasing common shares or portions thereof; and
•: the condition of the securities markets.

The Company currently intends to limit the number of common shares to be repurchased during any calendar year to the number of common shares it can repurchase with the proceeds it receives from the issuance of common shares under its distribution reinvestment plan. At the discretion of the Company's board of trustees, the Company may also use cash on hand, cash available from borrowings and cash from the liquidation of securities investments as of the end of the applicable period to repurchase common shares. In addition, the Company will limit the number of common shares to be repurchased in any calendar year to 10% of the weighted average number of common shares outstanding in the prior calendar year, or 2.5% in each quarter, though the actual number of common shares that the Company offers to repurchase may be less in light of the limitations noted above. The Company intends to offer to repurchase such common shares on each date of repurchase at a price equal to 90% of the offering price in effect on the date of repurchase. In months in which the Company repurchases common shares pursuant to its share repurchase program, it expects to conduct repurchases on the same date that it holds its first weekly closing in such month for the sale of common shares in its public offering. The Company's board of trustees may amend, suspend or terminate the share repurchase program at any time, upon 30 days' notice. The first such tender offer commenced in August 2012, and the repurchase occurred in connection with the Company's October 1, 2012 semi-monthly closing.

The following table provides information concerning the Company's repurchases of common shares pursuant to its share repurchase program during the three months ended March 31, 2015 and 2014:

For the Three Months Ended	Repurchase Date				Repurchase Price Per Share		Aggregate Consideration for Repurchased Shares

Fiscal 2014
December 31, 2013	January 2, 2014	174,181	100	%	$	9.720	$	1,693
Fiscal 2015
December 31, 2014	January 7, 2015	450,293	100	%	$	8.820	$	3,972

On April 1, 2015, the Company repurchased 716,857 common shares (representing 100% of common shares tendered for repurchase) at $8.73 per share for aggregate consideration totaling $6,258.

Note 4. Related Party Transactions

Compensation of the Investment Adviser and Dealer Manager

Pursuant to the investment advisory and administrative services agreement, FS Advisor is entitled to an annual base management fee of 2.0% of the average value of the Company's gross assets and an incentive fee based on the Company's performance. The Company commenced accruing fees under the investment advisory and administrative services agreement on July 18, 2011, upon commencement of the Company's investment operations. Base management fees are paid on a quarterly basis in arrears.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

hurdle rate, expressed as a rate of return on adjusted capital, as defined in the investment advisory and administrative services agreement, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FS Advisor will not earn this incentive fee for any quarter until the Company's pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.625%. Once the Company's pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FS Advisor will be entitled to a "catch-up" fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until the Company's pre-incentive fee net investment income for such quarter equals 2.031%, or 8.125% annually, of adjusted capital. This "catch-up" feature allows FS Advisor to recoup the fees foregone as a result of the existence of the hurdle rate. Thereafter, FS Advisor will be entitled to receive 20.0% of pre-incentive fee net investment income.

The second part of the incentive fee, which is referred to as the incentive fee on capital gains, is determined and payable in arrears as of the end of each calendar year (or upon termination of the investment advisory and administrative services agreement). This fee equals 20.0% of the Company's incentive fee capital gains, which equal the Company's realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees. The Company accrues for the capital gains incentive fee, which, if earned, is paid annually. The Company accrues the capital gains incentive fee based on net realized and unrealized gains; however, under the terms of the investment advisory and administrative services agreement, the fee payable to FS Advisor is based on realized gains and no such fee is payable with respect to unrealized gains unless and until such gains are actually realized.

The Company reimburses FS Advisor for expenses necessary to perform services related to the Company's administration and operations, including FS Advisor's allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings, L.P., or Franklin Square Holdings, the Company's sponsor and an affiliate of FS Advisor, providing administrative services to the Company on behalf of FS Advisor. The amount of the reimbursement payable to FS Advisor is the lesser of (1) FS Advisor's actual costs incurred in providing such services and (2) the amount that the Company estimates it would be required to pay alternative service providers for comparable services in the same geographic location. FS Advisor is required to allocate the cost of such services to the Company based on factors such as assets, revenues, time allocations and/or other reasonable metrics. The Company's board of trustees reviews the methodology employed in determining how the expenses are allocated to the Company and the proposed allocation of the administrative expenses among the Company and certain affiliates of FS Advisor. The Company's board of trustees then assesses the reasonableness of such reimbursements for expenses allocated to the Company based on the breadth, depth and quality of such services as compared to the estimated cost to the Company of obtaining similar services from third-party providers known to be available. In addition, the Company's board of trustees considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, the Company's board of trustees, among other things, compares the total amount paid to FS Advisor for such services as a percentage of the Company's net assets to the same ratio as reported by other comparable BDCs.

Under the investment advisory and administrative services agreement, the Company, either directly or through reimbursement to FS Advisor or its affiliates, is responsible for its organization and offering costs in an amount up to 1.5% of gross proceeds raised in the Company's continuous public offering. Organization and offering costs primarily include legal, accounting, printing and other expenses relating to the Company's continuous public offering, including costs associated with technology integration between the Company's systems and those of its selected broker-dealers, marketing expenses, salaries and direct expenses of FS Advisor's personnel, employees of its affiliates and others while engaged in registering and marketing the Company's common shares, which includes the development of marketing

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

materials and presentations, training and educational meetings, and generally coordinating the marketing process for the Company.

Prior to satisfaction of the minimum offering requirement and for a period of time thereafter, Franklin Square Holdings funded certain of the Company's organization and offering costs. Following this period, the Company paid certain of its organization and offering costs directly and reimbursed FS Advisor for offering costs incurred by FS Advisor on the Company's behalf, including marketing expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering and marketing the Company's common shares. Organization and offering costs funded directly by Franklin Square Holdings were recorded by the Company as a contribution to capital. The offering costs were offset against capital in excess of par value on the consolidated financial statements and the organization costs were charged to expense as incurred by the Company. All other offering costs, including costs incurred directly by the Company, amounts reimbursed to FS Advisor for ongoing offering costs and any reimbursements paid to Franklin Square Holdings for organization and offering costs previously funded, are recorded as a reduction of capital.

The dealer manager for the Company's continuous public offering is FS² Capital Partners, LLC, or FS², which is one of the Company's affiliates. Under the dealer manager agreement among the Company, FS Advisor and FS², or the dealer manager agreement, FS² is entitled to receive sales commissions and dealer manager fees in connection with the sale of common shares in the Company's continuous public offering, all or a portion of which may be re-allowed to selected broker-dealers.

The following table describes the fees and expenses accrued under the investment advisory and administrative services agreement and the dealer manager agreement during the three months ended March 31, 2015 and 2014:

			Three Months Ended March 31,

Related Party	Source Agreement	Description	2015		2014
FS Advisor	Investment Advisory and Administrative Services Agreement	Base Management Fee⁽¹⁾	$	18,745	$	12,867
FS Advisor	Investment Advisory and Administrative Services Agreement	Capital Gains Incentive Fee⁽²⁾		—	$	5,565
FS Advisor	Investment Advisory and Administrative Services Agreement	Subordinated Incentive Fee on Income⁽³⁾	$	2,879	$	4,610
FS Advisor	Investment Advisory and Administrative Services Agreement	Administrative Services Expenses⁽⁴⁾	$	1,500	$	935
FS Advisor	Investment Advisory and Administrative Services Agreement	Offering Costs⁽⁵⁾	$	1,624	$	904
FS²	Dealer Manager Agreement	Dealer Manager Fee⁽⁶⁾	$	3,217	$	5,038

(1): During the three months ended March 31, 2015 and 2014, $17,912 and $10,751, respectively, in base management fees were paid to FS Advisor. As of March 31, 2015, $18,745 in base management fees were payable to FS Advisor.
(2): During the three months ended March 31, 2015, the Company did not accrue any capital gains incentive fees. During the three months ended March 31, 2014, the Company accrued capital gains incentive fees of $5,565, of which $4,596 was based on unrealized gains and $969 was based on realized gains. No capital gains incentive fees are actually payable by the Company with respect to unrealized gains unless and until those gains are actually realized. The Company did not pay any capital gains incentive fees to FS Advisor during the three months ended March 31, 2015. The Company paid FS Advisor $2,857 in capital gains incentive fees during the three months ended March 31, 2014. As of March 31, 2015, the Company did not have any accrued capital gains incentive fees.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

(3): During the three months ended March 31, 2015 and 2014, $12,142 and $6,786, respectively, of subordinated incentive fees on income were paid to FS Advisor. As of March 31, 2015, a subordinated incentive fee on income of $2,879 was payable to FS Advisor.
(4): During the three months ended March 31, 2015 and 2014, $1,412 and $872, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to the Company by FS Advisor and the remainder related to other reimbursable expenses. The Company paid $1,373 and $166 in administrative services expenses to FS Advisor during the three months ended March 31, 2015 and 2014, respectively.
(5): During the three months ended March 31, 2015 and 2014, the Company incurred offering costs of $2,500 and $1,200, respectively, of which $1,624 and $904, respectively, related to reimbursements to FS Advisor for offering costs incurred on the Company's behalf, including marketing expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering and marketing the Company's common shares.
(6): Represents aggregate dealer manager fees retained by FS² and not re-allowed to selected broker-dealers.

Capital Contribution by FS Advisor and GSO

In December 2010, Michael C. Forman and David J. Adelman, the principals of FS Advisor, contributed an aggregate of $200 to purchase 22,444 common shares (as adjusted for share distributions) at $8.91 per share, which represents the initial public offering price (as adjusted for share distributions), net of selling commissions and dealer manager fees. The principals have agreed not to tender these common shares for repurchase as long as FS Advisor remains the Company's investment adviser.

In April 2011, pursuant to a private placement, Messrs. Forman and Adelman agreed to purchase, through affiliated entities controlled by each of them, 224,444 additional common shares (as adjusted for share distributions) at $8.91 per share (as adjusted for share distributions). The principals have agreed not to tender these common shares for repurchase as long as FS Advisor remains the Company's investment adviser. In connection with the same private placement, certain members of the Company's board of trustees and other individuals and entities affiliated with FS Advisor agreed to purchase 1,459,320 common shares (as adjusted for share distributions), and certain individuals and entities affiliated with GSO agreed to purchase 561,111 common shares (as adjusted for share distributions), in each case at a price of $8.91 per share (as adjusted for share distributions). In connection with the private placement, the Company issued an aggregate of 2,244,875 common shares (as adjusted for share distributions) for aggregate proceeds of $20,004, upon satisfaction of the minimum offering requirement on July 18, 2011. As of April 28, 2015, the Company has issued an aggregate of 4,181,046 common shares (as adjusted for share distributions) for aggregate gross proceeds of $37,703 to members of its board of trustees and individuals and entities affiliated with FS Advisor and GSO, including common shares sold to Messrs. Forman and Adelman in December 2010 and common shares sold in the private placement conducted in April 2011.

Potential Conflicts of Interest

FS Advisor's senior management team is comprised of substantially the same personnel as the senior management teams of FB Income Advisor, LLC, FSIC II Advisor, LLC, FSIC III Advisor, LLC and FS Global Advisor, LLC, the investment advisers to Franklin Square Holdings' other affiliated BDCs and affiliated closed-end management investment company. As a result, such personnel provide investment advisory services to the Company and each of FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III and FS Global Credit Opportunities Fund. While none of FS Advisor, FB Income Advisor, LLC, FSIC II Advisor, LLC, FSIC III Advisor, LLC or FS Global Advisor, LLC is currently making private corporate debt investments for clients other than the Company, FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

or FS Global Credit Opportunities Fund, respectively, any, or all, may do so in the future. In the event that FS Advisor undertakes to provide investment advisory services to other clients in the future, it intends to allocate investment opportunities in a fair and equitable manner consistent with the Company's investment objectives and strategy, if necessary, so that the Company will not be disadvantaged in relation to any other client of FS Advisor or its management team. In addition, even in the absence of FS Advisor retaining additional clients, it is possible that some investment opportunities may be provided to FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III and/or FS Global Credit Opportunities Fund rather than to the Company.

Exemptive Relief

In an order dated June 4, 2013, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of FS Advisor, including FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III and any future BDCs that are advised by FS Advisor or its affiliated investment advisers, or collectively the Company's co-investment affiliates. The Company believes this relief has and may continue to enhance its ability to further its investment objectives and strategy. The Company believes this relief may also increase favorable investment opportunities for the Company, in part, by allowing it to participate in larger investments, together with the Company's co-investment affiliates, than would be available to it if it had not obtained such relief. Because the Company did not seek exemptive relief to engage in co-investment transactions with its investment sub-adviser, GSO, and its affiliates, it will continue to be permitted to co-invest with GSO and its affiliates only in accordance with existing regulatory guidance.

Expense Reimbursement

Pursuant to an expense support and conditional reimbursement agreement, dated as of February 14, 2012 and amended and restated as of May 16, 2013, or, as amended and restated, the expense reimbursement agreement, Franklin Square Holdings has agreed to reimburse the Company for expenses in an amount that is sufficient to ensure that no portion of the Company's distributions to shareholders will be paid from its offering proceeds or borrowings. However, because certain investments the Company may make, including preferred and common equity investments, may generate dividends and other distributions to the Company that are treated for tax purposes as a return of capital, a portion of the Company's distributions to shareholders may also be deemed to constitute a return of capital for tax purposes to the extent that the Company may use such dividends or other distribution proceeds to fund its distributions to shareholders. Under those circumstances, Franklin Square Holdings will not reimburse the Company for the portion of such distributions to shareholders that represent a return of capital for tax purposes, as the purpose of the expense reimbursement arrangement is not to prevent tax-advantaged distributions to shareholders.

Under the expense reimbursement agreement, Franklin Square Holdings will reimburse the Company for expenses in an amount equal to the difference between the Company's cumulative distributions paid to its shareholders in each quarter, less the sum of its net investment company taxable income, net capital gains and dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent such amounts are not included in net investment company taxable income or net capital gains) in each quarter.

Pursuant to the expense reimbursement agreement, the Company has a conditional obligation to reimburse Franklin Square Holdings for any amounts funded by Franklin Square Holdings under such agreement if (and only to the extent that), during any fiscal quarter occurring within three years of the date on which Franklin Square Holdings funded such amount, the sum of the Company's net

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 4. Related Party Transactions (Continued)

investment income for tax purposes, net capital gains and the amount of any dividends and other distributions paid to the Company on account of preferred and common equity investments in portfolio companies (to the extent not included in net investment income for tax purposes or net capital gains) exceeds the distributions paid by the Company to shareholders; provided, however, that (i) the Company will only reimburse Franklin Square Holdings for expense support payments made by Franklin Square Holdings with respect to any calendar quarter beginning on or after July 1, 2013 to the extent that the payment of such reimbursement (together with any other reimbursement paid during such fiscal year) does not cause "other operating expenses" (as defined below) (on an annualized basis and net of any expense support payments received by the Company during such fiscal year) to exceed the lesser of (A) 1.75% of the Company's average net assets attributable to its common shares for the fiscal year-to-date period after taking such payments into account and (B) the percentage of the Company's average net assets attributable to its common shares represented by "other operating expenses" during the fiscal year in which such expense support payment from Franklin Square Holdings was made (provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from Franklin Square Holdings made during the same fiscal year) and (ii) the Company will not reimburse Franklin Square Holdings for expense support payments made by Franklin Square Holdings if the aggregate amount of distributions per share declared by the Company in such calendar quarter is less than the aggregate amount of distributions per share declared by the Company in the calendar quarter in which Franklin Square Holdings made the expense support payment to which such reimbursement relates. "Other operating expenses" means the Company's total "operating expenses" (as defined below), excluding base management fees, incentive fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. "Operating expenses" means all operating costs and expenses incurred, as determined in accordance with GAAP for investment companies.

The Company or Franklin Square Holdings may terminate the expense reimbursement agreement at any time. The specific amount of expenses reimbursed by Franklin Square Holdings, if any, will be determined at the end of each quarter. Upon termination of the expense reimbursement agreement by Franklin Square Holdings, Franklin Square Holdings will be required to fund any amounts accrued thereunder as of the date of termination. Similarly, the Company's conditional obligation to reimburse Franklin Square Holdings pursuant to the terms of the expense reimbursement agreement shall survive the termination of such agreement by either party.

Franklin Square Holdings is controlled by the Company's chairman, president and chief executive officer, Michael C. Forman, and the Company's vice-chairman, David J. Adelman. There can be no assurance that the expense reimbursement agreement will remain in effect or that Franklin Square Holdings will reimburse any portion of the Company's expenses in future quarters.

As of March 31, 2015, the Company had no reimbursements due from Franklin Square Holdings and no further amounts remained subject to repayment by the Company to Franklin Square Holdings in the future.

FS Benefit Trust

On May 30, 2013, FS Benefit Trust was formed as a Delaware statutory trust for the purpose of awarding equity incentive compensation to employees of Franklin Square Holdings and its affiliates. During the three months ended March 31, 2015 and 2014, FS Benefit Trust did not purchase any of the Company's common shares.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 5. Distributions

The following table reflects the cash distributions per share that the Company declared and paid on its common shares during the three months ended March 31, 2015 and 2014:

	Distribution

For the Three Months Ended	Per Share		Amount
Fiscal 2014
March 31, 2014	$	0.1524	$	28,423
Fiscal 2015
March 31, 2015	$	0.1771	$	54,825

The Company authorizes and declares ordinary cash distributions on a weekly basis and pays such distributions on a monthly basis. On March 9, 2015 and May 13, 2015, the Company's board of trustees declared regular weekly cash distributions for April 2015 through June 2015 and July 2015 through September 2015, respectively. These distributions have been or will be paid monthly to shareholders of record as of weekly record dates previously determined by the Company's board of trustees in the amount of $0.013625 per share. The timing and amount of any future distributions to shareholders are subject to applicable legal restrictions and the sole discretion of the Company's board of trustees.

