The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

This is an offering of 10,000,000 shares of the common stock of Prospect Capital Corporation. Prospect Capital Corporation is a financial services company that lends to and invests in middle market, privately-held companies. We are organized as an externally-managed, non-diversified closed-end management investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. Prospect Capital Management LLC manages our investments and Prospect Administration LLC provides the administrative services necessary for us to operate.

Our common stock trades on the NASDAQ Global Select Market under the symbol "PSEC." The last reported closing sale price of our common stock on June 17, 2011 was $10.65 per share and our most recently determined net asset value per share was $10.33 as of March 31, 2011 ($10.23 on an as adjusted basis solely to give effect to our distributions with record dates of April 29, 2011 and May 31, 2011, our issuance of common stock on April 29, 2011 and May 31, 2011 in connection with our dividend reinvestment plan and our public stock offering of 9,000,000 shares on April 7, 2011).

Investing in our common stock involves risks. See "Risk Factors" beginning on page S-8 of this prospectus supplement and page 9 of the accompanying prospectus.

The underwriter has an option for a period of 30 days from the date of this prospectus supplement to purchase up to an aggregate of 1,500,000 additional shares of our common stock at $ per share.

This prospectus supplement and the accompanying prospectus contain important information you should know before investing in our securities. Please read it before you invest and keep it for future reference. We file annual, quarterly and current reports, proxy statements and other information about us with the Securities and Exchange Commission, or the "SEC". This information is available free of charge by contacting us at 10 East 40th Street, 44th Floor, New York, NY 10016 or by telephone at (212) 448-0702. The SEC maintains a website at www.sec.gov where such information is available without charge upon written or oral request. Our internet website address is www.prospectstreet.com. Information contained on our website is not incorporated by reference into this prospectus supplement or the accompanying prospectus and you should not consider information contained on our website to be part of this prospectus supplement or the accompanying prospectus.

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus supplement. Any representation to the contrary is a criminal offense.

Our annual report on Form 10-K for the year ended June 30, 2010, any of our quarterly reports on Form 10-Q or current reports on Form 8-K, or any other oral or written statements made in press releases or otherwise by or on behalf of Prospect Capital Corporation, including this prospectus supplement and the accompanying prospectus, may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act", which involve substantial risks and uncertainties. Forward-looking statements predict or describe our future operations, business plans, business and investment strategies and portfolio management and the performance of our investments and our investment management business. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our industry, our beliefs, and our assumptions. Words such as "intends", "intend", "intended", "goal", "estimate", "estimates", "expects", "expect", "expected", "project", "projected", "projections", "plans", "seeks", "anticipates", "anticipated", "should", "could", "may", "will", "designed to", "foreseeable future", "believe", "believes" and "scheduled" and variations of these words and similar expressions are intended to identify forward-looking statements. Our actual results or outcomes may differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, ability to obtain certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this prospectus supplement and the accompanying prospectus, respectively, should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in "Risk Factors" and elsewhere in this prospectus supplement and the accompanying prospectus, respectively. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus supplement or the accompanying prospectus, as applicable. These forward-looking statements do not meet the safe harbor for forward-looking statements pursuant to Section 27A of the Securities Act of 1933, as amended, or the "Securities Act".

You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. We have not, and the underwriter has not, authorized any other person to provide you with information that is different from that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriter is not, making an offer of these securities in any jurisdiction where the offer is not permitted. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus is accurate only as of their respective dates. Our business, financial condition and results of operations may have changed since those dates. This prospectus supplement supersedes the accompanying prospectus to the extent it contains information that is different from or in addition to the information in that prospectus.

This summary highlights some information from this prospectus supplement and the accompanying prospectus, and it may not contain all of the information that is important to you. To understand the terms of the common stock offered hereby, you should read this prospectus supplement and the accompanying prospectus carefully. Together, these documents describe the specific terms of the shares of common stock we are offering. You should carefully read the sections titled "Risk Factors" in this prospectus supplement and in the accompanying prospectus and the documents identified in the section "Available Information".

The terms "we", "us", "our" and "Company", refer to Prospect Capital Corporation; "Prospect Capital Management", "Investment Advisor" and "PCM" refer to Prospect Capital Management LLC; and "Prospect Administration" and the "Administrator" refer to Prospect Administration LLC.

Prospect Capital Corporation is a financial services company that primarily lends to and invests in middle market privately-held companies. We are a closed-end investment company that has filed an election to be treated as a business development company under the Investment Company Act of 1940, or the "1940 Act". We invest primarily in senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development, project financing and recapitalization. We work with the management teams or financial sponsors to seek investments with historical cash flows, asset collateral or contracted pro-forma cash flows.

Typically, we concentrate on making investments in companies with annual revenues of less than $500 million and enterprise values of less than $250 million. Our typical investment involves a secured loan of less than $50 million with some form of equity participation. From time to time, we acquire controlling interests in companies in conjunction with making secured debt investments in such companies. In most cases, companies in which we invest are privately held at the time we invest in them. We refer to these companies as "target" or "middle market" companies and these investments as "middle market investments".

We seek to maximize total returns to our investors, including both current yield and equity upside, by applying rigorous credit analysis and asset-based and cash-flow based lending techniques to make and monitor our investments. Many of our investments to date have been in energy-related industries. We have made no investments to date in the real estate or mortgage industries, and we do not intend currently to focus on such investments.

We are currently pursuing multiple investment opportunities, including purchases of portfolios from private and public companies, as well as originations and secondary purchases of particular securities. There can be no assurance that we will successfully consummate any investment opportunity we are currently pursuing. Motivated sellers, including commercial finance companies, hedge funds, other business development companies, total return swap counterparties, banks, collateralized loan obligation funds, and other entities, are suffering from excess leverage, and we believe we are well positioned to capitalize as potential buyers of such assets at attractive prices. If any of these opportunities are consummated, there can be no assurance that investors will share our view of valuation or that any assets acquired will not be subject to future write downs, each of which could have an adverse effect on our stock price.

As of March 31, 2011, we held investments in 64 portfolio companies. The aggregate fair value as of March 31, 2011 of investments in these portfolio companies held on that date is approximately $1.214 billion. Our portfolio across all our long-term debt and certain equity investments had an annualized current yield of 12.9% as of March 31, 2011. The yield includes interest as well as dividends.

On April 7, 2011, we completed a public stock offering for 9,000,000 shares of our common stock at $11.40 per share, raising $102.6 million of gross proceeds.

On April 29, 2011, we issued 76,377 shares of our common stock in connection with the dividend reinvestment plan.

On May 31, 2011, we issued 78,689 shares of our common stock in connection with the dividend reinvestment plan.

On May 9, 2011, we announced the declaration of monthly dividends in the following amounts and with the following dates:

$0.101225 per share for May 2011 to holders of record on May 31, 2011 with a payment date of June 24, 2011;

$0.101250 per share for June 2011 to holders of record on June 30, 2011 with a payment date of July 22, 2011;

$0.101275 per share for July 2011 to holders of record on July 29, 2011 with a payment date of August 26, 2011; and

$0.101300 per share for August 2011 to holders of record on August 31, 2011 with a payment date of September 23, 2011.

On April 21, 2011, we announced an increase in commitments to our credit facility of $40.0 million. The commitments to the credit facility now stand at $325.0 million.

On April 18, 2011, we made a $13.0 million secured debt investment to support the acquisition of a leading food distributor by Annex Capital Management.

On April 26, 2011, we made a senior secured follow-on investment of $11.0 million in ICON Health & Fitness, Inc. ("ICON").

On May 2, 2011, we sold our membership interests in Fischbein, LLC ("Fischbein") for $13.3 million of gross proceeds, $1.5 million of which is deferred revenue held in escrow, realizing a gain of $9.9 million, and received a repayment on the loan that was outstanding. We subsequently made a $3.3 million senior secured second-lien term loan and invested $0.875 million in the common equity of Fischbein with the new ownership.

On May 3, 2011, we made a debt investment of $25.0 million to support the acquisition of J.D. Byrider, Inc., a leading used car sales and finance business, by Altamont Capital Partners.

On May 6, 2011, we made a $31.75 million investment in an advertising media buying business. $24.25 million is structured as senior secured debt, $2.8 million as subordinated debt and $4.4 million as controlling equity. In addition, $0.3 million was funded on a $3.0 million committed revolver.

On May 6, 2011, we provided $15.0 million in secured second-lien acquisition financing for a top company in the in-store media industry.

On May 6, 2011, we provided $15.0 million in secured second-lien financing for the recapitalization of a leading company in the engineered glass materials industry.

On May 25, 2011, we provided $24 million in secured first-lien financing to Targus Group International, Inc., the leading global supplier of notebook carrying cases and accessories.

On May 31, 2011, we provided $35 million in secured second-lien financing to Spring Window Fashions, LLC, a leading designer and manufacturer of high-quality window treatments.

On May 31, 2011, Label Corp Holdings Inc. repaid the $5.7 million loan receivable to us.

On June 3, 2011, Prince Mineral Company, Inc. repaid the $23.5 million loan receivable to us and we recognized $10.5 million of accelerated purchase discount accretion.

On June 17, 2011, we provided $26.5 million in senior secured financing to support the acquisition of ST Products, LLC by Quilvest Private Equity and Malakand Capital.


Common stock offered by us, excluding the underwriter's option to purchase additional shares		10,000,000 shares.
Common stock outstanding prior to this offering		97,513,877 shares.
Common stock outstanding after this offering, excluding the underwriter's option to purchase additional shares		107,513,877 shares.
Use of proceeds		We expect to use the net proceeds from this offering initially to maintain balance sheet liquidity, involving repayment of debt under our credit facility, investments in high quality short-term debt instruments or a combination thereof, and thereafter to make long-term investments in accordance with our investment objective. See "Use of Proceeds" in this prospectus supplement.
The NASDAQ Global Select Market symbol		PSEC
Risk factors		See "Risk Factors" in this prospectus supplement and the accompanying prospectus and other information in this prospectus supplement and the accompanying prospectus for a discussion of factors you should carefully consider before you decide whether to make an investment in shares of our common stock.
Current distribution rate		On May 9, 2011, we announced that our Board of Directors declared monthly distributions in the following amounts and with the following dates:
		• $0.101225 per share for May 2011 to holders of record on May 31, 2011 with a payment date of June 24, 2011;
		• $0.101250 per share for June 2011 to holders of record on June 30, 2011 with a payment date of July 22, 2011;
		• $0.101275 per share for July 2011 to holders of record on July 29, 2011 with a payment date of August 26, 2011; and
		• $0.101300 per share for August 2011 to holders of record on August 31, 2011 with a payment date of September 23, 2011,
		representing an annualized distribution yield (based on the June 2011 distribution) of approximately 11.41% based on our June 17, 2011 closing stock price of $10.65 per share. Such distributions are expected to be payable out of earnings. Our distribution levels are subject to change or discontinuance at any time in the discretion of our Board of Directors. Our future earnings and operating cash flow may not be sufficient to support a dividend.

The following tables are intended to assist you in understanding the costs and expenses that an investor in this offering will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. In these tables, we assume that we have borrowed $325 million under our credit facility, which is the maximum amount available under the credit facility. Except where the context suggests otherwise, whenever this prospectus contains a reference to fees or expenses paid by "you" or "us" or that "we" will pay fees or expenses, the Company will pay such fees and expenses out of our net assets and, consequently, you will indirectly bear such fees or expenses as an investor in the Company. However, you will not be required to deliver any money or otherwise bear personal liability or responsibility for such fees or expenses.



Stockholder transaction expenses:
Sales load (as a percentage of offering price)¹		%
Offering expenses borne by us (as a percentage of offering price)²		%
Dividend reinvestment plan expenses³	None
Total stockholder transaction expenses (as a percentage of offering price)⁴		%
Annual expenses (as a percentage of net assets attributable to common stock)⁴:
Management Fees⁵	3.54	%
Incentive fees payable under Investment Advisory Agreement (20% of realized capital gains and 20% of pre-incentive fee net investment income) ⁶	2.34	%
Interest payments on the credit facility	1.51	%
Interest payments on the 2010 Notes⁷	1.03	%
Interest payments on the 2011 Notes⁸	1.04	%
Acquired Fund Fees and Expenses⁹	0.01	%
Other expenses¹⁰	1.64	%
Total annual expenses^6,10	11.11	%

The following table demonstrates the projected dollar amount of cumulative expenses we would pay out of net assets and that you would indirectly bear over various periods with respect to a hypothetical investment in our common stock. In calculating the following expense amounts, we have assumed we would have borrowed all $325 million available under our line of credit, that our annual operating expenses would remain at the levels set forth in the table above and that we would pay the costs shown in the table above.

While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. The income incentive fee under our Investment Advisory Agreement with Prospect Capital Management is unlikely to be material assuming a 5% annual return and is not included in the example. If we achieve sufficient returns on our investments, including through the realization of capital gains, to trigger an incentive fee of a material amount, our distributions to our common stockholders and our expenses would likely be higher. In addition, while the example assumes reinvestment of all dividends and other distributions at net asset value, or NAV, participants in our dividend reinvestment plan will receive a number of shares of our common stock determined by dividing the total dollar amount of the distribution payable to a participant by the market price per share of our common stock at the close of trading on the valuation date for the distribution. See "Dividend Reinvestment Plan" for additional information regarding our dividend reinvestment plan.

This example and the expenses in the table above should not be considered a representation of our future expenses. Actual expenses (including the cost of debt, if any, and other expenses) may be greater or less than those shown.

You should read the condensed financial information below with the Financial Statements and Notes thereto included in this prospectus supplement and the accompanying prospectus. Financial information below for the years ended June 30, 2010, 2009, 2008, 2007 and 2006 has been derived from the financial statements that were audited by our independent registered public accounting firm. The selected consolidated financial data at and for the three months and nine months ended March 31, 2011 and 2010 has been derived from unaudited financial data. Certain reclassifications have been made to the prior period financial information to conform to the current period presentation. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" starting on page S-10 for more information.

	For the Three Months Ended March 31,						For the Nine Months Ended March 31,						For the Year Ended June 30,

	2011			2010			2011			2010			2010			2009			2008			2007			2006
	(In thousands except data relating to shares, per share and number of portfolio companies)
Performance Data:
Interest income	$	34,504		$	27,947		$	90,787		$	61,321		$	86,518		$	62,926		$	59,033		$	30,084		$	13,268
Dividend income		2,763			2,301			8,328			12,689			15,366			22,793			12,033			6,153			3,601
Other income		7,306			1,757			13,970			11,313			12,675			14,762			8,336			4,444			—

Total investment income		44,573			32,005			113,085			85,323			114,559			100,481			79,402			40,681			16,869

Interest and debt expenses		5,660			2,111			10,182			5,480			(8,382	)		(6,161	)		(6,318	)		(1,903	)		(642	)
Investment advisory expense		12,034			8,320			31,231			22,601			(30,727	)		(26,705	)		(20,199	)		(11,226	)		(3,868	)
Other expenses		2,923			2,600			7,641			6,692			(8,260	)		(8,452	)		(7,772	)		(4,421	)		(3,801	)

Total operating expenses		20,617			13,031			49,054			34,773			(47,369	)		(41,318	)		(34,289	)		(17,550	)		(8,311	)

Net investment income		23,956			18,974			64,031			50,550			67,190			59,163			45,113			23,131			8,558

Realized and unrealized gains (losses)		9,803			6,966			27,248			(45,508	)		(47,565	)		(24,059	)		(17,522	)		(6,403	)		4,338

Net increase (decrease) in net assets from operations	$	33,759		$	25,940		$	91,279		$	5,042		$	19,625		$	35,104		$	27,591		$	16,728		$	12,896

Per Share Data:
Net increase (decrease) in net assets from operations¹	$	0.38		$	0.41		$	1.11		$	0.09		$	0.33		$	1.11		$	1.17		$	1.06		$	1.83
Distributions declared per share	$	0.30		$	0.41		$	0.91		$	1.23		$	(1.33	)	$	(1.62	)	$	(1.59	)	$	(1.54	)	$	(1.12	)
Average weighted shares outstanding for the period		88,200,916			63,569,663			82,112,300			56,948,036			59,429,222			31,559,905			23,626,642			15,724,095			7,056,846
Assets and Liabilities Data:
Investments	$	1,213,517		$	697,001		$	1,213,517		$	697,001		$	748,483		$	547,168		$	497,530		$	328,222		$	133,969
Other assets		125,345			53,526			125,345			53,526			84,212			119,857			44,248			48,280			4,511

Total assets		1,338,862			750,527			1,338,862			750,527			832,695			667,025			541,778			376,502			138,480

Amount drawn on credit facility		47,500			54,200			47,500			54,200			100,300			124,800			91,167			—			28,500
2010 Notes		150,000			—			150,000			—			—			—			—			—			—
2011 Notes		172,500			—			172,500			—			—			—			—			—			—
Amount owed to related parties		7,809			10,074			7,809			10,074			9,300			6,713			6,641			4,838			745
Other liabilities		48,132			34,434			48,132			34,434			11,671			2,916			14,347			71,616			965

Total liabilities		425,941			98,708			425,941			98,708			121,271			134,429			112,155			76,454			30,210

Net assets	$	912,921		$	651,819		$	912,921		$	651,819		$	711,424		$	532,596		$	429,623		$	300,048		$	108,270

Investment Activity Data:
No. of portfolio companies at period end		64			55			64			55			58			30			29	²		24	²		15
Acquisitions	$	359,152		$	59,311		$	641,036		$	275,815		$	364,788	⁴	$	98,305		$	311,947		$	167,255		$	83,625
Sales, repayments, and other disposals	$	76,494		$	26,603		$	207,557		$	96,338		$	136,221		$	27,007		$	127,212		$	38,407		$	9,954
Weighted-Average Yield at end of period³		12.9	%		14.6	%		12.9	%		14.6	%		14.2	%		13.7	%		15.5	%		17.1	%		17.0	%

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below and in the accompanying prospectus, together with all of the other information included in this prospectus supplement and in the accompanying prospectus, before you decide whether to make an investment in our common stock. The risks set forth below and in the accompanying prospectus are not the only risks we face. If any of the adverse events or conditions described below or in the accompanying prospectus occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our NAV and the trading price of our common stock could decline, we could reduce or eliminate our dividend and you could lose all or part of your investment.

Recent developments may increase the risks associated with our business and an investment in us.

The U.S. financial markets have been experiencing a high level of volatility, disruption and distress, which was exacerbated by the failure of several major financial institutions in the last few months of 2008. Despite actions of the United States federal government, these events contributed to worsening general economic conditions that materially and adversely impacted the broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. Similar conditions have occurred in the financial markets and economies of numerous other countries. While these conditions appear to be improving, they could continue for a prolonged period of time or worsen in the future both in the U.S. and globally. These conditions have raised the level of many of the risks described in this prospectus supplement and in the accompanying prospectus and could have an adverse effect on our portfolio companies as well as on our business, financial condition, results of operations, dividend payments, credit facility, access to capital, valuation of our assets, including our NAV, and our stock price.

Our most recent NAV was calculated on March 31, 2011 and our NAV when calculated effective June 30, 2011 may be higher or lower.

Our most recently estimated NAV per share is $10.23 on an as adjusted basis solely to give effect to our distributions with record dates of April 29, 2011 and May 31, 2011, our issuance of common stock on April 29, 2011 and May 31, 2011 in connection with our dividend reinvestment plan and our public stock offering of 9,000,000 shares on April 7, 2011 versus $10.33 determined by us as of March 31, 2011. NAV per share as of June 30, 2011, may be higher or lower than $10.23 based on potential changes in valuations and earnings for the quarter then ended. Our Board of Directors has not yet determined the fair value of portfolio investments at any date subsequent to March 31, 2011. Our Board of Directors determines the fair value of our portfolio investments on a quarterly basis in connection with the preparation of quarterly financial statements and based on input from an independent valuation firm, our Investment Advisor and the audit committee of our Board of Directors.

If we sell common stock at a discount to our NAV per share, stockholders who do not participate in such sale will experience immediate dilution in an amount that may be material.

We have obtained approval from our stockholders for us to be able to sell an unlimited number of shares of our common stock at any level of discount from NAV per share in certain circumstances during the one-year period ending on December 11, 2011, as described in this prospectus supplement and in the accompanying prospectus. The issuance or sale by us of shares of our common stock at a discount to net asset value poses a risk of dilution to our stockholders. In particular, stockholders who do not purchase additional shares of common stock at or below the discounted price in proportion to their current ownership will experience an immediate decrease in NAV per share (as well as in the

aggregate NAV of their shares of common stock if they do not participate at all). These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we experience in our assets, potential earning power and voting interests from such issuance or sale. In addition, such sales may adversely affect the price at which our common stock trades. For additional information about recent sales below NAV per share, see "Recent Sales of Common Stock Below Net Asset Value" in this prospectus supplement and for additional information and hypothetical examples of these risks, see "Sales of Common Stock Below Net Asset Value" in this prospectus supplement and in the accompanying prospectus.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All figures in this section are in thousands except share, per share and other data)

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this prospectus supplement and the accompanying prospectus. Historical results set forth are not necessarily indicative of our future financial position and results of operations.

We are a financial services company that primarily lends to and invests in middle market privately-held companies. We are a closed-end investment company that has filed an election to be treated as a business development company under the 1940 Act. We invest primarily in senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development, project financing and recapitalization. We work with the management teams or financial sponsors to seek investments with historical cash flows, asset collateral or contracted pro-forma cash flows.

We seek to be a long-term investor with our portfolio companies. From our July 27, 2004 inception to the fiscal year ended June 30, 2007, we invested primarily in industries related to the industrial/energy economy. Since then, we have widened our strategy to focus in other sectors of the economy and continue to diversify our portfolio holdings.

The aggregate value of our portfolio investments was $1,213,517 and $748,483 as of March 31, 2011 and June 30, 2010, respectively. During the nine months ended March 31, 2011, our net cost of investments increased by $444,880, or 61.0%, primarily as a result of our investment in nineteen new and ten follow-on investments of $632,526, while we received full repayment on eleven investments, sold three investments and received several partial prepayments and revolver paydowns of $214,125.

Compared to the end of last fiscal year (ended June 30, 2010), net assets increased by $201,497 or 28.0% during the nine months ended March 31, 2011, from $711,424 to $912,921. This increase resulted from the issuance of new shares of our common stock (less offering costs) in the amount of $177,593, dividend reinvestments of $8,166, and another $91,279 from operations. These increases, in turn, were offset by $75,541 in dividend distributions to our stockholders. The $91,279 increase in net assets resulting from operations is net of the following: net investment income of $64,031, net realized gain on investments of $7,094, and an increase in net assets due to changes in net unrealized appreciation of investments of $20,154.

The economy continues to show signs of recovery from the deteriorating credit markets of 2008 and 2009. The growth and improvement in the capital markets that began during the second half of 2009 has continued. While encouraged by the signs of improvement, we operate in a challenging environment that is still recovering from a recession and financial services industry negatively affected by the deterioration of credit quality in subprime residential mortgages that spread rapidly to other credit markets. Market liquidity and credit quality conditions continue to remain weaker today than three years ago.

We believe that Prospect is well positioned to navigate through these adverse market conditions. As a business development company, we are limited to a maximum 1 to 1 debt to equity ratio. On December 21, 2010 and February 18, 2011, we issued $150,000 of 6.25% Senior Convertible Notes due 2015 ("2010 Notes") and $172,500 of 5.50% Senior Convertible Notes due 2016 ("2011 Notes"), respectively (collectively, "Senior Convertible Notes"), to further enhance our liquidity position and to

demonstrate our access to the unsecured term debt market (as described in Note 6 to our consolidated financial statements). The Senior Convertible Notes are general unsecured obligations, rank equally in right of payment with our existing and future senior unsecured debt, and will rank senior in right of payment to any potential subordinated debt, should any be issued in the future. The Senior Convertible Notes have no restrictions related to the type and security of assets in which Prospect might invest.

As of March 31, 2011, we had $47,500 outstanding borrowings on the credit facility and $322,500 outstanding on our Senior Convertible Notes. We also had $159,967 available under our credit facility for additional borrowing. Further, as we pledge additional investments to the credit facility, we will generate additional credit facility availability. The revolving period for our credit facility continues until June 13, 2012, with an amortization running to June 13, 2013. During the amortization period only principal payments received on the pledged assets are required to be used for amortization.

We also continue to generate liquidity through public and private stock offerings. On July 7, 2009, we completed a public stock offering for 5,175,000 shares of our common stock at $9.00 per share, raising $46,575 of gross proceeds. On August 20, 2009 and September 24, 2009, we issued 3,449,686 shares and 2,807,111 shares, respectively, of our common stock at $8.50 and $9.00 per share, respectively, in private stock offerings, raising $29,322, and $25,264 of gross proceeds, respectively. Concurrent with the sale of these shares, we entered into a registration rights agreement in which we granted the purchasers certain registration rights with respect to the shares. Under the terms and conditions of the registration rights agreement, we filed with the SEC a post-effective amendment to the registration statement on Form N-2 on November 6, 2009. Such amendment was declared effective by the SEC on November 9, 2009.

On March 17, 2010, we established an at-the-market program through which we sold shares of our common stock. An at-the-market offering is a registered offering by a publicly traded issuer of its listed equity securities selling shares directly into the market at market prices. We engaged two broker-dealers to act as agents and sell our common stock directly into the market over a period of time. We paid a 2% commission to the broker-dealer on shares sold. Through this program we issued 8,000,000 shares of our common stock at an average price of $10.90 per share, raising $87,177 of gross proceeds, from March 23, 2010 through July 21, 2010.

On July 19, 2010, we established a second at-the-market program, as we had sold all the shares authorized in the original at-the-market program. We engaged three broker-dealers to act as potential agents and sell our common stock directly into the market over a period of time. We paid a 2% commission to the broker-dealer on shares sold. Through this program we issued 6,000,000 shares of our common stock at an average price of $9.73 per share, raising $58,403 of gross proceeds, from July 22, 2010 through September 28, 2010.

On September 24, 2010, we established a third at-the-market program, as we had sold all the shares authorized in the preceding at-the-market programs, through which we may sell, from time to time and at our discretion, 6,000,000 shares of our common stock. We engaged three broker-dealers to act as potential agents and sell our common stock directly into the market over a period of time. We paid a 2% commission to the broker-dealer on shares sold. Through this program we issued 302,400 shares of our common stock at an average price of $9.87 per share, raising $2,986 of gross proceeds, from September 29, 2010 through September 30, 2010. During the period from October 1, 2010 to November 3, 2010, we continued this program and issued an additional 4,929,556 shares of our common stock at an average price of $9.86 per share, raising $48,611 of gross proceeds.

we issued 4,513,920 shares of our common stock at an average price of $10.00 per share, raising $45,147 of gross proceeds, from November 16, 2010 through December 15, 2010.

On March 16, 2011, our new Registration Statement on Form N-2 was declared effective by the SEC. Under this Shelf Registration Statement, we can issue up to $750,000 of additional equity securities as of March 31, 2011.

On April 7, 2011, we completed a public stock offering for 9,000,000 shares of our common stock at $11.40 per share, raising $102,600 of gross proceeds.

Our Board of Directors, pursuant to the Maryland General Corporation Law, executed Articles of Amendment to increase the number of shares authorized for issuance from 100,000,000 to 200,000,000 in the aggregate. The amendment became effective August 31, 2010.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management 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 income and expenses during the reported period. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ.

On January 6, 2011, we made a senior secured term loan investment of $30,000 to support the acquisition of Progressive Logistics Services, LLC ("Progressive") by a middle market private equity firm.

On January 10, 2011, we made a senior secured debt investment of $19,000 to support the acquisition of Endeavor House by Pinnacle Treatment Centers, Inc. ("Pinnacle").

On January 10, 2011, we sold our remaining 616,304 shares of Miller Petroleum, Inc. ("Miller") common stock realizing $4.23 of net proceeds per share, realizing a gain of $2,561 on the sale.

