10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 814-00659

PROSPECT CAPITAL CORPORATION

(Exact name of registrant as specified in its charter)

Maryland	43-2048643
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
10 East 40th Street, 42nd Floor
New York, New York	10016
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code: (212) 448-0702

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbols	Name of each exchange on which registered
Common Stock, $0.001 par value	PSEC	NASDAQ Global Select Market
6.875% Notes due 2029, par value $25	PBC	New York Stock Exchange
5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001	PSEC PRA	New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of November 5, 2021, there were 389,866,500 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
	Forward-Looking Statements	3
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of September 30, 2021 (unaudited) and June 30, 2021	4
	Consolidated Statements of Operations for the three months ended September 30, 2021 and September 30, 2020 (unaudited)	5
	Consolidated Statements of Changes in Net Assets for the three months ended September 30, 2021 and September 30, 2020 (unaudited)	6
	Consolidated Statements of Cash Flows for the three months ended September 30, 2021 and September 30, 2020 (unaudited)	7
	Consolidated Schedules of Investments as of September 30, 2021 (unaudited) and June 30, 2021	8
	Notes to Consolidated Financial Statements (unaudited)	44
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	107
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	140
Item 4.	Controls and Procedures	142
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	143
Item 1A.	Risk Factors	143
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	145
Item 3.	Defaults Upon Senior Securities	145
Item 4.	Mine Safety Disclosures	145
Item 5.	Other Information	146
Item 6.	Exhibits	149
	Signatures

FORWARD-LOOKING STATEMENTS

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,”

“intend,” “estimate,” “anticipate,” “project,” “will,” “should,” “could,” “may,” “plan” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results—are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when 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, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended June 30, 2021, and those described from time to time in reports that we have filed or in the future may file with the Securities and Exchange Commission.

The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

•our future operating results;

•our business prospects and the prospects of our portfolio companies;

•the impact of investments that we expect to make;

•our contractual arrangements and relationships with third parties;

•the dependence of our future success on the general economy and its impact on the industries in which we invest;

•the impact of global health epidemics, including, but not limited to, the recent and ongoing novel coronavirus pandemic, on our and our portfolio companies’ business and the global economy;

•uncertainty surrounding the financial stability of the United States, Europe, and China;

•the ability of our portfolio companies to achieve their objectives;

•difficulty in obtaining financing or raising capital, especially in the current credit and equity environment, and the impact of a protracted decline in the liquidity of credit markets on our and our portfolio companies’ business;

•the level and volatility of prevailing interest rates and credit spreads, magnified by the current turmoil in the credit markets;

•the impact of changes in London Interbank Offered Rate on our operating results;

•adverse developments in the availability of desirable loan and investment opportunities whether they are due to competition, regulation or otherwise;

•a compression of the yield on our investments and the cost of our liabilities, as well as the level of leverage available to us;

•our regulatory structure and tax treatment, including our ability to operate as a business development company and a regulated investment company;

•the adequacy of our cash resources and working capital;

•the timing of cash flows, if any, from the operations of our portfolio companies;

•the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments;

•authoritative generally accepted accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board, the Securities and Exchange Commission, Internal Revenue Service, the NASDAQ Global Select Market, the New York Stock Exchange LLC, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business; and

•any of the other risks, uncertainties and other factors we identify in our Annual Report on Form 10-K for the year ended June 30, 2021.

3

PART I

Item 1. Financial Statements

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share and per share data)