The Company has adopted an "opt in" distribution reinvestment plan for its shareholders. As a result, if the Company makes a cash distribution, its shareholders will receive distributions in cash unless they specifically "opt in" to the distribution reinvestment plan so as to have their cash distributions reinvested in additional common shares. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a shareholder's ability to participate in the distribution reinvestment plan.

The Company may fund its cash distributions to shareholders from any sources of funds legally available to it, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies and expense reimbursements from Franklin Square Holdings. The Company has not established limits on the amount of funds it may use from available sources to make distributions.

For a period of time following commencement of the Company's continuous public offering, substantial portions of the Company's distributions were funded through the reimbursement of certain expenses by Franklin Square Holdings and its affiliates, including through the waiver of certain investment advisory fees by FS Advisor, that were subject to repayment by the Company within three years. The purpose of this arrangement was to ensure that no portion of the Company's distributions to shareholders was paid from offering proceeds or borrowings. Any such distributions funded through expense reimbursements or waivers of advisory fees were not based on the Company's investment performance.

No portion of the distributions paid during the three months ended March 31, 2015 or 2014 was funded through the reimbursement of operating expenses by Franklin Square Holdings. During the three months ended March 31, 2015, the Company did not repay any amounts to Franklin Square Holdings for expenses previously reimbursed or waived. There can be no assurance that the Company will continue to achieve the performance necessary to sustain its distributions or that the Company will be able to pay distributions at a specific rate or at all. Franklin Square Holdings and its affiliates have no obligation to waive advisory fees or otherwise reimburse expenses in future periods.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 5. Distributions (Continued)

The following table reflects the sources of the cash distributions on a tax basis that the Company paid on its common shares during the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,

	2015					2014
Source of Distribution	Distribution Amount		Percentage			Distribution Amount		Percentage
Offering proceeds	$	—		—		$	—		—
Borrowings		—		—			—		—
Net investment income⁽¹⁾		41,234		75	%		28,423		100	%
Short-term capital gains proceeds from the sale of assets		—		—			—		—
Long-term capital gains proceeds from the sale of assets		13,591		25	%		—		—
Non-capital gains proceeds from the sale of assets		—		—			—		—
Distributions on account of limited partnership interest		—		—			—		—
Expense reimbursement from sponsor		—		—			—		—

Total	$	54,825		100	%	$	28,423		100	%

(1): During the three months ended March 31, 2015 and 2014, 88.6% and 92.3%, respectively, of the Company's gross investment income was attributable to cash income earned, 2.7% and 3.1%, respectively, was attributable to non-cash accretion of discount and 8.7% and 4.6%, respectively, was attributable to paid-in-kind, or PIK, interest.

The Company's net investment income on a tax basis for the three months ended March 31, 2015 and 2014 was $53,492 and $30,092, respectively. As of March 31, 2015, the Company had $12,258 of undistributed ordinary income and $23,194 of net realized losses on a tax basis. As of December 31, 2014, the Company had $13,591 of undistributed ordinary income and net realized gains on a tax basis, all of which was distributed during the three months ended March 31, 2015.

The difference between the Company's GAAP-basis net investment income and its tax-basis net investment income is primarily due to the amount by which tax-basis income on a limited partnership interest differs from its GAAP-basis income, the reclassification of unamortized original issue discount and prepayment fees recognized upon prepayment of loans from income for GAAP purposes to realized gains for tax purposes, the impact of revenue and expense items incurred at certain consolidated subsidiaries that are subject to U.S. federal and state income tax, and with respect to the three months ended March 31, 2014, the reversal of the required accrual for GAAP purposes of incentive fees on unrealized gains even though no such incentive fees on unrealized gains were payable by the Company.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 5. Distributions (Continued)

The following table sets forth a reconciliation between GAAP-basis net investment income and tax-basis net investment income during the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,

	2015			2014
GAAP-basis net investment income	$	52,725		$	26,288
Income on limited partnership interest		(372	)		(783	)
Reversal of incentive fee accrual on unrealized gains		—			4,596
Reclassification of unamortized original issue discount and prepayment fees		(856	)		(40	)
Other miscellaneous differences		1,995			31

Tax-basis net investment income	$	53,492		$	30,092

The determination of the tax attributes of the Company's distributions is made annually as of the end of the Company's fiscal year based upon the Company's taxable income for the full year and distributions paid for the full year. Therefore, a determination made on a quarterly basis may not be representative of the actual tax attributes of the Company's distributions for a full year. The actual tax characteristics of distributions to shareholders are reported to shareholders annually on Form 1099-DIV.

As of March 31, 2015 and December 31, 2014, the components of accumulated earnings on a tax basis were as follows:

	March 31, 2015 (Unaudited)			December 31, 2014

Distributable ordinary income	$	12,258		$	—
Distributable capital gains (accumulated capital losses)		(23,194	)		13,591
Deferral of late year capital losses		—			(6,094	)
Distribution receivable on limited partnership interest		28			57
Unamortized organization costs		(262	)		(268	)
Net unrealized appreciation (depreciation) on investments and unrealized gain/loss on foreign currency⁽¹⁾		(264,451	)		(283,310	)

Total	$	(275,621	)	$	(276,024	)

(1): As of March 31, 2015 and December 31, 2014, the gross unrealized appreciation on the Company's investments and unrealized gain on foreign currency was $74,481 and $50,887, respectively. As of March 31, 2015 and December 31, 2014, the gross unrealized depreciation on the Company's investments and unrealized loss on foreign currency was $338,932 and $334,197, respectively.

The aggregate cost of the Company's investments for U.S. federal income tax purposes totaled $3,666,975 and $3,658,498 as of March 31, 2015 and December 31, 2014, respectively. The aggregate net unrealized appreciation (depreciation) on a tax basis was $(264,451) and $(283,310) as of March 31, 2015 and December 31, 2014, respectively.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 6. Investment Portfolio

The following table summarizes the composition of the Company's investment portfolio at cost and fair value as of March 31, 2015 and December 31, 2014:

	March 31, 2015 (Unaudited)							December 31, 2014

	Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio			Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	870,917	$	825,837		24	%	$	881,945	$	854,825		25	%
Senior Secured Loans—Second Lien		1,155,972		1,084,620		32	%		1,059,981		989,972		29	%
Senior Secured Bonds		311,265		280,984		9	%		324,963		285,485		9	%
Subordinated Debt		1,057,191		893,547		26	%		1,124,512		940,313		28	%
Equity/Other		276,583		317,653		9	%		271,649		304,582		9	%

Total	$	3,671,928	$	3,402,641		100	%	$	3,663,050	$	3,375,177		100	%

(1): Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

As of March 31, 2015, except for FourPoint Energy, LLC, in which the Company held a senior secured bond and two equity/other investments, the Company was not an "affiliated person" of any of its portfolio companies, as defined in the 1940 Act. As of March 31, 2015, the Company did not "control" any of its portfolio companies, as defined in the 1940 Act. In general, under the 1940 Act, the Company would be presumed to "control" a portfolio company if it owned 25% or more of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an "affiliated person" of a portfolio company if it owned 5% or more of its voting securities.

The Company's investment portfolio may contain loans or bonds that are in the form of lines of credit or revolving credit facilities, or other investments, pursuant to which the Company may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of March 31, 2015, the Company had four senior secured loan investments with aggregate unfunded commitments of $179,628, one senior secured bond investment with an unfunded commitment of $86,192 and three equity/other investments with aggregate unfunded commitments of $24,035. As of March 31, 2015, these unfunded equity/other investments were Altus Power America Holdings, LLC, BL Sand Hills Unit, L.P., net profits interest and BL Sand Hills Unit, L.P., overriding royalty interest. As of December 31, 2014, the Company had four senior secured loan investments with aggregate unfunded commitments of $218,120, one senior secured bond investment with an unfunded commitment of $86,192 and three equity/other investments with aggregate unfunded commitments of $26,109. As of December 31, 2014, these unfunded equity/other investments were Altus Power America Holdings, LLC, BL Sand Hills Unit, L.P., net profits interest and BL Sand Hills Unit, L.P., overriding royalty interest. The Company maintains sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 6. Investment Portfolio (Continued)

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets in such industries as of March 31, 2015 and December 31, 2014:

	March 31, 2015 (Unaudited)					December 31, 2014

Industry Classification	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
Upstream	$	1,926,462		57	%	$	1,815,456		54	%
Midstream		236,450		7	%		233,836		7	%
Downstream		17,751		0	%		12,494		0	%
Power		332,974		10	%		326,773		10	%
Service & Equipment		889,004		26	%		986,618		29	%

Total	$	3,402,641		100	%	$	3,375,177		100	%

Note 7. Fair Value of Financial Instruments

Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.

Level 3: Inputs that are unobservable for an asset or liability.

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of March 31, 2015 and December 31, 2014, the Company's investments were categorized as follows in the fair value hierarchy:

Valuation Inputs	March 31, 2015 (Unaudited)		December 31, 2014

Level 1—Price quotations in active markets	$	—	$	—
Level 2—Significant other observable inputs		—		—
Level 3—Significant unobservable inputs		3,402,641		3,375,177

Total	$	3,402,641	$	3,375,177

The Company's investments as of March 31, 2015 consisted primarily of debt investments that were traded on a private over-the-counter market for institutional investors. Eighteen senior secured loan investments, one senior secured bond investment and two subordinated debt investments were valued by independent valuation firms, which determined the fair value of such investments by considering,

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Fair Value of Financial Instruments (Continued)

among other factors, the borrower's ability to adequately service its debt, prevailing interest rates for like investments, call features, anticipated prepayments and other relevant terms of the debt. All of the Company's equity/other investments were also valued by an independent valuation firm, which determined the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. Except as described above, the Company valued its other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by an independent third-party pricing service and screened for validity by such service.

The Company's investments as of December 31, 2014 consisted primarily of debt investments that were traded on a private over-the-counter market for institutional investors. Seventeen senior secured loan investments, one senior secured bond investment and two subordinated debt investments were valued by an independent valuation firm, which determined the fair value of such investments by considering, among other factors, the borrower's ability to adequately service its debt, prevailing interest rates for like investments, call features, anticipated prepayments and other relevant terms of the debt. All of the Company's equity/other investments were valued by the same independent valuation firm, which determined the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. Except as described above, the Company valued its other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by an independent third-party pricing service and screened for validity by such service.

The Company periodically benchmarks the bid and ask prices it receives from the third-party pricing service and/or dealers, as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company's management in purchasing and selling these investments, the Company believes that these prices are reliable indicators of fair value. However, because of the private nature of this marketplace (meaning actual transactions are not publicly reported), the Company believes that these valuation inputs are classified as Level 3 within the fair value hierarchy. The Company may also use other methods, including the use of an independent valuation firm, to determine fair value for securities for which it cannot obtain prevailing bid and ask prices through its third-party pricing service or independent dealers or where the Company's board of trustees otherwise determines that the use of such methods is appropriate. The Company periodically benchmarks the valuations provided by the independent valuation firms against the actual prices at which it purchases and sells its investments. The Company's valuation committee and board of trustees reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Company's valuation process.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Fair Value of Financial Instruments (Continued)

The following is a reconciliation for the three months ended March 31, 2015 and 2014 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:

	For the Three Months Ended March 31, 2015

	Senior Secured Loans— First Lien			Senior Secured Loans— Second Lien			Senior Secured Bonds			Subordinated Debt			Equity/ Other		Total
Fair value at beginning of period	$	854,825		$	989,972		$	285,485		$	940,313		$	304,582	$	3,375,177
Accretion of discount (amortization of premium)		1,134			313			213			268			355		2,283
Net realized gain (loss)		(2,187	)		(287	)		(3,374	)		(12,109	)		—		(17,957	)
Net change in unrealized appreciation (depreciation)		(17,960	)		(1,343	)		9,197			20,555			8,137		18,586
Purchases		83,258			105,290			6,891			13,962			2,228		211,629
Paid-in-kind interest		2,226			2,876			—			—			2,351		7,453
Sales and redemptions		(95,459	)		(12,201	)		(17,428	)		(69,442	)		—		(194,530	)
Net transfers in or out of Level 3		—			—			—			—			—		—

Fair value at end of period	$	825,837		$	1,084,620		$	280,984		$	893,547		$	317,653	$	3,402,641



The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	(4,063	)	$	(2,063	)	$	4,897		$	(403	)	$	8,137	$	6,505

	For the Three Months Ended March 31, 2014

	Senior Secured Loans— First Lien			Senior Secured Loans— Second Lien			Senior Secured Bonds			Subordinated Debt			Equity/ Other			Total
Fair value at beginning of period	$	634,919		$	683,723		$	82,484		$	789,834		$	109,241		$	2,300,201
Accretion of discount (amortization of premium)		134			134			134			29			1,315			1,746
Net realized gain (loss)		312			517			509			942			—			2,280
Net change in unrealized appreciation (depreciation)		2,095			394			1,021			16,167			6,344			26,021
Purchases		176,658			13,389			62,070			71,191			21,663			344,971
Paid-in-kind interest		—			1,614			—			—			986			2,600
Sales and redemptions		(32,769	)		(19,626	)		(20,829	)		(25,772	)		(4,987	)		(103,983	)
Net transfers in or out of Level 3		—			—			—			—			—			—

Fair value at end of period	$	781,349		$	680,145		$	125,389		$	852,391		$	134,562		$	2,573,836



The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	2,843		$	1,191		$	1,820		$	18,397		$	6,344		$	30,595

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Fair Value of Financial Instruments (Continued)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of March 31, 2015 and December 31, 2014 were as follows:

Type of Investment	Fair Value at March 31, 2015 (Unaudited)		Valuation Technique⁽¹⁾	Unobservable Input	Range	Weighted Average

Senior Secured Loans—First Lien	$	397,659	Market Comparables	Market Yield (%)	8.5% - 13.0%	10.3	%
		428,178	Market Quotes	Indicative Dealer Quotes	55.0% - 101.3%	90.4	%
Senior Secured Loans—Second Lien		555,606	Market Comparables	Market Yield (%)	8.5% - 13.3%	11.2	%
		529,014	Market Quotes	Indicative Dealer Quotes	67.5%-102.1%	88.4	%
Senior Secured Bonds		190,698	Market Comparables	Market Yield (%)	10.3% - 10.8%	10.5	%
		90,286	Market Quotes	Indicative Dealer Quotes	74.0% - 110.3%	98.1	%
Subordinated Debt		74,625	Market Comparables	Market Yield (%)	11.5% - 12.0%	11.8	%
		818,521	Market Quotes	Indicative Dealer Quotes	27.5% - 106.8%	87.5	%
		401	Other⁽²⁾	Other⁽²⁾	N/A	N/A
Equity/Other		317,481	Market Comparables	Market Yield (%)	11.0% - 15.8%	13.2	%
				EBITDA Multiples (x)	4.8x - 10.5x	9.1x
				Production Multiples (Mmb/d)	$37,500.0 - $170,000.0	$44,283.0
				Proved Reserves Multiples (Mmboe)	$7.0 - $14.0	$8.9
				PV-10 Multiples (x)	0.5x - 1.9x	1.2x
				Capacity Multiple ($/kW)	$1,500.0 - $2,000.0	$1,750.0
			Discounted Cash Flow	Discount Rate (%)	11.0% - 29.3%	16.3	%
			Option Valuation Model	Volatility (%)	50.0% - 60.0%	58.7	%
		172	Other⁽²⁾	Other⁽²⁾	N/A	N/A

Total	$	3,402,641

(1): Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by an independent third-party pricing service and screened for validity by such service. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.
(2): Fair valued based on expected outcome of proposed corporate transactions.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 7. Fair Value of Financial Instruments (Continued)

Type of Investment	Fair Value at December 31, 2014		Valuation Technique⁽¹⁾	Unobservable Input	Range	Weighted Average

Senior Secured Loans—First Lien	$	356,089	Market Comparables	Market Yield (%)	8.5% - 12.3%	10.2	%
		498,736	Market Quotes	Indicative Dealer Quotes	78.8% - 102.3%	93.9	%
Senior Secured Loans—Second Lien		449,771	Market Comparables	Market Yield (%)	8.5% - 12.0%	10.6	%
		540,201	Market Quotes	Indicative Dealer Quotes	71.6% - 101.6%	89.6	%
Senior Secured Bonds		186,058	Market Comparables	Market Yield (%)	10.5% - 11.0%	10.8	%
		99,427	Market Quotes	Indicative Dealer Quotes	76.5% - 106.3%	94.2	%
Subordinated Debt		74,250	Market Comparables	Market Yield (%)	11.5% - 12.0%	11.8	%
		865,750	Market Quotes	Indicative Dealer Quotes	41.5% - 110.5%	84.9	%
		313	Other	Other	N/A	N/A
Equity/Other		304,582	Market Comparables	Market Yield (%)	11.0% - 15.8%	13.1	%
				EBITDA Multiples (x)	4.5x - 10.5x	8.9x
				Production Multiples (Mmb/d)	$37,500.0 - $174,000.0	$47,173.9
				Proved Reserves Multiples (Mmboe)	$6.5 - $27.2	$7.2
				PV-10 Multiples (x)	0.3x - 1.8x	1.2x
			Discounted Cash Flow	Discount Rate (%)	11.5% - 30.3%	16.0	%
			Option Valuation Model	Volatility (%)	45.0% - 52.5%	51.6	%

Total	$	3,375,177

(1): Investments using a market quotes valuation technique were valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by an independent third-party pricing service and screened for validity by such service. For investments utilizing a market comparables valuation technique, a significant increase (decrease) in the market yield, in isolation, would result in a significantly lower (higher) fair value measurement, and a significant increase (decrease) in any of the valuation multiples, in isolation, would result in a significantly higher (lower) fair value measurement. For investments utilizing a discounted cash flow valuation technique, a significant increase (decrease) in the discount rate, in isolation, would result in a significantly lower (higher) fair value measurement. For investments utilizing an option valuation model valuation technique, a significant increase (decrease) in the volatility, in isolation, would result in a significantly higher (lower) fair value measurement.