On January 21, 2011, we provided senior secured credit facilities of $28,200 to support the acquisition of Stauber Performance Ingredients ("Stauber") by ICV Partners. Through March 31, 2011, we have funded $25,700 of the commitment.

On January 24, 2011, Maverick Healthcare, LLC ("Maverick") repaid the $13,122 loan receivable to us.

On January 31, 2011, we made a senior secured term investment of $7,500 to support the recapitalization of Empire Today, LLC ("Empire"), which is the second largest independent provider of carpet and hard surface flooring to consumers in the residential replacement flooring industry.

On February 3, 2011, we made a senior secured debt investment of $22,000 to support the recapitalization of Medical Security Card Company, LLC ("Medical Security"), a pharmacy services company. Through March 31, 2011, we funded $20,500 of the commitment.

On February 4, 2011, we made a secured second-lien debt investment of $45,000 to support the refinancing of Clearwater Seafoods Limited Partnership ("Clearwater"), a leading premium seafood company based in Nova Scotia, Canada.

On February 9, 2011, we made a net follow-on investment of $2,967 in The Copernicus Group, Inc. ("Copernicus") that increased our total investment to $22,500.

On March 2, 2011, we made a senior secured first-lien debt investment of $12,500 to support the acquisition of Out Rage, LLC ("Out Rage"), a market leader in the bowhunting equipment industry.

On March 4, 2011, we made a $27,000 secured second-lien term loan to Arrowhead General Insurance Agency, Inc. ("Arrowhead"). After the financing we received a repayment of the loan that was previously outstanding.

On March 11, 2011, EXL Acquisition Corporation ("EXL") repaid the $22,988 loan receivable to us and we sold our 2,500 shares of EXL common stock.

On March 18, 2011, we closed a $60,000 first-lien senior secured facility for Safe-Guard Products International, LLC ("Safe-Guard"), the leading third-party administrator of ancillary finance and insurance products and services for new, used, and leased motor vehicles.

On March 31, 2011, we funded a $53,000 first-lien senior secured credit facility, funded $1,435 of a $5,000 commitment on a revolving line of credit and invested $1,500 in common equity to support the acquisition of Cargo Airport Services by ICV Partners.

On March 31, 2011, we provided a net $32,770 in first-lien senior secured financing for the recapitalization of Progrexion Holdings, LLC ("Progrexion") focused on the consumer credit information sector.

On March 31, 2011, KTPS Holdings, LLC ("KTPS") repaid the $8,414 loan receivable to us. A portion of the loan receivable was repaid at a discount, for which we realized a loss of $549.

On January 31, 2011, February 28, 2011 and March 31, 2011, we issued shares of our common stock in connection with the dividend reinvestment plan of 84,155, 83,021 and 76,253, respectively.

On February 8, 2011, we announced the declaration of monthly dividends in the following amounts and with the following dates:

On January 13, 2011, we amended our revolving credit facility. The amendment increases the accordion feature limit from $300,000 to $400,000 of commitments, of which $285,000 of commitments were in place as of March 31, 2011. Other changes in the amendment increase our borrowing base with the investments currently pledged to the facility by reducing some concentration limits and allow us to pledge new assets to the facility on an expedited basis.

On February 18, 2011, we issued $172,500 in aggregate principal amount of 5.50% senior convertible notes due 2016. The 2011 Notes mature on August 15, 2016, unless previously converted in

accordance with their terms. The 2011 Notes are general unsecured obligations, rank equally in right of payment with our existing, including the 2010 Notes and future senior unsecured debt, and rank senior in right of payment to any potential subordinated debt, should any be issued in the future. The 2011 Notes are convertible into shares of our common stock at an initial conversion rate and conversion rate at March 31, 2011 of 78.3699 and 78.3701 shares, respectively, of Common Stock per $1,000 principal amount of 2011 Notes, which is equivalent to a conversion price of approximately $12.76 per share of Common Stock, subject to adjustment in certain circumstances. The holders of the 2011 Notes may also put back the 2011 Notes to the Company under certain circumstances. The net proceeds from the offering of the 2011 Notes were approximately $166,925, which have used to maintain balance sheet liquidity, including repayment of debt under our credit facility, investments in high quality short-term debt instruments or a combination thereof, and will thereafter be used to make long-term investments in accordance with our investment objective. We have analyzed the features of the 2011 Notes to determine if bifurcation was necessary and have determined that it is not material.

On April 7, 2011, we completed a public stock offering for 9,000,000 shares of our common stock at $11.40 per share, raising $102,600 of gross proceeds.

On April 18, 2011, we made a $13,000 secured debt investment to support the acquisition of a leading food distributor by Annex Capital Management.

On April 21, 2011, we announced an increase in commitments to our credit facility of $40,000. The commitments to the credit facility now stand at $325,000.

On April 26, 2011, we made a senior secured follow-on investment of $11,000 in ICON Health & Fitness, Inc. ("ICON").

On April 29, 2011, we issued 76,377 shares of our common stock in connection with the dividend reinvestment plan.

On May 2, 2011, we sold our membership interests in Fischbein, LLC ("Fischbein") for $13,270 of gross proceeds, $1,479 of which is deferred revenue held in escrow, realizing a gain of $9,893, and received a repayment on the loan that was outstanding. We subsequently made a $3,334 senior secured second-lien term loan and invested $875 in the common equity of Fischbein with the new ownership.

On May 3, 2011, we made a debt investment of $25,000 to support the acquisition of J.D. Byrider, Inc., a leading used car sales and finance business, by Altamont Capital Partners.

On May 6, 2011, we made a $31,750 investment in an advertising media buying business. $24,250 is structured as senior secured debt, $2,800 as subordinated debt and $4,400 as controlling equity. In addition, $300 was funded on a $3,000 committed revolver.

On May 6, 2011, we provided $15,000 in secured second-lien acquisition financing for a top company in the in-store media industry.

On May 6, 2011, we provided $15,000 in secured second-lien financing for the recapitalization of a leading company in the engineered glass materials industry.

On May 9, 2011, we announced the declaration of monthly dividends in the following amounts and with the following dates:

On May 25, 2011, we provided $24,000 in secured first-lien financing to Targus Group International, Inc., the leading global supplier of notebook carrying cases and accessories.

On May 31, 2011, we issued 78,689 shares of our common stock in connection with the dividend reinvestment plan.

On May 31, 2011, we provided $35,000 in secured second-lien financing to Spring Window Fashions, LLC, a leading designer and manufacturer of high-quality window treatments.

On May 31, 2011, Label Corp Holdings Inc. repaid the $5,749 loan receivable to us.

On June 3, 2011, Prince Mineral Company, Inc. repaid the $23,540 loan receivable to us and we recognized $10,463 of accelerated purchase discount accretion.

On June 17, 2011, we provided $26,500 in senior secured financing to support the acquisition of ST Products, LLC by Quilvest Private Equity and Malakand Capital.

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially. In addition to the discussion below, our critical accounting policies are further described in the notes to the financial statements.

Under the 1940 Act rules, the regulations pursuant to Article 6 of Regulation S-X, and the American Institute of Certified Public Accountants' Audit and Accounting Guide for Investment Companies, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services and benefits to us. Our March 31, 2011 and June 30, 2010 financial statements include our accounts and the accounts of Prospect Capital Funding, LLC, our only wholly-owned, closely-managed subsidiary, which is also an investment company. All intercompany balances and transactions have been eliminated in consolidation.

We are a non-diversified company within the meaning of the 1940 Act. We classify our investments by level of control. As defined in the 1940 Act, control investments are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of 25% or more of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are

deemed to exist through the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities of another person.

Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Investments in other, non-security financial instruments are recorded on the basis of subscription date or redemption date, as applicable. Amounts for investments recognized or derecognized but not yet settled are reported as Receivables for investments sold and Payables for investments purchased, respectively, in the Consolidated Statements of Assets and Liabilities.

Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.

Investments for which market quotations are readily available are valued at such market quotations.

For most of our investments, market quotations are not available. With respect to investments for which market quotations are not readily available or when such market quotations are deemed not to represent fair value, our Board of Directors has approved a multi-step valuation process each quarter, as described below:

In September 2006, the Financial Accounting Standards Board ("FASB") issued ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. We adopted ASC 820 on a prospective basis beginning in the quarter ended September 30, 2008.

ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:

measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment.

The changes to generally accepted accounting principles from the application of ASC 820 relate to the definition of fair value, framework for measuring fair value, and the expanded disclosures about fair value measurements. ASC 820 applies to fair value measurements already required or permitted by other standards.

In accordance with ASC 820, the fair value of our investments is defined as the price that we would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market in which that investment is transacted.

In April 2009, the FASB issued ASC 820-10-65, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" ("ASC 820-10-65"). This update provides further clarification for ASC 820 in markets that are not active and provides additional guidance for determining when the volume of trading level of activity for an asset or liability has significantly decreased and for identifying circumstances that indicate a transaction is not orderly. ASC 820-10-65 is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of ASC 820-10-65 for the three and nine months ended March 31, 2011 and 2010, did not have any effect on our net asset value, financial position or results of operations as there was no change to the fair value measurement principles set forth in ASC 820.

In January 2010, the FASB issued Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements ("ASU 2010-06"). ASU 2010-06 amends ASC 820-10 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers' disclosures about postretirement benefit plan assets. ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009. Our management does not believe that the adoption of the amended guidance in ASC 820-10 will have a significant effect on our financial statements.

We have elected to be treated as a regulated investment company and intend to continue to comply with the requirements of the Internal Revenue Code of 1986 (the "Code"), applicable to regulated investment companies. We are required to distribute at least 90% of our investment company taxable income and intend to distribute (or retain through a deemed distribution) all of our investment company taxable income and net capital gain to stockholders; therefore, we have made no provision for income taxes. The character of income and gains that we will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.

If we do not distribute (or are not deemed to have distributed) at least 98% of our annual taxable income in the calendar year earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual taxable income exceeds the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.

distributions. Distributions would generally be taxable to our individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate for taxable years beginning before 2013 (but not for taxable years beginning thereafter, unless the relevant provisions are extended by legislation) to the extent of our current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our shareholders our accumulated earnings and profits attributable to non-RIC years reduced by an interest charge of 50% of such earnings and profits payable by us as an additional tax. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.

We follow ASC 740, Income Taxes ("ASC 740"). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Adoption of ASC 740 was applied to all open tax years as of July 1, 2007. The adoption of ASC 740 did not have an effect on our net asset value, financial condition or results of operations as there was no liability for unrecognized tax benefits and no change to our beginning net asset value. As of March 31, 2011 and for the three and nine months then ended, we did not have a liability for any unrecognized tax benefits. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof.

Realized gains or losses on the sale of investments are calculated using the specific identification method.

Loans are placed on non-accrual status when there is reasonable doubt that principal or interest will not be collected in accordance with the terms of the investment. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management's judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management's judgment, are likely to remain current. As of March 31, 2011, approximately 2.4% of our net assets are in non-accrual status.

Structuring fees and similar fees are recognized as income as earned, usually when paid. Structuring fees, excess deal deposits, net profits interests and overriding royalty interests are included in other income.

Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a monthly dividend or distribution is approved by our Board of Directors quarterly and is generally based upon our management's estimate of our earnings for the quarter. Net realized capital gains, if any, are distributed at least annually.

We record origination expenses related to our credit facility and the Senior Convertible Notes as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method for our revolving credit facility and the effective interest method for our Senior Convertible Notes, over the respective stated life.

We record registration expenses related to shelf filings as prepaid assets. These expenses consist principally of SEC registration fees, legal fees and accounting fees incurred. These prepaid assets will be charged to capital upon the receipt of an equity offering proceeds or charged to expense if no offering completed.

We have recorded the Senior Convertible Notes (See Note 6 to our consolidated financial statements) at their contractual amounts. The Senior Convertible Notes were analyzed for any features that would require its accounting to be bifurcated and they were determined to be immaterial.

We follow ASC 460, Guarantees ("ASC 460"). ASC 460 elaborates on the disclosure requirements of a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, for those guarantees that are covered by ASC 460, the fair value of the obligation undertaken in issuing certain guarantees.

Net increase or decrease in net assets resulting from operations per common share are calculated using the weighted average number of common shares outstanding for the period presented. In accordance with ASC 946, Financial Services—Investment Companies, convertible securities are not considered in the calculation of net assets per share.

In June 2009, the FASB issued ASC 860, Accounting for Transfers of Financial Assets—an amendment to FAS 140 ("ASC 860"). ASC 860 improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial assets: the effects of a transfer on its financial position, financial performance, and cash flows: and a transferor's continuing involvement, if any, in transferred financial assets. ASC 860 was effective as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009 (our June 30, 2011 fiscal year), for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The adoption of this standard had no effect on our results of operation or our financial position.

In June 2009, the FASB issued ASC 810, Consolidation ("ASC 810"). ASC 810 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003),

Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in ASC 860, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provided timely and useful information about an enterprise's involvement in a variable interest entity. ASC 810 was effective as of the beginning of our first annual reporting period that begins after November 15, 2009 (our June 30, 2011 fiscal year). The adoption of this standard had no effect on our results of operation or our financial position.

In January 2010, the FASB issued Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements ("ASC 2010-06"). ASU 2010-06 amends ASC 820-10 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers' disclosures about postretirement benefit plan assets. ASU 2010-06 is effective December 15, 2009, except for the disclosure about purchase, sales, issuances and settlements in the roll forward of activity in level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 (or July 1, 2011 for us) and for interim periods within those fiscal years. We do not believe that the adoption of the amended guidance in ASC 820-10 will have a significant effect on our financial statements.

In February 2010, the FASB issued Accounting Standards Update 2010-10, Consolidation (Topic 810)—Amendments for Certain Investments Funds ("ASU 2010-10"), which defers the application of the consolidation guidance in ASC 810 for certain investments funds. The disclosure requirements continue to apply to all entities. ASU 2010-10 was effective as of the beginning of the first annual period that began after November 15, 2009 and for interim periods within that first annual period or July 1, 2010 for us. The adoption of this standard had no effect on our results of operation or our financial position.

In August 2010, the FASB issued Accounting Standards Update 2010-21, Accounting for Technical Amendments to Various SEC Rules and Schedules ("ASU 2010-21"). This Accounting Standards Update various SEC paragraphs pursuant to the issuance of Release No. 33-9026: Technical Amendments to Rules, Forms, Schedules and Codification of Financial Reporting Policies. The adoption of this standard had no effect on our results of operation or our financial position.

In August 2010, the FASB issued Accounting Standards Update 2010-22, Accounting for Various Topics—Technical Corrections to SEC Paragraphs ("ASU 2010-22"). ASU 2010-22 amends various SEC paragraphs based on external comments received and the issuance of Staff Accounting Bulletin ("SAB") 112, which amends or rescinds portions of certain SAB topics. The adoption of this standard had no effect on our results of operation or our financial position.

In December 2010, the FASB issued Accounting Standards Update 2010-29, Business Combinations (Topic 805)—Disclosure of Supplementary Pro Forma Information for Business Combinations (a consensus of the FASM Emerging Issues Task Force ("ASU 2010-29"). ASU 2010-29 addresses diversity in practice about the interpretation of pro forma revenue and earnings disclosure requirements for business combinations. The amended guidance in ASU 2010-29 specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior reporting period only. This standard also expands the supplemental pro forma disclosures under ASC 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in ASU 2010-29 are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted or effective

July 1, 2011 for us. Our management does not believe that the adoption of the amended guidance in ASU 2010-29 will have a significant effect on our financial statements

In February 2011, the FASB issued Accounting Standards Update 2011-02, Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring ("ASU 2011-02"). ASU 2011-02 clarifies which loan modifications constitute troubled debt restructurings. It is intended to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. In evaluating whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial difficulties. ASU 2011-02 provides guidance to clarify whether the creditor has granted a concession and whether a debtor is experiencing financial difficulties. The new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption or July 1, 2011 for us. We do not believe that the adoption of the amended guidance in ASU 2011-02 will have a significant effect on our financial statements.

On December 2, 2009, we acquired the outstanding shares of Patriot Capital Funding, Inc. ("Patriot") common stock for $201,083. Under the terms of the merger agreement, Patriot common shareholders received 0.363992 shares of our common stock for each share of Patriot common stock, resulting in 8,444,068 shares of common stock being issued by us. In connection with the transaction, we repaid all the outstanding borrowings of Patriot, in compliance with the merger agreement.

On December 2, 2009, Patriot made a final dividend equal to its undistributed net ordinary income and capital gains of $0.38 per share. In accordance with a recent IRS revenue procedure, the dividend was paid 10% in cash and 90% in newly issued shares of Patriot's common stock. The exchange ratio was adjusted to give effect to the final income distribution.

The merger has been accounted for as an acquisition of Patriot by Prospect in accordance with acquisition method of accounting as detailed in Accounting Standards Codification ("ASC" or "Codification") 805, Business Combinations ("ASC 805"). The fair value of the consideration paid was allocated to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. As described in more detail in ASC 805, goodwill, if any, would have been recognized as of the acquisition date, if the consideration transferred exceeded the fair value of identifiable net assets acquired. As of the acquisition date, the fair value of the identifiable net assets acquired exceeded the fair value of the consideration transferred, and we recognized the excess as a gain. A preliminary gain of $5,714 was recorded by Prospect in the quarter ended December 31, 2009 related to the acquisition of Patriot, which was revised in the fourth quarter of Fiscal 2010, to $7,708, when we settled severance accruals related to certain members of Patriot's top management, and finalized during the first quarter of Fiscal 2011, to $8,632, when we settled the remaining severance accruals related to the last two members of Patriot's top management. Under ASC 805, the adjustments to our preliminary estimates were reflected in the three months ended December 31, 2009 (See Note 14 to our consolidated financial statements.). The acquisition of Patriot was negotiated in July 2009 with the purchase agreement being signed on August 3, 2009. Between July 2009 and December 2, 2009, our valuation of certain of the investments acquired from Patriot increased due to market improvement, which resulted in the recognition of the gain at closing.

The purchase price has been allocated to the assets acquired and the liabilities assumed based on their estimated fair values as summarized in the following table:

During the three and nine months ended March 31, 2011, we recognized $4,739 and $10,092, respectively, of interest income due to purchase discount accretion from the assets acquired from Patriot. Included in the $4,739 for the three months ended March 31, 2011, is $1,302 of normal accretion and $3,268 of accelerated accretion resulting from the recapitalization of our loans to Arrowhead and Copernicus. Included in the $10,092 for the nine months ended March 31, 2011, is $3,979 of normal accretion, $1,285 of accelerated accretion resulting from the repayment of Impact Products, LLC ("Impact Products") and $4,828 of accelerated accretion resulting from the recapitalization of our debt investments in Arrowhead, Copernicus and Northwestern Management Services, LLC ("Northwestern"). The restructured loans for Arrowhead, Copernicus and Northwestern were issued at market terms comparable other industry transactions. In accordance with ASC 320-20-35 the cost basis of the new loan was recorded at par value, which precipitated the acceleration of original purchase discount from the loan repayment which was recognized as interest income.

During the three and nine months ended March 31, 2010, we recognized $9,133 and $14,454, respectively, of interest income due to purchase discount accretion from the assets acquired from Patriot. Included in the $9,133 for the three months ended March 31, 2010, is $2,231 of normal accretion and $6,902 of accelerated accretion resulting from the restructuring of our loans to Aircraft Fasteners International, LLC ("AFI"), Prince Mineral Company, Inc. ("Prince") and R-O-M Corporation ("ROM"). The revised terms were more favorable than the original terms and increased the present value of the future cash flows. In accordance with ASC 320-20-35 the cost basis of the new loans were recorded at par value, which precipitated the acceleration of original purchase discount from the loan repayment which was recognized as interest income. Included in the $14,454 for the nine

months ended March 31, 2010, is $2,992 of normal accretion and $11,462 of accelerated accretion resulting from the early repayments of three loans, three revolving lines of credit, the sale of one investment position and the restructuring of our loans to AFI, Prince and ROM.

As of March 31, 2011, we continue to pursue our investment strategy. Despite our name change to "Prospect Capital Corporation" and the termination of our policy to invest at least 80% of our net assets in energy companies in May 2007, we currently have a concentration of investments in companies in the energy and energy related industries. Some of the companies in which we invest have relatively short or no operating histories. These companies are and will be subject to all of the business risk and uncertainties associated with any new business enterprise, including the risk that these companies may not reach their investment objective or the value of our investment in them may decline substantially or fall to zero.

At March 31, 2011, approximately $1,213,517 or 132.9% of our net assets was invested in 64 long-term portfolio investments and 10.4% of our net assets invested in money market funds.

During the nine months ended March 31, 2011, we originated $641,036 of new investments. Our origination efforts recently have focused primarily on secured lending and reducing the risk in the portfolio, including a higher percentage of first-lien loans than in prior peiods, though we also continue to close selected junior debt and equity investments. In addition to targeting investments senior in corporate capital structures with our new originations, we have also increased our origination business mix of third party private equity sponsor owned companies, which tend to have more third party equity capital supporting our debt investments than non-sponsor transactions. Our portfolio's annualized current yield decreased from 14.6% as of March 31, 2010 to 12.9% as of March 31, 2011 across all long-term debt and certain equity investments. We expect Prospect's current asset yield may decline modestly over the next few quarters as we increase the size of the portfolio while reducing credit risk. Monetization of other equity positions that we hold is not included in this yield calculation. In many of our portfolio companies, we hold equity positions, ranging from minority interests to majority stakes, which we expect over time to contribute to our investment returns. Some of these equity positions include features such as contractual minimum internal rates of returns, preferred distributions, flip structures and other features expected to generate additional investment returns, as well as contractual protections and preferences over junior equity, in addition to the yield and security offered by our cash flow and collateral debt protections.

We classify our investments by level of control. As defined in the 1940 Act, control investments are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of 25% or more of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist through the possession outright or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities of another person.

As of March 31, 2011, we own controlling interests in AIRMALL USA, Inc. ("AIRMALL"), Ajax Rolled Ring & Machine, Inc. ("Ajax"), AWCNC, LLC, Borga, Inc., C&J Cladding, LLC ("C&J"), Change Clean Energy Holdings, Inc. ("CCEHI"), Fischbein, Freedom Marine Services LLC ("Freedom Marine"), Gas Solutions Holdings, Inc. ("GSHI"), Integrated Contract Services, Inc. ("ICS"), Iron Horse Coiled Tubing, Inc. ("Iron Horse"), Manx Energy, Inc. ("Manx"), NRG Manufacturing, Inc. ("NRG"), Nupla Corporation ("Nupla"), R-V Industries ("R-V"), Inc. and Yatesville Coal Holdings, Inc. ("Yatesville"). We also own an affiliated interest in Biotronic NeuroNetwork ("Biotronic"), Boxercraft Incorporated ("Boxercraft"), Smart, LLC, and Sport Helmets Holdings, LLC ("Sport Helmets").

The following is our investment portfolio presented by type of investment at March 31, 2011 and June 30, 2010, respectively:

		March 31, 2011										June 30, 2010

Type of Investment		Cost		Percent of Portfolio			Fair Value		Percent of Portfolio			Cost		Percent of Portfolio			Fair Value		Percent of Portfolio
Money Market Funds		$	94,919		7.5	%	$	94,919		7.3	%	$	68,871		8.6	%	$	68,871		8.4	%
Revolving Line of Credit			3,379		0.3	%		3,378		0.3	%		4,754		0.6	%		5,017		0.6	%
Senior Secured Debt			677,450		53.3	%		650,356		49.8	%		313,755		39.4	%		287,470		35.2	%
Subordinated Secured Debt			382,220		30.1	%		357,600		27.3	%		333,453		41.8	%		313,511		38.4	%
Subordinated Unsecured Debt			54,488		4.3	%		55,375		4.2	%		30,209		3.8	%		30,895		3.8	%
Preferred Stock			27,468		2.2	%		20,257		1.5	%		16,969		2.1	%		5,872		0.7	%
Common Stock			19,864		1.6	%		93,546		7.1	%		20,243		2.5	%		77,131		9.4	%
Membership Interests			5,917		0.5	%		22,725		1.7	%		6,964		0.9	%		17,730		2.2	%
Overriding Royalty Interests			—		—	%		2,230		0.2	%		—		—	%		2,768		0.3	%
Net Profit Interests			—		—	%		—		—	%		—		—	%		1,020		0.1	%
Warrants			2,853		0.2	%		8,050		0.6	%		2,412		0.3	%		7,069		0.9	%

	Total Portfolio	$	1,268,558		100.0	%	$	1,308,436		100.0	%	$	797,630		100.0	%	$	817,354		100.0	%

The following is our investment portfolio presented by geographic location of the investment at March 31, 2011 and June 30, 2010, respectively:

		March 31, 2011										June 30, 2010

Geographic Location		Cost		Percent of Portfolio			Fair Value		Percent of Portfolio			Cost		Percent of Portfolio			Fair Value		Percent of Portfolio
Canada		$	61,387		4.8	%	$	61,963		4.7	%	$	21,002		2.6	%	$	12,054		1.5	%
Ireland			14,908		1.2	%		15,000		1.1	%		14,903		1.9	%		15,000		1.8	%
Netherlands			—		—	%		—		—	%		1,397		0.2	%		1,233		0.2	%
Midwest US			233,012		18.4	%		227,702		17.4	%		170,869		21.5	%		167,571		20.5	%
Northeast US			190,268		15.0	%		191,865		14.7	%		61,813		7.7	%		62,727		7.7	%
Southeast US			234,631		18.5	%		215,768		16.5	%		193,420		24.2	%		171,144		20.9	%
Southwest US			186,435		14.7	%		248,215		19.0	%		179,641		22.6	%		235,945		28.9	%
Western US			252,998		19.9	%		253,004		19.3	%		85,714		10.7	%		82,809		10.1	%
Money Market Funds			94,919		7.5	%		94,919		7.3	%		68,871		8.6	%		68,871		8.4	%

	Total Portfolio	$	1,268,558		100.0	%	$	1,308,436		100.0	%	$	797,630		100.0	%	$	817,354		100.0	%

The following is our investment portfolio presented by industry sector of the investment at March 31, 2011 and June 30, 2010, respectively:

		March 31, 2011										June 30, 2010

Industry		Cost		Percent of Portfolio			Fair Value		Percent of Portfolio			Cost		Percent of Portfolio			Fair Value		Percent of Portfolio
Aerospace and Defense		$	56		—	%	$	35		—	%	$	56		—	%	$	38		—	%
Automobile			17,114		1.3	%		17,711		1.4	%		19,017		2.4	%		18,615		2.3	%
Biomass Power			2,540		0.2	%		—		—	%		2,383		0.3	%		—		—	%
Business Services			12,223		1.0	%		12,607		1.0	%		12,060		1.5	%		12,132		1.5	%
Chemicals			25,150		2.0	%		25,150		1.9	%		1,397		0.2	%		1,233		0.2	%
Commercial Services			30,000		2.4	%		30,000		2.3	%		—		—	%		—		—	%
Consumer Services			68,500		5.4	%		68,500		5.2	%		—		—	%		—		—	%
Contracting			17,873		1.4	%		1,680		0.1	%		16,652		2.1	%		4,542		0.6	%
Durable Consumer Products			72,259		5.7	%		72,900		5.6	%		20,000		2.5	%		20,000		2.4	%
Ecological			141		—	%		245		—	%		141		—	%		340		—	%
Electronics			588		—	%		1,171		0.1	%		25,777		3.2	%		25,629		3.1	%
Financial Services			—		—	%		—		—	%		25,814		3.2	%		25,592		3.1	%
Food Products			133,123		10.5	%		137,682		10.5	%		53,681		6.7	%		60,882		7.4	%
Gas Gathering and Processing			42,003		3.3	%		97,596		7.5	%		37,503		4.7	%		93,096		11.4	%
Healthcare			132,216		10.4	%		138,928		10.6	%		89,026		11.2	%		93,593		11.5	%
Home and Office Furnishings, Housewares and Durable			2,021		0.2	%		6,085		0.5	%		14,112		1.8	%		17,232		2.1	%
Insurance			87,000		6.9	%		87,000		6.6	%		5,811		0.7	%		5,952		0.7	%
Machinery			12,911		1.0	%		22,829		1.7	%		15,625		2.0	%		17,776		2.2	%
Manufacturing			72,935		5.7	%		78,859		6.0	%		74,961		9.4	%		64,784		7.9	%
Metal Services and Minerals			13,498		1.1	%		28,932		2.2	%		19,252		2.4	%		33,620		4.1	%
Mining, Steel, Iron and Non-Precious Metals and Coal Production			1,435		0.1	%		—		—	%		1,130		0.1	%		808		0.1	%
Oil and Gas Production			124,536		9.8	%		86,039		6.6	%		122,034		15.3	%		96,988		11.9	%
Oilfield Fabrication			24,700		1.9	%		25,194		1.9	%		30,429		3.8	%		30,429		3.7	%
Personal and Nondurable Consumer Products			14,960		1.2	%		22,413		1.7	%		14,387		1.8	%		20,049		2.5	%
Pharmaceuticals			—		—	%		—		—	%		11,955		1.5	%		12,000		1.5	%
Printing and Publishing			5,272		0.4	%		5,651		0.4	%		5,222		0.7	%		5,284		0.6	%
Production Services			16,387		1.3	%		16,963		1.3	%		21,002		2.6	%		12,054		1.5	%
Property Management			52,420		4.1	%		51,726		4.0	%		—		—	%		—		—	%
Retail			14,669		1.2	%		1,504		0.1	%		14,669		1.8	%		2,148		0.3	%
Shipping Vessels			10,838		0.9	%		3,783		0.3	%		10,040		1.3	%		3,583		0.4	%
Software & Computer Services			37,889		3.0	%		38,000		2.9	%		14,903		1.9	%		15,000		1.8	%
Specialty Minerals			30,169		2.4	%		33,858		2.6	%		15,814		2.1	%		18,463		2.3	%
Technical Services			11,409		0.9	%		11,500		0.9	%		11,387		1.4	%		11,615		1.4	%
Textiles and Leather			12,879		1.0	%		15,449		1.2	%		22,519		2.8	%		25,006		3.1	%
Transportation			73,925		5.8	%		73,527		5.6	%		—		—	%		—		—	%
Money Market Funds			94,919		7.5	%		94,919		7.3	%		68,871		8.6	%		68,871		8.4	%

	Total Portfolio	$	1,268,558		100.0	%	$	1,308,436		100.0	%	$	797,630		100.0	%	$	817,354		100.0	%

During the nine months ended March 31, 2011, we acquired $570,480 of new investments, completed follow-on investments in existing portfolio companies, totaling approximately $59,111, funded $2,935 of revolver advances, and recorded PIK interest of $8,510, resulting in gross investment originations of $641,036. The more significant of these investments are described briefly in the following:

During the nine months ended March 31, 2011, we closed-out fourteen positions which are briefly described below.