	September 30, 2021		June 30, 2021
	(Unaudited)		(Audited)
Assets
Investments at fair value:
Control investments (amortized cost of $2,486,474 and $2,482,431, respectively)	$	3,046,090	$	2,919,717
Affiliate investments (amortized cost of $219,229 and $202,943, respectively)	379,057		356,734
Non-control/non-affiliate investments (amortized cost of $3,444,630 and $3,372,750, respectively)	3,005,560		2,925,327
Total investments at fair value (amortized cost of $6,150,333 and $6,058,124, respectively)	6,430,707		6,201,778
Cash	42,156		63,610
Receivables for:
Interest, net	12,892		12,575
Other	409		365
Deferred financing costs on Revolving Credit Facility (Note 4)	10,945		11,141
Due from broker	—		12,551
Prepaid expenses	838		1,072
Due from Affiliate (Note 13)	1		—
Total Assets	6,497,948		6,303,092
Liabilities
Revolving Credit Facility (Notes 4 and 8)	84,537		356,937
Public Notes (less unamortized discount and debt issuance costs of $27,368 and $20,061,   respectively) (Notes 6 and 8)	1,407,410		1,114,717
Prospect Capital InterNotes® (less unamortized debt issuance costs of $8,814 and $10,496,    respectively) (Notes 7 and 8)	373,350		498,215
Convertible Notes (less unamortized debt issuance costs of $3,416 and $4,123, respectively) (Notes 5 and 8)	213,253		263,100
Due to Prospect Capital Management (Note 13)	51,950		48,612
Dividends payable	23,390		23,313
Interest payable	15,076		27,359
Due to broker	12,227		14,854
Accrued expenses	5,098		5,151
Due to Prospect Administration (Note 13)	3,037		4,835
Other liabilities	320		482
Total Liabilities	2,189,648		2,357,575
Commitments and Contingencies (Note 3)
Preferred Stock, par value $0.001 per share (147,900,000 shares authorized, with 40,000,000 shares of preferred stock authorized for each of the Series A1, Series M1, and Series M2 and 20,000,000 shares of preferred stock authorized for the Series AA1 and 1,000,000 shares of preferred stock authorized for the Series A2 and 6,900,000 shares of preferred stock authorized for the Series A; 8,110,251 Series A1 shares issued and outstanding; 304,220 Series M1 shares issued and outstanding; 0 Series M2 shares issued and outstanding; 0 Series AA1 shares issued and outstanding; 187,000 Series A2 shares issued and outstanding; and 6,000,000 Series A shares issued and outstanding as of September 30, 2021) (Note 9)	365,037		—
Net Assets as of June 30, 2021	$	—	$	3,945,517
Net Assets Applicable to Common Shares as of September 30, 2021	$	3,943,263	$	—
Components of Net Assets Applicable to Common Shares
Preferred Stock, par value $0.001 per share (141,000,000 shares authorized, with 40,000,000 shares of preferred stock authorized for each of the Series A1, Series M1, and Series M2 and 20,000,000 shares of preferred stock authorized for the Series AA1 and 1,000,000 shares of preferred stock authorized for the Series A2; 5,163,926 Series A1 shares issued and outstanding; 130,666 Series M1 shares issued and outstanding; 0 Series M2 shares issued and outstanding; 0 Series AA1 shares issued and outstanding; and 187,000 Series A2 shares issued and outstanding as of June 30, 2021) (Note 9)	$	—	137,040
Common stock, par value $0.001 per share (1,852,100,000 common shares authorized; 389,504,713 and 388,419,573 issued and outstanding, respectively) (Note 9)	390		388
Paid-in capital in excess of par (Note 9 and 12)	4,035,851		4,040,748
Total distributable loss (Note 12)	(92,978)		(232,659)
Net Assets as of June 30, 2021	$	—	$	3,945,517
Net Assets Applicable to Common Shares as of September 30, 2021	$	3,943,263	$	—
Net Asset Value Per Common Share (Note 16)	$	10.12	$	9.81

See notes to consolidated financial statements.

4

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)

	Three Months Ended September 30,
	2021		2020
Investment Income
Interest income:
Control investments	$	55,831	$	48,727
Affiliate investments	10,077		7,362
Non-control/non-affiliate investments	57,529		51,250
Structured credit securities	22,834		24,900
Total interest income	146,271		132,239
Dividend income:
Control investments	1,250		—
Non-control/non-affiliate investments	17		25
Total dividend income	1,267		25
Other income:
Control investments	17,032		9,071
Affiliate investments	3,816		—
Non-control/non-affiliate investments	1,088		1,545
Total other income (Note 10)	21,936		10,616
Total Investment Income	169,474		142,880
Operating Expenses
Base management fee (Note 13)	32,203		26,850
Income incentive fee (Note 13)	19,740		14,386
Interest and credit facility expenses	28,038		34,049
Allocation of overhead from Prospect Administration (Note 13)	4,526		4,657
Audit, compliance and tax related fees	617		938
Directors’ fees	116		113
Other general and administrative expenses	2,865		4,342
Total Operating Expenses	88,105		85,335
Net Investment Income	81,369		57,545
Net Realized and Net Change in Unrealized Gains (Losses) from Investments
Net realized gains (losses)
Control investments	3		2,832
Non-control/non-affiliate investments	(604)		11
Net realized (losses) gains	(601)		2,843
Net change in unrealized gains
Control investments	122,330		13,535
Affiliate investments	6,037		66,473
Non-control/non-affiliate investments	8,353		27,836
Net change in unrealized gains	136,720		107,844
Net Realized and Net Change in Unrealized Gains from Investments	136,119		110,687
Net realized (losses) on extinguishment of debt	(5,357)		(486)
Net Increase in Net Assets Resulting from Operations	212,131		167,746
Preferred stock dividend	2,407		—
Net Increase in Net Assets Resulting from Operations attributable to Common Stockholders	$	209,724	$	167,746
Basic and diluted earnings per common share (Note 11)
Basic	$	0.54	$	0.45
Diluted	$	0.52	$	0.45
Weighted-average shares of common stock outstanding (Note 11)
Basic	388,886,142		375,910,891
Diluted	409,052,821		375,910,891

See notes to consolidated financial statements.