Note 8. Financing Arrangements

The following table presents summary information with respect to the Company's outstanding financing arrangements as of March 31, 2015. For additional information regarding these financing arrangements, please see the notes to the Company's audited consolidated financial statements contained in its annual report on Form 10-K for the fiscal year ended December 31, 2014 and the additional disclosure set forth in this Note 8.

Arrangement	Type of Arrangement	Rate	Amount Outstanding		Amount Available		Maturity Date

BNP Facility	Prime Brokerage	L+1.10%	$	223,000	$	77,000	December 26, 2015⁽¹⁾
Deutsche Bank Credit Facility	Revolving	L+1.80%	$	280,000	$	60,000	June 11, 2015
Goldman Facility	Repurchase	L+2.75%	$	189,113	$	135,887	September 15, 2017
Natixis Credit Facility	Revolving	CP+2.25%	$	148,214		—	July 11, 2023
Wells Fargo Credit Facility	Revolving	L+2.50% to 2.75%	$	125,000	$	75,000	September 9, 2019

(1): As described below, the BNP facility generally is terminable upon 270 days' notice by either party. As of March 31, 2015, neither Berwyn Funding nor BNP had provided notice of its intent to terminate the facility.

The Company's average borrowings and weighted average interest rate, including the effect of non-usage fees, for the three months ended March 31, 2015 were $1,026,392 and 2.61%, respectively. As of March 31, 2015, the Company's weighted average effective interest rate on borrowings was 2.39%.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

BNP Facility

On December 11, 2013, Berwyn Funding LLC, or Berwyn Funding, the Company's wholly-owned, special-purpose financing subsidiary, entered into a committed facility arrangement, or the BNP facility, with BNP Paribas Prime Brokerage, Inc., or BNP, pursuant to which Berwyn Funding may borrow, from time to time, up to $200,000 from BNP. The BNP facility was effected through a committed facility agreement by and between Berwyn Funding and BNP, or the committed facility agreement, a U.S. PB Agreement by and between Berwyn Funding and BNP and a special custody and pledge agreement by and among Berwyn Funding, BNP and State Street Bank and Trust Company, or State Street, as custodian, each dated as of December 11, 2013, and which are collectively referred to herein as the BNP financing agreements.

On August 18, 2014, the BNP facility was amended to increase the maximum commitment financing available to Berwyn Funding from $200,000 to $300,000 and add a 30-day cancellation right for BNP if BNP's long-term credit rating declines three or more notches below its highest rating by any of Standard & Poor's Financial Services LLC, Moody's Investors Service, Inc. or Fitch Ratings, Inc., during the term of the facility.

The Company may contribute securities to Berwyn Funding from time to time, subject to certain restrictions set forth in the committed facility agreement, and will retain a residual interest in any securities contributed through its ownership of Berwyn Funding or will receive fair market value for any securities sold to Berwyn Funding. Berwyn Funding may purchase additional securities from various sources. Berwyn Funding has appointed the Company to manage its portfolio of securities pursuant to the terms of an investment management agreement. Berwyn Funding will pledge certain of its securities as collateral to secure borrowings under the BNP facility. Such pledged securities will be held in a segregated custody account with State Street. The value of securities required to be pledged by Berwyn Funding is determined in accordance with the margin requirements described in the BNP financing agreements. Berwyn Funding's obligations to BNP under the facility are secured by a first priority security interest in substantially all of the assets of Berwyn Funding, including its portfolio of securities. The obligations of Berwyn Funding under the facility are non-recourse to the Company and the Company's exposure under the facility is limited to the value of the Company's investment in Berwyn Funding.

Borrowings under the BNP facility accrue interest at a rate equal to three-month London Interbank Offered Rate, or LIBOR, plus 1.10% per annum. Berwyn Funding is required to pay a non-usage fee of 0.55% per annum to the extent the aggregate principal amount available under the facility is not borrowed. Berwyn Funding may terminate the committed facility agreement upon 270 days' notice. Subject to the right of cancellation described above, absent a default or facility termination event, BNP is required to provide Berwyn Funding with 270 days' notice prior to terminating or amending the committed facility agreement.

As of March 31, 2015 and December 31, 2014, $223,000 was outstanding under the BNP facility. The carrying amount outstanding under the facility approximates its fair value. The Company incurred costs of $449 in connection with obtaining and amending the facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the 270 day period following the closing date of the BNP facility or the amendment thereto, as applicable. As of March 31, 2015, $26 of such deferred financing costs had yet to be amortized to interest expense.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

For the three months ended March 31, 2015 and 2014, the components of total interest expense for the BNP facility were as follows:

	Three Months Ended March 31,

	2015		2014
Direct interest expense	$	759	$	247
Non-usage fees		106		173
Amortization of deferred financing costs		50		99

Total interest expense	$	915	$	519

For the three months ended March 31, 2015 and 2014, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the BNP facility were as follows:

	Three Months Ended March 31,

	2015			2014
Cash paid for interest expense⁽¹⁾	$	875			479
Average borrowings under the facility	$	223,000		$	74,000
Effective interest rate on borrowings		1.37	%		1.33	%
Weighted average interest rate (including the effect of non-usage fees)		1.55	%		2.27	%

(1): Interest under the BNP facility is paid monthly in arrears and commenced on January 2, 2014.

Under the terms of the BNP financing agreements, BNP has the ability to borrow a portion of the pledged collateral, or, collectively, the rehypothecated securities, subject to certain limits. Berwyn Funding may designate any security within the pledged collateral as ineligible to be a rehypothecated security, provided there are eligible securities within the segregated custody account in an amount equal to the outstanding borrowings owed by Berwyn Funding to BNP. Berwyn Funding may recall any rehypothecated security at any time and BNP must return such security or an equivalent security within a commercially reasonable period. In the event BNP does not return the security, Berwyn Funding will have the right to, among other things, apply and set off an amount equal to 100% of the then-current fair market value of such rehypothecated securities against any outstanding borrowings owed to BNP under the facility. Rehypothecated securities are marked-to-market daily and if the value of all rehypothecated securities exceeds 100% of the outstanding borrowings owed by Berwyn Funding under the facility, BNP may either reduce the amount of rehypothecated securities to eliminate such excess or deposit into the segregated custody account an amount of cash equal to such excess. Berwyn Funding will continue to receive interest and the scheduled repayment of principal balances on rehypothecated securities. For the three months ended March 31, 2015, Berwyn Funding received a fee of $1 from BNP for securities that had been rehypothecated pursuant to the BNP financing agreements. As of March 31, 2015, the fair value of those securities rehypothecated by BNP was $81,544.

Borrowings of Berwyn Funding will be considered borrowings by the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.

Citibank Credit Facility

On March 24, 2015, EP Funding LLC, or EP Funding, the Company's wholly-owned, special-purpose financing subsidiary, repaid and terminated the revolving credit facility, or the Citibank credit facility, with Citibank, N.A., or Citibank, as administrative agent, and the financial institutions and

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

other lenders from time to time party thereto. The Citibank credit facility provided for borrowings in an aggregate principal amount up to $175,000 on a committed basis. Prior to the termination of the Citibank credit facility, borrowings under the facility accrued interest at a rate equal to three-month LIBOR plus 2.75% per annum. Under the Citibank credit facility, EP Funding was subject to a non-usage fee of 0.50% per annum to the extent that the aggregate principal amount available under the facility was not borrowed.

As of March 31, 2015, no amounts remained outstanding under the Citibank credit facility. As of December 31, 2014, $128,300 was outstanding under the Citibank credit facility. The carrying amount outstanding under the facility approximated its fair value. The Company incurred costs of $657 in connection with obtaining the facility, which the Company recorded as deferred financing costs on its consolidated balance sheets and amortized to interest expense over the life of the facility. In conjunction with the repayment and termination of the Citibank credit facility on March 24, 2015, $49 of remaining unamortized deferred financing costs were charged to interest expense.

For the three months ended March 31, 2015 and 2014, the components of total interest expense for the Citibank credit facility were as follows:

	Three Months Ended March 31,

	2015		2014
Direct interest expense	$	471	$	1,178
Non-usage fees		—		1
Amortization of deferred financing costs		130		81

Total interest expense	$	601	$	1,260

For the three months ended March 31, 2015 and 2014, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Citibank credit facility were as follows:

	Three Months Ended March 31,

	2015			2014
Cash paid for interest expense⁽¹⁾	$	1,011		$	1,195
Average borrowings under the facility⁽²⁾	$	70,020		$	174,174
Effective interest rate on borrowings		—			2.73	%
Weighted average interest rate (including the effect of non-usage fees)		2.99	%		2.74	%

(1): Interest under the Citibank credit facility was paid quarterly in arrears.
(2): Average borrowings for the three months ended March 31, 2015 were calculated for the period since the beginning of the period to when the Company ceased borrowings.

Borrowings of EP Funding were considered borrowings by the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.

Deutsche Bank Credit Facility

On June 24, 2011, FSEP Term Funding, LLC, or FSEP Funding, the Company's wholly-owned, special-purpose financing subsidiary, entered into a revolving credit facility, or the Deutsche Bank credit facility, with Deutsche Bank AG, New York Branch, or Deutsche Bank, as administrative agent and the lender party thereto, which provided for borrowings in an aggregate amount of up to $50,000.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

On May 30, 2012, August 28, 2012 and October 18, 2012, FSEP Funding and Deutsche Bank entered into separate amendments to the Deutsche Bank credit facility which increased the aggregate borrowings available under the facility to $100,000, $175,000 and $240,000, respectively. On June 24, 2013, FSEP Funding and Deutsche Bank entered into an additional amendment to the Deutsche Bank credit facility which extended the maturity date of the facility to June 24, 2014 and consolidated the existing four tranches of commitments under the facility into a single tranche of commitments with an aggregate principal amount of $240,000. On June 11, 2014, FSEP Funding and Deutsche Bank entered into an additional amendment to the Deutsche Bank credit facility which, among other things, extended the scheduled maturity date from June 24, 2014 to June 11, 2015 and increased the maximum commitments under the facility from $240,000 to $340,000 through the addition of a $100,000 tranche of revolving loan commitments from State Street.

Under the Deutsche Bank credit facility, the Company has transferred from time to time cash or securities to FSEP Funding as a contribution to capital and retains a residual interest in the contributed cash or securities through the Company's ownership of FSEP Funding. The Company may contribute additional cash or securities to FSEP Funding from time to time and FSEP Funding may purchase additional securities from various sources. FSEP Funding has appointed the Company to manage its portfolio of securities pursuant to the terms of an investment management agreement. FSEP Funding's obligations to the lenders under the facility are secured by a first priority security interest in substantially all of the assets of FSEP Funding, including its portfolio of securities. The obligations of FSEP Funding under the facility are non-recourse to the Company and the Company's exposure under the facility is limited to the value of the Company's investment in FSEP Funding.

Pricing under the Deutsche Bank credit facility is based on LIBOR for an interest period closest to the weighted average LIBOR interest period of eligible securities owned by FSEP Funding plus 1.80% per annum. FSEP Funding is subject to a non-usage fee of 0.75% per annum to the extent that the aggregate principal amount available under the facility is not borrowed. Any amounts borrowed under the Deutsche Bank credit facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on June 11, 2015.

As of March 31, 2015 and December 31, 2014, $280,000 was outstanding under the Deutsche Bank credit facility. The carrying amount outstanding under the facility approximates its fair value. The Company incurred costs of $2,150 in connection with obtaining and amending the facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of March 31, 2015, $165 of such deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2015 and 2014, the components of total interest expense for the Deutsche Bank credit facility were as follows:

	Three Months Ended March 31,

	2015		2014
Direct interest expense	$	1,411	$	1,219
Non-usage fees		113		—
Amortization of deferred financing costs		210		148

Total interest expense	$	1,734	$	1,367

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

For the three months ended March 31, 2015 and 2014, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Deutsche Bank credit facility were as follows:

	Three Months Ended March 31,

	2015			2014
Cash paid for interest expense⁽¹⁾	$	1,549		$	1,275
Average borrowings under the facility	$	280,000		$	240,000
Effective interest rate on borrowings		2.01	%		2.03	%
Weighted average interest rate (including the effect of non-usage fees)		2.18	%		2.03	%

(1): Interest under the Deutsche Bank credit facility is paid quarterly in arrears.

Borrowings of FSEP Funding will be considered borrowings by the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.

Goldman Financing

On September 11, 2014, through its two wholly-owned, special-purpose financing subsidiaries, Gladwyne Funding LLC, or Gladwyne Funding, and Strafford Funding LLC, or Strafford Funding, the Company entered into a debt financing arrangement with Goldman Sachs Bank USA, or Goldman. Pursuant to this financing arrangement, up to $225,000 was initially made available to the Company to fund investments in securities and for general corporate purposes. On December 15, 2014, the parties amended the financing arrangement to increase the amount available thereunder to $325,000. The Company elected to structure the financing in the manner described more fully below in order to, among other things, obtain such financing at a lower cost than would have been available through alternate arrangements.

Under the financing arrangement, assets in the Company's portfolio may be sold and/or contributed by it from time to time to Gladwyne Funding, pursuant to an Amended and Restated Sale and Contribution Agreement, dated as of September 11, 2014, between the Company and Gladwyne Funding, or the Sale and Contribution Agreement. As of March 31, 2015, the fair value of assets held by Gladwyne Funding was $671,385, which includes an initial contribution by the Company of a portfolio of assets with an aggregate par value of $427,061. The assets held by Gladwyne Funding secure the obligations of Gladwyne Funding under certain Floating Rate Notes, or the Notes, to be issued from time to time by Gladwyne Funding to Strafford Funding, pursuant to an indenture, dated as of September 11, 2014, as supplemented by the First Supplemental Indenture dated as of December 15, 2014, or the Indenture, with Citibank, as trustee. Pursuant to the Indenture, the aggregate principal amount of Notes that may be issued by Gladwyne Funding from time to time is $577,750. Interest on the Notes under the Indenture accrues at three-month LIBOR plus a spread of 4.00% per annum. Principal and any unpaid interest on the Notes will be due and payable on the stated maturity date of November 15, 2025. As of March 31, 2015, Strafford Funding had purchased $336,200 of Notes and intends to purchase from time to time the remaining Notes, in each case, from Gladwyne Funding at a purchase price equal to their par value. Strafford Funding did not purchase any Notes during the three months ended March 31, 2015.

Strafford Funding, in turn, has entered into a repurchase transaction with Goldman, pursuant to the terms of a master repurchase agreement and the related annex thereto, each dated as of September 11, 2014, and an amended and restated master confirmation dated as of December 15, 2014, or collectively, the Goldman facility. Pursuant to the Goldman facility, on one or more occasions

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

beginning December 15, 2014, Goldman will purchase Notes held by Strafford Funding for an aggregate purchase price equal to approximately 56.25% of the principal amount of the Notes purchased. As of March 31, 2015, Goldman had purchased Notes in the principal amount of $336,200 from Strafford Funding pursuant to the Goldman facility for $189,113. Subject to certain conditions, the maximum principal amount of Notes that may be purchased under the Goldman facility is $577,750. Accordingly, the aggregate maximum amount payable to Strafford Funding under the Goldman facility will not exceed $325,000. Strafford Funding intends to enter into additional repurchase transactions under the Goldman facility with respect to the entire $241,550 principal amount of Notes not previously purchased by Strafford Funding and sold to Goldman.

Strafford Funding will repurchase the Notes sold to Goldman under the Goldman facility no later than September 15, 2017. The repurchase price paid by Strafford Funding to Goldman will be equal to the purchase price paid by Goldman for the repurchased Notes, plus financing fees accrued at the applicable pricing rate under the Goldman facility. Through March 15, 2015, financing fees accrued on the greater of $225,000 or the aggregate purchase price paid by Goldman for such Notes. Thereafter, financing fees accrued on $325,000 (even if the aggregate purchase price paid for Notes purchased by Goldman is less than that amount), unless and until the outstanding amount is reduced in accordance with the terms of the Goldman facility.

If the Goldman facility is accelerated prior to September 15, 2017 due to an event of default or the failure of Gladwyne Funding to commit to sell any underlying assets that become defaulted obligations within 30 days and thereafter to use commercially reasonable efforts to sell any such defaulted obligations, then Strafford Funding must pay to Goldman a fee equal to the present value of the aggregate amount of the financing fees that would have been payable to Goldman through September 15, 2017 had the acceleration not occurred. The financing fee under the Goldman facility is equal to three-month LIBOR plus a spread of up to 2.75% per annum for the relevant period.

Goldman may require Strafford Funding to post cash collateral if the market value of the Notes (measured by reference to the market value of Gladwyne Funding's portfolio of assets) declines and is less than the required margin amount under the Goldman facility. In such event, in order to satisfy any such margin-posting requirements, Strafford Funding has the option to borrow funds from the Company pursuant to an uncommitted revolving credit agreement, dated as of September 11, 2014 and amended and restated on December 15, 2014, between Strafford Funding, as borrower, and the Company, as lender, or the Revolving Credit Agreement. Borrowings under the Revolving Credit Agreement may not exceed $325,000 and will accrue interest at a rate equal to one-month LIBOR plus a spread of 0.75% per annum.