During the nine months ended March 31, 2011, we also received principal amortization payments of $12,584 on several loans, and $12,640 of partial prepayments related to AIRMALL, AFI, Ajax, EXL Acquisition Corporation, Fischbein, Iron Horse, LHC Holdings Corp., Nupla and Progrexion.

During the three and nine months ended March 31, 2011, we recognized $4,739 and $10,092, respectively, of interest income due to purchase discount accretion from the assets acquired from Patriot. Included in the $4,739 for the three months ended March 31, 2011, is $1,302 of normal accretion and $3,268 of accelerated accretion resulting from the recapitalization of our loans to Arrowhead Copernicus. Included in the $10,092 for the nine months ended March 31, 2011, is $3,979 of normal accretion, $1,116 of accelerated accretion resulting from the repayment of Impact Products, and $4,828 of accelerated accretion resulting from the recapitalization of our debt investments in Arrowhead, Copernicus and Northwestern. The restructured loans for Arrowhead, Copernicus and Northwestern were issued at market terms comparable other industry transactions. In accordance with ASC 320-20-35 the cost basis of the new loan was recorded at par value, which precipitated the acceleration of original purchase discount from the loan repayment which was recognized as interest income. We expect to recognize $1,059 of normal accretion during the three months ended June 30, 2011.

Quarter-End		Acquisitions¹		Dispositions²

March 31, 2011		$	359,152	$	76,494
December 31, 2010			140,933		62,915
September 30, 2010			140,951		68,148
June 30, 2010			88,973		39,883
March 31, 2010			59,311		26,603
December 31, 2009³			210,438		45,494
September 30, 2009			6,066		24,241
June 30, 2009			7,929		3,148
March 31, 2009			6,356		10,782
December 31, 2008			13,564		2,128
September 30, 2008			70,456		10,949
June 30, 2008			118,913		61,148
March 31, 2008			31,794		28,891
December 31, 2007			120,846		19,223
September 30, 2007			40,394		17,949
June 30, 2007			130,345		9,857
March 31, 2007			19,701		7,731
December 31, 2006			62,679		17,796
September 30, 2006			24,677		2,781
June 30, 2006			42,783		5,752
March 31, 2006			15,732		901
December 31, 2005			—		3,523
September 30, 2005			25,342		—
June 30, 2005			17,544		—
March 31, 2005			7,332		—
December 31, 2004			23,771		32,083
September 30, 2004			30,371		—

	Since inception	$	1,816,353	$	578,420

In determining the fair value of our portfolio investments at March 31, 2011, the Audit Committee considered valuations from the independent valuation firm and from management having an aggregate range of $1,195,867 to $1,280,930 excluding money market investments.

In determining the range of value for debt instruments, management and the independent valuation firm generally shadow rated the investment and then based upon the range of ratings, determined appropriate yields to maturity for a loan rated as such. A discounted cash flow analysis was then prepared using the appropriate yield to maturity as the discount rate, yielding the ranges. For equity investments, the enterprise value was determined by applying EBITDA multiples for similar recent investment sales. For stressed equity investments, a liquidation analysis was prepared.

The Board of Directors looked at several factors in determining where within the range to value the asset including: recent operating and financial trends for the asset, independent ratings obtained from third parties and comparable multiples for recent sales of companies within the industry. The composite of all these analysis, applied to each investment, was a total valuation of $1,213,517, excluding money market investments.

Our portfolio companies are generally lower middle market companies, outside of the financial sector, with less than $50,000 of annual EBITDA. We believe our market has experienced less volatility than others because we believe there are more buy and hold investors who own these less liquid investments.

During the nine months ended March 31, 2011, there has been a general improvement in the markets in which we operate, and market rates of interest negotiated for middle market loans have decreased.

Control investments offer increased risk and reward over straight debt investments. Operating results and changes in market multiples can result in dramatic changes in values from quarter to quarter. Significant downturns in operations can further result in our looking to recoveries on sales of assets rather than the enterprise value of the investment. Several control investments in our portfolio are under enhanced scrutiny by our senior management and our Board of Directors and are discussed below.

Equity positions in the portfolio are susceptible to potentially significant changes in value, both increases as well as decreases, due to changes in operating results. Five of our portfolio companies have experienced such volatility—C&J, Fischbein, Iron Horse and NRG, with improved operating results and AIRMALL with declining operating results. NRG experienced a meaningful increase in valuation during the three months ended March 31, 2011, due to overall industry stabilization and increased backlog resulting from a new product line. The value of our equity position in NRG has increased to $19,826 as of March 31, 2011, a premium of $17,509 to its amortized cost, compared to the $4,714 unrealized gain recorded at June 30, 2010. Seven of the other controlled investments have continuing challenges and have been valued at discounts to the original investment. Seven of the

control investments are valued at premiums to the original investment amounts, including Iron Horse for which our unrealized gain increased by $9,524 during the nine months ended March 31, 2011 due to improved operating results. Overall, at March 31, 2011, the control investments are valued at $39,470 above their amortized cost.

We hold four affiliate investments at March 31, 2011. The affiliate investments reported strong operating results with valuations increasing for three investments—Biotronic, Boxercraft and Sport Helmets. Biotronic experienced the most meaningful increase in valuation. Biotronic completed a significant acquisition in November 2010, which is driving the operating results and the increase in the value of the investment. All affiliate investments are valued at amortized cost or higher. Overall, at March 31, 2011, affiliate investments are valued $14,160 above their amortized cost.

With the Non-control/Non-affiliate investments, generally, there is less volatility related to our total investments because our equity positions tend to be smaller than with our control/affiliate investments, and debt investments are generally not as susceptible to large swings in value as equity investments. For debt investments, the fair value is limited on the high side to each loan's par value, plus any prepayment premia that could be imposed. Many of the debt investments in this category have not experienced a significant change in value, as they were previously valued at or near par value. The exception to this categorization relates to investments which were acquired in the Patriot Acquisition, many of which were acquired at significant discounts to par value, and any changes in operating results or interest rates can have a significant effect on the value of such investments. H&M Oil & Gas, LLC ("H&M"), Shearer's Food's, Inc. ("Shearer's") and Stryker Energy, LLC ("Stryker"), experienced decreases in valuations due to declines in their operating results. The remaining investments did not experience significant changes in operations or valuation.

During the three and nine months ended March 31, 2011, we recognized $4,739 and $10,092, respectively, of interest income due to purchase discount accretion from the assets acquired from Patriot. Included in the $4,739 for the three months ended March 31, 2011, is $1,302 of normal accretion and $3,268 of accelerated accretion resulting from the recapitalization of our loans to Arrowhead Copernicus. Included in the $10,092 for the nine months ended March 31, 2011, is $3,979 of normal accretion, $1,116 of accelerated accretion resulting from the repayment of Impact Products, and $4,828 of accelerated accretion resulting from the recapitalization of our debt investments in Arrowhead, Copernicus and Northwestern. The restructured loans for Arrowhead, Copernicus and Northwestern were issued at market terms comparable other industry transactions. In accordance with ASC 320-20-35 the cost basis of the new loan was recorded at par value, which precipitated the acceleration of original purchase discount from the loan repayment which was recognized as interest income.

Our investment activities are capital intensive and the availability and cost of capital is a critical component of our business. We capitalize our business with a combination of debt and equity. Our debt currently consists of a revolving credit facility availing us of the ability to borrow debt subject to borrowing base determinations and Senior Convertible Notes which we issued in December 2010 and February 2011 and our equity capital is currently comprised entirely of common equity. The following table shows the Revolving Credit Facility and Senior Convertible Notes amounts and outstanding borrowings at March 31, 2011 and June 30, 2010:

The following table shows the contractual maturity of our Revolving Credit Facility and Senior Convertible Notes at December 31, 2010:

We have and expect to continue to fund a portion of our cash needs through borrowings from banks, issuances of senior securities, including secured, unsecured and convertible debt securities and preferred stock, or issuances of common equity. For flexibility, we maintain a universal shelf registration statement that allows for the public offering and sale of our debt securities, common stock, preferred stock and warrants to purchase such securities in an amount up to $750,000 less issuances to date. We may from time to time issue securities pursuant to the shelf registration statement or otherwise pursuant to private offerings. The issuance of debt or equity securities will depend on future market conditions, funding needs and other factors and there can be no assurance that any such issuance will occur or be successful.

On June 25, 2009, we completed a first closing on an expanded $250,000 syndicated revolving credit facility (the "Facility"). The Facility included an accordion feature which allowed the Facility to accept up to an aggregate total of $250,000 of commitments for which we had $210,000 of commitments from six lenders when the Facility was renegotiated. The revolving period of the Facility extended through June 2010, with an additional one year amortization period after the completion of the revolving period.

On June 11, 2010, we closed an extension and expansion of our revolving credit facility with a syndicate of lenders (the "Syndicated Facility"). The lenders have extended current commitments of $325,000 under the Syndicated Facility as detailed in the Recent Developments. The Syndicated Facility includes an accordion feature which allows the facility to be increased to up to $400,000 of commitments in the aggregate to the extent additional or existing lenders commit to increase the commitments. We will seek to add additional lenders in order to reach the maximum size, although no assurance can be given we will be able to do so. As we make additional investments which are eligible to be pledged under the Syndicated Facility, we will generate additional availability to the extent such investments are eligible to be placed into the borrowing base. The revolving period of the Syndicated Facility extends through June 2012, with an additional one year amortization period (with distributions allowed) after the completion of the revolving period. During such one year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the one year amortization period, the remaining balance will become due if required by the lenders.

As of March 31, 2011 and June 30, 2010, we had the ability to borrow up to $207,467 and $180,678, respectively under our Syndicated Facility based on the assets pledged as collateral at that time, of which $47,500 and $100,300 was drawn, respectively. The Syndicated Facility requires us to pledge assets as collateral in order to borrow under the credit facility. At March 31, 2011, the investments used as collateral for the Syndicated Facility had an aggregate market value of $603,759, which represents 66.1% of net assets. Prospect Capital Funding, LLC, our wholly-owned subsidiary, holds $543,159 of these investments at market value as of March 31, 2011. The release of any assets from Prospect Capital Funding, LLC requires the approval of Rabobank as facility agent.

The borrowings under the Syndicated Facility bore interest at a rate of one-month Libor plus 250 basis points prior to June 25, 2009, which increased to one-month Libor plus 400 basis points, subject

to a minimum Libor floor of 200 basis points for the period from June 26, 2009 to June 10, 2010. Beginning June 11, 2010, interest on borrowings decreased under the Syndicated Facility is one-month Libor plus 325 basis points, subject to a minimum Libor floor of 100 basis points. The maintenance of this facility requires us to pay a fee for the amount not drawn upon. Prior to June 25, 2009, this fee was assessed at the rate of 37.5 basis points per annum of the amount of that unused portion. For the period from June 26, 2010 to June 10, 2010, this rate increased to 100 basis points per annum. After June 11, 2010, the lenders charge a fee on the unused portion of the credit facility equal to either 75 basis points if at least half of the credit facility is used or 100 basis points otherwise.

Concurrent with the extension of our Syndicated Facility, in June 2010, we wrote off $759 of the unamortized debt issue costs associated with the original credit facility, in accordance with ASC 470-50, Debt Modifications and Extinguishments.

On December 21, 2010, we issued $150,000 in aggregate principal amount of our 6.25% senior convertible notes due 2015 ("2010 Notes") for net proceeds following underwriting expenses of approximately $145,200. Interest on the 2010 Notes is paid semi-annually in arrears on June 15 and December 15, at a rate of 6.25% per year, commencing June 15, 2011. The 2010 Notes mature on December 15, 2015 unless converted earlier. The 2010 Notes are convertible into shares of Common Stock at an initial conversion rate and conversion rate at March 31, 2011 of 88.0902 shares of Common Stock per $1,000 principal amount of 2010 Notes, which is equivalent to a conversion price of approximately $11.352 per share of Common Stock, subject to adjustment in certain circumstances. The conversion rate for the 2010 Notes will be increased if monthly cash dividends paid to common shares exceed the rate of $0.101125 cents per share, subject to adjustment.

On February 18, 2011, we issued $172,500 in aggregate principal amount of our 5.50% senior convertible notes due 2016 ("2011 Notes") for net proceeds following underwriting expenses of approximately $167,325. Interest on the 2011 Notes is paid semi-annually in arrears on February 15 and August 15, at a rate of 5.50% per year, commencing August 15, 2011. The 2011 Notes mature on August 15, 2016 unless converted earlier. The 2011 Notes are convertible into shares of Common Stock at an initial conversion rate and conversion rate at March 31, 2011 of 78.3699 shares of Common Stock per $1,000 principal amount of 2011 Notes, which is equivalent to a conversion price of approximately $12.76 per share of Common Stock, subject to adjustment in certain circumstances. The conversion rate for the 2011 Notes will be increased when monthly cash dividends paid to common shares exceed the rate of $0.101150 per share.

In no event will the total number of shares of common stock issuable upon conversion exceed 96.8992 and 78.3699 per $1,000 principal amount of the 2010 Notes and 2011 Notes, respectively, (the "conversion rate cap"), except that, to the extent we receive written guidance or a no-action letter from the staff of the Securities and Exchange Commission (the "Guidance") permitting us to adjust the conversion rate in certain instances without regard to the conversion rate cap and to make the 2010 Notes and 2011 Notes (collectively, "Senior Convertible Notes") convertible into certain reference property in accordance with certain reclassifications, business combinations, asset sales and corporate events by us without regard to the conversion rate cap, we will make such adjustments without regard to the conversion rate cap and will also, to the extent that we make any such adjustment without regard to the conversion rate cap pursuant to the Guidance, adjust the conversion rate cap accordingly. We will use our commercially reasonable efforts to obtain such Guidance as promptly as practicable.

Prior to obtaining the Guidance, we will not engage in certain transactions that would result in an adjustment to the conversion rate increasing the conversion rate beyond what it would have been in the absence of such transaction unless we have engaged in a reverse stock split or share combination transaction such that in our reasonable best estimation, the conversion rate following the adjustment for such transaction will not be any closer to the conversion rate cap than it would have been in the absence of such transaction.

Upon conversion, unless a holder converts after a record date for an interest payment but prior to the corresponding interest payment date, the holder will receive a separate cash payment with respect to the Notes surrendered for conversion representing accrued and unpaid interest to, but not including the conversion date. Any such payment will be made on the settlement date applicable to the relevant conversion on the Senior Convertible Notes.

No holder of Senior Convertible Notes will be entitled to receive shares of our common stock upon conversion to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a beneficial owner (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time. The 5.0% limitation shall no longer apply following the effective date of any fundamental change. We will not issue any shares in connection with the conversion or redemption of the Notes which would equal or exceed 20% of the shares outstanding at the time of the transaction in accordance with NASDAQ rules.

Subject to certain exceptions, holders may require us to repurchase, for cash, all or part of their Notes upon a fundamental change at a price equal to 100% of the principal amount of the Notes being repurchased plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date. In addition, upon a fundamental change that constitutes a non-stock change of control we will also pay holders an amount in cash equal to the present value of all remaining interest payments (without duplication of the foregoing amounts) on such Senior Convertible Notes through and including the maturity date.

In connection with the issuance of the Senior Convertible Notes, we incurred $10,536 of fees which are being amortized over the term of the facility in accordance with ASC 470-50, Debt Modifications and Extinguishments, of which $10,226 remains to be amortized.

During the three months ended March 31, 2011, we recorded $3,688 of interest costs and amortization of financing costs as interest expense.

During the nine months ended March 31, 2011, we raised $177,593 of additional equity, net of offering costs, by issuing 18,494,476 shares of our common stock below net asset value diluting shareholder value by $0.15 per share. The following table shows the calculation of net asset value per share as of December 31, 2010 and June 30, 2010:

At March 31, 2011, we had 88,358,811 of our common stock issued and outstanding.

Net increase in net assets resulting from operations for the three months ended March 31, 2011 and 2010 was $33,759 and $25,940, respectively, representing $0.38 and $0.41 per weighted average share, respectively. During the three months ended March 31, 2011, we experienced net unrealized and realized gains of $9,803 or approximately $0.11 per weighted average share primarily from significant write-ups of our investments in Biotronic, NRG and Sport Helmets, and our sale of Miller common stock for which we realized a gain of $2,561. These instances of appreciation were partially offset by unrealized depreciation in AIRMALL, Copernicus and Shearer's. During the three months ended March 31, 2010, we experienced net unrealized and realized losses of $6,966 or approximately $0.11 per

weighted average share due primarily to write-ups of our investments in GSHI, Prince and Miller, partially offset by unrealized depreciation of our investments in NRG and Freedom Marine.

Net increase in net assets resulting from operations for the nine months ended March 31, 2011 and 2010 was $91,279 and $5,042, respectively, representing $1.11 and $0.09 per weighted average share, respectively. During the nine months ended March 31, 2011, we experienced net unrealized and realized gains of $27,248 or approximately $0.34 per weighted average share primarily from significant write-ups of our investments in Ajax, Biotronic, Fischbein, Iron Horse, NRG, Nupla and Sport Helmets, and our sale of Miller common stock for which we realized a gain of $7,976. These instances of unrealized appreciation were partially offset by unrealized depreciation in H&M, ICS, Shearer's and Stryker. During the nine months ended March 31, 2010, we experienced net unrealized and realized losses of $45,508 or approximately $0.80 per weighted average share due primarily due to the impairment of Yatesville (See Investment Valuations for further discussion.). The $51,228 realized loss for Yatesville was partially offset by write-ups of our investments in Ajax, Freedom Marine, H&M, Manx, NRG, and R-V.

While we seek to maximize gains and minimize losses, our investments in portfolio companies can expose our capital to risks greater than those we may anticipate as these companies are typically not issuing securities rated investment grade, have limited resources, have limited operating history, are generally private companies with limited operating information available and are likely to depend on a small core of management talents. Changes in any of these factors can have a significant impact on the value of the portfolio company.

We generate revenue in the form of interest income on the debt securities that we own, dividend income on any common or preferred stock that we own, and amortized loan origination fees on the structuring of new deals. Our investments, if in the form of debt securities, will typically have a term of one to ten years and bear interest at a fixed or floating rate. To the extent achievable, we will seek to collateralize our investments by obtaining security interests in our portfolio companies' assets. We also may acquire minority or majority equity interests in our portfolio companies, which may pay cash or in-kind dividends on a recurring or otherwise negotiated basis. In addition, we may generate revenue in other forms including prepayment penalties and possibly consulting fees. Any such fees generated in connection with our investments are recognized as earned.

Investment income, which consists of interest income, including accretion of loan origination fees and prepayment penalty fees, dividend income and other income, including settlement of net profits interests, overriding royalty interests and structuring fees, was $44,573 and $32,005 for the three months ended March 31, 2011 and March 31, 2010, respectively. Investment income was $113,085 and $85,323 for the nine months ended, March 31, 2011 and March 31, 2010, respectively. During the three and nine months ended March 31, 2011, the primary driver of the increase in investment income is the deployment of additional capital in revenue-producing assets through increased origination, for which we recognized an increase of $5,721 and $11,383, respectively, in structuring fee income, and $9,896 and $34,135, respectively, in cash and payment-in-kind interest income. This $9,896 and $34,135 of interest income excludes purchase discount accretion from the assets acquired from Patriot and is the result of a larger income producing investment portfolio. For the respective three-month period ended March 31, 2011, these increases were partially offset by a $4,394 decrease in purchase discount accretion from the assets acquired from Patriot recognized as interest income. For the respective nine-month period ended March 31, 2011, these increases were partially offset by a $5,950 decline in dividend income from GSHI and a decline in income from the Patriot acquisition, for which we

recognized a gain of $8,632. The following table describes the various components of investment income and the related levels of debt investments:

Average interest income producing assets have increased from $676,780 for the three months ended March 31, 2010 to $1,059,124 for the three months ended March 31, 2011. The average yield on interest bearing assets decreased from 16.75% for the three months ended March 31, 2010 to 13.03% for the three months ended March 31, 2011. Average interest income producing assets have increased from $579,835 for the nine months ended March 31, 2010 to $936,302 for the three months ended March 31, 2011. The average yield on interest bearing assets decreased from 14.09% for the nine months ended March 31, 2010 to 12.93% for the nine months ended March 31, 2011. These decreases are primarily due to our origination efforts being focused on secured lending, including a higher percentage of first-lien loans than in prior periods, which generally earn interest at lower interest rates than second-lien loans with more risk. The fair market value of senior secured loans as a percentage of our total portfolio has increased to 49.8% from 39.6% as of March 31, 2011 and March 31, 2010, respectively. The decrease in annualized returns is also attributed to changes in the accelerated accretion on the assets acquired in the Patriot acquisition, for which we recognized $5,350 and $3,465 less accelerated purchase discount accretion during the three and nine months ended March 31, 2011, respectively, primarily due to incremental repayments and restructurings in 2010 when compared to those in 2011, the most significant of which were AFI, Prince and ROM.

Investment income is also generated from dividends and other income. Dividend income has increased from $2,301 for the three months ended March 31, 2011 to $2,763 for the three months ended March 31, 2010. This $462 increase is primarily due to the increased dividends received from our investments in GSHI and NRG. We received dividends from GSHI of $2,500 and $2,300 during the three months ended March 31, 2011 and March 31, 2010, respectively. We received a dividend from NRG of $200 during the three months ended March 31, 2011. No dividend was received from NRG during the three months ended March 31, 2010. Dividend income decreased from $12,689 for the nine months ended March 31, 2010 to $8,328 for the nine months ended March 31, 2011. The decrease in dividend income is primarily attributable to a decrease in the level of dividends received from our investment in GSHI. We received dividends from GSHI of $6,350 and $12,300 during the nine months ended March 31, 2011 and March 31, 2010, respectively. The decrease in dividends from GSHI is primarily the a consequence of GSHI distributing dividends in excess of their current earnings in 2009, as GSHI had accumulated excess earnings and profits available for distribution. GSHI remains profitable and has increased its EBITDA in 2010 in comparison with 2009. We anticipate that GSHI may be able to increase its dividends in the future as the result of organic growth and add-on acquisitions. This decrease was partially offset by $1,507 of dividends received from American Gilsonite and Northwestern during the nine months ended March 31, 2011. No dividend was received from American Gilsonite or Northwestern during the nine months ended March 31, 2010.

Other income has come primarily from structuring fees, overriding royalty interests, and settlement of net profits interests. Income from other sources increased from $1,757 for the three months ended March 31, 2010 to $7,306 for the three months ended March 31, 2011. This $5,549 increase is primarily due to $7,190 of structuring fees recognized during the three months ended March 31, 2011 primarily from the Arrowhead, CAS, Clearwater, Progressive, Progrexion, Safe-Guard and Stauberoriginations. During the three months ended March 31, 2010 we recognized $1,440 of structuring fees, of which $1,235 was recognized as a result of our follow-on debt investments in H&M and Shearer's. Comparing the nine months ended March 31, 2010 to the nine months ended March 31, 2011, other income, excluding the $8,632 gain on the Patriot acquisition, increased from $2,681 to $13,970. This $11,289 increase is due to $12,865 of structuring fees recognized during the nine months ended March 31, 2011 primarily related to AIRMALL, Arrowhead, CAS, Progrexion, Progressive, Royal and Safe-Guard.

Our primary operating expenses consist of investment advisory fees (base management and income incentive fees), borrowing costs, legal and professional fees and other operating and overhead-related expenses. These expenses include our allocable portion of overhead under the Administration Agreement with Prospect Administration under which Prospect Administration provides administrative services and facilities for us. Our investment advisory fees compensate our Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses of our operations and transactions in accordance with our Administration Agreement with Prospect Administration. Operating expenses were $20,617 and $13,031 for the three months ended March 31, 2011 and March 31, 2010, respectively. Operating expenses were $49,054 and $34,773 for the nine months ended March 31, 2011 and March 31, 2010, respectively.

The base investment advisory expenses were $6,037 and $3,576 for the three months ended March 31, 2011 and March 31, 2010, respectively. The base investment advisory expenses were $15,216 and $9,961 for the nine months ended March 31, 2011 and March 31, 2010, respectively. This increase is directly related to our growth in total assets. For the three months ended March 31, 2011 and March 31, 2010, we incurred $5,997 and $4,744, respectively, of income incentive fees. For the nine months ended March 31, 2011 and March 31, 2010, we incurred $16,015 and $12,640, respectively, of income incentive fees. The $3,375 increase in the income incentive fee for the respective nine-month period is driven by an increase in pre-incentive fee net investment income from $63,190 for the nine months ended March 31, 2010 to $80,046 for the nine months ended March 31, 2011, primarily due to an increase in interest income from a larger asset base. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.