5

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(in thousands, except share data)

(Unaudited)

	Common Stock
Three Months Ended September 30, 2020	Shares	Par		Paid-in capital in excess of par(1)		Distributable earnings (loss)(1)		Total Net Assets
Balance as of June 30, 2020	373,538,499	$	374	$	3,986,417	$	(930,930)	$	3,055,861
Net Increase in Net Assets Resulting from Operations:
Net investment income						57,545		57,545
Net realized gains						2,357		2,357
Net change in unrealized gains						107,844		107,844
Distributions to Shareholders(1)
Distributions from earnings						(55,598)		(55,598)
Return of capital to common stockholders				(12,263)				(12,263)
Capital Transactions
Shares issued through reinvestment of dividends	5,238,459	5		25,276				25,281
Total increase for the three months ended September 30, 2020	5,238,459	5		13,013		112,148		125,166
Balance as of September 30, 2020(1)	378,776,958	$	379	$	3,999,430	$	(818,782)	$	3,181,027

	Preferred Stock		Common Stock
Three Months Ended September 30, 2021	Liquidation Value		Shares	Par		Paid-in capital in excess of par		Distributable earnings (loss)		Total Net Assets Attributable to Common Shares
Balance as of June 30, 2021	$	137,040	388,419,573	$388		$	4,040,748	$	(232,659)	$	3,945,517
Net Increase in Net Assets Resulting from Operations:
Net investment income								81,369		81,369
Net realized losses								(5,958)		(5,958)
Net change in unrealized gains								136,720		136,720
Distributions to Shareholders(1)
Distributions from earnings								(72,450)		(72,450)
Capital Transactions
Issuance of preferred stock	7,866					(13,239)				(5,373)
Shares issued through reinvestment of dividends	8		1,079,168	2		8,288				8,298
Conversion of preferred stock to common stock			5,972			54				54
Reclassification of preferred stock to temporary equity(2)	(144,914)									(144,914)
Total increase (decrease) for the three months ended September 30, 2021	(137,040)		1,085,140	2		(4,897)		139,681		(2,254)
Balance as of September 30, 2021	$	—	389,504,713	$	390	$	4,035,851	$	(92,978)	$	3,943,263

(1) Certain reclassifications have been made in the presentation of prior year and prior quarter amounts to conform to the presentation for the current fiscal year. In addition, we have not yet finalized return of capital estimates for the current period. See Note 2 and Note 12 within the accompanying notes to consolidated financial statements for further discussion.

(2) Preferred Stock issued prior to our 5.35% Series A Preferred Stock issuance reclassified to temporary equity. Refer to Note 9 within the accompanying notes to the consolidated financial statements for further discussion.

See notes to consolidated financial statements.

6

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share data)

(Unaudited)

	Three Months Ended September 30,
	2021		2020
Operating Activities
Net increase in net assets resulting from operations	$	212,131	$	167,746
Net realized losses on extinguishment of debt	5,357		486
Net realized losses (gains) on investments	601		(2,843)
Net change in unrealized (gains) on investments	(136,720)		(107,844)
Amortization of (accretion of premiums) discounts, net	8,459		(14,482)
Accretion of original issue discount	573		269
Amortization of deferred financing costs	1,915		1,921
Payment-in-kind interest	(18,790)		(20,341)
Structuring fees	(11,360)		(170)
Change in operating assets and liabilities:
Payments for purchases of investments	(394,518)		(156,630)
Proceeds from sale of investments and collection of investment principal	323,399		148,253
Decrease in due to broker	(2,627)		(1)
Increase (decrease) in due to Prospect Capital Management	3,338		(1,249)
(Increase) decrease in interest receivable, net	(317)		701
Decrease in interest payable	(12,283)		(11,692)
(Decrease) increase in accrued expenses	(53)		2,006
Decrease (increase) in due from broker	12,551		(829)
Decrease in other liabilities	(162)		(1,369)
Increase in other receivables	(44)		(832)
Increase in due from affiliate	(1)		(38)
Decrease in prepaid expenses	234		341
(Decrease) Increase in due to Prospect Administration	(1,798)		1,164
Net Cash (Used in) Provided by Operating Activities	(10,115)		4,567
Financing Activities
Borrowings under Revolving Credit Facility (Note 4)	417,618		212,900
Principal payments under Revolving Credit Facility (Note 4)	(690,018)		(199,443)
Issuances of Public Notes, net of original issue discount (Note 6)	294,798		—
Redemptions of Convertible Notes, net (Note 5)	(51,872)		(29,420)
Issuances of Prospect Capital InterNotes® (Note 7)	87,657		38,657
Redemptions of Prospect Capital InterNotes®, net (Note 7)	(214,204)		(565)
Financing costs paid and deferred	(6,047)		(689)
Proceeds from issuance of preferred stock, net of underwriting costs	216,123		—
Offering costs from issuance of preferred stock	(1,360)		—
Dividends paid and distributions to stockholders	(64,034)		(42,265)
Net Cash Used in Financing Activities	(11,339)		(20,825)
Net Decrease in Cash	(21,454)		(16,258)
Cash at beginning of period	63,610		44,561
Cash at End of Period	$	42,156	$	28,303
Supplemental Disclosures
Cash paid for interest	$	37,833	$	43,551
Non-Cash Financing Activities
Value of shares issued through reinvestment of dividends	$	8,339	$	25,281