As of March 31, 2015, Notes in an aggregate principal amount of $336,200 had been purchased by Strafford Funding from Gladwyne Funding and subsequently sold to Goldman under the Goldman facility for aggregate proceeds of $189,113. The carrying amount outstanding under the Goldman facility approximates its fair value. The Company funded each purchase of Notes by Strafford Funding through a capital contribution to Strafford Funding. As of March 31, 2015, Strafford Funding's liability under the Goldman facility was $189,113, plus $2,179 of accrued interest expense. The Notes issued by Gladwyne Funding and purchased by Strafford Funding eliminate in consolidation on the Company's financial statements. As of March 31, 2015, the fair value of assets held by Gladwyne Funding was $671,385.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

The Company incurred costs of $380 in connection with obtaining and amending the Goldman facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of March 31, 2015, $316 of such deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2015, the components of total interest expense for the Goldman facility were as follows:

	Three Months Ended March 31, 2015

Direct interest expense	$	1,867
Amortization of deferred financing costs		32

Total interest expense	$	1,899

For the three months ended March 31, 2015, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Goldman facility were as follows:

	Three Months Ended March 31, 2015

Cash paid for interest expense⁽¹⁾	$	—
Average borrowings under the facility	$	189,113
Effective interest rate on borrowings		2.99	%
Weighted average interest rate		3.95	%

(1): Interest under the Goldman facility is payable quarterly in arrears.

Amounts outstanding under the Goldman facility will be considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.

Natixis Credit Facility

On July 11, 2013, Energy Funding LLC, or Energy Funding, the Company's wholly-owned, special-purpose financing subsidiary, entered into a revolving credit facility, or the Natixis credit facility, with Natixis, New York Branch, or Natixis, as administrative agent and lender, Wells Fargo Bank, National Association, as collateral agent and custodian, and the other lenders from time to time party thereto. The Natixis credit facility provided for revolving borrowings though January 11, 2015 in an aggregate principal amount up to $150,000 on a committed basis. After that date, the Company was no longer permitted to borrow under the facility and outstanding amounts began to amortize. During the three months ended March 31, 2015, the Company repaid $1,786 of outstanding borrowings under the facility.

The Company may contribute cash or debt securities to Energy Funding from time to time, subject to certain restrictions set forth in the Natixis credit facility, and will retain a residual interest in any assets contributed through its ownership of Energy Funding or will receive fair market value for any debt securities sold to Energy Funding. Energy Funding may purchase additional debt securities from various sources. Energy Funding has appointed the Company to manage its portfolio of debt securities pursuant to the terms of a collateral management agreement. Energy Funding's obligations to the lenders under the facility are secured by a first priority security interest in substantially all of the assets of Energy Funding, including its portfolio of debt securities. The obligations of Energy Funding under

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

the facility are non-recourse to the Company and the Company's exposure under the facility is limited to the value of the Company's investment in Energy Funding.

Prior to March 2014, borrowings under the Natixis credit facility accrued interest at a rate equal to three-month LIBOR plus 2.40% per annum. In March 2014, borrowings under the Natixis credit facility began to accrue interest at a rate equal to the applicable commercial paper rate plus 2.25% per annum. Borrowings under the facility are subject to compliance with, among other things, an overcollateralization ratio test with respect to the current value of Energy Funding's portfolio, an interest coverage ratio test with respect to the payments due under the facility and eligibility criteria with respect to the initial acquisition of each debt security in Energy Funding's portfolio.

Prior to the commencement of the amortization period, Energy Funding was subject to a non-usage fee of 1.00% per annum to the extent that the aggregate principal amount available under the Natixis credit facility had not been borrowed. Any amounts borrowed under the facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on July 11, 2023.

As of March 31, 2015 and December 31, 2014, $148,214 and $150,000, respectively, was outstanding under the Natixis credit facility. The carrying amount outstanding under the facility approximates its fair value. The Company incurred costs of $2,544 in connection with obtaining the facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of March 31, 2015, $2,106 of such deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2015 and 2014, the components of total interest expense for the Natixis credit facility were as follows:

	Three Months Ended March 31,

	2015		2014
Direct interest expense	$	946	$	1,128
Amortization of deferred financing costs		62		63

Total interest expense	$	1,008	$	1,191

For the three months ended March 31, 2015 and 2014, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Natixis credit facility were as follows:

	Three Months Ended March 31,

	2015			2014
Cash paid for interest expense⁽¹⁾	$	971		$	1,146
Average borrowings under the facility	$	149,206		$	150,000
Effective interest rate on borrowings		2.56	%		2.51	%
Weighted average interest rate		2.54	%		3.01	%

(1): Interest under the Natixis credit facility is paid quarterly in arrears.

Borrowings of Energy Funding will be considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

Wells Fargo Credit Facility

On September 9, 2014, Wayne Funding LLC, or Wayne Funding, the Company's wholly-owned, special purpose financing subsidiary, entered into a revolving credit facility, or the Wells Fargo credit facility, with Wells Fargo Securities, LLC, as administrative agent, each of the conduit lenders and institutional lenders from time to time party thereto and Wells Fargo Bank, National Association, collectively referred to herein as Wells Fargo, as the collateral agent, account bank and collateral custodian under the Wells Fargo credit facility. The Wells Fargo credit facility provides for borrowings in an aggregate principal amount up to $200,000 on a committed basis.

The Company may contribute cash, loans or bonds to Wayne Funding from time to time and will retain a residual interest in any assets contributed through its ownership of Wayne Funding or will receive fair market value for any assets sold to Wayne Funding. Wayne Funding may purchase additional assets from various sources. Wayne Funding has appointed the Company to manage its portfolio of assets pursuant to the terms of a collateral management agreement. Wayne Funding's obligations to Wells Fargo under the Wells Fargo credit facility are secured by a first priority security interest in substantially all of the assets of Wayne Funding, including its portfolio of assets. The obligations of Wayne Funding under the Wells Fargo credit facility are non-recourse to the Company and the Company's exposure under the facility is limited to the value of its investment in Wayne Funding.

Borrowings under the Wells Fargo credit facility accrue interest at a rate equal to three-month LIBOR plus a spread ranging between 2.50% and 2.75% per annum, depending on the composition of the portfolio of assets for the relevant period. Beginning October 10, 2014, Wayne Funding became subject to a non-usage fee to the extent the aggregate principal amount available under the Wells Fargo credit facility is not borrowed. Any amounts borrowed under the Wells Fargo credit facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on September 9, 2019. Borrowings under the Wells Fargo credit facility are subject to compliance with a borrowing base, pursuant to which the amount of funds advanced to Wayne Funding varies depending upon the types of assets in Wayne Funding's portfolio.

As of March 31, 2015 and December 31, 2014, $125,000 and $120,000, respectively, was outstanding under the Wells Fargo credit facility. The carrying amount outstanding under the facility approximates its fair value. The Company incurred costs of $2,641 in connection with obtaining the facility, which the Company has recorded as deferred financing costs on its consolidated balance sheets and amortizes to interest expense over the life of the facility. As of March 31, 2015, $2,349 of such deferred financing costs had yet to be amortized to interest expense.

For the three months ended March 31, 2015, the components of total interest expense for the Wells Fargo credit facility were as follows:

	Three Months Ended March 31, 2015

Direct interest expense	$	933
Non-usage fees		97
Amortization of deferred financing costs		129

Total interest expense	$	1,159

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 8. Financing Arrangements (Continued)

For the three months ended March 31, 2015, the cash paid for interest expense, average borrowings, effective interest rate and weighted average interest rate for the Wells Fargo credit facility were as follows:

	Three Months Ended March 31, 2015

Cash paid for interest expense⁽¹⁾	$	984
Average borrowings under the facility	$	122,056
Effective interest rate on borrowings		2.91	%
Weighted average interest rate (including the effect of non-usage fees)		3.38	%

(1): Interest under the Wells Fargo credit facility is paid quarterly in arrears and commenced on December 15, 2014.

Borrowings of Wayne Funding will be considered borrowings of the Company for purposes of complying with the asset coverage requirements under the 1940 Act applicable to BDCs.

Note 9. Commitments and Contingencies

The Company enters into contracts that contain a variety of indemnification provisions. The Company's maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. Management of FS Advisor has reviewed the Company's existing contracts and expects the risk of loss to the Company to be remote.

The Company is not currently subject to any material legal proceedings and, to the Company's knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company's rights under contracts with its portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material effect upon its financial condition or results of operations.

See Note 6 for a discussion of the Company's unfunded commitments.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 10. Financial Highlights

The following is a schedule of financial highlights of the Company for the three months ended March 31, 2015 and the year ended December 31, 2014:

	Three Months Ended March 31, 2015 (Unaudited)			Year Ended December 31, 2014

Per Share Data:⁽¹⁾
Net asset value, beginning of period	$	8.57		$	9.66
Results of operations⁽²⁾
Net investment income (loss)		0.17			0.74
Net realized and unrealized appreciation (depreciation) on investments and gain/loss on foreign currency		0.00			(1.46	)

Net increase (decrease) in net assets resulting from operations		0.17			(0.72	)

Shareholder distributions⁽³⁾
Distributions from net investment income		(0.14	)		(0.62	)
Distributions from net realized gain on investments		(0.04	)		(0.07	)

Net decrease in net assets resulting from shareholder distributions		(0.18	)		(0.69	)

Capital share transactions
Issuance of common shares⁽⁴⁾		0.02			0.35
Repurchases of common shares⁽⁵⁾		—			—
Offering costs⁽²⁾		(0.01	)		(0.03	)

Net increase (decrease) in net assets resulting from capital share transactions		0.01			0.32

Net asset value, end of period	$	8.57		$	8.57



Shares outstanding, end of period		320,625,044			299,394,371



Total return⁽⁶⁾		2.10	%		(4.14	)%



Ratio/Supplemental Data:
Net assets, end of period	$	2,746,346		$	2,565,721



Ratio of net investment income to average net assets⁽⁷⁾		2.00	%		7.71	%
Ratio of total expenses to average net assets⁽⁷⁾		1.25	%		5.07	%
Portfolio turnover⁽⁸⁾		5.49	%		35.55	%
Total amount of senior securities outstanding, exclusive of treasury securities	$	965,327		$	1,090,413
Asset coverage per unit⁽⁹⁾		3.84			3.35

(1): Per share data may be rounded in order to recompute the ending net asset value per share.
(2): The per share data was derived by using the weighted average shares outstanding during the applicable period.
(3): The per share data for distributions reflects the actual amount of distributions paid per share during the applicable period.
(4): The issuance of common shares on a per share basis reflects the incremental net asset value changes as a result of the issuance of common shares in the Company's continuous public offering and pursuant to the Company's distribution reinvestment plan. The issuance of common shares at

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 10. Financial Highlights (Continued)

an offering price, net of selling commissions and dealer manager fees, that is greater than the net asset value per share results in an increase in net asset value per share.

(5): The per share impact of the Company's repurchases of common shares was a reduction to net asset value of less than $0.01 per share during each period.
(6): The total return for each period presented was calculated by taking the net asset value per share as of the end of the applicable period, adding the cash distributions per share which were declared during the applicable period and dividing the total by the net asset value per share at the beginning of the applicable period. The total return does not consider the effect of the sales load from the sale of the Company's common shares. The total return includes the effect of the issuance of common shares at a net offering price that is greater than net asset value per share, which causes an increase in net asset value per share. The historical calculation of total return in the table should not be considered a representation of the Company's future total return, which may be greater or less than the returns shown in the table due to a number of factors, including the Company's ability or inability to make investments in companies that meet its investment criteria, the interest rates payable on the debt securities the Company acquires, the level of the Company's expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which the Company encounters competition in its markets and general economic conditions. As a result of these factors, results for any previous period should not be relied upon as being indicative of performance in future periods. The total return calculations set forth above represent the total return on the Company's investment portfolio during the applicable period and are calculated in accordance with GAAP. These return figures do not represent an actual return to shareholders.
(7): Weighted average net assets during the applicable period are used for this calculation. Ratios for the three months ended March 31, 2015 are not annualized. The following is a schedule of supplemental ratios for the three months ended March 31, 2015 and the year ended December 31, 2014:



Ratio of accrued capital gains incentive fees to average net assets	—		(0.48	)%
Ratio of subordinated income incentive fees to average net assets	0.11	%	1.41	%
Ratio of interest expense to average net assets	0.28	%	0.84	%
Ratio of income and excise taxes to average net assets	0.00	%	0.04	%

(8): Portfolio turnover for the three months ended March 31, 2015 is not annualized.
(9): Asset coverage per unit is the ratio of the carrying value of the Company's total consolidated assets, less liabilities and indebtedness not represented by senior securities, to the aggregate amount of senior securities representing indebtedness.

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FS Energy and Power Fund

Notes to Unaudited Consolidated Financial Statements (Continued)
(in thousands, except share and per share amounts)

Note 11. Recently Issued Accounting Standards

In April 2015, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update No. 2015-03, Interest—Imputation of Interest, to simplify the presentation in the financial statements of debt issuance costs. Under existing guidance, debt issuance costs are recognized as a deferred charge and presented as an asset on the balance sheet. The amendments to the guidance require that debt issuance costs related to a recognized liability for indebtedness be presented in the balance sheet as a direct deduction from the carrying amount of that liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by the amendments to the guidance. The amendments to the FASB codification guidance are to be applied retrospectively with applicable disclosures for a change in accounting principle upon transition. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2015. Early application by public entities is permitted. The Company is currently assessing the impact of this guidance on its consolidated financial statements.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
(in thousands, except share and per share amounts)

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q. In this report, "we," "us" and "our" refer to FS Energy and Power Fund.

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:

•: our future operating results;
•: our business prospects and the prospects of the companies in which we may invest;
•: the impact of the investments that we expect to make;
•: the ability of our portfolio companies to achieve their objectives;
•: our current and expected financing arrangements and investments;
•: changes in the general interest rate environment;
•: the adequacy of our cash resources, financing sources and working capital;
•: the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies;
•: our contractual arrangements and relationships with third parties;
•: actual and potential conflicts of interest with FS Advisor, FB Income Advisor, LLC, FSIC II Advisor, LLC, FSIC III Advisor, LLC, FS Global Advisor, LLC, FS Investment Corporation, FS Investment Corporation II, FS Investment Corporation III, FS Global Credit Opportunities Fund, GSO or any of their affiliates;
•: the dependence of our future success on the general economy and its effect on the industries in which we may invest;
•: our use of financial leverage;
•: the ability of FS Advisor to locate suitable investments for us and to monitor and administer our investments;
•: the ability of FS Advisor or its affiliates to attract and retain highly talented professionals;
•: our ability to maintain our qualification as a RIC and as a BDC;
•: the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, and the rules and regulations issued thereunder;
•: the effect of changes to tax legislation and our tax position; and
•: the tax status of the enterprises in which we may invest.

In addition, words such as "anticipate," "believe," "expect" and "intend" indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason. Factors that could cause actual results to differ materially include:

•: changes in the economy;
•: risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and
•: future changes in laws or regulations and conditions in our operating areas.

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We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Shareholders are advised to consult any additional disclosures that we may make directly to shareholders or through reports that we may file in the future with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements and projections contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Overview

We were formed as a Delaware statutory trust under the Delaware Statutory Trust Act on September 16, 2010 and formally commenced investment operations on July 18, 2011 upon raising gross proceeds in excess of $2,500 from sales of our common shares in our continuous public offering to persons who were not affiliated with us or FS Advisor. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act and has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC under Subchapter M of the Code. Prior to satisfying the minimum offering requirement, we had no operations except for matters relating to our organization.

Our investment activities are managed by FS Advisor and supervised by our board of trustees, a majority of whom are independent. Under our investment advisory and administrative services agreement, we have agreed to pay FS Advisor an annual base management fee based on our gross assets as well as incentive fees based on our performance. FS Advisor has engaged GSO to act as our investment sub-adviser. GSO assists FS Advisor in identifying investment opportunities and makes investment recommendations for approval by FS Advisor according to guidelines set by FS Advisor.

Our investment policy is to invest, under normal circumstances, at least 80% of our total assets in securities of Energy companies. This investment policy may not be changed without at least 60 days' prior notice to holders of our common shares of any such change.

Our investment objectives are to generate current income and long-term capital appreciation. We have identified and intend to focus on the following investment categories, which we believe will allow us to generate an attractive total return with an acceptable level of risk.

Direct Originations: We intend to leverage our relationship with GSO and its global sourcing and origination platform to directly source investment opportunities. Such investments are originated or structured for us or made by us and are not generally available to the broader market. These investments may include both debt and equity components, although we do not expect to make equity investments (other than income-oriented equity investments) independent of having an existing credit relationship. We believe directly originated investments may offer higher returns and more favorable protections than broadly syndicated transactions.

Opportunistic: We seek to capitalize on market price inefficiencies by investing in loans, bonds and other securities where the market price of such investment reflects a lower value than deemed warranted by our fundamental analysis. We believe that market price inefficiencies may occur due to, among other things, general dislocations in the markets, a misunderstanding by the market of a particular company or an Energy industry sub-sector being out of favor with the broader investment community. We seek to allocate capital to these securities that have been misunderstood or mispriced by the market and where we believe there is an opportunity to earn an attractive return on our investment. Such opportunities may include both event driven investments and anchor orders.

In the case of event driven investments, we intend to take advantage of dislocations that arise in the markets due to an impending event and where the market's apparent expectation of value differs substantially from our fundamental analysis. Such events may include a looming debt maturity or default, a merger, spin-off or other corporate reorganization, an adverse regulatory or legal ruling, or a material contract expiration, any of which may significantly improve or impair a company's financial position. Compared to other investment strategies, event driven investing depends more heavily on our

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ability to successfully predict the outcome of an individual event rather than on underlying macroeconomic fundamentals. As a result, successful event driven strategies may offer both substantial diversification benefits and the ability to generate performance in uncertain market environments.

We may also invest in certain opportunities that are originated and then syndicated by a commercial or investment bank but where we provide a capital commitment significantly above the average syndicate participant, i.e., an anchor order. In these types of investments, we may receive fees, preferential pricing or other benefits not available to other lenders in return for our significant capital commitment. Our decision to provide an anchor order to a syndicated transaction is predicated on a rigorous credit analysis, our familiarity with a particular company, Energy industry sub-sector or financial sponsor, and the broader investment experiences of FS Advisor and GSO.