During the three and nine months ended March 31, 2011, we incurred $5,660 and $10,182, respectively, of expenses related to our Syndicated Facility and Senior Convertible Notes. This compares with expenses of $2,111 and $5,480 incurred during the three and nine months ended March 31, 2010, respectively. These expenses are related directly to the leveraging capacity put into place for each of those periods and the levels of indebtedness actually undertaken during those quarters. The table below describes the various expenses of our Syndicated Facility and Senior

Convertible Notes and the related indicators of leveraging capacity and indebtedness during these periods.

The decrease in our interest rate from 2009 to 2010 is primarily the result of the closing of our current facility on June 11, 2010. At that time, the borrowing rate and Libor floor decreased by 75 basis points and 100 basis points, respectively. The higher interest rate during the three months ended March 31, 2011 versus the nine months then ended reflects the issuance of Senior Convertible Notes on December 21, 2010 and February 28, 2011.

As our asset base has grown and we have added complexity to our capital raising activities, due, in part, to our assumption of the sub-administration role from Vastardis, we have commensurately increased the size of our administrative and financial staff, accounting for a significant increase in the overhead allocation from Prospect Administration. Over the last year, Prospect Administration has increased staffing levels along with the costs passed through. The allocation of overhead expense from Prospect Administration increased from $840 and $2,520 for the three and nine months ended March 31, 2010, to $1,669 and $3,309 for the three and nine months ended March 31, 2011, respectively. As our portfolio continues to grow, we expect to further increase the size of our administrative and financial staff on a basis that provides increasing returns to scale. However, initial investments in administrative and financial staff may not provide returns to scale immediately, perhaps not until the portfolio increases to a greater size.

Other allocated expenses from Prospect Administration will continue to increase along with the increase in staffing and asset base.

Total operating expenses, net of investment advisory fees, interest costs and allocation of overhead from Prospect Administration ("Other Operating Expenses"), were $1,254 and $1,760 for the three months ended March 31, 2011 and 2010, respectively. This $506 decrease is primarily the result of costs incurred in connection with merger discussions with Allied Capital Corporation expensed in the 2010 period offset by higher costs for legal and administrative expenses incurred in the 2011 period due to the increased size of our portfolio. Other Operating Expenses were $4,332 and $4,172 for the nine months ended March 31, 2011 and 2010, respectively.

Net Investment Income, Net Realized Gains, Increase in Net Assets from Net Change in Unrealized Appreciation (Depreciation) and Net Increase in Net Assets Resulting from Operations

Net investment income represents the difference between investment income and operating expenses. Our net investment income ("NII") was $23,956 and $18,974 for the three months ended March 31, 2011 and March 31, 2010, respectively, or $0.27 per share and $0.30 per share, respectively. Our NII was $64,031 and $50,550 for the nine months ended March 31, 2011 and March 31, 2010, respectively, or $0.78 per share and $0.89 per share, respectively. The primary source of the higher NII

per share in 2010 for the respective nine-month period is our recognition of a gain on the Patriot acquisition of $8,632 in December 2009. Net realized gains (losses) were $2,078 and ($2) for the three months ended March 31, 2011 and March 31, 2010, respectively. Net realized gains (losses) were $7,094 and ($51,231) for the nine months ended March 31, 2011 and March 31, 2010, respectively. The net realized gain for the three and nine months ended March 31, 2011 was due primarily to the sale of our common stock in Miller. The net realized loss of $51,231 for the nine months ended March 31, 2010 was due primarily to the impairment of Yatesville. See Investment Valuations for further discussion.

Net increase in net assets from changes in unrealized appreciation (depreciation) was $7,725 and $6,968 for the three months ended March 31, 2011 and March 31, 2010, respectively. For the three months ended March 31, 2011, the $7,725 increase in net assets from the net change in unrealized appreciation (depreciation) was driven by significant write-ups of approximately $17,982 related to our investments in Biotronic, NRG and Sport Helmets. These instances of unrealized appreciation were partially offset by unrealized depreciation of approximately $10,536 related to our investments in AIRMALL, Copernicus and Shearer's. For the three months ended March 31, 2010, the $6,968 increase in net assets from the net change in unrealized appreciation (depreciation) was driven primarily by write-ups of approximately $16,162 related to our investments in GSHI, Prince and Miller, partially offset by unrealized depreciation of approximately $9,578 related to our investments in NRG and Freedom Marine.

Net increase in net assets from changes in unrealized appreciation (depreciation) was $20,154 and $5,723 for the nine months ended March 31, 2011 and March 31, 2010, respectively. For the nine months ended March 31, 2011, the $20,154 increase in net assets from the net change in unrealized appreciation (depreciation) was driven by significant write-ups of approximately $39,561 related to our investments in Ajax, Biotronic, Fischbein, Iron Horse, NRG, Nupla and Sport Helmets. These instances of unrealized appreciation were partially offset by unrealized depreciation of approximately $18,292 related to our investments in H&M, ICS, Shearer's and Stryker. The $5,723 increase occurring during the nine months ended March 31, 2010 was primarily attributable to unrealized depreciation of approximately $52,085 related to our investments in Ajax, Freedom Marine, H&M, Manx, NRG, and R-V partially offset by the impairment of our investment in Yatesville of $51,228.

For the nine months ended March 31, 2011 and March 31, 2010, our operating activities (used) provided ($368,400) and $142,132 of cash, respectively. Investing activities used $106,586 of cash during the nine months ended March 31, 2010. Financing activities provided (used) $369,714 and ($24,239) of cash during the nine months ended March 31, 2011 and 2010, respectively, which included the payments of dividends of $65,345 and $59,467, during the nine months ended March 31, 2011 and March 31, 2010, respectively.

Our primary uses of funds have been to continue to invest in our investments in portfolio companies, to add new companies to our investment portfolio, to acquire Patriot, to repay outstanding borrowings and to make cash distributions to holders of our common stock.

We have and expect to continue to fund a portion of our cash needs through borrowings from banks, issuances of senior securities or secondary offerings. We may also securitize a portion of our investments in mezzanine or senior secured loans or other assets. Our objective is to put in place such borrowings in order to enable us to expand our portfolio. During the nine months ended March 31, 2011, we borrowed $259,100 and made repayments totaling $311,900 under our revolving credit facility. As of March 31, 2011, we had $47,500 outstanding borrowings on our revolving credit facility and $322,500 outstanding on our Senior Convertible notes (See Note 6 to our consolidated financial statements.)

On March 16, 2011, our Registration Statement on Form N-2 was declared effective by the SEC. Under this Shelf Registration Statement, we can issue up to $750,000 of additional equity securities as of March 31, 2011.

We also continue to generate liquidity through public and private stock offerings. On July 7, 2009 we completed a public stock offering for 5,175,000 shares of our common stock at $9.00 per share, raising $46,575 of gross proceeds. On August 20, 2009 and September 24, 2009, we issued 3,449,686 shares and 2,807,111 shares, respectively, of our common stock at $8.50 and $9.00 per share, respectively, in private stock offerings, raising $29,322, and $25,264 of gross proceeds, respectively. Concurrent with the sale of these shares, we entered into a registration rights agreement in which we granted the purchasers certain registration rights with respect to the shares. Under the terms and conditions of the registration rights agreement, we filed with the SEC a post-effective amendment to the registration statement on Form N-2 on November 6, 2009. Such amendment was declared effective by the SEC on November 9, 2009.

On September 24, 2010, we established a third at-the-market program, as we had sold all the shares authorized in the preceding programs, through which we may sell, from time to time and at our discretion, 6,000,000 shares of our common stock. We engaged three broker-dealers to act as potential agents and sell our common stock directly into the market over a period of time. We paid a 2% commission to the broker-dealer on shares sold. Through this program we issued 5,231,956 shares of our common stock at an average price of $9.86 per share, raising $51,597 of gross proceeds, from September 29, 2010 through November 3, 2010.

On November 10, 2010, we established a fourth at-the-market program, as we had sold all the shares authorized in the preceding programs, through which we may sell, from time to time and at our discretion, 9,750,000 shares of our common stock. We engaged three broker-dealers to act as potential agents and sell our common stock directly into the market over a period of time. We paid a 2% commission to the broker-dealer on shares sold. Through this program we issued 4,513,920 shares of our common stock at an average price of $10.00 per share, raising $45,147 of gross proceeds, from November 16, 2010 through December 15, 2010.

At March 31, 2011, we did not have any off-balance sheet liabilities or other contractual obligations that are reasonably likely to have a current or future material effect on our financial condition, other than those which originate from 1) the investment advisory and management agreement and the administration agreement and 2) the portfolio companies.

We are subject to financial market risks, including changes in interest rates and equity price risk. At March 31, 2011, most of the loans in our portfolio bore interest at fixed interest rates. Several of our floating rate loans have floors which have effectively converted the loans to fixed rate loans in the current interest rate environment. As of March 31, 2011, $776,521 of our loans bear interest at floating rates, $766,855 of which have Libor floors ranging from 1.00% to 6.00%.

If we continue to invest in fixed rate loans, we may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to our portfolio of investments. During the three months ended March 31, 2011, we did not engage in interest rate hedging activities.

The following summary of certain U.S. federal income tax considerations supplements the discussion set forth under the heading "Material U.S. Federal Income Tax Considerations—Taxation Of Non-U.S. Stockholders" in the accompanying prospectus and is subject to the qualifications and assumptions set forth therein.

For our taxable years beginning before January 1, 2012, properly designated distributions to Non-U.S. Stockholders are generally exempt from U.S. federal withholding tax where they (i) are paid in respect of our "qualified net interest income" (generally, our U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we are at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii) are paid in respect of our "qualified short-term capital gains" (generally, the excess of our net short-term capital gain over our long-term capital loss for such taxable year). Depending on the circumstances, however, we may designate all, some or none of our potentially eligible distributions as such qualified net interest income or as qualified short-term capital gains, and/or treat such distributions, in whole or in part, as ineligible for this exemption from withholding. In order to qualify for this exemption from withholding, a Non-U.S. Stockholder will need to comply with applicable certification requirements relating to its non-U.S. status (including, in general, furnishing an IRS Form W-8BEN or substitute Form). In the case of our shares held through an intermediary, the intermediary may withhold even if we designate the payment as qualified net interest income or qualified short-term capital gain. Non-U.S. Stockholders should contact their intermediaries with respect to the application of these rules to their accounts. There can be no assurance as to what portion of our distributions will qualify for favorable treatment as qualified net interest income or qualified short-term capital gains.

The net proceeds from the sale of 10,000,000 shares of our common stock in this offering will be $ (or $ if the option to purchase additional shares is exercised in full) after deducting offering expenses of approximately $200,000 payable by us.

We expect to use the net proceeds from this offering initially to maintain balance sheet liquidity, involving repayment of debt under our credit facility, investments in high quality short-term debt instruments or a combination thereof, and thereafter to make long-term investments in accordance with our investment objective. We anticipate that substantially all of the net proceeds from this offering will be used for the above purposes within six months, depending on the availability of appropriate investment opportunities consistent with our investment objective and market conditions.

As of June 20, 2011, we had $68.1 million outstanding under our credit facility and, based on the assets currently pledged as collateral on the facility, an additional approximately $113.7 million was available to us for borrowing under our credit facility. Interest on borrowings under the credit facility is one-month LIBOR plus 325 basis points, subject to a minimum Libor floor of 100 basis points. Additionally, the lenders charge a fee on the unused portion of the credit facility equal to either 75 basis points if at least half of the credit facility is used or 100 basis points otherwise.

This table should be read in conjunction with "Use of Proceeds" and our "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and notes thereto included in this prospectus supplement and the accompanying prospectus. The adjusted information is illustrative only; our capitalization following the completion of this offering is subject to adjustment based on the actual public offering price of our common stock and the actual number of shares of common stock we sell in this offering, both of which will be determined at pricing.

	As of March 31, 2011

	Actual			As Adjusted for Stock Issuances and Borrowings After March 31, 2011			As Further Adjusted for this Offering²
	(In thousands, except shares and per share data) (Unaudited)
Long-term debt, including current maturities:
Borrowings under senior credit facility¹	$	47,500		$	68,100		$	68,100
2010 Notes		150,000			150,000			150,000
2011 Notes		172,500			172,500			172,500
Amount owed to affiliates		7,809			7,809			7,809

Total long-term debt		377,809			398,409			398,409

Stockholders' equity:
Common stock, par value $0.001 per share (200,000,000 common shares authorized; 88,358,811 shares outstanding actual, 97,513,877 shares outstanding as adjusted for our issuance of 9,000,000 shares on April 7, 2011 and stock issuances in connection with our dividend reinvestment plan and 107,513,877 shares outstanding as further adjusted for this offering)		88			98			108
Paid-in capital in excess of par value		991,658			1,076,143
Distributions in excess of net investment income		(21,202	)		(21,202	)		(21,202	)
Accumulated realized losses on investments		(97,501	)		(97,501	)		(97,501	)
Net unrealized appreciation on investments		39,878			39,878			39,878

Total stockholders' equity		912,921			997,416

Total capitalization	$	1,290,730		$	1,395,825		$

At our 2008, 2009 and 2010 annual meeting of stockholders, our stockholders approved our ability to sell an unlimited number of shares of our common stock at any level of discount to NAV per share during the twelve-month period following such approval. Accordingly, we may make offerings of our common stock without any limitation on the total amount of dilution to stockholders. See "Sales of Common Stock Below Net Asset Value" in this prospectus supplement and in the accompanying prospectus. Pursuant to this authority and the approval of our Board of Directors, we have made the following offerings:

Date of Offering	Price Per Share to Investors		Estimated Net Asset Value per Share¹

March 18, 2009	$8.20	1,500,000	$14.43	2.20	%
April 22, 2009	$7.75	3,680,000	$14.15	5.05	%
May 19, 2009	$8.25	7,762,500	$13.44	7.59	%
July 7, 2009	$9.00	5,175,000	$12.40	3.37	%
August 20, 2009	$8.50	3,449,686	$11.57	1.78	%
September 24, 2009	$9.00	2,807,111	$11.36	1.20	%
June 21, 2010 to June 25, 2010²	$10.01-$10.67	1,072,500	$10.39-10.40	0.06	%
June 28, 2010 to July 16, 2010³	$9.47-$10.04	2,748,600	$10.31-10.34	0.29	%
July 19, 2010 to August 19, 2010⁴	$9.28-$10.04	3,814,528	$10.26-10.36	0.39	%
September 7, 2010 to September 23, 2010⁵	$9.47-$9.98	2,185,472	$10.22-10.25	0.18	%
September 24, 2010 to September 27, 2010⁶	$9.74-$9.92	302,400	$10.25-10.26	0.02	%
September 28, 2010 to October 29, 2010⁷	$9.65-$10.09	4,929,556	$10.13-10.27	0.32	%
November 11, 2010 to December 10, 2010⁸	$9.70-$10.54	4,513,920	$10.18-10.28	0.22	%

Information about our senior securities is shown in the following table as of each fiscal year ended June 30 since the Company commenced operations and as of March 31, 2011.

We have paid and intend to continue to distribute monthly distributions to our stockholders out of assets legally available for distribution. Our distributions, if any, will be determined by our Board of Directors. Certain amounts of the monthly distributions may from time to time be paid out of our capital rather than from earnings for the period as a result of our deliberate planning or by accounting reclassifications.

In order to maintain RIC tax treatment, we must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, out of the assets legally available for distribution. In order to avoid certain excise taxes imposed on RICs, we are required to distribute with respect to each calendar year by January 31 of the following year an amount at least equal to the sum of

In December 2008, our Board of Directors elected to retain excess profits generated in the quarter ended September 30, 2008 and pay a 4% excise tax on such retained earnings. We paid $533,000 for the excise tax with the filing of our tax return in March 2009. No such election was made in December 2009.

In addition, although we currently intend to distribute realized net capital gains (which we define as net long-term capital gains in excess of short-term capital losses), if any, at least annually, out of the assets legally available for such distributions, we may decide in the future to retain such capital gains for investment. In such event, the consequences of our retention of net capital gains are as described under "Material U.S. Federal Income Tax Considerations" in the accompanying prospectus. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we will be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.

We maintain an "opt out" dividend reinvestment plan for our common stockholders. As a result, if we declare a dividend, then stockholders' cash dividends will be automatically reinvested in additional shares of our common stock, unless they specifically "opt out" of the dividend reinvestment plan so as to receive cash dividends. Stockholders who receive distributions in the form of stock are subject to the same U.S. Federal, state and local tax consequences as are stockholders who elect to receive their distributions in cash. See "Dividend Reinvestment Plan" in the accompanying prospectus. The tax consequences of distributions to stockholders are described in the accompanying prospectus under the label "Material U.S. Federal Income Tax Considerations". To the extent prudent and practicable, we intend to declare and pay dividends on a monthly basis.

With respect to the distributions paid to stockholders, income from origination, structuring, closing, commitment and other upfront fees associated with investments in portfolio companies were treated as taxable income and accordingly, distributed to stockholders. During the fiscal year ended June 30, 2009, we recorded total dividends of approximately $56.1 million. For the fiscal year ended June 30, 2010, we recorded total distributions of approximately $81.5 million. On June 18, 2010, we announced a change in dividend policy from quarterly to monthly dividends. For the first, second and third quarters of the fiscal year ending June 30, 2011, we recorded total distributions of approximately $75.5 million.

Tax characteristics of all distributions will be reported to stockholders, as appropriate, on Form 1099-DIV after the end of the year. Our ability to pay distributions could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants.

Our common stock is quoted on the NASDAQ Global Select Market under the symbol "PSEC". The following table sets forth, for the periods indicated, our NAV per share of common stock and the high and low closing prices per share of our common stock as reported on the NASDAQ Global Select Market. Our common stock historically trades at prices both above and below its NAV per share. There can be no assurance, however, that such premium or discount, as applicable, to NAV per share will be maintained. Common stock of business development companies, like that of closed-end investment companies, frequently trades at a discount to current NAV per share. In the past, our common stock has traded at a discount to our NAV per share. The risk that our common stock may continue to trade at a discount to our NAV per share is separate and distinct from the risk that our NAV per share may decline.

	Stock Price

	Stock Price											Dividend Declared
	NAV¹			High²		Low²						Dividend Declared
Twelve Months Ending June 30, 2008
First quarter	$	15.08		$	18.68	$	14.16	23.9	%	(6.1	)%	$	0.3925
Second quarter		14.58			17.17		11.22	17.8	%	(23.0	)%		0.395
Third quarter		14.15			16.00		13.55	13.1	%	(4.2	)%		0.400
Fourth quarter		14.55			16.12		13.18	10.8	%	(9.4	)%		0.40125
Twelve Months Ending June 30, 2009
First quarter	$	14.63		$	14.24	$	11.12	(2.7	)%	(24.0	)%	$	0.4025
Second quarter		14.43			13.08		6.29	(9.4	)%	(56.4	)%		0.40375
Third quarter		14.19			12.89		6.38	(9.2	)%	(55.0	)%		0.405
Fourth quarter		12.40			10.48		7.95	(15.5	)%	(35.9	)%		0.40625
Twelve Months Ending June 30, 2010
First quarter	$	11.11		$	10.99	$	8.82	(1.1	)%	(20.6	)%	$	0.4075
Second quarter		10.10			12.31		9.93	21.9	%	(1.7	)%		0.40875
Third quarter		10.12			13.20		10.45	30.4	%	3.3	%		0.410
Fourth quarter		10.30			12.20		9.65	18.4	%	(6.3	)%		0.10
Twelve Months Ending June 30, 2011
First quarter	$	10.24		$	10.00	$	9.18	(2.3	)%	(10.4	)%	$	0.301375	⁵
Second quarter		10.25			10.86		9.69	6.0	%	(5.5	)%		0.302625	⁵
Third quarter		10.33			12.33		10.72	19.4		3.8			0.303450
Fourth quarter (to June 17, 2011)		(3)(4	)		12.18		10.65	(4	)	(4	)		(5	)

In May 2011, we announced the declaration of four additional monthly distributions as follows:

At our 2010 annual meeting of stockholders held on December 10, 2010, our stockholders approved our ability to sell an unlimited number of shares of our common stock at any level of discount from NAV per share during the twelve-month period following such approval. In order to sell shares pursuant to this authorization, a majority of our directors who have no financial interest in the sale and a majority of our independent directors must (a) find that the sale is in our best interests and in the best interests of our stockholders, and (b) in consultation with any underwriter or underwriters or sales manager or sales managers of the offering, such directors must make a good faith determination as of a time either immediately prior to the first solicitation by us or on our behalf of firm commitments to purchase such shares, or immediately prior to the issuance of such shares of common stock, that the price at which such shares are to be sold is not less than a price which closely approximates the market value of such shares, less any distributing commission or discount.

We may sell our common stock at prices below our most recently determined NAV per share. Pursuant to the approval of our Board of Directors, we have made such sales in the past and we may do so under this prospectus supplement.

The offering being made pursuant to this prospectus supplement is at a price below our most recently determined NAV per share. In making a determination that this offering below NAV per share is in our and our stockholders' best interests, our Board of Directors considered a variety of factors including matters such as:

Our Board of Directors also considered the fact that sales of common stock at a discount will benefit our Investment Advisor as the Investment Advisor will earn additional investment management fees on the proceeds of such offerings, as it would from the offering of any other securities of the Company or from the offering of common stock at a premium to NAV per share.

We will not sell shares of common stock under a prospectus supplement to the registration statement (the "current registration statement") if the cumulative dilution to our NAV per share from offerings under the current registration statement exceeds 15%. This limit would be measured separately for each offering pursuant to the current registration statement by calculating the percentage dilution or accretion to aggregate NAV from that offering and then summing the percentage from each offering. For example, if our most recently determined NAV per share at the time of the first offering is $10.23 and we have 97.5 million shares of common stock outstanding, the sale of 10.0 million shares of common stock at net proceeds to us of $5.12 per share (an approximately 50% discount) would produce dilution of 4.65%. If we subsequently determined that our NAV per share increased back to

$10.24 on the then 107.5 million shares of common stock outstanding and then made an additional offering, we could, for example, sell approximately an additional 28.07 million shares of common stock at net proceeds to us of $5.12 per share, which would produce dilution of 10.35%, before we would reach the aggregate 15% limit. If we file a new post-effective amendment, the threshold would reset.

Sales by us of our common stock at a discount from NAV per share pose potential risks for our existing stockholders whether or not they participate in the offering, as well as for new investors who participate in the offering.

The following three headings and accompanying tables will explain and provide hypothetical examples on the impact of an offering at a price less than NAV per share on three different set of investors:

Our existing stockholders who do not participate in an offering below NAV per share or who do not buy additional shares of common stock in the secondary market at the same or lower price we obtain in the offering (after expenses and commissions) face the greatest potential risks. These stockholders will experience an immediate decrease (often called dilution) in the NAV of the shares of common stock they hold and their NAV per share. These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we will experience in our assets, potential earning power and voting interests due to the offering. These stockholders may also experience a decline in the market price of their shares of common stock, which often reflects to some degree announced or potential increases and decreases in NAV per share. This decrease could be more pronounced as the size of the offering and level of discounts increases.

The following chart illustrates the level of NAV dilution that would be experienced by a stockholder who does not participate in the offering. It is not possible to predict the level of market price decline that may occur. NAV has not been finally determined for any day after March 31, 2011. The table below is shown based upon the pro-forma NAV calculated by us taking into account the dilutive effects on our NAV per share of our distributions with record dates of April 29, 2011 and May 31, 2011, our issuance of common stock on April 29, 2011 and May 31, 2011 in connection with our dividend reinvestment plan and our public stock offering of 9,000,000 shares on April 7, 2011. For

purposes of illustration, the table below assumes that our March 31, 2010 NAV per share has been reduced by 1.0% to $10.23 per share as a result of the foregoing transactions.

	Prior to Sale Below NAV			Following Sale

*Offering Price*
Price per Share to Public				$
Net Proceeds per Share to Issuer				$
*Decrease to NAV*
Total Shares Outstanding		97,513,877				%
NAV per Share	$	10.23		$		%
*Dilution to Nonparticipating Stockholder*
Shares Held by Stockholder A		97,514				%
Percentage Held by Stockholder A		0.10	%		%	%
Total NAV Held by Stockholder A	$	997,416		$		%
Total Investment by Stockholder A (Assumed to be $10.23 per Share)				$
Total Dilution to Stockholder A (Total NAV Less Total Investment)				$
NAV per Share Held by Stockholder A				$
Investment per Share Held by Stockholder A (Assumed to be $10.23 on Shares Held Prior to Sale)	$	10.23		$		%
Dilution per Share Held by Stockholder A (NAV per Share Less Investment per Share)				$
Percentage Dilution to Stockholder A (NAV per Share Divided by Investment per Share)						%

Our existing stockholders who participate in the offering below NAV per share or who buy additional shares of common stock in the secondary market at the same or lower price as we obtain in the offering (after expenses and commissions) will experience the same types of NAV dilution as the nonparticipating stockholders, albeit at a lower level, to the extent they purchase less than the same percentage of the discounted offering as their interest in our shares of common stock immediately prior to the offering. The level of NAV dilution will decrease as the number of shares of common stock such stockholders purchase increases. Existing stockholders who buy more than such percentage will experience NAV dilution on their existing shares but will, in contrast to existing stockholders who purchase less than their proportionate share of the offering, experience an increase (often called accretion) in average NAV per share over their investment per share and will also experience a disproportionately greater increase in their participation in our earnings and assets and their voting power than our increase in assets, potential earning power and voting interests due to the offering. The level of accretion will increase as the excess number of shares of common stock such stockholder purchases increases. Even a stockholder who over-participates will, however, be subject to the risk that we may make additional discounted offerings in which such stockholder does not participate, in which case such a stockholder will experience NAV dilution as described above in such subsequent offerings. These stockholders may also experience a decline in the market price of their shares of common stock, which often reflects to some degree announced or potential decreases in NAV per share. This decrease could be more pronounced as the size of the offering and level of discounts increases.

The following chart illustrates the level of dilution and accretion in the offering for a stockholder that acquires shares equal to (1) 50% of its proportionate share of the offering (i.e., 5,000 shares, which is 0.05% of the offering of 10,000,000 shares rather than its 0.10% proportionate share) and (2) 150% of such percentage (i.e., 15,000 shares, which is 0.15% of the offering rather than its 0.10% proportionate share). NAV has not been finally determined for any day after March 31, 2011. The table

below is shown based upon the pro-forma NAV calculated by us taking into account the dilutive effects on our NAV per share of our distributions with record dates of April 29, 2011 and May 31, 2011, our issuance of common stock on April 29, 2011 and May 31, 2011 in connection with our dividend reinvestment plan and our public stock offering of 9,000,000 shares on April 7, 2011. For purposes of illustration, the table below assumes that our March 31, 2011 NAV per share has been reduced by 1.0% to $10.23 per share as a result of the foregoing transactions.

				50% Participation				150% Participation

	Prior to Sale Below NAV			Following Sale		% Change		Following Sale		% Change
*Offering Price*
Price per Share to Public				$				$
Net Proceeds per Share to Issuer				$				$
*Decrease/Increase to NAV*
Total Shares Outstanding		97,513,877					%				%
NAV per Share	$	10.23		$			%	$			%
*Dilution/Accretion to Participating Stockholder*
Shares Held by Stockholder A		97,514					%				%
Percentage Held by Stockholder A		0.10	%		%		%		%		%
Total NAV Held by Stockholder A	$	997,416		$			%	$			%
Total Investment by Stockholder A (Assumed to be $10.23 per Share on Shares held Prior to Sale)				$				$
Total Dilution/Accretion to Stockholder A (Total NAV Less Total Investment)				$				$
NAV per Share Held by Stockholder A				$				$
Investment per Share Held by Stockholder A (Assumed to Be $10.23 on Shares Held Prior to Sale)	$	10.23		$			%	$			%
Dilution/Accretion per Share Held by Stockholder A (NAV per Share Less Investment per Share)				$				$
Percentage Dilution/Accretion to Stockholder A (NAV per Share Divided by Investment per Share)							%				%

Investors who are not currently stockholders and who participate in an offering below NAV but whose investment per share is greater than the resulting NAV per share due to selling compensation and expenses paid by the issuer will experience an immediate decrease, albeit small, in the NAV of their shares of common stock and their NAV per share compared to the price they pay for their shares of common stock. Investors who are not currently stockholders and who participate in an offering below NAV per share and whose investment per share is also less than the resulting NAV per share due to selling compensation and expenses paid by the issuer being significantly less than the discount per share will experience an immediate increase in the NAV of their shares of common stock and their NAV per share compared to the price they pay for their shares of common stock. These investors will experience a disproportionately greater participation in our earnings and assets and their voting power than our increase in assets, potential earning power and voting interests. These investors will, however, be subject to the risk that we may make additional discounted offerings in which such new stockholder does not participate, in which case such new stockholder will experience dilution as described above in such subsequent offerings. These investors may also experience a decline in the market price of their

shares of common stock, which often reflects to some degree announced or potential increases and decreases in NAV per share. This decrease could be more pronounced as the size of the offering and level of discounts increases.