Broadly Syndicated/Other: Although our primary focus is to invest in directly originated transactions and opportunistic investments, in certain circumstances we will also invest in the broadly syndicated loan and high yield markets. Broadly syndicated loans and bonds are generally more liquid than our directly originated investments and provide a complement to our less liquid strategies. In addition, and because we typically receive more attractive financing terms on these positions than we do on our less liquid assets, we are able to leverage the broadly syndicated portion of our portfolio in such a way that maximizes the levered return potential of our portfolio.

Our portfolio is comprised primarily of income-oriented securities, which refers to debt securities and income-oriented preferred and common equity interests, of privately-held Energy companies within the United States. We intend to weight our portfolio towards senior and subordinated debt. In addition to investments purchased from dealers or other investors in the secondary market, we expect to invest in primary market transactions and directly originated investments as this will provide us with the ability to tailor investments to best match a project's or company's needs with our investment objectives. Our portfolio may also be comprised of select income-oriented preferred or common equity interests, which refers to equity interests that pay consistent, high-yielding dividends, that we believe will produce both current income and long-term capital appreciation. These income-oriented preferred or common equity interests may include interests in master limited partnerships. In connection with certain of our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration.

Revenues

The principal measure of our financial performance is net increase in net assets resulting from operations, which includes net investment income, net realized gain or loss on investments, net realized gain or loss on foreign currency, net change in unrealized appreciation or depreciation on investments and net change in unrealized gain or loss on foreign currency. Net investment income is the difference between our income from interest, dividends, fees and other investment income and our operating and other expenses. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for those foreign denominated investment transactions. Net realized gain or loss on foreign currency is the portion of realized gain or loss attributable to foreign currency fluctuations. Net change in unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized gain or loss on foreign currency for those foreign denominated investments. Net change in unrealized gain or loss on foreign currency is the net change in the value of receivables or accruals due to the impact of foreign currency fluctuations.

We principally generate revenues in the form of interest income on the debt investments we hold. We also generate revenues in the form of dividends and other distributions on the equity or other securities we may hold. In addition, we may generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. Any such fees generated in connection with our investments will be recognized as earned.

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Expenses

Our primary operating expenses include the payment of advisory fees and other expenses under the investment advisory and administrative services agreement, interest expense from financing arrangements and other expenses necessary for our operations. Our investment advisory fee compensates FS Advisor for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments. FS Advisor is responsible for compensating our investment sub-adviser.

We reimburse FS Advisor for expenses necessary to perform services related to our administration and operations, including FS Advisor's allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings providing administrative services to us on behalf of FS Advisor. Such services include the provision of general ledger accounting, fund accounting, legal services, investor relations and other administrative services. FS Advisor also performs, or oversees the performance of, our corporate operations and required administrative services, which includes being responsible for the financial records that we are required to maintain and preparing reports for our shareholders and reports filed with the SEC. In addition, FS Advisor assists us in calculating our net asset value, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our shareholders, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others. See "—Related Party Transactions" for additional information regarding the reimbursements payable to FS Advisor for administrative services and the methodology for determining the amount of any such reimbursements. We bear all other expenses of our operations and transactions. For additional information regarding these expenses, please see our annual report on Form 10-K for the year ended December 31, 2014.

In addition, we have contracted with State Street to provide various accounting and administrative services, including, but not limited to, preparing preliminary financial information for review by FS Advisor, preparing and monitoring expense budgets, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing with respect to RIC compliance.

Expense Reimbursement

Pursuant to the expense reimbursement agreement, Franklin Square Holdings has agreed to reimburse us for expenses in an amount that is sufficient to ensure that no portion of our distributions to shareholders will be paid from our offering proceeds or borrowings. However, because certain investments we may make, including preferred and common equity investments, may generate dividends and other distributions to us that are treated for tax purposes as a return of capital, a portion of our distributions to shareholders may also be deemed to constitute a return of capital for tax purposes to the extent that we may use such dividends or other distribution proceeds to fund our distributions to shareholders. Under those circumstances, Franklin Square Holdings will not reimburse us for the portion of such distributions to shareholders that represent a return of capital for tax purposes, as the purpose of the expense reimbursement arrangement is not to prevent tax-advantaged distributions to shareholders.

Under the expense reimbursement agreement, Franklin Square Holdings will reimburse us for expenses in an amount equal to the difference between our cumulative distributions paid to our shareholders in each quarter, less the sum of our net investment company taxable income, net capital gains and dividends and other distributions paid to us on account of preferred and common equity investments in portfolio companies (to the extent such amounts are not included in net investment company taxable income or net capital gains) in each quarter.

Pursuant to the expense reimbursement agreement, we have a conditional obligation to reimburse Franklin Square Holdings for any amounts funded by Franklin Square Holdings under such agreement if (and only to the extent that), during any fiscal quarter occurring within three years of the date on which Franklin Square Holdings funded such amount, the sum of our net investment company income for tax purposes, net capital gains and the amount of any dividends and other distributions paid to us on account of preferred and common equity investments in portfolio companies (to the extent not included in net investment company income for tax purposes or net capital gains) exceeds the distributions paid by us to our shareholders; provided, however, that (i) we will only reimburse Franklin Square Holdings for expense support payments made by Franklin Square Holdings with respect to any

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calendar quarter beginning on or after July 1, 2013 to the extent that the payment of such reimbursement (together with any other reimbursement paid during such fiscal year) does not cause "other operating expenses" (as defined below) (on an annualized basis and net of any expense support payments received by us during such fiscal year) to exceed the lesser of (A) 1.75% of our average net assets attributable to common shares for the fiscal year-to-date period after taking such payments into account and (B) the percentage of our average net assets attributable to common shares represented by "other operating expenses" during the fiscal year in which such expense support payment from Franklin Square Holdings was made (provided, however, that this clause (B) shall not apply to any reimbursement payment which relates to an expense support payment from Franklin Square Holdings made during the same fiscal year) and (ii) we will not reimburse Franklin Square Holdings for expense support payments made by Franklin Square Holdings if the aggregate amount of distributions per share declared by us in such calendar quarter is less than the aggregate amount of distributions per share declared by us in the calendar quarter in which Franklin Square Holdings made the expense support payment to which such reimbursement relates. We are not obligated to pay interest on the payments we receive from Franklin Square Holdings. "Other operating expenses" means our total "operating expenses" (as defined below), excluding base management fees, incentive fees, organization and offering expenses, financing fees and costs, interest expense, brokerage commissions and extraordinary expenses. "Operating expenses" means all operating costs and expenses incurred, as determined in accordance with GAAP for investment companies.

We or Franklin Square Holdings may terminate the expense reimbursement agreement at any time. The specific amount of expenses reimbursed by Franklin Square Holdings, if any, will be determined at the end of each quarter. Upon termination of the expense reimbursement agreement by Franklin Square Holdings, Franklin Square Holdings will be required to fund any amounts accrued thereunder as of the date of termination. Similarly, our conditional obligation to reimburse Franklin Square Holdings pursuant to the terms of the expense reimbursement agreement shall survive the termination of such agreement by either party.

Franklin Square Holdings is controlled by our chairman, president and chief executive officer, Michael C. Forman, and our vice-chairman, David J. Adelman. There can be no assurance that the expense reimbursement agreement will remain in effect or that Franklin Square Holdings will reimburse any portion of our expenses in future quarters.

As of March 31, 2015, we had no reimbursements due from Franklin Square Holdings and no further amounts remained subject to repayment by us to Franklin Square Holdings in the future.

Portfolio Investment Activity for the Three Months Ended March 31, 2015 and for the Year Ended December 31, 2014

During the three months ended March 31, 2015, we made investments in portfolio companies totaling $211,629. During the same period, we sold investments for proceeds of $127,336 and received principal repayments of $67,194. As of March 31, 2015, our investment portfolio, with a total fair value of $3,402,641 (24% in first lien senior secured loans, 32% in second lien senior secured loans, 9% in senior secured bonds, 26% in subordinated debt and 9% in equity/other), consisted of interests in 116 portfolio companies. The portfolio companies that comprised our portfolio as of such date had an average annual EBITDA of approximately $263.9 million. As of March 31, 2015, the investments in our portfolio were purchased at a weighted average price of 98.8% of par or stated value, as applicable, and our estimated gross annual portfolio yield, prior to leverage (which represents the expected annualized yield to be generated by us on our investment portfolio based on the composition of our portfolio as of such date), was 8.8% based upon the amortized cost of our investments.

Based on our regular weekly cash distribution rate of $0.013625 per share as of March 31, 2015 and our public offering price of $9.70 per share as of such date, the annualized distribution rate to shareholders as of March 31, 2015 was 7.30%. The distribution rate to shareholders may include income, realized capital gains and a return of investors' capital.

During the year ended December 31, 2014, we made investments in portfolio companies totaling $2,437,689. During the same period, we sold investments for proceeds of $462,170 and received principal repayments of $582,141. As of December 31, 2014, our investment portfolio, with a total fair value of $3,375,177 (25% in first lien senior secured loans, 29% in second lien senior secured loans, 9%

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in senior secured bonds, 28% in subordinated debt and 9% in equity/other), consisted of interests in 125 portfolio companies. The portfolio companies that comprised our portfolio as of such date had an average annual EBITDA of approximately $233.3 million. As of December 31, 2014, the investments in our portfolio were purchased at a weighted average price of 99.1% of par or stated value, as applicable, and our estimated gross annual portfolio yield, prior to leverage, was 8.8% based upon the amortized cost of our investments.

Based on our regular weekly cash distribution rate of $0.013625 per share as of December 31, 2014 and our public offering price of $9.80 per share as of such date, the annualized distribution rate to shareholders as of December 31, 2014 was 7.23%. The distribution rate to shareholders may include income, realized capital gains and a return of investors' capital.

Our estimated gross portfolio yield and annualized distribution rate to shareholders do not represent actual investment returns to shareholders. Our gross annual portfolio yield and distribution rate to shareholders are subject to change and in the future may be greater or less than the rates set forth above. See the sections entitled "Risk Factors" in our annual report on Form 10-K for the fiscal year ended December 31, 2014 and in our other periodic reports filed with the SEC for a discussion of the uncertainties, risks and assumptions associated with these statements.

Total Portfolio Activity

The following tables present certain selected information regarding our portfolio investment activity for the three months ended March 31, 2015 and the year ended December 31, 2014:

Net Investment Activity	For the Three Months Ended March 31, 2015			For the Year Ended December 31, 2014

Purchases	$	211,629		$	2,437,689
Sales and Redemptions		(194,530	)		(1,044,311	)

Net Portfolio Activity	$	17,099		$	1,393,378

	For the Three Months Ended March 31, 2015					For the Year Ended December 31, 2014

New Investment Activity by Asset Class	Purchases		Percentage			Purchases		Percentage
Senior Secured Loans—First Lien	$	83,258		39	%	$	579,698		24	%
Senior Secured Loans—Second Lien		105,290		50	%		669,846		27	%
Senior Secured Bonds		6,891		3	%		314,897		13	%
Subordinated Debt		13,962		7	%		706,530		29	%
Equity/Other		2,228		1	%		166,718		7	%

Total	$	211,629		100	%	$	2,437,689		100	%

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The following table summarizes the composition of our investment portfolio at cost and fair value as of March 31, 2015 and December 31, 2014:

	March 31, 2015 (Unaudited)							December 31, 2014

	Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio			Amortized Cost⁽¹⁾		Fair Value		Percentage of Portfolio
Senior Secured Loans—First Lien	$	870,917	$	825,837		24	%	$	881,945	$	854,825		25	%
Senior Secured Loans—Second Lien		1,155,972		1,084,620		32	%		1,059,981		989,972		29	%
Senior Secured Bonds		311,265		280,984		9	%		324,963		285,485		9	%
Subordinated Debt		1,057,191		893,547		26	%		1,124,512		940,313		28	%
Equity/Other		276,583		317,653		9	%		271,649		304,582		9	%

Total	$	3,671,928	$	3,402,641		100	%	$	3,663,050	$	3,375,177		100	%

(1): Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

The following table presents certain selected information regarding the composition of our investment portfolio as of March 31, 2015 and December 31, 2014:

	March 31, 2015			December 31, 2014

Number of Portfolio Companies		116			125
% Variable Rate (based on fair value)		52.4	%		51.8	%
% Fixed Rate (based on fair value)		38.3	%		39.2	%
% Income Producing Equity/Other Investments (based on fair value)		4.2	%		4.0	%
% Non-Income Producing Equity/Other Investments (based on fair value)		5.1	%		5.0	%
Average Annual EBITDA of Portfolio Companies	$	263,934		$	233,303
Weighted Average Purchase Price of Investments (as a % of par or stated value)		98.8	%		99.1	%
% of Investments on Non-Accrual (based on fair value)		0.3	%		—
Gross Portfolio Yield Prior to Leverage (based on amortized cost)		8.8	%		8.8	%
Gross Portfolio Yield Prior to Leverage (based on amortized cost)—Excluding Non-Income Producing Assets		9.2	%		9.1	%

Direct Originations

The following tables present certain selected information regarding our direct originations for the three months ended March 31, 2015 and year ended December 31, 2014:

Net Direct Originations	For the Three Months Ended March 31, 2015			For the Year Ended December 31, 2014

Total Commitments (including Unfunded Commitments)	$	100,250		$	1,179,484
Exited Investments (including partial paydowns)		(1,847	)		(152,463	)

Net Direct Originations	$	98,403		$	1,027,021

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	For the Three Months Ended March 31, 2015					For the Year Ended December 31, 2014

New Direct Originations by Asset Class (including Unfunded Commitments)	Commitment Amount		Percentage			Commitment Amount		Percentage
Senior Secured Loans—First Lien	$	—		—		$	435,305		37	%
Senior Secured Loans—Second Lien		100,000		100	%		272,658		23	%
Senior Secured Bonds		—		—			301,198		26	%
Subordinated Debt		78		0	%		313		0	%
Equity/Other		172		0	%		170,010		14	%

Total	$	100,250		100	%	$	1,179,484		100	%

	For the Three Months Ended March 31, 2015			For the Year Ended December 31, 2014

Average New Direct Origination Commitment Amount	$	50,125		$	53,613
Weighted Average Maturity for New Direct Originations		2/24/20			4/23/20
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during Period		11.1	%		8.6	%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Funded during Period—Excluding Non-Income Producing Assets		11.3	%		9.6	%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Direct Originations Exited during Period		9.6	%		10.2	%

The following table presents certain selected information regarding our direct originations as of March 31, 2015 and December 31, 2014:

Characteristics of All Direct Originations held in Portfolio	March 31, 2015			December 31, 2014

Number of Portfolio Companies		23			22
Average Annual EBITDA of Portfolio Companies	$	47,928		$	29,450
Average Leverage Through Tranche of Portfolio Companies—Excluding Equity/Other Securities		4.2x			4.0x
% of Investments on Non-Accrual		—			—
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations		9.3	%		9.1	%
Gross Portfolio Yield Prior to Leverage (based on amortized cost) of Funded Direct Originations—Excluding Non-Income Producing Assets		10.3	%		10.1	%

Portfolio Composition by Strategy and Industry

The table below summarizes the composition of our investment portfolio by strategy and enumerates the percentage, by fair value, of the total portfolio assets in such strategies as of March 31, 2015 and December 31, 2014:

	March 31, 2015					December 31, 2014

Portfolio Composition by Strategy	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
Direct Originations	$	1,536,642		45	%	$	1,371,063		41	%
Opportunistic		831,363		25	%		892,154		26	%
Broadly Syndicated/Other		1,034,636		30	%		1,111,960		33	%

Total	$	3,402,641		100	%	$	3,375,177		100	%

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	March 31, 2015 (Unaudited)					December 31, 2014

Industry Classification	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
Upstream	$	1,926,462		57	%	$	1,815,456		54	%
Midstream		236,450		7	%		233,836		7	%
Downstream		17,751		0	%		12,494		0	%
Power		332,974		10	%		326,773		10	%
Service & Equipment		889,004		26	%		986,618		29	%

Total	$	3,402,641		100	%	$	3,375,177		100	%

As of March 31, 2015, except for FourPoint Energy, LLC, in which we held a senior secured bond and two equity/other investments, we were not an "affiliated person" of any of our portfolio companies, as defined in the 1940 Act. As of March 31, 2015, we did not "control" any of our portfolio companies, as defined in the 1940 Act. In general, under the 1940 Act, we would be presumed to "control" a portfolio company if we owned 25% or more of its voting securities or we had the power to exercise control over the management or policies of such portfolio company, and would be an "affiliated person" of a portfolio company if we owned 5% or more of its voting securities.

Our investment portfolio may contain loans or bonds that are in the form of lines of credit or revolving credit facilities, or other investments, pursuant to which we may be required to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. As of March 31, 2015, we had four senior secured loan investments with aggregate unfunded commitments of $179,628, one senior secured bond investment with an unfunded commitment of $86,192 and three equity/other investments with aggregate unfunded commitments of $24,035. As of March 31, 2015, these unfunded equity/other investments were Altus Power America Holdings, LLC, BL Sand Hills Unit, L.P., net profits interest and BL Sand Hills Unit, L.P., overriding royalty interest. As of December 31, 2014, we had four senior secured loan investments with aggregate unfunded commitments of $218,120, one senior secured bond investment with an unfunded commitment of $86,192 and three equity/other investments with aggregate unfunded commitments of $26,109. As of December 31, 2014, these unfunded equity/other investments were Altus Power America Holdings, LLC, BL Sand Hills Unit, L.P., net profits interest and BL Sand Hills Unit, L.P., overriding royalty interest. We maintain sufficient cash on hand and available borrowings to fund such unfunded commitments should the need arise.

Portfolio Asset Quality

In addition to various risk management and monitoring tools, FS Advisor uses an investment rating system to characterize and monitor the expected level of returns on each investment in our portfolio. FS Advisor uses an investment rating scale of 1 to 5. The following is a description of the conditions associated with each investment rating:

Investment Rating		Summary Description

1		Investment exceeding expectations and/or capital gain expected.
2		Performing investment generally executing in accordance with the portfolio company's business plan—full return of principal and interest expected.
3		Performing investment requiring closer monitoring.
4		Underperforming investment—some loss of interest or dividend possible, but still expecting a positive return on investment.
5		Underperforming investment with expected loss of interest and some principal.

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The following table shows the distribution of our investments on the 1 to 5 investment rating scale at fair value as of March 31, 2015 and December 31, 2014:

	March 31, 2015					December 31, 2014

Investment Rating	Fair Value		Percentage of Portfolio			Fair Value		Percentage of Portfolio
1	$	70,994		2	%	$	119,174		4	%
2		2,694,010		79	%		2,630,119		78	%
3		611,187		18	%		586,116		17	%
4		—		—			39,768		1	%
5		26,450		1	%		—		—

Total	$	3,402,641		100	%	$	3,375,177		100	%

The amount of the portfolio in each grading category may vary substantially from period to period resulting primarily from changes in the composition of the portfolio as a result of new investment, repayment and exit activities. In addition, changes in the grade of investments may be made to reflect our expectation of performance and changes in investment values.

Results of Operations

Comparison of the Three Months Ended March 31, 2015 and 2014

Revenues

We generated investment income of $85,587 and $56,556 for the three months ended March 31, 2015 and 2014, respectively, in the form of interest and fees earned on senior secured loans, senior secured bonds and subordinated debt investments in our portfolio and dividends and other distributions earned on equity/other investments in our portfolio. Such revenues represent $75,851 and $52,210 of cash income earned as well as $9,736 and $4,346 in non-cash portions relating to accretion of discount, PIK interest and accrual of limited partnership income for the three months ended March 31, 2015 and 2014, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.

The level of investment income we receive is directly related to the balance of income-producing investments multiplied by the weighted average yield of our investments. We expect the dollar amount of interest and any dividend income that we earn to increase as the size of our investment portfolio increases and the proportion of directly originated investments in our portfolio increases.

During the three months ended March 31, 2015 and 2014, we generated $4,518 and $5,589 of fee income, which represented 5.3% and 9.9%, respectively, of total investment income. Such fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees, upfront fees and other non-recurring fees. As such, future fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.

Expenses

Our total expenses were $32,862 and $30,268 for the three months ended March 31, 2015 and 2014, respectively. Our expenses include base management fees attributed to FS Advisor of $18,745 and $12,867 for the three months ended March 31, 2015 and 2014, respectively. Our expenses also include administrative services expenses attributed to FS Advisor of $1,500 and $935 for the three months ended March 31, 2015 and 2014, respectively.

FS Advisor is eligible to receive incentive fees based on our performance. During the three months ended March 31, 2015 and 2014, we accrued subordinated incentive fees on income of $2,879 and $4,610, respectively, based on the performance of our portfolio. During the three months ended March 31, 2015, we did not accrue any capital gains incentive fees. During the three months ended March 31, 2014, we accrued capital gains incentive fees of $5,565 based on the performance of our portfolio, of which $4,596 was based on unrealized gains and $969 was based on realized gains. No capital gains incentive fees are actually payable by us with respect to such unrealized gains unless and

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until those gains are actually realized. See "—Critical Accounting Policies—Capital Gains Incentive Fee."

We recorded interest expense of $7,316 and $4,337 for the three months ended March 31, 2015 and 2014, respectively, in connection with our financing arrangements. For the three months ended March 31, 2015 and 2014, fees and expenses incurred with our fund administrator, which provides various accounting and administrative services to us, totaled $360 and $266, respectively, and fees and expenses incurred with our share transfer agent totaled $794 and $647, respectively. Fees for our board of trustees were $225 and $281 for the three months ended March 31, 2015 and 2014, respectively.

Our other general and administrative expenses totaled $954 and $704 for the three months ended March 31, 2015 and 2014, respectively, and consisted of the following:

	Three Months Ended March 31,

	2015		2014
Expenses associated with our independent audit and related fees	$	136	$	94
Compensation of our chief compliance officer⁽¹⁾		20		20
Legal fees		223		243
Printing fees		120		89
Insurance expense		74		56
Other		381		202

Total	$	954	$	704

(1): On April 1, 2015, James F. Volk was appointed as our chief compliance officer. Prior to that date, we had contracted Vigilant Compliance, LLC to provide the services of Salvatore Faia as our chief compliance officer. Mr. Volk is employed by Franklin Square Holdings and will not receive any direct compensation from us in this capacity.

During the three months ended March 31, 2015 and 2014, the ratio of our total expenses to our average net assets was 1.25% and 1.66%, respectively. During the three months ended March 31, 2015 and 2014, our ratio of total expenses to average net assets included $7,316 and $4,337, respectively, related to interest expense, $2,879 and $10,175, respectively, related to accruals for incentive fees and $89 and $56, respectively, related to accruals for income taxes. Without such expenses, our ratio of total expenses to average net assets would have been 0.86% and 0.86% for the three months ended March 31, 2015 and 2014, respectively. Incentive fees, interest expense and income taxes, among other things, may increase or decrease our expense ratios relative to comparative periods depending on portfolio performance and changes in benchmark interest rates such as LIBOR, among other factors.

Net Investment Income

Our net investment income totaled $52,725 ($0.17 per share) and $26,288 ($0.14 per share) for the three months ended March 31, 2015 and 2014, respectively. The increase in net investment income on a per share basis can be attributed primarily to the growth of our portfolio and an increase in the amount of our directly originated and opportunistic investments as well as a reduction of incentive fees.

Net Realized Gains or Losses

We sold investments and received principal repayments of $127,336 and $67,194, respectively, during the three months ended March 31, 2015, from which we realized a net loss of $17,957. We realized a net loss of $238 from settlements on foreign currency during the three months ended March 31, 2015. We sold investments and received principal repayments of $83,529 and $20,454, respectively, during the three months ended March 31, 2014, from which we realized a net gain of $2,280. We realized a net loss of $538 from settlements on foreign currency during the three months ended March 31, 2014.

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Net Change in Unrealized Appreciation (Depreciation) on Investments and Unrealized Gain (Loss) on Foreign Currency

For the three months ended March 31, 2015 and 2014, the net change in unrealized appreciation (depreciation) on investments totaled $18,586 and $26,021, respectively, and the net change in unrealized gain (loss) on foreign currency was $(128) and $81, respectively. The change in unrealized appreciation (depreciation) on our investments during the three months ended March 31, 2015 was primarily driven by the performance of our directly originated investments. The change in unrealized appreciation (depreciation) on our investments during the three months ended March 31, 2014 was primarily driven by a general tightening of credit spreads and by the performance of our directly originated and opportunistic investments.

Net Increase (Decrease) in Net Assets Resulting from Operations

For the three months ended March 31, 2015 and 2014, the net increase (decrease) in net assets resulting from operations was $52,988 ($0.17 per share) and $54,132 ($0.29 per share), respectively.

Financial Condition, Liquidity and Capital Resources

Overview

As of March 31, 2015, we had $311,986 in cash and foreign currency, which is held in custodial accounts, and $347,887 in borrowings available under our financing arrangements. To seek to enhance our returns, we employ leverage as market conditions permit and at the discretion of FS Advisor, but in no event may leverage employed exceed 50% of the value of our assets, as required by the 1940 Act. See "—Financing Arrangements."

During the three months ended March 31, 2015, we sold 21,680,966 common shares for gross proceeds of $205,597 at an average price per share of $9.48. The gross proceeds received during the three months ended March 31, 2015 include reinvested shareholder distributions of $21,167, for which we issued 2,437,037 common shares. During the three months ended March 31, 2015, we also incurred offering costs of $2,500 in connection with the sale of our common shares, which consisted primarily of legal, accounting, printing and other expenses, including costs associated with technology integration between our systems and those of our selected broker-dealers, marketing expenses and printing, legal and due diligence fees. The offering costs were offset against capital in excess of par value on our consolidated financial statements. The sales commissions and dealer manager fees related to the sale of our common shares were $16,663 for the three months ended March 31, 2015. These sales commissions and fees include $3,217 retained by the dealer manager, FS², which is one of our affiliates. On December 23, 2014, the SEC declared effective our registration statement that registered an additional 92,200,000 common shares in our continuous public offering.

Since commencing our continuous public offering and through April 28, 2015, we have sold 324,515,063 common shares (as adjusted for share distributions) for gross proceeds of $3,371,717, including common shares issued under our distribution reinvestment plan. As of April 28, 2015, we have raised total gross proceeds of $3,391,921, including $200 of seed capital contributed by the principals of FS Advisor in December 2010 and $20,004 in proceeds raised from the principals of FS Advisor, other individuals and entities affiliated with FS Advisor, certain members of our board of trustees and certain individuals and entities affiliated with GSO in a private placement conducted in April 2011.

We generate cash primarily from the net proceeds of our continuous public offering and from cash flows from fees, interest and dividends earned from our investments as well as principal repayments and proceeds from sales of our investments. We are engaged in a continuous public offering of our common shares. We accept subscriptions on a continuous basis and issue common shares at weekly closings. Shares are issued at prices that, after deducting selling commissions and dealer manager fees, must be above our net asset value per share.

Prior to investing in securities of portfolio companies, we invest the net proceeds from our continuous public offering and from sales and paydowns of existing investments primarily in cash, cash equivalents, U.S. government securities, repurchase agreements and high-quality debt instruments

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maturing in one year or less from the time of investment, consistent with our BDC election and our election to be taxed as a RIC.

To provide our shareholders with limited liquidity, we conduct quarterly tender offers pursuant to our share repurchase program. The first such tender offer commenced in August 2012, and the repurchase occurred in connection with our October 1, 2012 semi-monthly closing.

The following table provides information concerning our repurchases of common shares pursuant to our share repurchase program during the three months ended March 31, 2015 and 2014:

For the Three Months Ended	Repurchase Date				Repurchase Price Per Share		Aggregate Consideration for Repurchased Shares

Fiscal 2014
December 31, 2013	January 2, 2014	174,181	100	%	$	9.720	$	1,693
Fiscal 2015
December 31, 2014	January 7, 2015	450,293	100	%	$	8.820	$	3,972

On April 1, 2015, we repurchased 716,857 common shares (representing 100% of common shares tendered for repurchase) at $8.73 per share for aggregate consideration totaling $6,258.

Financing Arrangements

The following table presents a summary of information with respect to our outstanding financing arrangements as of March 31, 2015:

Arrangement	Type of Arrangement	Rate	Amount Outstanding		Amount Available		Maturity Date

BNP Facility	Prime Brokerage	L+1.10%	$	223,000	$	77,000	December 26, 2015⁽¹⁾
Deutsche Bank Credit Facility	Revolving	L+1.80%	$	280,000	$	60,000	June 11, 2015
Goldman Facility	Repurchase	L+2.75%	$	189,113	$	135,887	September 15, 2017
Natixis Credit Facility	Revolving	CP+2.25%	$	148,214		—	July 11, 2023
Wells Fargo Credit Facility	Revolving	L+2.50% to 2.75%	$	125,000	$	75,000	September 9, 2019

(1): The BNP facility generally is terminable upon 270 days' notice by either party. As of March 31, 2015, neither Berwyn Funding nor BNP had provided notice of its intent to terminate the facility.

Our average borrowings and weighted average interest rate, including the effect of non-usage fees, for the three months ended March 31, 2015 were $1,026,392 and 2.61%, respectively. As of March 31, 2015, our weighted average effective interest rate on borrowings was 2.39%.

For additional information regarding our outstanding financing arrangements as of March 31, 2015, see Note 8 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q.

RIC Status and Distributions

We have elected to be treated for U.S. federal income tax purposes, and intend to qualify annually, as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our shareholders. In order to qualify for and maintain RIC tax treatment, we must, among other things, distribute to our shareholders each tax year dividends of an amount at least equal to 90% of our "investment company taxable income," determined without regard to any deduction for dividends paid. As long as the distributions are declared by the later of the fifteenth day of the ninth month following the close of the tax year or the due date of the tax return, including extensions, distributions paid up to one year after the current tax year can be carried back to the prior tax year for determining the distributions paid in such tax year. We intend to make sufficient distributions to our shareholders to qualify for and maintain our RIC status each tax year. We are also generally subject to nondeductible U.S. federal excise taxes on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our net ordinary taxable income (taking into account

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certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income, which is the excess of capital gains over capital losses, for the one-year period ending October 31 of that calendar year (adjusted for certain ordinary losses) and (3) any net ordinary income and capital gain net income for the preceding years that were not distributed during such years and on which we paid no U.S. federal income tax. Any distribution declared by us during October, November or December of any calendar year, payable to our shareholders of record on a specified date in such a month and actually paid during January of the following calendar year, will be treated as if it had been paid by us, as well as received by our U.S. shareholders on December 31 of the calendar year in which the distribution was declared.

We authorize and declare ordinary cash distributions on a weekly basis, while continuing to pay such distributions on a monthly basis, in each case subject to our board of trustees' discretion and applicable legal restrictions. We will calculate each shareholder's specific distribution amount for the period using record and declaration dates and each shareholder's distributions will begin to accrue on the date we accept such shareholder's subscription for our common shares. From time to time, we may also pay special interim distributions in the form of cash or common shares at the discretion of our board of trustees.

During certain periods, our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from our continuous public offering of common shares. As a result, it is possible that a portion of the distributions we make will represent a return of capital. A return of capital generally is a return of an investor's investment rather than a return of earnings or gains derived from our investment activities and will be made after deducting the fees and expenses payable in connection with our continuous public offering, including any fees payable to FS Advisor. Each year a statement on Form 1099-DIV identifying the sources of the distributions will be mailed to our shareholders. No portion of the distributions paid during the three months ended March 31, 2015 and 2014 represented a return of capital.

The following table reflects the cash distributions per share that we declared and paid on our common shares during the three months ended March 31, 2015 and 2014:

	Distribution

For the Three Months Ended	Per Share		Amount
Fiscal 2014
March 31, 2014	$	0.1524	$	28,423
Fiscal 2015
March 31, 2015	$	0.1771	$	54,825

On March 9, 2015 and May 13, 2015, our board of trustees declared regular weekly cash distributions for April 2015 through June 2015 and July 2015 through September 2015, respectively. These distributions have been or will be paid monthly to shareholders of record as of weekly record dates previously determined by our board of trustees in the amount of $0.013625 per share. The timing and amount of any future distributions to shareholders are subject to applicable legal restrictions and the sole discretion of our board of trustees.

We have adopted an "opt in" distribution reinvestment plan for our shareholders. As a result, if we make a cash distribution, our shareholders will receive distributions in cash unless they specifically "opt in" to the distribution reinvestment plan so as to have their cash distributions reinvested in additional common shares. However, certain state authorities or regulators may impose restrictions from time to time that may prevent or limit a shareholder's ability to participate in the distribution reinvestment plan.

We may fund our cash distributions to shareholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and expense reimbursements from Franklin Square Holdings. We have not established limits on the amount of funds we may use from available sources to make distributions.

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For a period of time following commencement of our continuous public offering, substantial portions of our distributions were funded through the reimbursement of certain expenses by Franklin Square Holdings and its affiliates, including through the waiver of certain investment advisory fees by FS Advisor, that were subject to repayment by us within three years. The purpose of this arrangement was to ensure that no portion of our distributions to shareholders was paid from offering proceeds or borrowings. Any such distributions funded through expense reimbursements or waivers of advisory fees were not based on our investment performance.

No portion of the distributions paid during the three months ended March 31, 2015 or 2014 was funded through the reimbursement of operating expenses by Franklin Square Holdings. During the three months ended March 31, 2015 and 2014, we did not repay any amounts to Franklin Square Holdings for expenses previously reimbursed or waived. There can be no assurance that we will continue to achieve the performance necessary to sustain our distributions or that we will be able to pay distributions at a specific rate or at all. Franklin Square Holdings and its affiliates have no obligation to waive advisory fees or otherwise reimburse expenses in future periods.

The following table reflects the sources of the cash distributions on a tax basis that we paid on our common shares during the three months ended March 31, 2015 and 2014:

	Three Months Ended March 31,

	2015					2014
Source of Distribution	Distribution Amount		Percentage			Distribution Amount		Percentage
Offering proceeds	$	—		—		$	—		—
Borrowings		—		—			—		—
Net investment income⁽¹⁾		41,234		75	%		28,423		100	%
Short-term capital gains proceeds from the sale of assets		—		—			—		—
Long-term capital gains proceeds from the sale of assets		13,591		25	%		—		—
Non-capital gains proceeds from the sale of assets		—		—			—		—
Distributions on account of limited partnership interest		—		—			—		—
Expense reimbursement from sponsor		—		—			—		—

Total	$	54,825		100	%	$	28,423		100	%

(1): During the three months ended March 31, 2015 and 2014, 88.6% and 92.3%, respectively, of our gross investment income was attributable to cash income earned, 2.7% and 3.1%, respectively, was attributable to non-cash accretion of discount and 8.7% and 4.6%, respectively, was attributable to PIK interest.

Our net investment income on a tax basis for the three months ended March 31, 2015 and 2014 was $53,492 and $30,092, respectively. As of March 31, 2015, we had $12,258 of undistributed ordinary income and $23,194 of net realized losses on a tax basis. As of December 31, 2014, we had $13,591 of undistributed ordinary income and net realized gains on a tax basis, all of which was distributed during the three months ended March 31, 2015.