The following chart illustrates the level of dilution or accretion for new investors that will be experienced by a new investor who purchases the same percentage (0.10%) of the shares in the offering as the stockholder in the prior examples held immediately prior to the offering. These stockholders may also experience a decline in the market price of their shares, which often reflects to some degree announced or potential increases and decreases in NAV per share. This decrease could be more pronounced as the size of the offering and level of discounts increases. It is not possible to predict the level of market price decline that may occur. NAV has not been finally determined for any day after March 31, 2011. The table below is shown based upon the pro-forma NAV calculated by us taking into account the dilutive effects on our NAV per share of our distributions with record dates of April 29, 2011 and May 31, 2011, our issuance of common stock on April 29, 2011 and May 31, 2011 in connection with our dividend reinvestment plan and our public stock offering of 9,000,000 shares on April 7, 2011. For purposes of illustration, the table below assumes that our March 31, 2011 NAV per share has been reduced by 1.0% to $10.23 per share as a result of the foregoing transactions.

	Prior to Sale Below NAV			Following Sale

*Offering Price*
Price per Share to Public				$
Net Proceeds per Share to Issuer				$
*Decrease/Increase to NAV*
Total Shares Outstanding		97,513,877				%
NAV per Share	$	10.23		$		%
*Dilution/Accretion to New Investor A*
Shares Held by Investor A		0
Percentage Held by Investor A		0.00	%		%
Total NAV Held by Investor A	$	0		$
Total Investment by Investor A (At Price to Public)				$
Total Dilution/Accretion to Investor A (Total NAV Less Total Investment)				$
NAV per Share Held by Investor A				$
Investment per Share Held by Investor A	$	0.00		$
Dilution/Accretion per Share Held by Investor A (NAV per Share Less Investment per Share)				$
Percentage Dilution/Accretion to Investor A (NAV per Share Divided by Investment per Share)						%

Under the terms of an underwriting agreement, Barclays Capital Inc., as the underwriter in this offering, has agreed to purchase from us, 10,000,000 shares of common stock.

The underwriting agreement provides that the underwriter's obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement including:

The following table summarizes the underwriting discounts and commissions we will pay to the underwriter. These amounts are shown assuming both no exercise and full exercise of the underwriter's option to purchase additional shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriter pays to us for the shares.

The underwriter has advised us that it proposes to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus supplement and to selected dealers, which may include the underwriter, at such offering price less a selling concession not in excess of $ per share. After the offering, the underwriter may change the offering price and other selling terms. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

The expenses of the offering that are payable by us are estimated to be $200,000 (excluding underwriting discounts and commissions).

We have granted the underwriter an option exercisable for 30 days after the date of this prospectus supplement, to purchase, from time to time, in whole or in part, up to an aggregate of 1,500,000 shares at the public offering price less underwriting discounts and commissions. This option may be exercised if the underwriter sells more than the 10,000,000 shares set forth on the cover of this prospectus supplement.

We and each of our directors and executive officers have agreed, without the prior written consent of the underwriter not to, during the period ending 45 days following the date of the underwriting agreement, (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement relating to, any securities of the Company that are substantially similar to the common stock offered hereby, including but not limited to any options or warrants to purchase shares of common stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock or any such substantially similar securities, or publicly disclose the intention to

make any offer, sale, pledge, disposition or filing or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common stock or any such other securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or such other securities, in cash or otherwise (other than shares of common stock to be sold hereunder or pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date of the underwriting agreement).

Barclays Capital Inc., in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release the common stock and other securities from lock-up agreements, Barclays Capital will consider, among other factors, the holder's reasons for requesting the release, the number of shares of common stock or other securities for which the release is being requested and market conditions at the time.

We have agreed to indemnify the underwriter against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriter may be required to make for these liabilities.

The underwriter may engage in stabilizing transactions, covering transactions or purchases for the purpose of pegging, fixing or maintaining the price of the common stock, in accordance with Regulation M under the Exchange Act:

These stabilizing transactions and covering transactions may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of the common stock. As a result, the price of the common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The NASDAQ Global Select Market or otherwise and, if commenced, may be discontinued at any time.

Neither we nor the underwriter make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor the underwriter will make representation that the underwriter will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

In connection with the offering, underwriters may engage in passive market making transactions in the common stock on The NASDAQ Global Select Market in accordance with Rule 103 of Regulation M under the Exchange Act during the period before the commencement of offers or sales of common stock and extending through the completion of distribution. A passive market maker must display its bids at a price not in excess of the highest independent bid of the security. However, if all independent bids are lowered below the passive market maker's bid that bid must be lowered when specified purchase limits are exceeded.

A prospectus supplement and the accompanying prospectus in electronic format may be made available on the Internet sites or through other online services maintained by the underwriter or by its affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter, prospective investors may be allowed to place orders online. The underwriter may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the underwriter on the same basis as other allocations.

Other than the prospectus supplement and the accompanying prospectus in electronic format, the information on the underwriter's website and any information contained in any other website maintained by the underwriter is not part of the prospectus supplement and the accompanying prospectus or the registration statement of which the prospectus supplement and the accompanying prospectus forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter and should not be relied upon by investors.

If you purchase shares of common stock offered in the prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of the prospectus.

From time to time, Barclays Capital Inc. and its affiliates have, directly or indirectly, provided investment banking or financial advisory services to us, for which they have received customary fees and commissions, and expect to provide these services to us in the future, for which they expect to receive customary fees and expense reimbursement.

In relation to each member state of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State"), including each Relevant Member State that has implemented the 2010 PD Amending Directive with regard to persons to whom an offer of securities is addressed and the denomination per unit of the offer of securities (each, an "Early Implementing Member State"), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date"), no offer of shares will be made to the public in that Relevant Member State (other than offers (the "Permitted Public Offers") where a prospectus will be published in relation to the shares that has been approved by the competent authority in a Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive), except that with effect from and including that Relevant Implementation Date, offers of shares may be made to the public in that Relevant Member State at any time:

(2) to fewer than 100 (or, in the case of Early Implementing Member States, 150) natural or legal persons (other than "qualified investors" as defined in the Prospectus Directive), as permitted in the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

(3) in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or of a supplement to a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State (other than a Relevant Member State where there is a Permitted Public Offer) who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that (A) it is a "qualified investor", and (B) in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (x) the shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than "qualified investors" as defined in the Prospectus Directive, or in circumstances in which the prior consent of the Subscribers has been given to the offer or resale, or (y) where shares have been acquired by it on behalf of persons in any Relevant Member State other than "qualified investors" as defined in the Prospectus Directive, the offer of those shares to it is not treated under the Prospectus Directive as having been made to such persons.

For the purpose of the above provisions, the expression "an offer to the public" in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer of any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression "Prospectus Directive" means Directive 2003/71 EC (including the 2010 PD Amending Directive, in the case of Early Implementing Member States) and includes any relevant implementing measure in each Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

The shares being sold by the Company in this offering may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange ("SIX") or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the offering or the shares being sold in the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company or the shares being sold in the offering have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offering will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offering has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes

("CISA"). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares being sold in the offering.

This document relates to an exempt offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority. This document is intended for distribution only to persons of a type specified in those rules. It must not be delivered to, or relied on by, any other person. The Dubai Financial Services Authority has no responsibility for reviewing or verifying any documents in connection with exempt offers. The Dubai Financial Services Authority has not approved this document nor taken steps to verify the information set out in it, and has no responsibility for it. The shares which are the subject of the offering contemplated by this prospectus may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this document you should consult an authorized financial adviser.

The shares may not be offered or sold by means of any document other than (1) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (2) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (3) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (1) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (2) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (3) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (1) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (2) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest in that trust shall not be transferable for 6 months after that corporation or that trust has acquired the shares under Section 275 except: (a) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (b) where no consideration is given for the transfer; or (c) by operation of law.

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

The underwriter and its affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriter and certain of its affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses. An affiliate of the underwriter is a lender under the Company's credit facility.

In the ordinary course of their various business activities, the underwriter and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments issued by us. The underwriter and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Certain legal matters regarding the common stock offered hereby have been passed upon for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and Venable LLP as special Maryland counsel. Certain legal matters will be passed upon for the underwriter by Troutman Sanders LLP. Troutman Sanders LLP will rely as to certain matters of Maryland law upon Venable LLP.

BDO USA, LLP (formerly BDO Seidman, LLP) is the independent registered public accounting firm for the Company.

We have filed with the SEC a registration statement on Form N-2, together with all amendments and related exhibits, under the Securities Act, with respect to our common stock offered by this prospectus supplement. The registration statement contains additional information about us and the common stock being registered by this prospectus supplement. We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Exchange Act. This information and the information specifically regarding how we voted proxies relating to portfolio securities for the period ended June 30, 2010, are available free of charge by contacting us at 10 East 40th Street, 44th floor, New York, NY 10016 or by telephone at toll-free (888) 748-0702. You may inspect and copy these reports, proxy statements and other information, as well as the registration statement and related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090. The SEC maintains an Internet site that contains reports, proxy and information statements and other information filed electronically by us with the SEC which are available on the SEC's Internet site at http://www.sec.gov. Copies of these reports, proxy and information statements and other information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing the SEC's Public Reference Section, Washington, D.C. 20549-0102.

No dealer, salesperson or other individual has been authorized to give any information or to make any representation other than those contained in this prospectus supplement and, if given or made, such information or representations must not be relied upon as having been authorized by us or the underwriter. This prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such an offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so, or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus supplement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in our affairs or that information contained herein is correct as of any time subsequent to the date hereof.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

March 31, 2011 and June 30, 2010

(in thousands, except share and per share data)

			March 31, 2011			June 30, 2010

			(Unaudited)			(Audited)
Assets (Note 5)
Investments at fair value:
	Control investments (cost of $235,879 and $185,720, respectively)		$	275,349		$	195,958
	Affiliate investments (cost of $56,594 and $65,082, respectively)			70,754			73,740
	Non-control/Non-affiliate investments (cost of $881,166 and $477,957, respectively)			867,414			478,785

		Total investments at fair value (cost of $1,173,639 and $728,759, respectively, Note 4)		1,213,517			748,483

Investments in money market funds				94,919			68,871
Cash				2,395			1,081
Receivables for:
	Interest, net			10,728			5,356
	Dividends			60			1
	Other			561			419
Prepaid expenses				496			371
Deferred financing costs, net				16,186			7,579
Other assets				—			534

		Total Assets		1,338,862			832,695

Liabilities
Credit facility payable (Note 5)				47,500			100,300
Senior convertible notes (Note 6)				322,500			—
Payable for securities purchased				31,984			—
Dividends payable				8,940			6,909
Due to Prospect Administration (Note 10)				1,456			294
Due to Prospect Capital Management (Note 10)				6,353			9,006
Accrued expenses				5,319			4,057
Other liabilities				1,889			705

		Total Liabilities		425,941			121,271

Net Assets			$	912,921		$	711,424

Components of Net Assets
Common stock, par value $0.001 per share (200,000,000 and 100,000,000 common shares authorized, respectively; 88,358,811 and 69,086,862 issued and outstanding, respectively) (Note 7)			$	88		$	69
Paid-in capital in excess of par (Note 7)				991,658			805,918
Distributions in excess of net investment income				(21,202	)		(9,692	)
Accumulated realized losses on investments				(97,501	)		(104,595	)
Unrealized appreciation on investments				39,878			19,724

Net Assets			$	912,921		$	711,424

Net Asset Value Per Share			$	10.33		$	10.30

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

For The Three and Nine Months Ended March 31, 2011 and 2010

(in thousands, except share and per share data)

(Unaudited)

				For The Three Months Ended March 31,					For The Nine Months Ended March 31,

				2011		2010			2011		2010
Investment Income
Interest Income: (Note 4)
		Control investments (Net of foreign withholding tax of $0, $0, $0, and ($19), respectively)		$	5,180	$	4,494		$	15,798	$	14,137
		Affiliate investments			3,049		2,731			9,523		5,119
		Non-control/Non-affiliate investments			26,275		20,722			65,466		42,065

			Total interest income		34,504		27,947			90,787		61,321

Dividend income:
		Control investments			2,760		2,300			6,810		12,660
		Non-control/Non-affiliate investments			—		—			1,508		—
		Money market funds			3		1			10		29

			Total dividend income		2,763		2,301			8,328		12,689

Other income: (Note 8)
		Control investments			2		235			1,787		243
		Affiliate investments			22		6			176		73
		Non-control/Non-affiliate investments			7,282		1,516			12,007		2,365
		Gain on Patriot acquisition (Note 3)			—		—			—		8,632

			Total other income		7,306		1,757			13,970		11,313

	Total Investment Income				44,573		32,005			113,085		85,323

Operating Expenses
Investment advisory fees:
		Base management fee (Note 10)			6,037		3,576			15,216		9,961
		Income incentive fee (Note 10)			5,997		4,744			16,015		12,640

			Total investment advisory fees		12,034		8,320			31,231		22,601
Interest and credit facility expenses					5,660		2,111			10,182		5,480
Legal fees					283		146			763		536
Valuation services					262		231			711		504
Audit, compliance and tax related fees					168		181			649		682
Allocation of overhead from Prospect Administration (Note 10)					1,669		840			3,309		2,520
Insurance expense					74		64			217		190
Directors' fees					64		64			191		192
Potential merger expenses (Note 11)					—		925			—		925
Other general and administrative expenses					403		149			1,801		1,143

		Total Operating Expenses			20,617		13,031			49,054		34,773

		Net Investment Income			23,956		18,974			64,031		50,550

Net realized gain (loss) on investments (Note 4)					2,078		(2	)		7,094		(51,231	)
Net change in unrealized appreciation (depreciation) on investments (Note 4)					7,725		6,968			20,154		5,723

		Net Increase in Net Assets Resulting from Operations		$	33,759	$	25,940		$	91,279	$	5,042

Net increase in net assets resulting from operations per share: (Note 9 and Note 14)				$	0.38	$	0.41		$	1.11	$	0.09

Dividends declared per share				$	0.30	$	0.41		$	0.91	$	1.23

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

For The Nine Months Ended March 31, 2011 and 2010

(in thousands, except share data)

(Unaudited)

			For The Nine Months Ended

			March 31, 2011			March 31, 2010
Increase in Net Assets from Operations:
	Net investment income		$	64,031		$	50,550
	Net realized gain (loss) on investments			7,094			(51,231	)
	Net change in unrealized appreciation (depreciation) on investments			20,154			5,723

		Net Increase in Net Assets Resulting from Operations		91,279			5,042

		Dividends to Shareholders		(75,541	)		(94,125	)

Capital Share Transactions:
	Net proceeds from capital shares sold			178,317			108,858
	Less: Offering costs of public share offerings			(724	)		(1,606	)
	Fair value of equity issued in conjunction with Patriot acquisition			—			92,800
	Reinvestment of dividends			8,166			8,254

		Net Increase in Net Assets Resulting from Capital Share Transactions		185,759			208,306

		Total Increase in Net Assets		201,497			119,223
Net assets at beginning of period				711,424			532,596

		Net Assets at End of Period	$	912,921		$	651,819

Capital Share Activity:
	Shares sold			18,494,476			12,243,297
	Shares issued for Patriot acquisition			—			8,444,068
	Shares issued through reinvestment of dividends/distributions			777,473			767,782

		Net increase in capital share activity		19,271,949			21,455,147
		Shares outstanding at beginning of period		69,086,862			42,943,084

		Shares Outstanding at End of Period		88,358,811			64,398,231

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Nine Months Ended March 31, 2011 and 2010

(in thousands, except share data)

(Unaudited)

		For The Nine Months Ended March 31,

		2011			2010
Cash Flows from Operating Activities:
	Net increase in net assets resulting from operations	$	91,279		$	5,042
	Net realized (gain) loss on investments		(7,094	)		51,231
	Net change in unrealized appreciation on investments		(20,154	)		(5,723	)
	Accretion of purchase discount on investments		(10,874	)		(15,865	)
	Amortization of deferred financing costs		3,628			3,427
	Gain on Patriot acquisition		—			(8,632	)
Change in operating assets and liabilities:
	Payments for purchases of investments		(632,526	)		(64,390	)
	Payment-in-kind interest		(8,510	)		(4,299	)
	Proceeds from sale of investments and collection of investment principal		214,124			96,338
	Purchases of cash equivalents		—			(199,997	)
	Sales of cash equivalents		—			199,997
	Net (increase) decrease investments in money market funds		(26,048	)		75,724
	(Increase) decrease in interest receivable		(5,372	)		2,653
	(Increase) decrease in dividends receivable		(59	)		27
	(Increase) decrease in other receivables		(142	)		167
	Increase in prepaid expenses		(125	)		(43	)
	Decrease in due from Prospect Administration		—			1,500
	Decrease (increase) in other assets		534			(534	)
	Increase (decrease) in due to Prospect Administration		1,162			(599	)
	(Decrease) increase in due to Prospect Capital Management		(2,653	)		3,960
	Increase in payable for securities purchased		31,984			1,743
	Increase (decrease) in accrued expenses		1,262			(626	)
	Increase in other liabilities		1,184			1,031

	Net Cash (Used In) Provided By Operating Activities		(368,400	)		142,132

Cash Flows from Investing Activities:
	Acquisition of Patriot, net of cash acquired (Note 3)		—			(106,586	)

	Net Cash Used In Investing Activities		—			(106,586	)

Cash Flows from Financing Activities:
	Issuance of Senior Convertible Notes (Note 6)		322,500			—
	Borrowings under credit facility		259,100			115,000
	Payments under credit facility		(311,900	)		(185,600	)
	Financing costs paid and deferred		(12,235	)		(1,424	)
	Net proceeds from issuance of common stock		178,317			108,858
	Offering costs from issuance of common stock		(724	)		(1,606	)
	Dividends paid		(65,344	)		(59,467	)

	Net Cash Provided By Financing Activities		369,714			(24,239	)

Total Increase in Cash			1,314			11,307
Cash balance at beginning of period			1,081			9,942

	Cash Balance at End of Period	$	2,395		$	21,249

Cash Paid For Interest		$	1,377		$	865

Non-Cash Financing Activity:
Amount of shares issued in connection with Patriot acquisition		$	—		$	92,800

Amount of shares issued in connection with dividend reinvestment plan		$	8,166		$	8,254

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

CONSOLIDATED SCHEDULE OF INVESTMENTS

March 31, 2011 and June 30, 2010

(in thousands, except share data)

				March 31, 2011

Portfolio Company		Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Control Investments (25.00% or greater of voting control)
AIRMALL USA, Inc²⁸		Pennsylvania /	Senior Secured Term Loan (12.00%, due 6/30/2015)^3,4	$	30,000	$	30,000	$	30,000		3.3	%
		Property Management	Senior Subordinated Term Loan (12.00% plus 6.00% PIK, due 12/31/2015)		12,500		12,500		12,500		1.4	%
			Convertible Preferred Stock (9,919.684 shares)				9,920		9,226		1.0	%
			Common Stock (100 shares)				—		—		0.0	%

							52,420		51,726		5.7	%

Ajax Rolled Ring &		South Carolina /	Senior Secured Note—Tranche A (10.50%, due 4/01/2013)^3,4		20,717		20,717		20,717		2.3	%
	Machine, Inc.	Manufacturing	Subordinated Secured Note—Tranche B (11.50% plus 6.00% PIK, due 4/01/2013)^3,4		15,035		15,035		10,783		1.2	%
			Convertible Preferred Stock—Series A (6,142.6 shares)				6,057		—		0.0	%
			Unrestricted Common Stock (6 shares)				—		—		0.0	%

							41,809		31,500		3.5	%

AWCNC, LLC²⁰		North Carolina /	Members Units—Class A (1,800,000 units)				—		—		0.0	%
		Machinery	Members Units—Class B-1 (1 unit)				—		—		0.0	%
			Members Units—Class B-2 (7,999,999 units)				—		—		0.0	%

							—		—		0.0	%

Borga, Inc.		California / Manufacturing	Revolving Line of Credit—$1,000 Commitment (5.00% plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)^4,26		1,000		945		850		0.1	%
			Senior Secured Term Loan B (8.50% plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)⁴		1,612		1,500		956		0.1	%
			Senior Secured Term Loan C (12.00% plus 4.00% PIK plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)		8,890		707		—		0.0	%
			Common Stock (100 shares)²²				—		—		0.0	%
			Warrants (33,750 warrants)²²				—		—		0.0	%

							3,152		1,806		0.2	%

C&J Cladding LLC		Texas / Metal Services and Minerals	Membership Interest (400 units)²³				580		5,456		0.6	%

							580		5,456		0.6	%

Change Clean Energy Holdings, Inc. ("CCEHI" or "Biomass")⁵		Maine / Biomass Power	Common Stock (1,000 shares)				2,540		—		0.0	%

							2,540		—		0.0	%

Fischbein, LLC		North Carolina / Machinery	Senior Subordinated Debt (13.00% plus 3.50% PIK, due 5/01/2013)		2,133		1,988		2,133		0.2	%
			Membership Interest²⁵				1,899		11,842		1.3	%

							3,887		13,975		1.5	%

Freedom Marine Services LLC²¹		Louisiana / Shipping Vessels	Subordinated Secured Note (12.00% plus 4.00% PIK, in non-accrual status effective 10/1/2010, due 12/31/2011)⁴		11,093		10,838		3,783		0.4	%
			Net Profits Interest (22.50% payable on equity distributions)⁷				—		—		0.0	%

							10,838		3,783		0.4	%

				March 31, 2011

Portfolio Company		Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Control Investments (25.00% or greater of voting control)
Gas Solutions		Texas / Gas Gathering	Senior Secured Note (18.00%, due 12/11/2016)	$	25,000	$	25,000	$	25,000		2.8	%
	Holdings, Inc.^8,3	and Processing	Junior Secured Note (18.00%, due 12/12/2016)		12,000		12,000		12,000		1.3	%
			Common Stock (100 shares)				5,003		60,596		6.7	%

							42,003		97,596		10.8	%

Integrated Contract Services, Inc.⁹		North Carolina / Contracting	Secured Promissory Notes (15.00%, in non-accrual status effective 12/22/2010, due 3/21/2012-1/02/2013)¹⁰		1,363		1,361		1,363		0.1	%
			Senior Demand Note (15.00%, in non-accrual status effective 11/1/2010, past due)¹⁰		1,170		1,170		317		0.0	%
			Senior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)		960		660		—		0.0	%
			Junior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)		14,003		14,003		—		0.0	%
			Preferred Stock—Series A (10 shares)				—		—		0.0	%
			Common Stock (49 shares)				679		—		0.0	%

							17,873		1,680		0.1	%

Iron Horse Coiled		Alberta, Canada /	Senior Secured Tranche 2 (Zero Coupon, due 12/31/2016)		2,338		2,338		2,142		0.2	%
	Tubing, Inc.²⁴	Production Services	Senior Secured Tranche 3 (2.00%, due 12/31/2016)		14,000		13,781		13,231		1.4	%
			Common Stock (3,821 shares)				268		1,590		0.2	%

							16,387		16,963		1.8	%

Manx Energy, Inc. ("Manx")¹²		Kansas / Oil & Gas Production	Appalachian Energy Holdings, LLC ("AEH")—Senior Secured Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)		2,203		2,000		345		0.0	%
			Coalbed, LLC—Senior Secured Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)⁶		6,608		5,991		1,034		0.1	%
			Manx—Senior Secured Note (13.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)		3,300		3,300		3,300		0.4	%
			Manx—Preferred Stock (6,635 shares)				6,307		—		0.0	%
			Manx—Common Stock (3,416,335 shares)				1,171		—		0.0	%

							18,769		4,679		0.5	%

NRG		Texas / Manufacturing	Senior Secured Note (16.50%, due 8/31/2011)^3,4		13,080		13,080		13,080		1.4	%
	Manufacturing, Inc.		Common Stock (800 shares)				2,317		19,826		2.2	%

							15,397		32,906		3.6	%

Nupla Corporation		California / Home & Office Furnishings,	Revolving Line of Credit—$2,000 Commitment (7.25% plus 2.00% default interest, due 9/04/2012)^4,26		1,093		999		1,093		0.1	%
		Housewares & Durable	Senior Secured Term Loan A (8.00% plus 2.00% default interest, due 9/04/2012)⁴		4,658		1,022		4,658		0.5	%
			Senior Subordinated Debt (15.00% PIK, in non-accrual status effective 4/01/2009, due 3/04/2013)		3,767		—		334		0.0	%
			Preferred Stock—Class A (2,850 shares)				—		—		0.0	%
			Preferred Stock—Class B (1,330 shares)				—		—		0.0	%
			Common Stock (2,360,743 shares)				—		—		0.0	%

							2,021		6,085		0.6	%

			March 31, 2011

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Control Investments (25.00% or greater of voting control)
R-V Industries, Inc.	Pennsylvania / Manufacturing	Warrants (200,000 warrants, expiring 6/30/2017)			$	1,682	$	1,931		0.2	%
		Common Stock (545,107 shares)				5,086		5,263		0.6	%

						6,768		7,194		0.8	%

Yatesville Coal Holdings, Inc.¹¹	Kentucky / Mining, Steel, Iron and Non-Precious Metals and Coal Production	Senior Secured Note (Non-accrual status effective 1/01/2009, due 12/31/2010)⁴	$	1,035		1,035		—		0.0	%
		Junior Secured Note (Non-accrual status effective 1/01/2009, due 12/31/2010)⁴		400		400		—		0.0	%
		Common Stock (1,000 shares)				—		—		0.0	%

						1,435		—		0.0	%

Total Control Investments						235,879		275,349		30.2	%

Affiliate Investments (5.00% to 24.99% voting control)
Biotronic NeuroNetwork	Michigan / Healthcare	Senior Secured Note (11.50% plus 1.00% PIK, due 2/21/2013)^{3, 4}		26,227		26,227		27,014		3.0	%
		Preferred Stock Series A (9,925.455 shares)¹³				2,300		5,401		0.6	%
		Preferred Stock Series B (1,753.64 shares)¹³				579		1,360		0.1	%

						29,106		33,775		3.7	%

Boxercraft Incorporated	Georgia / Textiles & Leather	Senior Secured Term Loan A (9.50%, due 9/16/2013)^{3, 4}		2,950		2,611		2,884		0.3	%
		Senior Secured Term Loan B (10.00%, due 9/16/2013)^{3, 4}		4,767		3,973		4,637		0.5	%
		Subordinated Secured Term Loan (12.00% plus 6.50% PIK, due 3/16/2014)³		7,601		6,295		7,520		0.8	%
		Preferred Stock (1,000,000 shares)				—		408		0.0	%
		Common Stock (10,000 shares)				—		—		0.0	%

						12,879		15,449		1.6	%

Smart, LLC(15)	New York / Diversified / Conglomerate Service	Membership Interest—Class B (1,218 units)				—		—		0.0	%
		Membership Interest—Class D (1 unit)				—		—		0.0	%