See Note 5 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q for additional information regarding our distributions, a reconciliation of our GAAP-basis net investment income and tax-basis net investment income for the three months ended March 31, 2015 and 2014 and a reconciliation of accumulated earnings on a tax basis as of March 31, 2015 and December 31, 2014.

Critical Accounting Policies

Our financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management's most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the

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financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.

Valuation of Portfolio Investments

We determine the net asset value of our investment portfolio each quarter. Securities that are publicly-traded are valued at the reported closing price on the valuation date. Securities that are not publicly-traded are valued at fair value as determined in good faith by our board of trustees. In connection with that determination, FS Advisor provides our board of trustees with portfolio company valuations which are based on relevant inputs, including, but not limited to, indicative dealer quotes, values of like securities, recent portfolio company financial statements and forecasts, and valuations prepared by third-party valuation services.

Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC Topic 820, issued by the FASB clarifies the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, which includes inputs such as quoted prices for similar securities in active markets and quoted prices for identical securities where there is little or no activity in the market; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

With respect to investments for which market quotations are not readily available, we undertake a multi-step valuation process each quarter, as described below:

•: our quarterly valuation process begins with FS Advisor's management team providing a preliminary valuation of each portfolio company or investment to our valuation committee, which valuation may be obtained from an independent valuation firm, if applicable;
•: preliminary valuation conclusions are then documented and discussed with our valuation committee;
•: our valuation committee reviews the preliminary valuation and FS Advisor's management team, together with our independent valuation firms, if applicable, responds and supplements the preliminary valuation to reflect any comments provided by the valuation committee; and
•: our board of trustees discusses valuations and determines the fair value of each such investment in our portfolio in good faith based on various statistical and other factors, including the input and recommendation of FS Advisor, the valuation committee and any third-party valuation firm, if applicable.

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our consolidated financial statements refer to the uncertainty with respect to the possible effect of such valuations and any change in such valuations on our consolidated financial statements. In making its determination of fair value, our board of trustees may use independent third-party pricing or valuation services. However, our board of trustees is not required to determine fair value in accordance with the valuation provided by any single source, and retains the discretion to use any relevant data, including information obtained from FS Advisor or any independent third-party valuation or pricing service that it deems to be reliable in determining fair value under the circumstances. Below is a description of factors that our board of trustees may consider when valuing our debt and equity investments.

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Valuation of fixed income investments, such as loans and debt securities, depends upon a number of factors, including prevailing interest rates for like securities, expected volatility in future interest rates, call features, put features and other relevant terms of the debt. For investments without readily available market prices, we may incorporate these factors into discounted cash flow models to arrive at fair value. Other factors that our board of trustees may consider include the borrower's ability to adequately service its debt, the fair market value of the portfolio company in relation to the face amount of its outstanding debt and the quality of collateral securing our debt investments.

For convertible debt securities, fair value generally approximates the fair value of the debt plus the fair value of an option to purchase the underlying security (the security into which the debt may convert) at the conversion price. To value such an option, a standard option pricing model may be used.

Our equity interests in portfolio companies for which there is no liquid public market are valued at fair value. Our board of trustees, in its analysis of fair value, may consider various factors, such as multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. All of these factors may be subject to adjustments based upon the particular circumstances of a portfolio company or our actual investment position. For example, adjustments to EBITDA may take into account compensation to previous owners or acquisition, recapitalization, restructuring or other related items.

Our board of trustees may also look to private merger and acquisition statistics, public trading multiples discounted for illiquidity and other factors, valuations implied by third-party investments in the portfolio companies or industry practices in determining fair value. Our board of trustees may also consider the size and scope of a portfolio company and its specific strengths and weaknesses, and may apply discounts or premiums, where and as appropriate, due to the higher (or lower) financial risk and/or the size of portfolio companies relative to comparable firms, as well as such other factors as our board of trustees, in consultation with any third-party valuation firm, if applicable, may consider relevant in assessing fair value. Generally, the value of our equity interests in public companies for which market quotations are readily available is based upon the most recent closing public market price. Portfolio securities that carry certain restrictions on sale are typically valued at a discount from the public market value of the security.

When we receive warrants or other equity securities at nominal or no additional cost in connection with an investment in a debt security, the cost basis in the investment will be allocated between the debt securities and any such warrants or other equity securities received at the time of origination. Our board of trustees will subsequently value these warrants or other equity securities received at fair value.

The fair values of our investments are determined in good faith by our board of trustees. Our board of trustees is solely responsible for the valuation of our portfolio investments at fair value as determined in good faith pursuant to our valuation policy and consistently applied valuation process.

Our investments as of March 31, 2015 consisted primarily of debt investments that were traded on a private over-the-counter market for institutional investors. Eighteen senior secured loan investments, one senior secured bond investment and two subordinated debt investments were valued by independent valuation firms, which determined the fair value of such investments by considering, among other factors, the borrower's ability to adequately service its debt, prevailing interest rates for like investments, call features, anticipated prepayments and other relevant terms of the debt. All of our equity/other investments were valued by the same independent valuation firm, which determined the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. Except as described above, we valued our other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by an independent third-party pricing service and screened for validity by such service.

Our investments as of December 31, 2014 consisted primarily of debt investments that were traded on a private over-the-counter market for institutional investors. Seventeen senior secured loan investments, one senior secured bond investment and two subordinated debt investments were valued by an independent valuation firm, which determined the fair value of such investments by considering,

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among other factors, the borrower's ability to adequately service its debt, prevailing interest rates for like investments, call features, anticipated prepayments and other relevant terms of the debt. All of our equity/other investments were valued by the same independent valuation firm, which determined the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. Except as described above, we valued our other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by an independent third-party pricing service and screened for validity by such service.

We periodically benchmark the bid and ask prices we receive from the third-party pricing service and/or dealers, as applicable, against the actual prices at which we purchase and sell our investments. Based on the results of the benchmark analysis and the experience of our management in purchasing and selling these investments, we believe that these prices are reliable indicators of fair value. However, because of the private nature of this marketplace (meaning actual transactions are not publicly reported), we believe that these valuation inputs are classified as Level 3 within the fair value hierarchy. We may also use other methods including the use of an independent valuation firm, to determine fair value for securities for which we cannot obtain prevailing bid and ask prices through our third-party pricing service or independent dealers or where our board of trustees otherwise determines that the use of such other method is appropriate. We periodically benchmark the valuations provided by the independent valuation firms against the actual prices at which we purchase and sell our investments. Our valuation committee and board of trustees reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with our valuation process.

Revenue Recognition

Security transactions are accounted for on the trade date. We record interest income on an accrual basis to the extent that we expect to collect such amounts. We record dividend income on the ex-dividend date. We do not accrue as a receivable interest or dividends on loans and securities if we have reason to doubt our ability to collect such income. Loan origination fees, original issue discount and market discount are capitalized and we amortize such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned. We record prepayment premiums on loans and securities as fee income when we receive such amounts.

Net Realized Gains or Losses, Net Change in Unrealized Appreciation or Depreciation and Net Change in Unrealized Gains or Losses on Foreign Currency

Gains or losses on the sale of investments are calculated by using the specific identification method. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized fees. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gains or losses when gains or losses are realized and the respective unrealized gain or loss on foreign currency for any foreign denominated investments we may hold. Net change in unrealized gains or losses on foreign currency reflects the change in the value of foreign currency held, receivables or accruals during the reporting period due to the impact of foreign currency fluctuations.

Capital Gains Incentive Fee

Pursuant to the terms of the investment advisory and administrative services agreement, the incentive fee on capital gains is determined and payable in arrears as of the end of each calendar year (or upon termination of such agreement). Such fee equals 20.0% of our incentive fee capital gains (i.e., our realized capital gains on a cumulative basis from inception, calculated as of the end of the applicable period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis), less the aggregate amount of any previously paid capital gains incentive fees. On a

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quarterly basis, we accrue for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

While the investment advisory and administrative services agreement with FS Advisor neither includes nor contemplates the inclusion of unrealized gains in the calculation of the capital gains incentive fee, pursuant to an interpretation of an AICPA Technical Practice Aid for investment companies, we include unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to FS Advisor as if our entire portfolio were liquidated at its fair value as of the balance sheet date even though FS Advisor is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized.

Subordinated Income Incentive Fee

Pursuant to the investment advisory and administrative services agreement, FS Advisor may also be entitled to receive a subordinated incentive fee on income. The subordinated incentive fee on income, which is calculated and payable quarterly in arrears, equals 20.0% of "pre-incentive fee net investment income" for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital, as defined in the investment advisory and administrative services agreement, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. As a result, FS Advisor will not earn this incentive fee for any quarter until our pre-incentive fee net investment income for such quarter exceeds the hurdle rate of 1.625%. Once our pre-incentive fee net investment income in any quarter exceeds the hurdle rate, FS Advisor will be entitled to a "catch-up" fee equal to the amount of the pre-incentive fee net investment income in excess of the hurdle rate, until our pre-incentive fee net investment income for such quarter equals 2.031%, or 8.125% annually, of adjusted capital. Thereafter, FS Advisor will receive 20.0% of pre-incentive fee net investment income.

Uncertainty in Income Taxes

We evaluate our tax positions to determine if the tax positions taken meet the minimum recognition threshold in connection with accounting for uncertainties in income tax positions taken or expected to be taken for the purposes of measuring and recognizing tax benefits or liabilities in our consolidated financial statements. Recognition of a tax benefit or liability with respect to an uncertain tax position is required only when the position is "more likely than not" to be sustained assuming examination by taxing authorities. We recognize interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in our consolidated statements of operations. During the three months ended March 31, 2015 and 2014, we did not incur any interest or penalties.

Contractual Obligations

We have entered into an agreement with FS Advisor to provide us with investment advisory and administrative services. Payments for investment advisory services under the investment advisory and administrative services agreement include (a) an annual base management fee of 2.0% of the average value of our gross assets and (b) an incentive fee based on our performance. FS Advisor, and to the extent it provides such services, GSO, are reimbursed for administrative expenses incurred on our behalf. For the three months ended March 31, 2015 and 2014, we incurred $18,745 and $12,867, respectively, in base management fees and $1,500 and $935, respectively, in administrative services expenses under the investment advisory and administrative services agreement. In addition, FS Advisor is eligible to receive incentive fees based on the performance of our portfolio. During the three months ended March 31, 2015 and 2014, we accrued subordinated incentive fees on income of $2,879 and $4,610, respectively, and paid FS Advisor $12,142 and $6,786, respectively, in respect of such fees. As of March 31, 2015, a subordinated incentive fee on income of $2,879 was payable to FS Advisor. During the three months ended March 31, 2015, we did not accrue any capital gains incentive fees. During the three months ended March 31, 2014, we accrued capital gains incentive fees of $5,565 based on the performance of our portfolio, of which $4,596 was based on unrealized gains and $969 was based on realized gains. No capital gains incentive fees are actually payable by us with respect to unrealized gains unless and until those gains are actually realized. We did not pay any capital gains incentive fees to FS Advisor during the three months ended March 31, 2015. We paid FS Advisor $2,857 in capital gains

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incentive fees during the three months ended March 31, 2014. As of March 31, 2015, we did not have any accrued capital gains incentive fees.

A summary of our significant contractual payment obligations for the repayment of outstanding borrowings under the BNP facility, the Deutsche Bank credit facility, the Goldman facility, the Natixis credit facility and the Wells Fargo credit facility at March 31, 2015 is as follows:

	Payments Due By Period

	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
BNP Facility⁽¹⁾	$	223,000	$	223,000		—		—		—
Deutsche Bank Credit Facility⁽²⁾	$	280,000	$	280,000		—		—		—
Goldman Facility⁽³⁾	$	189,113		—	$	189,113		—		—
Natixis Credit Facility⁽⁴⁾	$	148,214		—		—		—	$	148,214
Wells Fargo Credit Facility⁽⁵⁾	$	125,000		—		—	$	125,000		—

(1): At March 31, 2015, $77,000 remained unused under the BNP facility. The BNP facility generally is terminable upon 270 days' notice by either party. As of March 31, 2015, neither Berwyn Funding nor BNP had provided notice of its intent to terminate the facility.
(2): At March 31, 2015, $60,000 remained unused under the Deutsche Bank credit facility. All amounts borrowed under the facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on June 11, 2015.
(3): At March 31, 2015, $135,887 remained unused under the Goldman facility. Strafford Funding will repurchase all Notes sold to Goldman under the Goldman facility and will owe all accrued and unpaid interest thereunder, on September 15, 2017.
(4): At March 31, 2015, no amounts remained unused under the Natixis credit facility. All amounts borrowed under the facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on July 11, 2023. Amounts under the Natixis credit facility began to amortize after the first repayment thereunder and we cannot borrow additional amounts under the facility thereafter.
(5): At March 31, 2015, $75,000 remained unused under the Wells Fargo credit facility. All amounts borrowed under the facility will mature, and all accrued and unpaid interest thereunder will be due and payable, on September 9, 2019.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Recently Issued Accounting Standards

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, Interest—Imputation of Interest to simplify the presentation of debt issuance costs. Under existing guidance, debt issuance costs are recognized as a deferred charge and presented as an asset on the balance sheet. The amendments to the guidance require that debt issuance costs related to a recognized liability for indebtedness be presented in the balance sheet as a direct deduction from the carrying amount of that liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by the amendments to the guidance. The amendments to the FASB codification guidance are to be applied retrospectively with applicable disclosures for a change in accounting principle upon transition. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2015. Early application by public entities is permitted. We are currently assessing the impact of this guidance on our consolidated financial statements.

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Related Party Transactions

Compensation of the Dealer Manager and Investment Adviser

Pursuant to the investment advisory and administrative services agreement, FS Advisor is entitled to an annual base management fee of 2.0% of the average value of our gross assets and an incentive fee based on our performance. We commenced accruing fees under the investment advisory and administrative services agreement on July 18, 2011, upon commencement of our investment operations. Base management fees are paid on a quarterly basis in arrears.

The incentive fee consists of two parts. The first part, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears, equals 20.0% of our "pre-incentive fee net investment income" for the immediately preceding quarter and is subject to a hurdle rate, expressed as a rate of return on adjusted capital, as defined in the investment advisory and administrative services agreement, equal to 1.625% per quarter, or an annualized hurdle rate of 6.5%. The second part of the incentive fee, which is referred to as the incentive fee on capital gains, is accrued for on a quarterly basis and, if earned, is paid annually. We accrue this incentive fee based on net realized and unrealized gains; however, under the terms of the investment advisory and administrative services agreement, the fee payable to FS Advisor is based on realized gains and no such fee is payable with respect to unrealized gains unless and until such gains are actually realized.

We reimburse FS Advisor for expenses necessary to perform services related to our administration and operations, including FS Advisor's allocable portion of the compensation and related expenses of certain personnel of Franklin Square Holdings providing administrative services to us on behalf of FS Advisor. The amount of the reimbursement payable to FS Advisor is the lesser of (1) FS Advisor's actual costs incurred in providing such services and (2) the amount that we estimate we would be required to pay alternative service providers for comparable services in the same geographic location. FS Advisor is required to allocate the cost of such services to us based on factors such as assets, revenues, time allocations and/or other reasonable metrics. Our board of trustees reviews the methodology employed in determining how the expenses are allocated to us and the proposed allocation of the administrative expenses among us and certain affiliates of FS Advisor. Our board of trustees then assesses the reasonableness of such reimbursements for expenses allocated to us based on the breadth, depth and quality of such services as compared to the estimated cost to us of obtaining similar services from third-party providers known to be available. In addition, our board of trustees considers whether any single third-party service provider would be capable of providing all such services at comparable cost and quality. Finally, our board of trustees, among other things, compares the total amount paid to FS Advisor for such services as a percentage of our net assets to the same ratio as reported by other comparable BDCs.

Under the investment advisory and administrative services agreement, we, either directly or through reimbursement to FS Advisor or its affiliates, are responsible for our organization and offering costs in an amount up to 1.5% of gross proceeds raised in our continuous public offering. Organization and offering costs primarily include legal, accounting, printing and other expenses relating to our continuous public offering, including costs associated with technology integration between our systems and those of our selected broker-dealers, marketing expenses, salaries and direct expenses of FS Advisor's personnel, employees of its affiliates and others while engaged in registering and marketing our common shares, which includes the development of marketing materials and presentations, training and educational meetings, and generally coordinating the marketing process for us.

Prior to satisfaction of the minimum offering requirement and for a period of time thereafter, Franklin Square Holdings funded certain of our organization and offering costs. Following this period, we have paid certain of our organization and offering costs directly and reimbursed FS Advisor for offering costs incurred by FS Advisor on our behalf, including marketing expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering and marketing our common shares. Organization and offering costs funded directly by Franklin Square Holdings were recorded by us as a contribution to capital. The offering costs were offset against capital in excess of par value on our consolidated financial statements and the organization costs were charged to expense as incurred. All other offering costs, including costs incurred directly by us, amounts reimbursed to FS Advisor for ongoing offering costs and any reimbursements paid to Franklin Square Holdings for organization and offering costs previously funded, are recorded as a reduction of capital.

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The dealer manager for our continuous public offering is FS², which is one of our affiliates. Under the dealer manager agreement among us, FS Advisor and FS², FS² is entitled to receive sales commissions and dealer manager fees in connection with the sale of common shares in our continuous public offering, all or a portion of which may be re-allowed to selected broker-dealers.

			Three Months Ended March 31,

Related Party	Source Agreement	Description	2015		2014
FS Advisor	Investment Advisory and Administrative Services Agreement	Base Management Fee⁽¹⁾	$	18,745	$	12,867
FS Advisor	Investment Advisory and Administrative Services Agreement	Capital Gains Incentive Fee⁽²⁾		—	$	5,565
FS Advisor	Investment Advisory and Administrative Services Agreement	Subordinated Incentive Fee on Income⁽³⁾	$	2,879	$	4,610
FS Advisor	Investment Advisory and Administrative Services Agreement	Administrative Services Expenses⁽⁴⁾	$	1,500	$	935
FS Advisor	Investment Advisory and Administrative Services Agreement	Offering Costs⁽⁵⁾	$	1,624	$	904
FS²	Dealer Manager Agreement	Dealer Manager Fee⁽⁶⁾	$	3,217	$	5,038

(1): During the three months ended March 31, 2015 and 2014, $17,912 and $10,751, respectively, in base management fees were paid to FS Advisor. As of March 31, 2015, $18,745 in base management fees were payable to FS Advisor.
(2): During the three months ended March 31, 2015, we did not accrue any capital gains incentive fees. During the three months ended March 31, 2014, we accrued capital gains incentive fees of $5,565, of which $4,596 was based on unrealized gains and $969 was based on realized gains. No capital gains incentive fees are actually payable by us with respect to unrealized gains unless and until those gains are actually realized. We did not pay any capital gains incentive fees to FS Advisor during the three months ended March 31, 2015. We paid FS Advisor $2,857 in capital gains incentive fees during the three months ended March 31, 2014. As of March 31, 2015, we did not have any accrued capital gains incentive fees.
(3): During the three months ended March 31, 2015 and 2014, $12,142 and $6,786, respectively, of subordinated incentive fees on income were paid to FS Advisor. As of March 31, 2015, a subordinated incentive fee on income of $2,879 was payable to FS Advisor.
(4): During the three months ended March 31, 2015 and 2014, $1,412 and $872, respectively, of the accrued administrative services expenses related to the allocation of costs of administrative personnel for services rendered to us by FS Advisor and the remainder related to other reimbursable expenses. We paid $1,373 and $166 in administrative services expenses to FS Advisor during the three months ended March 31, 2015 and 2014, respectively.
(5): During the three months ended March 31, 2015 and 2014, we incurred offering costs of $2,500 and $1,200, respectively, of which $1,624 and $904, respectively, related to reimbursements to FS Advisor for offering costs incurred on our behalf, including marketing expenses, salaries and other direct expenses of FS Advisor's personnel and employees of its affiliates while engaged in registering and marketing our common shares.
(6): Represents aggregate dealer manager fees retained by FS² and not re-allowed to selected broker-dealers.

See Note 4 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q for additional information regarding our related party transactions and relationships, including capital contributions by FS Advisor and GSO, potential conflicts of interest, our exemptive relief order and our expense reimbursement arrangement with Franklin Square Holdings.

Recent Developments

During the period from April 1, 2015 to April 28, 2015, we sold 4,281,432 common shares for gross proceeds of $39,384 at an average price per share of $9.20.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. As of March 31, 2015, 52.4% of our portfolio investments (based on fair value) paid variable interest rates, 38.3% paid fixed interest rates, 4.2% were income producing equity or other investments and the remainder (5.1%) consisted of non-income producing equity or other investments. A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to the variable rate investments we hold and to declines in the value of any fixed rate investments we hold. However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount. To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to FS Advisor with respect to our increased pre-incentive fee net investment income.

Pursuant to the terms of the BNP facility, Deutsche Bank credit facility, Goldman facility, Natixis credit facility and Wells Fargo credit facility, Berwyn Funding, FSEP Funding, Strafford Funding, Energy Funding and Wayne Funding, respectively, borrow at a floating rate based on a benchmark interest rate. To the extent that any present or future credit facilities or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates. In periods of rising interest rates when we or our subsidiaries have such debt outstanding or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve-month period of changes in interest rates on our interest income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our borrowing arrangements in effect as of March 31, 2015 (dollar amounts are presented in thousands):

Basis Point Change in Interest Rates	Increase (Decrease) in Interest Income		Increase (Decrease) in Interest Expense			Increase (Decrease) in Net Interest Income

Down 25 basis points	$	—	$	(2,753	)	$	2,753		0.9	%
No change		—		—			—		—
Up 100 basis points		2,827		11,012			(8,185	)	(2.8	)%
Up 300 basis points		38,015		33,036			4,979		1.7	%
Up 500 basis points		75,141		55,061			20,080		6.8	%

We expect that our long-term investments will be financed primarily with equity and debt. If deemed prudent, we may use interest rate risk management techniques in an effort to minimize our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. During the three months ended March 31, 2015 and 2014, we did not engage in interest rate hedging activities.

In addition, we may have risk regarding portfolio valuation. See "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of Portfolio Investments."

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Item 4. Controls and Procedures.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2015. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) that occurred during the three month period ended March 31, 2015 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently subject to any material legal proceedings, and, to our knowledge, no material legal proceedings are threatened against us. From time to time, we may be party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, we do not expect that any such proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Risk Factors.

There have been no material changes from the risk factors set forth in our annual report on Form 10-K for the fiscal year ended December 31, 2014.

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

The table below provides information concerning our repurchases of common shares during the three months ended March 31, 2015 pursuant to our share repurchase program.

Period		Average Price Paid per Share

January 1 to January 31, 2015	450,293	$	8.82	450,293	(1	)
February 1 to February 28, 2015	—		—	—	—
March 1 to March 31, 2015	—		—	—	—

Total	450,293	$	8.82	450,293	(1	)

(1): A description of the maximum number of common shares that may be repurchased under our share repurchase program is set forth in Note 3 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q.

See Note 3 to our unaudited consolidated financial statements contained in this quarterly report on Form 10-Q for a more detailed discussion of the terms of our share repurchase program.

Item 3. Defaults upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.


3.1		Third Amended and Restated Declaration of Trust of FS Energy and Power Fund. (Incorporated by reference to Exhibit 3.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on March 13, 2012.)
3.2		Amended and Restated Bylaws of FS Energy and Power Fund. (Incorporated by reference to Exhibit 3.2 to FS Energy and Power Fund's Current Report on Form 8-K filed on March 13, 2012.)
4.1		Form of Subscription Agreement. (Incorporated by reference to FS Energy and Power Fund's prospectus supplement filed on May 13, 2015 with the Securities and Exchange Commission pursuant to Rule 497 of the Securities Act of 1933, as amended.)

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4.2		Amended and Restated Distribution Reinvestment Plan of FS Energy and Power Fund. (Incorporated by reference to Exhibit 4.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on November 14, 2011.)
10.1		Investment Advisory and Administrative Services Agreement, dated as of April 28, 2011, by and between FS Energy and Power Fund and FS Investment Advisor, LLC. (Incorporated by reference to Exhibit (g)(1) filed with Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
10.2		Amendment No. 1 dated as of August 10, 2012, to Investment Advisory and Administrative Services Agreement, dated as of April 28, 2011, by and between FS Energy and Power Fund and FS Investment Advisor, LLC. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on August 14, 2012.)
10.3		Investment Sub-advisory Agreement, dated as of April 28, 2011, by and between FS Investment Advisor, LLC and GSO Capital Partners LP. (Incorporated by reference to Exhibit (g) (2) filed with Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
10.4		Dealer Manager Agreement, dated as of April 28, 2011, by and between FS Energy and Power Fund and FS² Capital Partners, LLC. (Incorporated by reference to Exhibit (h)(1) filed with Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
10.5		Form of Follow-On Dealer Manager Agreement by and among FS Energy and Power Fund, FS Investment Advisor, LLC and FS² Capital Partners, LLC. (Incorporated by reference to Exhibit (h)(2) filed with Pre-Effective Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-184407) filed on May 10, 2013.)
10.6		2014 Follow-On Dealer Manager Agreement, dated as of January 7, 2015, by and among FS Energy and Power Fund, FS Investment Advisor, LLC and FS² Capital Partners, LLC. (Incorporated by reference to Exhibit (h)(3) filed with Post-Effective Amendment No. 1 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-199777) filed on April 1, 2015.)
10.7		Form of Selected Dealer Agreement (Included as Appendix A to the Dealer Manager Agreement). (Incorporated by reference to Exhibit (h)(1) filed with Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
10.8		Form of Follow-On Selected Dealer Agreement. (Included as Exhibit A to the Form of Follow-On Dealer Manager Agreement.) (Incorporated by reference to Exhibit (h)(2) filed with Pre-Effective Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-184407) filed on May 10, 2013.)
10.9		Custodian Agreement, dated as of November 14, 2011, by and between State Street Bank and Trust Company and FS Energy and Power Fund. (Incorporated by reference to Exhibit 10.6 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on November 14, 2011.)
10.10		Escrow Agreement, dated as of March 29, 2011, by and between FS Energy and Power Fund and UMB Bank, N.A. (Incorporated by reference to Exhibit (k) filed with Amendment No. 3 to FS Energy and Power Fund's registration statement on Form N-2 (File No. 333-169679) filed on May 6, 2011.)
10.11		Credit Agreement, dated as of June 24, 2011, by and among FSEP Term Funding, LLC, Deutsche Bank AG, New York Branch, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.7 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on June 27, 2011.)
10.12		First Amendment to Credit Agreement, dated as of May 30, 2012, by and among FSEP Term Funding, LLC, Deutsche Bank AG, New York Branch, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on May 30, 2012.)

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10.13		Second Amendment to Credit Agreement, dated as of August 28, 2012, by and among FSEP Term Funding, LLC, Deutsche Bank AG, New York Branch, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on August 30, 2012.)
10.14		Third Amendment to Credit Agreement, dated as of October 18, 2012, by and among FSEP Term Funding, LLC, Deutsche Bank AG, New York Branch, and the other lenders party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on October 18, 2012.)
10.15		Fourth Amendment to Credit Agreement, dated as of June 24, 2013, by and among FSEP Term Funding, LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on June 25, 2013.)
10.16		Amended and Restated Credit Agreement, dated as of June 11, 2014, by and among FSEP Term Funding, LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on June 17, 2014.)
10.17		Asset Contribution Agreement, dated as of June 24, 2011, by and between FS Energy and Power Fund and FSEP Term Funding, LLC. (Incorporated by reference to Exhibit 10.8 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on June 27, 2011.)
10.18		Investment Management Agreement, dated as of June 24, 2011, by and between FS Energy and Power Fund and FSEP Term Funding, LLC. (Incorporated by reference to Exhibit 10.9 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on June 27, 2011.)
10.19		Security Agreement, dated as of June 24, 2011, by and between FSEP Term Funding, LLC and Deutsche Bank AG, New York Branch. (Incorporated by reference to Exhibit 10.10 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on June 27, 2011.)
10.20		ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, each dated as of August 11, 2011, by and between EP Investments LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.11 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on August 15, 2011.)
10.21		Termination and Release Acknowledgment, dated as of May 11, 2012, by Citibank N.A. in favor of FS Energy and Power Fund. (Incorporated by reference to Exhibit 10.15 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on May 15, 2012.)
10.22		Amendment Agreement, dated as of May 11, 2012, to the ISDA 2002 Master Agreement, together with the Schedule thereto and Credit Support Annex to such Schedule, by and between EP Investments LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.16 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on May 15, 2012.)
10.23		Amended and Restated Confirmation Letter Agreement, dated as of May 11, 2012, by and between EP Investments LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.17 to FS Energy and Power Fund's Quarterly Report on Form 10-Q filed on May 15, 2012.)
10.24		Amended and Restated Confirmation Letter Agreement, dated as of October 11, 2012, by and between EP Investments LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on October 12, 2012.)
10.25		Termination Acknowledgment (TRS), dated as of May 24, 2013, by and between EP Investments LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on May 31, 2013.)
10.26		Loan Agreement, dated as of May 24, 2013, by and among EP Funding LLC, the financial institutions and other lenders from time to time party thereto and Citibank, N.A., as administrative agent. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on May 29, 2013.)
10.27		Account Control Agreement, dated as of May 24, 2013, by and among EP Funding LLC, Citibank, N.A. and Virtus Group, LP. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund's Current Report on Form 8-K filed on May 29, 2013.)

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10.28		Security Agreement, dated as of May 24, 2013, by and between EP Funding LLC and Citibank, N.A. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund's Current Report on Form 8-K filed on May 29, 2013.)
10.29		Investment Management Agreement, dated as of May 24, 2013, by and between FS Energy and Power Fund and EP Funding LLC. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund's Current Report on Form 8-K filed on May 29, 2013.)
10.30		Credit Agreement, dated as of July 11, 2013, by and among Energy Funding LLC, Natixis, New York Branch, Wells Fargo Bank, National Association and the other lenders from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on July 16, 2013.)
10.31		Securities Account Control Agreement, dated as of July 11, 2013, by and among Energy Funding LLC and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund's Current Report on Form 8-K filed on July 16, 2013.)
10.32		Collateral Management Agreement, dated as of July 11, 2013, by and between FS Energy and Power Fund and Energy Funding LLC. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund's Current Report on Form 8-K filed on July 16, 2013.)
10.33		Amended and Restated Expense Support and Conditional Reimbursement Agreement, dated May 16, 2013, by and between FS Energy and Power Fund and Franklin Square Holdings, L.P. (Incorporated by reference to Exhibit 99.1 to FS Energy and Power Fund's Current report on Form 8-K filed on May 17, 2013.)
10.34		Committed Facility Agreement, dated as of December 11, 2013, by and between Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on December 17, 2013.)
10.35		First Amendment Agreement, dated as of August 18, 2014, between BNP Paribas Prime Brokerage, Inc., on behalf of itself and as agent for the BNPP Entities, and Berwyn Funding LLC. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on August 21, 2014.)
10.36		U.S. PB Agreement, dated as of December 11, 2013, by and between Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund's Current Report on Form 8-K filed on December 17, 2013.)
10.37		Special Custody and Pledge Agreement, dated as of December 11, 2013, by and among State Street Bank and Trust Company, Berwyn Funding LLC and BNP Paribas Prime Brokerage, Inc. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund's Current Report on Form 8-K filed on December 17, 2013.)
10.38		Investment Management Agreement, dated as of December 11, 2013, by and between FS Energy and Power Fund and Berwyn Funding LLC. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund's Current Report on Form 8-K filed on December 17, 2013.)
10.39		Loan and Servicing Agreement, dated as of September 9, 2014, among Wayne Funding LLC, as borrower, Wells Fargo Securities, LLC, as administrative agent, Wells Fargo Bank, National Association, as collateral agent, account bank and collateral custodian, and the other lenders and lender agents from time to time party thereto. (Incorporated by reference to Exhibit 10.1 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.40		Purchase and Sale Agreement, dated as of September 9, 2014, by and between Wayne Funding LLC, as purchaser, and FS Energy and Power Fund, as seller. (Incorporated by reference to Exhibit 10.2 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.41		Collateral Management Agreement, dated as of September 9, 2014, by and between Wayne Funding LLC and FS Energy and Power Fund, as collateral manager. (Incorporated by reference to Exhibit 10.3 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)

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10.42		Securities Account Control Agreement, dated as of September 9, 2014, by and among Wayne Funding LLC, as pledgor, Wells Fargo Bank, National Association, as collateral agent, and Wells Fargo Bank, National Association, as securities intermediary. (Incorporated by reference to Exhibit 10.4 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.43		Amended and Restated Sale and Contribution Agreement, dated as of September 11, 2014, by and between FS Energy and Power Fund and Gladwyne Funding LLC. (Incorporated by reference to Exhibit 10.5 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.44		Indenture, dated as of September 11, 2014, by and between Gladwyne Funding LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.6 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.45		First Supplemental Indenture, dated as of December 15, 2014, by and between Gladwyne Funding LLC and Citibank, N.A., as trustee. (Incorporated by reference to Exhibit 10.1 of FS Energy and Power Fund's Current Report on Form 8-K filed on December 19, 2014.)
10.46		Gladwyne Funding LLC Floating Rate Notes due 2024. (Incorporated by reference to Exhibit 10.7 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.47		September 1996 Version Master Repurchase Agreement between Goldman Sachs Bank USA and Strafford Funding LLC, together with the related Annex and Master Confirmation thereto, each dated as of September 11, 2014. (Incorporated by reference to Exhibit 10.8 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.48		Amended and Restated Master Confirmation, dated as of December 15, 2014, by and between Goldman Sachs Bank USA and Strafford Funding LLC. (Incorporated by reference to Exhibit 10.2 of FS Energy and Power Fund's Current Report on Form 8-K filed on December 19, 2014.)
10.49		Revolving Credit Agreement, dated as of September 11, 2014, by and between FS Energy and Power Fund and Strafford Funding LLC. (Incorporated by reference to Exhibit 10.9 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.50		Amended and Restated Revolving Credit Agreement, dated as of December 15, 2014, by and between FS Energy and Power Fund and Strafford Funding LLC. (Incorporated by reference to Exhibit 10.3 of FS Energy and Power Fund's Current Report on Form 8-K filed on December 19, 2014.)
10.51		Amended and Restated Investment Management Agreement, dated as of September 11, 2014, by and between Gladwyne Funding LLC and FS Energy and Power Fund. (Incorporated by reference to Exhibit 10.10 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
10.52		Collateral Administration Agreement, dated as of September 11, 2014, by and among Gladwyne Funding LLC, FS Energy and Power Fund and Virtus Group, LP. (Incorporated by reference to Exhibit 10.11 to FS Energy and Power Fund's Current Report on Form 8-K filed on September 15, 2014.)
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended.
32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350, Chapter 63 of Title 18, United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*: Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on May 15, 2015.


		FS Energy and Power Fund
		By:		/s/ MICHAEL C. FORMAN Michael C. Forman Chief Executive Officer (Principal Executive Officer)
		By:		/s/ EDWARD T. GALLIVAN, JR. Edward T. Gallivan, Jr. Chief Financial Officer (Principal Financial and Accounting Officer)

FS Energy & Power Fund - FORM 10-Q - May 15, 2015

Attached files

FS Energy & Power Fund Reports