						—		—		0.0	%

Sport Helmets Holdings, LLC(15)	New York / Personal & Nondurable Consumer Products	Revolving Line of Credit—$3,000 Commitment (5.75%, due 12/14/2013)^{4, 26, 27}		—		—		—		0.0	%
		Senior Secured Term Loan A (4.06%, due 12/14/2013)^{3, 4}		2,350		1,416		2,335		0.3	%
		Senior Secured Term Loan B (4.56%, due 12/14/2013)^{3, 4}		7,331		5,495		7,331		0.8	%
		Senior Subordinated Debt—Series A (12.00% plus 3.00% PIK, due 6/14/2014)³		7,493		6,196		7,493		0.8	%
		Senior Subordinated Debt—Series B (10.00% plus 5.00% PIK, due 6/14/2014)³		1,409		1,044		1,409		0.2	%
		Common Stock (20,554 shares)				458		2,962		0.3	%

						14,609		21,530		2.4	%

Total Affiliate Investments						56,594		70,754		7.8	%

			March 31, 2011

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
ADAPCO, Inc.	Florida / Ecological	Common Stock (5,000 shares)			$	141	$	245		0.0	%

						141		245		0.0	%

Aircraft Fasteners International, LLC	California / Machinery	Revolving Line of Credit—$500 Commitment (9.50%, due 11/01/2012)^{4, 26, 27}	$	—		—		—		0.0	%
		Senior Secured Term Loan (9.50%, due 11/01/2012)^{3, 4}		3,799		3,799		3,799		0.4	%
		Junior Secured Term Loan (12.00% plus 6.00% PIK, due 5/01/2013)³		4,829		4,829		4,829		0.5	%
		Convertible Preferred Stock (32,500 units)				396		226		0.0	%

						9,024		8,854		0.9	%

American Gilsonite Company	Utah / Specialty Minerals	Senior Subordinated Note (12.00% plus 2.50% PIK, due 12/10/2016)⁴		30,169		30,169		30,169		3.3	%
		Membership Interest in AGC/PEP, LLC (99.9999%)¹⁶				—		3,689		0.4	%

						30,169		33,858		3.7	%

Arrowhead General Insurance Agency, Inc.¹⁷	California / Insurance	Junior Secured Term Loan (11.25%, due 9/30/2017)⁴		27,000		27,000		27,000		3.0	%

						27,000		27,000		3.0	%

Caleel + Hayden, LLC¹⁵	Colorado / Personal & Nondurable Consumer Products	Membership Units (7,500 shares)				351		883		0.1	%
		Options in Mineral Fusion Natural Brands, LLC (11,662 options)				—		—		0.0	%

						351		883		0.1	%

Cargo Airport Services USA, LLC	New York / Transportation	Revolving Line of Credit—$5,000 Commitment (11.50%, due 3/31/2012)^{4, 26}		1,435		1,435		1,435		0.2	%
		Senior Secured Term Loan A (11.50%, due 3/31/2016)⁴		20,000		20,000		20,000		2.2	%
		Senior Secured Term Loan B (11.50%, due 3/31/2016)⁴		33,000		33,000		33,000		3.6	%
		Common Equity (1.5 units)				1,500		1,500		0.2	%

						55,935		55,935		6.2	%

Clearwater Seafoods LP	Canada / Food Products	Second Lien Term Loan (12.00%, due 2/4/2016)		45,000		45,000		45,000		4.9	%

						45,000		45,000		4.9	%

The Copernicus Group, Inc.	North Carolina / Healthcare	Revolving Line of Credit—$1,000 Commitment (8.00%, due 2/9/2016)^{4, 26}		—		—		—		0.0	%
		Senior Secured Term Loan A (8.00%, due 2/9/2016)^{3, 4}		11,250		11,250		11,250		1.2	%
		Senior Secured Term Loan B (14.00%, due 2/9/2016)⁴		11,250		11,250		11,250		1.2	%
		Preferred Stock—Series A (1,000,000 shares)				67		853		0.1	%
		Preferred Stock—Series C (212,121 shares)				212		297		0.0	%

						22,779		23,650		2.5	%

Deb Shops, Inc.¹⁷	Pennsylvania / Retail	Second Lien Debt (14.00% PIK, in non-accrual status effective 2/24/2009, due 10/23/2014)		19,501		14,606		1,372		0.2	%

						14,606		1,372		0.2	%

Diamondback Operating, LP	Oklahoma / Oil & Gas Production	Net Profits Interest (15.00% payable on Equity distributions)⁷				—		—		0.0	%

						—		—		0.0	%

			March 31, 2011

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Empire Today, LLC¹⁷	Illinois / Durable Consumer Products	Senior Secured Note (11.375%, due 2/1/2017)	$	7,500	$	7,422	$	7,500		0.8	%

						7,422		7,500		0.8	%

Fairchild Industrial Products, Co.	North Carolina / Electronics	Preferred Stock—Class A (285.1 shares)				377		726		0.1	%
		Common Stock—Class B (28 shares)				211		445		0.0	%

						588		1,171		0.1	%

H&M Oil & Gas, LLC	Texas / Oil & Gas Production	Senior Secured Note (13.00% plus 3.00% PIK, past due)⁴		60,470		60,470		42,825		4.7	%
		Net Profits Interest (8.00% payable on Equity distributions)⁷				—		—		0.0	%

						60,470		42,825		4.7	%

Hoffmaster Group, Inc.	Wisconsin / Durable Consumer Products	Second Lien Term Loan (13.50%, due 6/2/2017)³		20,000		20,000		20,400		2.2	%

						20,000		20,400		2.2	%

Hudson Products Holdings, Inc.¹⁷	Texas / Manufacturing	Senior Secured Term Loan (8.50%, due 8/24/2015)^{3, 4}		6,365		5,809		5,453		0.6	%

						5,809		5,453		0.6	%

ICON Health & Fitness, Inc¹⁷	Utah / Durable Consumer Products	Senior Secured Note (11.875%, due 10/15/2016)³		32,500		32,337		32,500		3.6	%

						32,337		32,500		3.6	%

IEC Systems LP ("IEC") /Advanced Rig Services LLC ("ARS")	Texas / Oilfield Fabrication	IEC Senior Secured Note (12.00% plus 3.00% PIK, due 11/20/2012)^{3, 4}		16,196		16,196		16,520		1.8	%
		ARS Senior Secured Note (12.00% plus 3.00% PIK, due 11/20/2012)^{3, 4}		8,504		8,504		8,674		1.0	%

						24,700		25,194		2.8	%

Jordan Healthcare Holdings, Inc.	Texas / Healthcare	Senior Subordinated Debt (12.00% plus 2.50% PIK, due 6/23/2016)⁴		15,372		15,372		15,372		1.7	%

						15,372		15,372		1.7	%

Label Corp Holdings, Inc.¹⁷	Nebraska / Printing & Publishing	Senior Secured Term Loan (8.50%, due 8/08/2014)^{3, 4}		5,749		5,272		5,651		0.6	%

						5,272		5,651		0.6	%

LHC Holdings Corp.	Florida / Healthcare	Revolving Line of Credit—$750 Commitment (8.50%, due 6/30/2012)^{26, 27}				—		—		0.0	%
		Senior Secured Term Loan A (8.50%, due 6/30/2012)^{3, 4}		1,097		1,097		1,072		0.1	%
		Senior Subordinated Debt (12.00% plus 2.50% PIK, due 5/31/2013)³		4,565		4,272		4,384		0.5	%
		Membership Interest (125 units)				216		213		0.0	%

						5,585		5,669		0.6	%

Mac & Massey Holdings, LLC	Georgia / Food Products	Senior Subordinated Debt (10.00% plus 5.75% PIK, due 2/10/2013)³		9,056		8,011		9,056		1.0	%
		Membership Interest (250 units)				129		623		0.1	%

						8,140		9,679		1.1	%

Maverick Healthcare, LLC	Arizona / Healthcare	Preferred Units (1,250,000 units)				1,253		1,760		0.2	%
		Common Units (1,250,000 units)				—		270		0.0	%

						1,253		2,030		0.2	%

			March 31, 2011

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Medical Security Card Company, LLC	Arizona / Healthcare	Revolving Line of Credit—$1,500 Commitment (9.50%, due 2/1/2016)^{4, 26}	$	—	$	—	$	—		0.0	%
		Senior Secured Term Loan (11.25%, due 2/1/2016)⁴		20,500		20,500		20,500		2.2	%

						20,500		20,500		2.2	%

Northwestern Management Services, LLC	Florida / Healthcare	Revolving Line of Credit—$1,500 Commitment (10.50%, due 7/30/2015)^{4, 26}		—		—		—		0.0	%
		Senior Secured Term Loan A (10.50%, due 7/30/2015)^{3, 4}		18,250		18,250		18,250		2.0	%
		Common Stock (50 shares)				371		682		0.1	%

						18,621		18,932		2.1	%

Out Rage, LLC⁴	Wisconsin / Durable Consumer Products	Revolving Line of Credit—$1,500 Commitment (11.0%, due 3/2/2015)²⁶		—		—		—		0.0	%
		Senior Secured Term Loan (11.00%, due 3/2/2015)		12,500		12,500		12,500		1.4	%

						12,500		12,500		1.4	%

Pinnacle Treatment Centers, Inc.	Pennsylvania / Healthcare	Revolving Line of Credit—$1,000 Commitment (8.0%, due 1/10/2016)^{4, 26}		—		—		—		0.0	%
		Senior Secured Term Loan (11.0%, due 1/10/2016)⁴		19,000		19,000		19,000		2.1	%

						19,000		19,000		2.1	%

Prince Mineral Company, Inc.³	New York / Metal Services and Minerals	Junior Secured Term Loan (9.00%, due 12/21/2012)⁴		11,050		11,050		11,050		1.2	%
		Senior Subordinated Debt (13.00% plus 2.00% PIK, due 7/21/2013)		12,426		1,868		12,426		1.4	%

						12,918		23,476		2.6	%

Progressive Logistics Services, LLC	Georgia / Commercial Services	Senior Secured Term Loan A (8.50%, due 1/6/2016)⁴		15,000		15,000		15,000		1.6	%
		Senior Secured Term Loan B (14.50%, due 1/6/2016)⁴		15,000		15,000		15,000		1.6	%

						30,000		30,000		3.2	%

Progrexion Holdings, LLC	Utah / Consumer Services	Revolving Line of Credit—$2,000 Commitment (10.75%, due 6/30/2011)^{4, 26}		—		—		—		0.0	%
		Senior Secured Term Loan A (10.75%, due 12/31/2014)^{3, 4}		35,730		35,730		35,730		3.9	%
		Senior Secured Term Loan B (10.75%, due 12/31/2014)⁴		32,770		32,770		32,770		3.6	%

						68,500		68,500		7.5	%

R-O-M Corporation	Missouri / Automobile	Revolving Line of Credit—$1,750 Commitment (4.25%, due 2/08/2013)^{4, 26, 27}		—		—		—		0.0	%
		Senior Secured Term Loan A (4.25%, due 2/08/2013)^{3, 4}		3,360		3,033		3,299		0.4	%
		Senior Secured Term Loan B (8.00%, due 5/08/2013)^{3, 4}		7,187		7,187		7,187		0.8	%
		Senior Subordinated Debt (12.00% plus 3.00% PIK due 8/08/2013)³		7,153		6,894		7,225		0.8	%

						17,114		17,711		2.0	%

Royal Adhesives & Sealants, LLC	Indiana / Chemicals	Senior Subordinated Unsecured Term Loan (12.00% plus 2.00% PIK due 11/29/2016)		25,150		25,150		25,150		2.8	%

						25,150		25,150		2.8	%

Safe-Guard Acquisition, Inc.	Georgia / Insurance	Senior Secured Term Loan A (8.50%, due 3/18/2016)⁴		30,000		30,000		30,000		3.3	%
		Senior Secured Term Loan B (14.50%, due 3/18/2016)⁴		30,000		30,000		30,000		3.3	%

						60,000		60,000		6.6	%

			March 31, 2011

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Seaton Corp.	Illinois / Business Services	Subordinated Secured (12.50% plus 2.00% PIK, due 3/14/2014)^{3, 4}	$	12,420	$	12,223	$	12,607		1.4	%

						12,223		12,607		1.4	%

Shearer's Foods, Inc.	Ohio / Food Products	Junior Secured Debt (12.00% plus 3.50% PIK, due 3/31/2016)^{3, 4}		35,940		35,940		35,940		3.9	%
		Membership Interest in Mistral Chip Holdings, LLC (2,000 units)¹⁸				2,000		4,220		0.5	%
		Membership Interest in Mistral Chip Holdings, LLC 2 (595 units)¹⁸				1,322		1,255		0.1	%

						39,262		41,415		4.5	%

Skillsoft Public Limited Company	Ireland / Software & Computer Services	Subordinated Unsecured (11.125%, due 06/01/2018)		15,000		14,908		15,000		1.6	%

						14,908		15,000		1.6	%

Snacks Holding Corporation.	Minnesota / Food Products	Senior Subordinated Unsecured Term Loan (12.00% plus 1.00% PIK, due 11/12/2017)		15,000		14,430		15,225		1.7	%
		Series A Preferred Stock (4,021.45 shares)		—		56		63		0.0	%
		Series B Preferred Stock (1,866.10 shares)		—		56		63		0.0	%
		Warrant (to purchase 31,196.52 voting common shares, expires 11/12/2020)				479		537		0.1	%

						15,021		15,888		1.8	%

SonicWALL, Inc.	California / Software & Computer Services	Subordinated Secured (12.00%, due 1/23/2017)^{3, 4}		23,000		22,981		23,000		2.5	%

						22,981		23,000		2.5	%

Stauber Performance Ingredients, Inc.	California / Food Products	Revolving Line of Credit—$2,500 Commitment (10.50%, due 1/21/2016)^{4, 26}		—		—		—		0.0	%
		Subordinated Secured Revolving Credit Facility (10.50%, due 1/21/2016)⁴		25,700		25,700		25,700		2.8	%

						25,700		25,700		2.8	%

Stryker Energy, LLC	Ohio / Oil & Gas Production	Subordinated Secured Revolving Credit Facility—$49,250 Commitment (12.00% plus 3.00% PIK, due 12/01/2012)^{3, 4, 26}		30,410		30,297		28,315		3.1	%
		Overriding Royalty Interests¹⁹				—		2,230		0.2	%

						30,297		30,545		3.3	%

Unitek¹⁷	Pennsylvania / Technical Services	Second Lien Debt (13.08%, due 12/31/2013)^{3, 4}		11,500		11,409		11,500		1.3	%

						11,409		11,500		1.3	%

VPSI, Inc.	Michigan / Transportation	First Lien Senior Secured Note (12.00%, due 12/23/2015)⁴		17,990		17,990		17,592		1.9	%

						17,990		17,592		1.9	%

			March 31, 2011

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Wind River Resources Corp. and Wind River II Corp.	Utah / Oil & Gas Production	Senior Secured Note (13.00% plus 3.00% default interest on principal, 16.00% default interest on past due interest, in non-accrual status effective 12/01/2008, past due)⁴	$	15,000	$	15,000	$	7,990		0.9	%
		Net Profits Interest (5.00% payable on Equity distributions)⁷				—		—		0.0	%

						15,000		7,990		0.9	%

Total Non-control/Non-affiliate Investments (Level 3 Investments)						881,047		867,247		95.0	%

Total Level 3 Portfolio Investments						1,173,520		1,213,350		132.9	%

LEVEL 1 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Allied Defense Group, Inc.	Virginia / Aerospace & Defense	Common Stock (10,000 shares)				56		35		0.0	%

						56		35		0.0	%

Dover Saddlery, Inc.	Massachusetts / Retail	Common Stock (30,974 shares)				63		132		0.0	%

						63		132		0.0	%

Total Non-control/Non-affiliate Investments (Level 1 Investments)						119		167		0.0	%

Total Portfolio Investments						1,173,639		1,213,517		132.9	%

SHORT TERM INVESTMENTS: Money Market Funds (Level 2 Investments)
Fidelity Institutional Money Market Funds—Government Portfolio (Class I)						54,076		54,076		5.9	%
Fidelity Institutional Money Market Funds—Government Portfolio (Class I)³						40,842		40,842		4.5	%
Victory Government Money Market Funds						1		1		0.0	%

Total Money Market Funds						94,919		94,919		10.4	%

Total Investments						1,268,558		1,308,436		143.3	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Control Investments (25.00% or greater of voting control)
Ajax Rolled Ring & Machine, Inc.	South Carolina / Manufacturing	Senior Secured Note—Tranche A (10.50%, due 4/01/2013)^{3, 4}	$	21,047	$	21,047	$	21,047		3.0	%
		Subordinated Secured Note—Tranche B (11.50% plus 6.00% PIK, due 4/01/2013)^{3, 4}		16,306		16,306		9,857		1.3	%
		Subordinated Secured Note—Tranche B (15.00%, due 10/30/2010)		500		500		—		0.0	%
		Convertible Preferred Stock—Series A (6,142.6 shares)				6,057		—		0.0	%
		Unrestricted Common Stock (6 shares)				—		—		0.0	%

						43,910		30,904		4.3	%

AWCNC, LLC²⁰	North Carolina / Machinery	Members Units—Class A (1,800,000 units)				—		—		0.0	%
		Members Units—Class B-1 (1 unit)				—		—		0.0	%
		Members Units—Class B-2 (7,999,999 units)				—		—		0.0	%

						—		—		0.0	%

Borga, Inc.	California / Manufacturing	Revolving Line of Credit—$1,000 Commitment (4.75% plus 3.25% default interest, in non-accrual status effective 03/02/2010, past due)^4, 26		1,000		945		850		0.1	%
		Senior Secured Term Loan B (8.25% plus 3.25% default interest, in non-accrual status effective 03/02/2010, past due)⁴		1,612		1,500		1,282		0.2	%
		Senior Secured Term Loan C (12.00% plus 4.00% PIK plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)		8,624		707		—		0.0	%
		Common Stock (100 shares)²²				—		—		0.0	%
		Warrants (33,750 warrants)²²				—		—		0.0	%

						3,152		2,132		0.3	%

C&J Cladding LLC	Texas / Metal Services and Minerals	Membership Interest (400 units)²³				580		4,128		0.6	%

						580		4,128		0.6	%

Change Clean Energy Holdings, Inc. ("CCEHI" or "Biomass")⁵	Maine / Biomass Power	Common Stock (1,000 shares)				2,383		—		0.0	%

						2,383		—		0.0	%

Fischbein, LLC	North Carolina / Machinery	Senior Subordinated Debt (13.00% plus 5.50% PIK, due 5/01/2013)		3,811		3,631		3,811		0.5	%
		Membership Interest²⁵				1,899		4,812		0.7	%

						5,530		8,623		1.2	%

Freedom Marine Services LLC	Louisiana / Shipping Vessels	Subordinated Secured Note (16.00% PIK, due 12/31/2011)³		10,088		10,040		3,583		0.5	%
		Net Profits Interest (22.50% payable on equity distributions)^{3, 7}				—		—		0.0	%

						10,040		3,583		0.5	%

Gas Solutions Holdings, Inc.^{8, 3}	Texas / Gas Gathering and Processing	Senior Secured Note (18.00%, due 12/11/2016)		25,000		25,000		25,000		3.5	%
		Junior Secured Note (18.00%, due 12/12/2016)		7,500		7,500		7,500		1.1	%
		Common Stock (100 shares)				5,003		60,596		8.5	%

						37,503		93,096		13.1	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Control Investments (25.00% or greater of voting control)
Integrated Contract Services, Inc.⁹	North Carolina / Contracting	Senior Demand Note (15.00%, past due)¹⁰	$	1,170	$	1,170	$	1,170		0.2	%
		Senior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)		1,100		800		1,100		0.2	%
		Junior Secured Note (7.00% plus 7.00% PIK plus 6.00% default interest, in non-accrual status effective 10/09/2007, past due)		14,003		14,003		2,272		0.2	%
		Preferred Stock—Series A (10 shares)				—		—		0.0	%
		Common Stock (49 shares)				679		—		0.0	%

						16,652		4,542		0.6	%

Iron Horse Coiled Tubing, Inc.²⁴	Alberta, Canada / Production Services	Senior Secured Tranche 1 (Zero Coupon, in non-accrual status effective 1/01/2010, due 12/31/2016)		615		396		615		0.1	%
		Senior Secured Tranche 2 (Zero Coupon, in non-accrual status effective 1/01/2010, due 12/31/2016)		2,337		2,338		2,338		0.3	%
		Senior Secured Tranche 3 (1.00%, in non-accrual status effective 1/01/2010, due 12/31/2016)		18,000		18,000		9,101		1.3	%
		Common Stock (3,821 shares)				268		—		0.0	%

						21,002		12,054		1.7	%

Manx Energy, Inc. ("Manx")¹²	Kansas / Oil & Gas Production	Appalachian Energy Holdings, LLC ("AEH")—Senior Secured Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)		2,073		2,000		472		0.1	%
		Coalbed, LLC—Senior Secured Note (8.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)⁶		6,219		5,991		1,414		0.2	%
		Manx—Senior Secured Note (13.00%, in non-accrual status effective 1/19/2010, due 1/19/2013)		2,800		2,800		2,800		0.4	%
		Manx—Preferred Stock (6,635 shares)				6,308		—		0.0	%
		Manx—Common Stock (3,416,335 shares)				1,171		—		0.0	%

						18,270		4,686		0.7	%

NRG Manufacturing, Inc.	Texas / Manufacturing	Senior Secured Note (16.50%, due 8/31/2011)^{3, 4}		13,080		13,080		13,080		1.8	%
		Common Stock (800 shares)				2,317		7,031		1.0	%

						15,397		20,111		2.8	%

Nupla Corporation	California / Home & Office Furnishings, Housewares & Durable	Revolving Line of Credit—$2,000 Commitment (7.25% plus 2.00% default interest, due 9/04/2012)^{4, 26}		1,093		958		1,093		0.1	%
		Senior Secured Term Loan A (8.00% plus 2.00% default interest, due 9/04/2012)⁴		5,139		1,503		3,301		0.5	%
		Senior Subordinated Debt (10.00% plus 5.00% PIK, in non-accrual status effective 4/01/2009, due 3/04/2013)		3,368		—		—		0.0	%
		Preferred Stock—Class A (2,850 shares)				—		—		0.0	%
		Preferred Stock—Class B (1,330 shares)				—		—		0.0	%
		Common Stock (2,360,743 shares)				—		—		0.0	%

						2,461		4,394		0.6	%

R-V Industries, Inc.	Pennsylvania / Manufacturing	Warrants (200,000 warrants, expiring 6/30/2017)				1,682		1,697		0.2	%
		Common Stock (545,107 shares)				5,086		4,626		0.7	%

						6,768		6,323		0.9	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Control Investments (25.00% or greater of voting control)
Sidump'r Trailer Company, Inc.	Nebraska / Automobile	Revolving Line of Credit—$2,000 Commitment (7.25%, in non-accrual status effective 11/01/2008, due 1/10/2011)^{4, 26}	$	1,025	$	479	$	574		0.1	%
		Senior Secured Term Loan A (7.25%, in non-accrual status effective 11/01/2008, due 1/10/2011)⁴		2,048		463		—		0.0	%
		Senior Secured Term Loan B (8.75%, in-non-accrual status effective 11/01/2008, due 1/10/2011)⁴		2,321		—		—		0.0	%
		Senior Secured Term Loan C (16.50% PIK, in non-accrual status effective 9/27/2008, due 7/10/2011)		3,085		—		—		0.0	%
		Senior Secured Term Loan D (7.25%, in non-accrual status effective 11/01/2008, due 7/10/2011)⁴		1,700		—		—		0.0	%
		Preferred Stock (49,843 shares)				—		—		0.0	%
		Common Stock (64,050 shares)				—		—		0.0	%

						942		574		0.1	%

Yatesville Coal Holdings, Inc.¹¹	Kentucky / Mining, Steel, Iron and Non-Precious Metals and Coal Production	Senior Secured Note (Non-accrual status effective 1/01/2009, due 12/31/2010)⁴		10,000		1,035		808		0.1	%
		Junior Secured Note (Non-accrual status effective 1/01/2009, due 12/31/2010)⁴		41,931		95		—		0.0	%
		Common Stock (1,000 shares)				—		—		0.0	%

						1,130		808		0.1	%

		Total Control Investments				185,720		195,958		27.5	%

Affiliate Investments (5.00% to 24.99% voting control)
Biotronic NeuroNetwork	Michigan / Healthcare	Senior Secured Note (11.50% plus 1.00% PIK, due 2/21/2013)^{3, 4}		26,227		26,227		26,744		3.8	%
		Preferred Stock (9,925.455 shares)¹³				2,300		2,759		0.4	%

						28,527		29,503		4.2	%

Boxercraft Incorporated	Georgia / Textiles & Leather	Revolving Line of Credit—$1,000 Commitment (9.00%, due 9/16/2013)^{26, 27}		1,000		1,000		1,000		0.1	%
		Senior Secured Term Loan A (9.50%, due 9/16/2013)^{3, 4}		3,843		3,330		3,577		0.5	%
		Senior Secured Term Loan B (10.00%, due 9/16/2013)^{3, 4}		4,822		3,845		4,386		0.6	%
		Subordinated Secured Term Loan (12.00% plus 6.50% PIK, due 3/16/2014)³		7,235		5,775		6,717		1.0	%
		Preferred Stock (1,000,000 shares)				—		205		0.0	%
		Common Stock (10,000 shares)				—		—		0.0	%

						13,950		15,885		2.2	%

KTPS Holdings, LLC	Colorado / Textiles & Leather	Revolving Line of Credit—$1,500 Commitment (10.50%, due 1/31/2012)^{26, 27}		1,000		1,000		1,000		0.1	%
		Senior Secured Term Loan A (10.50%, due 1/31/2012)^{3, 4}		3,130		2,847		2,916		0.4	%
		Senior Secured Term Loan B (12.00%, due 1/31/2012)³		435		377		409		0.1	%
		Senior Secured Term Loan C (12.00% plus 6.00% PIK, due 3/31/2012)³		4,932		4,345		4,796		0.7	%
		Membership Interest—Class A (730 units)				—		—		0.0	%
		Membership Interest—Common (199,795 units)				—		—		0.0	%

						8,569		9,121		1.3	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Affiliate Investments (5.00% to 24.99% voting control)
Smart, LLC¹⁵	New York / Diversified / Conglomerate Service	Membership Interest—Class B (1,218 units)			$	—	$	—		0.0	%
		Membership Interest—Class D (1 unit)				—		—		0.0	%

						—		—		0.0	%

Sport Helmets Holdings, LLC¹⁵	New York / Personal & Nondurable Consumer Products	Revolving Line of Credit—$3,000 Commitment (4.54%, due 12/14/2013)^{26, 27}				—		—		0.0	%
		Senior Secured Term Loan A (4.54%, due 12/14/2013)^{3, 4}	$	3,025		1,658		2,993		0.4	%
		Senior Secured Term Loan B (5.04%, due 12/14/2013)^{3, 4}		7,388		5,161		6,432		0.9	%
		Senior Subordinated Debt—Series A (12.00% plus 3.00% PIK, due 6/14/2014)³		7,325		5,857		6,734		0.9	%
		Senior Subordinated Debt—Series B (10.00% plus 5.00% PIK, due 6/14/2014)³		1,357		952		1,160		0.2	%
		Common Stock (20,554 shares)				408		1,912		0.3	%

						14,036		19,231		2.7	%

		Total Affiliate Investments				65.082		73,740		10.4	%

Non-control/Non-affiliate Investments (less than 5.00% of voting control)
ADAPCO, Inc.	Florida / Ecological	Common Stock (5,000 shares)				141		340		0.0	%

						141		340		0.0	%

Aircraft Fasteners International, LLC	California / Machinery	Revolving Line of Credit—$500 Commitment (9.50%, due 11/01/2012)^{26, 27}				—		—		0.0	%
		Senior Secured Term Loan (9.50%, due 11/01/2012)^{3, 4}		4,565		4,565		4,248		0.6	%
		Junior Secured Term Loan (12.00% plus 6.00% PIK, due 5/01/2013)³		5,134		5,134		4,807		0.7	%
		Convertible Preferred Stock (32,500 units)				396		98		0.0	%

						10,095		9,153		1.3	%

American Gilsonite Company	Utah / Specialty Minerals	Senior Subordinated Note (12.00% plus 3.00% PIK, due 3/14/2013)³		14,783		14,783		14,931		2.1	%
		Membership Interest in AGC/PEP, LLC (99.9999%)¹⁶				1,031		3,532		0.5	%

						15,814		18,463		2.6	%

Arrowhead General Insurance Agency, Inc.¹⁷	California / Insurance	Senior Secured Term Loan (8.50%, due 8/08/2012)		850		809		830		0.1	%
		Junior Secured Term Loan (10.25% plus 2.50% PIK, due 2/08/2013)		6,179		5,002		5,122		0.7	%

						5,811		5,952		0.8	%

Caleel + Hayden, LLC¹⁵	Colorado / Personal & Nondurable Consumer Products	Membership Units (7,500 shares)				351		818		0.1	%
		Options in Mineral Fusion Natural Brands, LLC (11,662 options)				—		—		0.0	%

						351		818		0.1	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Castro Cheese Company, Inc.	Texas / Food Products	Subordinated Secured Note (11.00% plus 2.00% PIK, due 2/28/2013)³	$	7,692	$	7,597	$	7,769		1.1	%

						7,597		7,769		1.1	%

The Copernicus Group, Inc.	North Carolina / Healthcare	Revolving Line of Credit—$500 Commitment (10.00%, due 10/08/2013)^4,26		150		22		150		0.0	%
		Senior Secured Term Loan A (10.00%, due 10/08/2013)^3,4		5,850		5,058		5,416		0.8	%
		Senior Subordinated Debt (10.00% plus 10.00% PIK, due 4/08/2014)		13,390		11,421		12,677		1.8	%
		Preferred Stock—Series A (1,000,000 shares)				67		104		0.0	%
		Preferred Stock—Series C (212,121 shares)				212		246		0.0	%

						16,780		18,593		2.6	%

Deb Shops, Inc.¹⁷	Pennsylvania / Retail	Second Lien Debt (14.00% PIK, in non-accrual status effective 2/24/2009, due 10/23/2014)		17,562		14,606		2,051		0.3	%

						14,606		2,051		0.3	%

Diamondback Operating, LP	Oklahoma / Oil & Gas Production	Net Profits Interest (15.00% payable on Equity distributions)⁷				—		193		0.0	%

						—		193		0.0	%

EXL Acquisition Corporation	South Carolina / Electronics	Revolving Line of Credit—$1,000 Commitment (7.75%, due 06/24/2015)^26,27				—		—		0.0	%
		Senior Secured Term Loan A (7.75%, due 6/24/2015)^3,4		12,250		12,250		12,250		1.7	%
		Senior Secured Term Loan B (12.00% plus 2.00% PIK, due 12/24/2015)³		12,250		12,250		12,250		1.7	%
		Common Stock—Class A (2,475 shares)				437		363		0.1	%
		Common Stock—Class B (25 shares)				252		103		0.0	%

						25,189		24,966		3.5	%

Fairchild Industrial Products, Co.	North Carolina / Electronics	Preferred Stock—Class A (285.1 shares)				377		435		0.1	%
		Common Stock—Class B (28 shares)				211		228		0.0	%

						588		663		0.1	%

H&M Oil & Gas, LLC	Texas / Oil & Gas Production	Senior Secured Note (13.00% plus 3.00% PIK, due 9/30/2010)		59,107		59,107		48,867		6.9	%
		Net Profits Interest (8.00% payable on Equity distributions)⁷				—		827		0.1	%

						59,107		49,694		7.0	%

Hoffmaster Group, Inc.	Wisconsin / Durable Consumer Products	Second Lien Term Loan (13.50%, due 6/2/2017)³		20,000		20,000		20,000		2.8	%

						20,000		20,000		2.8	%

Hudson Products Holdings, Inc.¹⁷	Texas / Manufacturing	Senior Secured Term Loan (8.00%, due 8/24/2015)^3,4		6,365		5,734		5,314		0.7	%

						5,734		5,314		0.7	%

IEC Systems LP ("IEC") /Advanced Rig	Texas / Oilfield	IEC Senior Secured Note (12.00% plus 3.00% PIK, due 11/20/2012)^3,4		19,008		19,008		19,008		2.7	%
Services LLC ("ARS")	Fabrication	ARS Senior Secured Note (12.00% plus 3.00% PIK, due 11/20/2012)^3,4		11,421		11,421		11,421		1.6	%

						30,429		30,429		4.3	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Impact Products, LLC	Ohio / Home & Office Furnishings,	Junior Secured Term Loan (6.38%, due 9/09/2012)⁴	$	7,300	$	6,351	$	7,290		1.0	%
	Housewares & Durable	Senior Subordinated Debt (10.00% plus 5.00% PIK, due 9/09/2012)		5,548		5,300		5,548		0.8	%

						11,651		12,838		1.8	%

Label Corp Holdings, Inc.	Nebraska / Printing & Publishing	Senior Secured Term Loan (8.50%, due 8/08/2014)^3,4		5,794		5,222		5,284		0.7	%

						5,222		5,284		0.7	%

LHC Holdings Corp.¹⁷	Florida / Healthcare	Revolving Line of Credit—$750 Commitment (9.00%, due 11/30/2012)^26,27				—		—		0.0	%
		Senior Secured Term Loan A (9.00%, due 11/30/2012)^3,4		2,015		2,015		1,839		0.3	%
		Senior Subordinated Debt (12.00% plus 2.50% PIK, due 5/31/2013)³		4,565		4,199		4,220		0.6	%
		Membership Interest (125 units)				216		217		0.0	%

						6,430		6,276		0.9	%

Mac & Massey Holdings, LLC	Georgia / Food Products	Senior Subordinated Debt (10.00% plus 5.75% PIK, due 2/10/2013)		8,671		7,351		8,643		1.2	%
		Membership Interest (250 units)				145		390		0.1	%

						7,496		9,033		1.3	%

Maverick Healthcare, LLC	Arizona / Healthcare	Second Lien Debt (12.50% plus 3.50% PIK, due 4/30/2014)³		13,122		13,122		13,247		1.9	%
		Preferred Units (1,250,000 units)				1,252		2,025		0.2	%
		Common Units (1,250,000 units)				—		—		0.0	%

						14,374		15,272		2.1	%

Miller Petroleum, Inc.	Tennessee / Oil & Gas Production	Warrants, Common Stock (2,208,772 warrants, expiring 5/04/2010 to 3/31/2015)¹⁴				150		1,244		0.2	%

						150		1,244		0.2	%

Northwestern Management Services, LLC	Florida / Healthcare	Revolving Line of Credit—$1,000 Commitment (4.36%, due 12/13/2012)^26,27		350		350		350		0.0	%
		Senior Secured Term Loan A (4.36%, due 12/13/2012)^3,4		4,309		3,516		3,578		0.5	%
		Senior Secured Term Loan B (4.86%, due 12/13/2012)^3,4		1,219		904		956		0.1	%
		Subordinated Secured Term Loan (12.00% plus 3.00%, due 6/13/2013)³		2,971		2,468		2,606		0.4	%
		Common Stock (50 shares)				371		564		0.1	%

						7,609		8,054		1.1	%

Prince Mineral Company, Inc.	New York / Metal Services and Minerals	Junior Secured Term Loan (9.00%, due 12/21/2012)⁴		11,150		11,150		11,150		1.6	%
		Senior Subordinated Debt (13.00% plus 2.00%, due 7/21/2013)		12,260		1,420		12,260		1.7	%

						12,570		23,410		3.3	%

Qualitest Pharmaceuticals, Inc.¹⁷	Alabama / Pharmaceuticals	Second Lien Debt (7.79%, due 4/30/2015)^3,4		12,000		11,955		12,000		1.7	%

						11,955		12,000		1.7	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Regional Management Corporation	South Carolina / Financial Services	Second Lien Debt (12.00% plus 2.00% PIK, due 6/29/2012)³	$	25,814	$	25,814	$	25,592		3.6	%

						25,814		25,592		3.6	%

Roll Coater Acquisition Corp	Indiana / Metal Services and Minerals	Subordinated Secured Debt (10.25%, due 9/30/2010)		6,268		6,102		6,082		0.9	%

						6,102		6,082		0.9	%

R-O-M Corporation	Missouri / Automobile	Revolving Line of Credit—$1,750 Commitment (4.50%, due 2/08/2013)^26,27				—		—		0.0	%
		Senior Secured Term Loan A (4.50%, due 2/08/2013)^3,4		4,640		4,025		4,571		0.6	%
		Senior Secured Term Loan B (8.00%, due 5/08/2013)^3,4		7,251		7,251		7,078		1.0	%
		Senior Subordinated Debt (12.00% plus 3.00% PIK due 8/08/2013)³		7,118		6,799		6,392		0.9	%

						18,075		18,041		2.5	%

Seaton Corp	Illinois / Business Services	Subordinated Secured (12.50% plus 2.00% PIK, due 3/14/2011)		12,296		12,060		12,132		1.7	%

						12,060		12,132		1.7	%

Shearer's Foods, Inc.	Ohio / Food Products	Junior Secured Debt (12.00% plus 3.00% PIK, due 3/31/2016)³		35,266		35,266		36,119		5.1	%
		Membership Interest in Mistral Chip Holdings, LLC (2,000 units)¹⁸				2,560		6,136		0.9	%
		Membership Interest in Mistral Chip Holdings, LLC 2 (595 units)¹⁸				762		1,825		0.2	%

						38,588		44,080		6.2	%

Skillsoft Public Limited Company	Ireland / Prepackaged Software	Subordinated Unsecured (11.125%, due 06/01/2018)		15,000		14,903		15,000		2.2	%

						14,903		15,000		2.2	%

Stryker Energy, LLC	Ohio / Oil & Gas Production	Subordinated Secured Revolving Credit Facility—$49,250 Commitment (12.00%, due 12/01/2012)^3,4		29,724		29,507		29,624		4.2	%
		Overriding Royalty Interests¹⁹				—		2,768		0.4	%

						29,507		32,392		4.6	%

TriZetto Group¹⁷	California / Healthcare	Subordinated Unsecured Note (12.00% plus 1.50% PIK, due 10/01/2016)³		15,434		15,306		15,895		2.2	%

						15,306		15,895		2.2	%

Unitek¹⁷	Pennsylvania / Technical Services	Second Lien Debt (13.08%, due 12/31/2013)^3,4		11,500		11,387		11,615		1.7	%

						11,387		11,615		1.7	%

			June 30, 2010

Portfolio Company	Locale / Industry	Investments¹	Principal Value		Cost		Fair Value²		% of Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Wind River Resources Corp. and Wind River II Corp.	Utah / Oil & Gas Production	Senior Secured Note (13.00% plus 3.00% default interest, in non-accrual status effective 12/01/2008, due 7/31/2010)⁴	$	15,000	$	15,000	$	8,779		1.2	%
		Net Profits Interest (5.00% payable on Equity distributions)⁷				—		—		0.0	%

						15,000		8,779		1.2	%

	Total Non-control/Non-affiliate Investments (Level 3 Investments)					476,441		477,417		67.1	%

		Total Level 3 Portfolio Investments				727,243		747,115		105.0	%

LEVEL 1 PORTFOLIO INVESTMENTS:
Non-control/Non-affiliate Investments (less than 5.00% of voting control)
Allied Defense Group, Inc.	Virginia / Aerospace & Defense	Common Stock (10,000 shares)				56		38		0.0	%

						56		38		0.0	%

Dover Saddlery, Inc.	Massachusetts / Retail	Common Stock (30,974 shares)				63		97		0.0	%

						63		97		0.0	%

LyondellBasell Industries N.V.	Netherlands / Chemical Company	Class A Common Stock (26,961 shares)				874		435		0.2	%
		Class B Common Stock (49,421 shares)				523		798		0.0	%

						1,397		1,233		0.2	%

	Total Non-control/Non-affiliate Investments (Level 1 Investments)					1,516		1,368		0.2	%

		Total Portfolio Investments				728,759		748,483		105.2	%

SHORT TERM INVESTMENTS: Money Market Funds (Level 2 Investments)
Fidelity Institutional Money Market Funds—Government Portfolio (Class I)						62,183		62,183		8.8	%
Fidelity Institutional Money Market Funds—Government Portfolio (Class I)³						6,687		6,687		0.9	%
Victory Government Money Market Funds						1		1		0.0	%

		Total Money Market Funds				68,871		68,871		9.7	%

		Total Investments				797,630		817,354		114.9	%

Endnote Explanations for the Consolidated Schedule of Investments as of March 31, 2011 and June 30, 2010

PROSPECT CAPITAL CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Unaudited)

(In thousands, except share and per share data)

References herein to "we", "us" or "our" refer to Prospect Capital Corporation and its subsidiary unless the context specifically requires otherwise.

We were formerly known as Prospect Energy Corporation, a Maryland corporation. We were organized on April 13, 2004 and were funded in an initial public offering ("IPO"), completed on July 27, 2004. We are a closed-end investment company that has filed an election to be treated as a Business Development Company ("BDC"), under the Investment Company Act of 1940 (the "1940 Act"). As a BDC, we have qualified and have elected to be treated as a regulated investment company ("RIC"), under Subchapter M of the Internal Revenue Code. We invest primarily in senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development, project financings, recapitalizations, and other purposes.

On May 15, 2007, we formed a wholly-owned subsidiary, Prospect Capital Funding, LLC, a Delaware limited liability company, for the purpose of holding certain of our loan investments in the portfolio which are used as collateral for our credit facility.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. The financial results of our portfolio investments are not consolidated in the financial statements.

The preparation of GAAP financial statements 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 income and expenses during the reported period. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

Under the 1940 Act rules, the regulations pursuant to Article 6 of Regulation S-X and the American Institute of Certified Public Accountants' Audit and Accounting Guide for Investment Companies, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services and benefits to us. Our financial statements include our accounts and the accounts of Prospect Capital Funding, LLC, our only

wholly-owned, closely-managed subsidiary that is also an investment company. All intercompany balances and transactions have been eliminated in consolidation.

Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Investments in other, non-security financial instruments are recorded on the basis of subscription date or redemption date, as applicable. Amounts for investments recognized or derecognized but not yet settled are reported as receivables for investments sold and payables for investments purchased, respectively, in the Consolidated Statements of Assets and Liabilities.

The Company's investments are subject to a variety of risks. Those risks include the following:

Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.

Investments for which market quotations are readily available are valued at such market quotations.

that we may take into account in fair value pricing our investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, the principal market and enterprise values, among other factors.

ASC 820 classifies the inputs used to measure these fair values into the following hierarchy:

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. The changes to GAAP from the application of ASC 820 relate to the definition of fair value, framework for measuring fair value, and the expanded disclosures about fair value measurements. ASC 820 applies to fair value measurements already required or permitted by other standards. In accordance with ASC 820, the fair value of our investments is defined as the price that we would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market in which that investment is transacted.

In April 2009, the FASB issued ASC Subtopic 820-10-65, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly" ("ASC 820-10"). This update provides further clarification for ASC 820 in markets that are not active and provides additional guidance for determining when the volume of trading level of activity for an asset or liability has significantly decreased and for identifying circumstances that indicate a transaction is not orderly. ASC 820-10-65 is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of ASC 820-10-65 for the three and nine months ended March 31, 2011 and 2010, did not have any effect on our net asset value, financial position or results of operations as there was no change to the fair value measurement principles set forth in ASC 820.

In February 2007, FASB issued ASC Subtopic 820-10-05-1, The Fair Value Option for Financial Assets and Financial Liabilities ("ASC 820-10-05-1"). ASC 820-10-05-1 permits an entity to elect fair value as the initial and subsequent measurement attribute for many of assets and liabilities for which the fair value option has been elected and similar assets and liabilities measured using another measurement attribute. We adopted this statement on July 1, 2008 and have elected not to value other assets and liabilities at fair value as would be permitted by ASC 820-10-05-1.

We have recorded the Senior Convertible Notes (See Note 6) at their contractual amounts. The Senior Convertible Notes were analyzed for any features that would require its accounting to be bifurcated and they were determined to be immaterial.

Realized gains or losses on the sale of investments are calculated using the specific identification method.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Accretion of such purchase discounts or premiums is calculated by the effective interest method as of the purchase date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as interest income. The purchase discount for portfolio investments acquired from Patriot was determined based on the difference between par value and fair market value as of December 2, 2009, and will continue to accrete until maturity or repayment of the respective loans.

If we do not distribute (or are not deemed to have distributed) at least 98% of our annual taxable income in the calendar year it is earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual taxable income exceeds the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.

If we fail to satisfy the Annual Distribution Requirement or otherwise fail to qualify as a RIC in any taxable year, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would we be required to make distributions. Distributions would generally be taxable to our individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate for taxable years beginning before 2013 (but not for taxable years beginning thereafter, unless the relevant provisions are extended by legislation) to the extent of our current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our shareholders our accumulated earnings and profits attributable to non-RIC years reduced by an interest charge of 50% of such earnings and profits payable by us as an additional tax. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.

the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Adoption of ASC 740 was applied to all open tax years as of July 1, 2007. The adoption of ASC 740 did not have an effect on our net asset value, financial condition or results of operations as there was no liability for unrecognized tax benefits and no change to our beginning net asset value. As of March 31, 2011 and for the three and nine months then ended, we did not have a liability for any unrecognized tax benefits. Management's determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof.

We record registration expenses related to shelf filings as prepaid assets. These expenses consist principally of Securities and Exchange Commission ("SEC") registration fees, legal fees and accounting fees incurred. These prepaid assets will be charged to capital upon the receipt of an equity offering proceeds or charged to expense if no offering completed.

In June 2009, the FASB issued ASC 810, Consolidation ("ASC 810"). ASC 810 is intended to (1) address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, as a result of the elimination of the qualifying special-purpose entity concept in ASC 860, and (2) constituent concerns about the application of certain key provisions of Interpretation 46(R), including those in which the accounting and disclosures under the Interpretation do not always provide timely and useful information about an enterprise's involvement in a variable interest entity. ASC 810 was effective as of the beginning of our first annual reporting period that begins after November 15, 2009 (our June 30, 2011 fiscal year). The adoption of this standard had no effect on our results of operation or our financial position.

In January 2010, the FASB issued Accounting Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements ("ASC 2010-06"). ASU 2010-06 amends ASC 820-10 and clarifies and provides additional disclosure requirements related to recurring and non-recurring fair value measurements and employers' disclosures about postretirement benefit plan assets. ASU 2010-06 is effective December 15, 2009, except for the disclosure about purchase, sales, issuances and settlements in the roll forward of activity in level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010 (or July 1, 2011 for us) and for interim periods within those fiscal years. Our management does not believe that the adoption of the amended guidance in ASC 820-10 will have a significant effect on our financial statements.

Schedules and Codification of Financial Reporting Policies. The adoption of this standard had no effect on our results of operation or our financial position.

On December 2, 2009, Patriot made a final dividend payment equal to its undistributed net ordinary income and capital gains of $0.38 per share. In accordance with a recent IRS revenue procedure, the dividend was paid 10% in cash and 90% in newly issued shares of Patriot's common stock. The exchange ratio was adjusted to give effect to the final income distribution.

The merger has been accounted for as an acquisition of Patriot by Prospect Capital Corporation ("Prospect") in accordance with acquisition method of accounting as detailed in ASC 805, Business Combinations ("ASC 805"). The fair value of the consideration paid was allocated to the assets acquired and liabilities assumed based on their fair values as the date of acquisition. As described in more detail in ASC 805, goodwill, if any, would have been recognized as of the acquisition date, if the consideration transferred exceeded the fair value of identifiable net assets acquired. As of the acquisition date, the fair value of the identifiable net assets acquired exceeded the fair value of the consideration transferred, and we recognized the excess as a gain. A preliminary gain of $5,714 was recorded by Prospect in the quarter ended December 31, 2009 related to the acquisition of Patriot, which was revised in the fourth quarter of Fiscal 2010 to $7,708, when we settled severance accruals related to certain members of Patriot's top management and finalized during the first quarter of Fiscal 2011, to $8,632, when we settled the remaining severance accruals related to the last two members of Patriot's top management. Under ASC 805, the adjustments to our preliminary estimate were reflected in the three months ended December 31, 2009 (See Note 14). The acquisition of Patriot was negotiated in July 2009 with the purchase agreement being signed on August 3, 2009. Between July 2009 and December 2, 2009, our valuation of certain of the investments acquired from Patriot increased due to market improvement, which resulted in the recognition of the gain at closing.

The purchase price has been allocated to the assets acquired and the liabilities assumed based on their estimated fair values as summarized in the following table:

The following condensed statement of net assets acquired reflects the values assigned to Patriot's net assets as of the acquisition date, December 2, 2009.

The following unaudited pro forma condensed combined financial information does not purport to be indicative of actual financial position or results of our operations had the Patriot acquisition actually been consummated as of July 1, 2009. Certain one-time charges have been eliminated. The pro forma adjustments reflecting the allocation of the purchase price of Patriot and the gain of $8,632 recognized on the Patriot Acquisition have been eliminated. Management has realized net operating synergies from this transaction. The pro forma condensed combined financial information does not reflect the potential impact of these synergies and does not reflect any impact of additional accretion which would have been recognized on the transaction, except for that which was recorded after the transaction was consummated on December 2, 2009.

At March 31, 2011, we had invested in 64 long-term portfolio investments, which had an amortized cost of $1,173,639 and a fair value of $1,213,517 and at June 30, 2010, we had invested in 58 long-term portfolio investments, which had an amortized cost of $728,759 and a fair value of $748,483.

As of March 31, 2011, we own controlling interests in AIRMALL USA, Inc., Ajax Rolled Ring & Machine, Inc., AWCNC, LLC, Borga, Inc. ("Borga"), C&J Cladding, LLC, Change Clean Energy Holdings, Inc., Fischbein, LLC, Freedom Marine Services LLC ("Freedom Marine"), Gas Solutions Holdings, Inc. ("GSHI"), Integrated Contract Services, Inc. ("ICS"), Iron Horse Coiled Tubing, Inc.

("Iron Horse"), Manx Energy, Inc. ("Manx"), NRG Manufacturing, Inc., Nupla Corporation ("Nupla"), R-V Industries, Inc. and Yatesville Coal Holdings, Inc. ("Yatesville"). We also own an affiliated interest in Biotronic NeuroNetwork, Boxercraft Incorporated, Smart, LLC, and Sport Helmets Holdings, LLC.

The composition of our investments as of March 31, 2011 and June 30, 2010 at cost and fair value was as follows:

The fair values of our portfolio investments as of March 31, 2011 disaggregated into the three levels of the ASC 820 valuation hierarchy are as follows:

The fair values of our portfolio investments as of June 30, 2010 disaggregated into the three levels of the ASC 820 valuation hierarchy are as follows:

The aggregate values of Level 3 portfolio investments changed during the nine months ended March 31, 2011 as follows:

			Fair Value Measurements Using Unobservable Inputs (Level 3)

			Control Investments			Affiliate Investments			Non-Control/ Non-Affiliate Investments			Total
Fair value as of June 30, 2010			$	195,958		$	73,740		$	477,417		$	747,115
Total realized (loss) gain, net				(810	)		(549	)		8,050			6,691
Change in unrealized appreciation (depreciation)				28,864			6,054			(12,029	)		22,889	¹

	Net realized and unrealized gain (loss)			28,054			5,505			(3,979	)		29,580

Purchases of portfolio investments				59,839			1,380			562,110			623,329
Payment-in-kind interest				2,291			1,081			5,138			8,510
Accretion of purchase discount				84			2,094			8,696			10,874
Repayments and sales of portfolio investments				(10,877	)		(13,046	)		(182,135	)		(206,058	)
Transfers within Level 3				—			—			—			—
Transfers in (out) of Level 3				—			—			—			—

		Fair value as of March 31, 2011	$	275,349		$	70,754		$	867,247		$	1,213,350

		Fair Value Measurements Using Unobservable Inputs (Level 3)

		Revolving Line of Credit			Senior Secured Debt			Subordinated Secured Debt			Subordinated Unsecured Debt			Equity			Total
Fair value as of June 30, 2010		$	5,017		$	287,470		$	313,511		$	30,895		$	110,222		$	747,115
Total realized (loss) gain, net			—			(1,072	)		—			—			7,763			6,691
Change in unrealized (depreciation) appreciation¹			(169	)		(722	)		(2,799	)		201			26,378			22,889

	Net realized and unrealized (loss) gain		(169	)		(1,794	)		(2,799	)		201			34,141			29,580

Purchases of portfolio investments			4,335			411,695			155,093			39,410			12,796			623,329
Payment-in-kind interest			—			1,857			6,445			208			—			8,510
Accretion of purchase discount			169			4,142			6,410			153			—			10,874
Repayments and sales of portfolio investments			(5,974	)		(53,014	)		(121,060	)		(15,492	)		(10,518	)		(206,058	)
Transfers within Level 3			—			—			—			—			—			—
Transfers in (out) of Level 3			—			—			—			—			—			—

Fair value as of March 31, 2011		$	3,378		$	650,356		$	357,600		$	55,375		$	146,641		$	1,213,350

The aggregate values of Level 3 portfolio investments changed during the nine months ended March 31, 2010 as follows:

		Fair Value Measurements Using Unobservable Inputs (Level 3)

		Control Investments			Affiliate Investments			Non-Control/ Non-Affiliate Investments			Total
Fair value as of June 30, 2009		$	206,332		$	32,254		$	308,582		$	547,168
Total realized losses			(51,228	)		—			—			(51,228	)
Change in unrealized appreciation (depreciation)			(5,888	)		11,609			1,642			7,363	¹

Net realized and unrealized (loss) gain			(57,116	)		11,609			1,642			(43,865	)

Assets acquired in the Patriot acquisition			10,534			36,400			160,073			207,007
Purchases of portfolio investments			12,940			750			48,904			62,594
Payment-in-kind interest			1,747			449			2,103			4,299
Accretion of original issue discount			3,580			867			11,414			15,861
Dispositions of portfolio investments			(8,843	)		(3,935	)		(85,015	)		(97,793	)
Transfers within Level 3			25,473			(4,878	)		(20,595	)		—
Transfers in (out) of Level 3			—			—			—			—

	Fair value as of March 31, 2010	$	194,647		$	73,516		$	427,108		$	695,271

		Fair Value Measurements Using Unobservable Inputs (Level 3)

		Revolving Line of Credit			Senior Secured Debt			Subordinated Secured Debt			Subordinated Unsecured Debt			Equity/ Equivalents			Total
Fair value as of June 30, 2009		$	—		$	220,993		$	194,547		$	16,331		$	115,297		$	547,168
Total realized (loss) gain, net			—			(8,965	)		(41,836	)		—			(427	)		(51,228	)
Change in unrealized (depreciation) appreciation¹			(118	)		(9,819	)		31,324			(673	)		(13,351	)		7,363

	Net realized and unrealized (loss) gain		(118	)		(18,784	)		(10,512	)		(673	)		(13,778	)		(43,865	)

Assets acquired in the Patriot acquisition			8,979			98,310			94,369			—			5,349			207,007
Purchases of portfolio investments			1,120			7,107			45,038			—			9,329			62,594
Payment-in-kind interest			—			(1	)		4,129			171			—			4,299
Accretion of purchase discount			2,528			7,160			6,164			6			—			15,861
Repayments and sales of portfolio investments			(10,496	)		(30,634	)		(55,808	)		3			(855	)		(97,793	)
Transfers within Level 3			—			—			—			—			—			—
Transfers in (out) of Level 3			—			—			—			—			—			—

Fair value as of March 31, 2010		$	2,013		$	284,151		$	277,927		$	15,838		$	115,342		$	695,271

At March 31, 2011, eight loan investments were on non-accrual status: Borga, Deb Shops, Inc. ("Deb Shops"), Freedom Marine, ICS, Nupla, Manx, Wind River Resources Corp. and Wind River II Corp. ("Wind River"), and Yatesville. At June 30, 2010, nine loan investments were on non-accrual status: Borga, Deb Shops, ICS, Iron Horse, Nupla, Manx, Sidump'r Trailer Company, Inc., Wind River and Yatesville. The loan principal of these loans amounted to $91,905 and $163,653 as of March 31, 2011 and June 30, 2010, respectively. The fair values of these investments represent approximately 2.4% and 5.6% of our net assets as of March 31, 2011 and June 30, 2010, respectively. For the three months ended March 31, 2011 and March 31, 2010, the income foregone as a result of not accruing interest on non-accrual debt investments amounted to $3,518 and $4,027, respectively. For the nine months ended March 31, 2011 and March 31, 2010, the income foregone as a result of not accruing interest on non-accrual debt investments amounted to $10,085 and $16,604, respectively. At March 31, 2011, we held one asset on accrual status for which the payment of interest was past-due more than 60 days, H&M Oil and Gas, LLC. The principal balance of this loan is $60,470 and the accrued interest receivable is $1,955 at March 31, 2011.

GSHI has indemnified us against any legal action arising from its investment in Gas Solutions, LP. We have incurred approximately $2,093 from the inception of the investment in GSHI through December 31, 2009 for fees associated with a legal action, and GSHI has reimbursed us for the entire amount. There were no such legal fees incurred or reimbursed for the three and nine months ended March 31, 2011 and March 31, 2010. Additionally, certain other expenses incurred by us which are attributable to GSHI have been reimbursed by GSHI and are reflected as dividend income: control investments in the Consolidated Statements of Operations. For the three months ended March 31, 2011 and March 31, 2010, such reimbursements totaled as $2,500 and $2,300, respectively. For the nine months ended March 31, 2011 and March 31, 2010, such reimbursements totaled as $6,350 and $12,300, respectively.

On December 3, 2010, we exercised our warrants in Miller Petroleum, Inc ("Miller") and received 2,013,814 shares of Miller common stock. On December 27, 2010, we sold 1,397,510 these shares receiving $3.95 of net proceeds per share, realizing a gain of $5,415. On January 10, 2011, we sold the remaining 616,304 shares of Miller common stock receiving $4.23 of net proceeds per share, realizing an additional gain of $2,561. The total gain was $7,976 on the sale of the Miller common stock.

During the quarter ended December 31, 2009, we discontinued operations at Yatesville. As of December 31, 2009, consistent with the decision to discontinue operations, we determined that the impairment of Yatesville was other-than-temporary and recorded a realized loss of $51,228 for the amount that the amortized cost exceeded the fair market value. As of March 31, 2011 and June 30, 2010, Yatesville is valued at zero and $808, respectively.

The original cost basis of debt placements and equity securities acquired, including follow-on investments for existing portfolio companies, totaled $356,659 and $59,311 during the three months ended March 31, 2011 and March 31, 2010, respectively. These placements and acquisitions totaled $632,526 and $275,815 during the nine months ended March 31, 2011 and March 31, 2010, respectively. The $275,815 for the nine months ended March 31, 2010 includes $207,126 of portfolio investments

acquired from Patriot. Debt repayments and sales of equity securities with a cost basis of $76,494 and $26,603 were received during the three months ended March 31, 2011 and March 31, 2010, respectively. These repayments and sales amounted to $207,557 and $96,338 during the nine months ended March 31, 2011 and March 31, 2010, respectively.

During the three and nine months ended March 31, 2011, we recognized $4,739 and $10,092, respectively, of interest income due to purchase discount accretion from the assets acquired from Patriot. Included in the $4,739 for the three months ended March 31, 2011, is $1,302 of normal accretion and $3,268 of accelerated accretion resulting from the recapitalization of our loans to Arrowhead General Insurance Agency, Inc. ("Arrowhead") and The Copernicus Group, Inc. ("Copernicus"). Included in the $10,092 for the nine months ended March 31, 2011, is $3,979 of normal accretion, $1,116 of accelerated accretion resulting from the repayment of Impact Products, LLC and $4,828 of accelerated accretion resulting from the recapitalization of our debt investments in Arrowhead, Copernicus and Northwestern Management Services, LLC ("Northwestern"). The restructured loans for Arrowhead, Copernicus and Northwestern were issued at market terms comparable other industry transactions. In accordance with ASC 320-20-35 the cost basis of the new loan was recorded at par value, which precipitated the acceleration of original purchase discount from the loan repayment which was recognized as interest income.

As of March 31, 2011, $20,658 of purchase discount from the assets acquired from Patriot remains to be accreted as interest income.

As of March 31, 2011, $776,521 of our loans bear interest at floating rates, $766,855 of which have Libor floors ranging from 1.00% to 6.00%.

On June 6, 2007, we closed on a $200,000 three-year revolving credit facility (as amended on December 31, 2007) with Rabobank Nederland ("Rabobank") as administrative agent and sole lead arranger (the "Rabobank Facility").

On June 25, 2009, we completed a first closing on an expanded $250,000 revolving credit facility. The new Syndicated Facility, which had $175,000 total commitments as of June 30, 2009, included an accordion feature which allows the Syndicated Facility to accept up to an aggregate total of $250,000 of commitments for which we solicited additional commitments from other lenders for an additional $35,000 raising the commitments to $210,000. The revolving period ended on June 11, 2010, when we closed on our expanded revolving credit facility. On June 11, 2010, we closed an extension and expansion of our revolving credit facility with a syndicate of lenders (the "Syndicated Facility"). The lenders have extended commitments of $285,000 under the Syndicated Facility as of March 31, 2011; which was increased to $325,000 on April 21, 2011. The Syndicated Facility includes an accordion feature which allows the facility to be increased to up to $400,000 of commitments in the aggregate to the extent additional or existing lenders commit to increase the commitments. We will seek to add additional lenders in order to reach the maximum size; although no assurance can be given we will be able to do so. As we pledge additional investments to the Syndicated Facility, we will generate additional availability to the extent such investments are eligible to be placed into the borrowing base. The revolving period of the Syndicated Facility extends through June 2012, with an additional one year amortization period (with distributions allowed) after the completion of the revolving period. During such one year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the one year amortization period, the remaining balance will become due if required by the lenders.

The Syndicated Facility contains restrictions pertaining to the geographic and industry concentrations of funded loans, maximum size of funded loans, interest rate payment frequency of funded loans, maturity dates of funded loans and minimum equity requirements. The Syndicated Facility also contains certain requirements relating to portfolio performance, including required minimum portfolio yield and limitations on delinquencies and charge-offs, violation of which could result in the early termination of the Syndicated Facility. The Syndicated Facility also requires the maintenance of a minimum liquidity requirement. At March 31, 2011, we were in compliance with the applicable covenants or had obtained waivers for conditions of non-compliance.

Interest on borrowings under the Syndicated Facility is one-month LIBOR plus 325 basis points, subject to a minimum Libor floor of 100 basis points. Additionally, the lenders charge a fee on the unused portion of the Syndicated Facility equal to either 75 basis points if at least half of the credit facility is used or 100 basis points otherwise. The Syndicated Facility requires us to pledge assets as collateral in order to borrow under the credit facility. As of March 31, 2011 and June 30, 2010, we had $207,467 and $180,678 available to us for borrowing under our Syndicated Facility, of which $47,500 and $100,300 was outstanding, respectively. As we make additional investments which are eligible to be pledged under the Syndicated Facility, we will generate additional availability to the extent such investments are eligible to be placed into the borrowing base. At March 31, 2011, the investments used as collateral for the Syndicated Facility had an aggregate market value of $603,759, which represents 66.1% of net assets. Prospect Capital Funding, LLC, our wholly-owned subsidiary, holds $543,159 of these investments at market value as of March 31, 2011. The release of any assets from Prospect Capital Funding, LLC requires the approval of Rabobank as facility agent.

In connection with the origination and amendments of the Syndicated Facility, we incurred $9,476 of fees, including $3,224 of fees carried over from the previous facility, which are being amortized over the term of the facility in accordance with ASC 470-50, Debt Modifications and Extinguishments, of which $5,960 remains to be amortized.

On December 21, 2010, we issued $150,000 in aggregate principal amount of our 6.25% senior convertible notes due 2015 ("2010 Notes") for net proceeds following underwriting expenses of approximately $145,200. Interest on the 2010 Notes is paid semi-annually in arrears on June 15 and December 15, at a rate of 6.25% per year, commencing June 15, 2011. The 2010 Notes mature on December 15, 2015 unless converted earlier. The 2010 Notes are convertible into shares of Common Stock at an initial conversion rate and conversion rate at March 31, 2011 of 88.0902 and 88.0908 shares, respectively, of Common Stock per $1,000 principal amount of 2010 Notes, which is equivalent to a conversion price of approximately $11.352 per share of Common Stock, subject to adjustment in certain circumstances. The conversion rate for the 2010 Notes will be increased when monthly cash dividends paid to common shares exceed the rate of $0.101125 per share, subject to adjustment.

On February 18, 2011, we issued $172,500 in aggregate principal amount of our 5.50% senior convertible notes due 2016 ("2011 Notes") for net proceeds following underwriting expenses of approximately $167,325. Interest on the 2011 Notes is paid semi-annually in arrears on February 15 and August 15, at a rate of 5.50% per year, commencing August 15, 2011. The 2011 Notes mature on August 15, 2016 unless converted earlier. The 2011 Notes are convertible into shares of Common Stock at an initial conversion rate and conversion rate at March 31, 2011 of 78.3699 and 78.3701 shares, respectively, of Common Stock per $1,000 principal amount of 2011 Notes, which is equivalent to a conversion price of approximately $12.76 per share of Common Stock, subject to adjustment in certain circumstances. The conversion rate for the 2011 Notes will be increased when monthly cash dividends paid to common shares exceed the rate of $0.101150 per share.

absence of such transaction unless we have engaged in a reverse stock split or share combination transaction such that in our reasonable best estimation, the conversion rate following the adjustment for such transaction will not be any closer to the conversion rate cap than it would have been in the absence of such transaction.

No holder of Senior Convertible Notes will be entitled to receive shares of our common stock upon conversion to the extent (but only to the extent) that such receipt would cause such converting holder to become, directly or indirectly, a beneficial owner (within the meaning of Section 13(d) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder) of more than 5.0% of the shares of our common stock outstanding at such time. The 5.0% limitation shall no longer apply following the effective date of any fundamental change. We will not issue any shares in connection with the conversion or redemption of the Notes which would equal or exceed 20% of the shares outstanding at the time of the transaction in accordance with NASDAQ rules.

During the three months ended March 31, 2011, we recorded $3,688 of interest costs and amortization of financing costs as interest expense.

We issued 18,494,476 and 12,243,297 shares of our common stock during the nine months ended March 31, 2011 and March 31, 2010, respectively. The proceeds raised, the related underwriting fees, the offering expenses and the prices at which these shares were issued are as follows:

Issuances of Common Stock			Gross Proceeds Raised		Underwriting Fees		Offering Expenses		Offering Price

During the nine months ended March 31, 2011:
	November 16, 2010-December15, 2010¹	4,513,920	$	45,147	$	904	$	459	$	10.000
	September 29, 2010-November 3, 2010²	5,231,956	$	51,597	$	1,033	$	163	$	9.861
	July 22, 2010-September 28, 2010³	6,000,000	$	58,403	$	1,156	$	103	$	9.734
	July 1, 2010-July 21, 2010⁴	2,748,600	$	26,799	$	536	$	—	$	9.749
During the nine months ended March 31, 2010:
	March 23, 2010-March 31, 2010⁴	811,500	$	10,230	$	205	$	449	$	12.600
	September 24, 2009⁵	2,807,111	$	25,264	$	—	$	840	$	9.000
	August 20, 2009⁵	3,449,686	$	29,322	$	—	$	117	$	8.500
	July 7, 2009	5,175,000	$	46,575	$	2,329	$	200	$	9.000

¹: On November 10, 2010, we established a fourth at-the-market program through which we may sell, from time to time and at our sole discretion 9,750,000 shares of our common stock. Through this program we issued 4,513,920 shares of our common stock at an average price of $10.00 per share, raising $45,147 of gross proceeds, from November 16, 2010 through December 15, 2010.
²: On September 24, 2010, we established a third at-the-market program through which we sold 5,231,956 shares of our common stock at an average price of $9.86 per share, raising $51,597 of gross proceeds, from September 29, 2010 through November 3, 2010.
³: On July 19, 2010, we established a second at-the-market program through which we sold 6,000,000 shares of our common stock at an average price of $9.73 per share, raising $58,403 of gross proceeds, from July 22, 2010 through September 28, 2010.
⁴: On March 17, 2010, we established an at-the-market program through which we sold 8,000,000 shares of our common stock. Through this program we issued 811,500 shares of our common stock at an average price of $12.60 per share, raising $10,230 of gross proceeds, from March 23, 2010 through March 31, 2010. Through this program we also issued 2,748,600 shares of our common stock at an average price of $9.75 per share, raising $26,799 of gross proceeds, from July 1, 2010 through July 21, 2010.
⁵: Concurrent with the sale of these shares, we entered into a registration rights agreement in which we granted the purchasers certain registration rights with respect to the shares. We have filed with the SEC a post-effective amendment to the registration statement on Form N-2 which has been declared effective by the SEC.

Our shareholders' equity accounts at March 31, 2011 and June 30, 2010 reflect cumulative shares issued as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, private offerings, the exercise of over-allotment options on the part of the underwriters and our dividend reinvestment plan. When our common stock is issued, the related offering expenses have been charged against paid-in capital in excess of par. All underwriting fees and offering expenses were borne by us.

On December 2, 2009, we issued 8,444,068 shares of common stock to acquire Patriot. This transaction is described in further detail in Note 3.

On October 9, 2008, our Board of Directors approved a share repurchase plan under which we may repurchase up to $20,000 of our common stock at prices below our net asset value as reported in our financial statements published for the year ended June 30, 2008. We have not made any purchases of our common stock during the period from October 9, 2008 to March 31, 2011 pursuant to this plan.

On October 29, 2010, November 30, 2010, December 31, 2010, January 31, 2011, February 28, 2011 and March 31, 2011, we issued shares of our common stock in connection with the dividend reinvestment plan of 92,999, 87,941, 89,603, 84,155, 83,021 and 76,253, respectively.

On November 8, 2010, we announced the declaration of monthly dividends in the following amounts and with the following dates:

On February 9, 2011, we announced the declaration of monthly dividends in the following amounts and with the following dates:

At March 31, 2011, we have reserved 26,732,449 shares of our common stock for issuance upon conversion of the Senior Convertible Notes (See Note 6).

Other investment income consists of structuring fees, overriding royalty interests, settlement of net profit interests, deal deposits, administrative agent fee, and other miscellaneous and sundry cash receipts. Income from such sources for the three and nine months ended March 31, 2011 and March 31, 2010 were as follows:

The following information sets forth the computation of net increase in net assets resulting from operations per common share for the three and nine months ended March 31, 2011 and March 31, 2010, respectively.

Investment Adviser: (i) determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes, (ii) identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and (iii) closes and monitors investments we make.

Prospect Capital Management's services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. For providing these services the Investment Adviser receives a fee from us, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated at an annual rate of 2.00% on our gross assets (including amounts borrowed). For services currently rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.

The total base management fees incurred to the favor of the Investment Adviser for the three months ended March 31, 2011 and March 31, 2010 were $6,037, and $3,576, respectively. The fees incurred for the nine months ended March 31, 2011 and March 31, 2010 were $15,216, and $9,961, respectively.

The incentive fee has two parts. The first part, the income incentive fee, is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees and other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement described below, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a "hurdle rate" of 1.75% per quarter (7.00% annualized).

The net investment income used to calculate this part of the incentive fee is also included in the amount of the gross assets used to calculate the 2.00% base management fee. We pay the Investment Adviser an income incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

The second part of the incentive fee, the capital gains incentive fee, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.00% of our realized capital gains for the calendar year, if any, computed net of all realized capital losses and unrealized capital depreciation at the end of such year. In determining the capital gains incentive fee payable to the Investment Adviser, we calculate the aggregate realized capital gains, aggregate realized capital losses and aggregate unrealized capital depreciation, as applicable, with respect to each investment that has been in its portfolio. For the purpose of this calculation, an "investment" is defined as the total of all rights and claims which maybe asserted against a portfolio company arising from our participation in the debt, equity, and other financial instruments issued by that company. Aggregate realized capital gains, if any, equals the sum of the differences between the aggregate net sales price of each investment and the aggregate cost basis of such investment when sold or otherwise disposed. Aggregate realized capital losses equal the sum of the amounts by which the aggregate net sales price of each investment is less than the aggregate cost basis of such investment when sold or otherwise disposed. Aggregate unrealized capital depreciation equals the sum of the differences, if negative, between the aggregate valuation of each investment and the aggregate cost basis of such investment as of the applicable calendar year-end. At the end of the applicable calendar year, the amount of capital gains that serves as the basis for our calculation of the capital gains incentive fee involves netting aggregate realized capital gains against aggregate realized capital losses on a since-inception basis and then reducing this amount by the aggregate unrealized capital depreciation. If this number is positive, then the capital gains incentive fee payable is equal to 20.00% of such amount, less the aggregate amount of any capital gains incentive fees aid since inception.

For the three months ended March 31, 2011 and March 31, 2010, income incentive fees of $5,997 and $4,744, respectively, were incurred. For the nine months ended March 31, 2011 and March 31, 2010, income incentive fees of $16,015 and $12,640, respectively, were incurred. No capital gains incentive fees were incurred for the three or nine months ended March 31, 2011 and March 31, 2010.

We have also entered into an Administration Agreement with Prospect Administration, LLC ("Prospect Administration") under which Prospect Administration, among other things, provides (or

arranges for the provision of) administrative services and facilities for us. For providing these services, we reimburse Prospect Administration for our allocable portion of overhead incurred by Prospect Administration in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of our chief compliance officer and chief financial officer and his staff. For the three months ended March 31, 2011 and 2010, the reimbursement was approximately $1,669 and $840, respectively. For the nine months ended March 31, 2011 and 2010, the reimbursement was approximately $3,309 and $2,520, respectively. Under this agreement, Prospect Administration furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Prospect Administration also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Prospect Administration assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Under the Administration Agreement, Prospect Administration also provides on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance. The Administration Agreement may be terminated by either party without penalty upon 60 days' written notice to the other party. Prospect Administration is a wholly owned subsidiary of our Investment Adviser.

The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Prospect Administration and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys' fees and amounts reasonably paid in settlement) arising from the rendering of Prospect Administration's services under the Administration Agreement or otherwise as administrator for us.

Prospect Administration, pursuant to the approval of our Board of Directors, engaged Vastardis Fund Services LLC ("Vastardis") to serve as our sub-administrator to perform certain services required of Prospect Administration. Under the sub-administration agreement, Vastardis provided us with office facilities, equipment, clerical, bookkeeping and record keeping services at such facilities. Vastardis also conducted relations with custodians, depositories, transfer agents, dividend disbursing agents, other stockholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks and such other persons in any such other capacity deemed to be necessary or desirable.

On April 30, 2009 we gave a 60-day notice to Vastardis of termination of our agreement to provide sub-administration services effective June 30, 2009. We entered into a new consulting services agreement for the period from July 1, 2009 until the filing of our Form 10-K for the year ended June 30, 2009. We paid Vastardis a total of $30 for services rendered in conjunction with preparation of Form 10-K under the new agreement. All services previously provided by Vastardis were assumed by Prospect Administration beginning on July 1, 2009.

As a business development company, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. We billed $400 and $215 of managerial assistance fees for the three months ended March 31, 2011 and June 30, 2010, respectively, of which $277 and $247 remains on the consolidated statement of assets and liabilities as of March 31, 2011 and June 30, 2010, respectively. We billed $1,013 and $431 of managerial assistance fees for the nine months ended March 31, 2011 and June 30, 2010, respectively. These fees are paid to the Administrator when received. We simultaneously accrue a payable to the Administrator for the same amounts, which remain on the consolidated statements of assets and liabilities.

In January 2010, we delivered a proposal letter to Allied Capital Corporation ("Allied") noting our opposition to Allied's proposed merger with Ares Capital Corporation ("Ares") and containing an offer to acquire each outstanding Allied share in exchange for 0.385 of a share of our common stock. Allied expressed that our offer did not constitute a "Superior Proposal" as defined in their Merger Agreement with Ares and declined our January 2010 offer. In February 2010, we increased our offer to 0.4416 of a share of our common stock. This final offer was also declined by Allied. On March 5, 2010, following Allied's announcement of a special dividend to shareholders, we terminated our solicitation in opposition of the proposed merger with Ares. We incurred $925 of administrative and legal expense for advice relating to this potential acquisition for the nine months ended March 31, 2010.

From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, employment, tax, regulation, contract or other matters. The resolution of these matters as they arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any such litigation as of March 31, 2011.

	For The Three Months Ended						For The Nine Months Ended

	March 31, 2011			March 31, 2010			March 31, 2011			March 31, 2010
Per Share Data¹:
Net asset value at beginning of period	$	10.25		$	10.10		$	10.30		$	12.40
Net investment income		0.27			0.30			0.78			0.89
Net realized gain (loss)		0.02			—			0.09			(0.90	)
Net unrealized appreciation		0.09			0.11			0.25			0.10
Net increase (decrease) in net assets as a result of public offerings		—			0.02			(0.16	)		(0.86	)
Net increase in net assets as a result of shares issued for Patriot acquisition		—			—			—			0.14
Dividends declared and paid		(0.30	)		(0.41	)		(0.93	)		(1.65	)

Net asset value at end of period	$	10.33		$	10.12		$	10.33		$	10.12

Per share market value at end of period	$	12.21		$	12.15		$	12.21		$	12.15
Total return based on market value²		15.87	%		6.35	%		37.44	%		46.62	%
Total return based on net asset value²		3.29	%		3.58	%		8.94	%		(9.39	)%
Shares outstanding at end of period		88,358,811			64,398,231			88,358,811			64,398,231
Average weighted shares outstanding for period		88,200,916			63,569,663			82,112,300			56,948,036
Ratio / Supplemental Data:
Net assets at end of period (in thousands)	$	912,921		$	651,819		$	912,921		$	651,819
Annualized ratio of operating expenses to average net assets		9.08	%		8.07	%		7.86	%		7.63	%
Annualized ratio of net operating income to average net assets		10.55	%		11.75	%		10.25	%		11.08	%

	Year Ended June 30, 2010			Year Ended June 30, 2009			Year Ended June 30, 2008			Year Ended June 30, 2007			Year Ended June 30, 2006

Per Share Data¹:
Net asset value at beginning of period	$	12.40		$	14.55		$	15.04		$	15.31		$	14.59
Costs related to the initial public offering		—			—			—			—			0.01
Costs related to the secondary public offering		—			—			(0.07	)		(0.06	)		—
Net investment income		1.13			1.87			1.91			1.47			1.21
Realized (loss) gain		(0.87	)		(1.24	)		(0.69	)		0.12			0.04
Net unrealized appreciation (depreciation)		0.07			0.48			(0.05	)		(0.52	)		0.58
Net (decrease) increase in net assets as a result of public offering		(0.85	)		(2.11	)		—			0.26			—
Net increase in net assets as a result of shares issued for Patriot acquisition		0.12			—			—			—			—
Dividends declared and paid		(1.70	)		(1.15	)		(1.59	)		(1.54	)		(1.12	)

Net asset value at end of period	$	10.30		$	12.40		$	14.55		$	15.04		$	15.31

Per share market value at end of period	$	9.65		$	9.20		$	13.18		$	17.47		$	16.99
Total return based on market value²		17.66	%		(18.60	)%		(15.90	)%		12.65	%		44.90	%
Total return based on net asset value²		(6.82	)%		(0.61	)%		7.84	%		7.62	%		12.76	%
Shares outstanding at end of period		69,086,862			42,943,084			29,520,379			19,949,065			7,069,873
Average weighted shares outstanding for period		59,429,222			31,559,905			23,626,642			15,724,095			7,056,846
Ratio / Supplemental Data:
Net assets at end of period (in thousands)	$	711,424		$	532,596		$	429,623		$	300,048		$	108,270
Annualized ratio of operating expenses to average net assets		7.54	%		9.03	%		9.62	%		7.36	%		8.19	%
Annualized ratio of net investment income to average net assets		10.69	%		13.14	%		12.66	%		9.71	%		7.90	%

	Investment Income				Net Investment Income				Net Realized and Unrealized Gains (Losses)						Net Increase (Decrease) in Net Assets from Operations

Quarter Ended	Total		Per Share¹		Total		Per Share¹		Total			Per Share¹			Total			Per Share¹
September 30, 2007		15,391		0.77		7,865		0.39		685			0.04			8,550			0.43
December 31, 2007		18,563		0.80		10,660		0.46		(14,346	)		(0.62	)		(3,686	)		(0.16	)
March 31, 2008		22,000		0.92		12,919		0.54		(14,178	)		(0.59	)		(1,259	)		(0.05	)
June 30, 2008		23,448		0.85		13,669		0.50		10,317			0.38			23,986			0.88
September 30, 2008²		35,799		1.21		23,502		0.80		(9,504	)		(0.33	)		13,998			0.47
December 31, 2008		22,213		0.75		11,960		0.40		(5,436	)		(0.18	)		6,524			0.22
March 31, 2009		20,669		0.69		11,720		0.39		3,611			0.12			15,331			0.51
June 30, 2009		21,800		0.59		11,981		0.32		(12,730	)		(0.34	)		(749	)		(0.02	)
September 30, 2009		21,517		0.43		12,318		0.25		(18,696	)		(0.38	)		(6,378	)		(0.13	)
December 31, 2009³		31,801		0.55		19,258		0.33		(33,778	)		(0.59	)		(14,520	)		(0.25	)
March 31, 2010		32,005		0.50		18,974		0.30		6,966			0.11			25,940			0.41
June 30, 2010		29,236		0.44		16,640		0.25		(2,057	)		(0.03	)		14,583			0.22
September 30, 2010		35,212		0.47		20,995		0.28		4,585			0.06			25,580			0.34
December 31, 2010		33,300		0.40		19,080		0.23		12,861			0.16			31,940			0.38
March 31, 2011		44,573		0.51		23,956		0.27		9,803			0.11			33,759			0.38

On April 7, 2011, we completed a public stock offering for 9,000,000 shares of our common stock at $11.40 per share, raising $102,600 of gross proceeds.

On April 18, 2011, we made a $13,000 secured debt investment to support the acquisition of a leading food distributor by Annex Capital Management.

On April 21, 2011, we announced an increase in commitments to our credit facility of $40,000. The commitments to the credit facility now stand at $325,000.

On April 26, 2011, we made a senior secured follow-on investment of $11,000 in ICON Health & Fitness, Inc.

On April 29, 2011, we issued 76,377 shares of our common stock in connection with the dividend reinvestment plan.

On May 2, 2011, we sold our membership interests in Fischbein, LLC ("Fischbein") realizing a gain of $9,893 on the sale and received a repayment of the loan that was outstanding. We subsequently made a $3,334 senior secured second-lien term loan and invested $875 in the common equity of Fischbein with the new ownership group.

On May 3, 2011, we made a debt investment of $25,000 to support the acquisition of J.D. Byrider, Inc., a leading used car sales and finance business, by Altamont Capital Partners.

On May 6, 2011, we provided $15,000 in secured second-lien acquisition financing for a company in the in-store media industry.