See notes to consolidated financial statements.

7

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value	Amortized Cost	Fair Value(2)	% of Net Assets
Control Investments (greater than 25.00% voting control)(40)
CP Energy Services Inc. (20)	Energy Equipment & Services	Senior Secured Term Loan	10/1/2017	12.00% (3ML+ 11.00%)	1.00	1/31/2024	$42,692	$42,692	$42,692	1.0%	(10)(39)
		Senior Secured Term Loan A to Spartan Energy Services, LLC	10/20/2014	9.00% (1ML+ 8.00%)	1.00	12/31/2022	15,656	15,656	15,656	0.4%	(10)
		Series A Preferred Units to Spartan Energy Holdings, Inc. (10,000 shares)	9/25/2020		—	N/A	—	26,193	11,210	0.3%	(16)
		Series B Convertible Preferred Stock (790 shares)	10/30/2015		—	N/A	—	63,225	2,557	0.1%	(16)
		Common Stock (102,924 shares)	8/2/2013		—	N/A	—	86,240	—	—%	(16)
								234,006	72,115	1.8%
Credit Central Loan Company, LLC (21)	Consumer Finance	Subordinated Term Loan	12/28/2012	10.00% plus 10.00% PIK	—	6/26/2024	69,893	67,491	69,893	1.9%	(14)(39)
		Class A Units (14,867,312 units)	12/28/2012		—	N/A	—	19,331	18,576	0.5%	(14)(16)
		Net Revenues Interest (25% of Net Revenues)	1/28/2015		—	N/A	—	—	—	—%	(14)(16)
								86,822	88,469	2.4%
Echelon Transportation, LLC	Aerospace & Defense	Senior Secured Term Loan	3/31/2014	11.75% (1ML+ 9.75%) plus 2.25% PIK	2.00	3/31/2022	56,168	56,168	56,168	1.4%	(10)(39)
		Senior Secured Term Loan	12/9/2016	11.00% (1ML+ 9.00%) plus 1.00% PIK	2.00	12/7/2024	24,342	24,342	24,342	0.6%	(10)(39)
		Membership Interest (100%)	3/31/2014		—	N/A	—	22,738	1,111	—%	(16)
								103,248	81,621	2.0%
First Tower Finance Company LLC (23)	Consumer Finance	First Lien Term Loan	6/24/2014	10.00% plus 12.00% PIK	—	2/18/2025	328,177	328,177	328,177	8.3%	(14)(39)
		Class A Units (95,709,910 units)	6/14/2012		—	N/A	—	31,146	283,051	7.2%	(14)(16)
								359,323	611,228	15.5%
Freedom Marine Solutions, LLC (24)	Energy Equipment & Services	Membership Interest (100%)	11/9/2006		—	N/A	—	44,493	11,717	0.3%	(16)
								44,493	11,717	0.3%
InterDent, Inc.	Health Care Providers & Services	Senior Secured Term Loan A/B	8/1/2018	16.65% (1ML+ 14.65%)	2.00	9/5/2022	14,249	14,249	14,249	0.5%	(10)
		Senior Secured Term Loan A	8/3/2012	6.50% (1ML+ 5.50%)	1.00	9/5/2022	86,896	86,896	86,896	2.2%	(10)
		Senior Secured Term Loan B	8/3/2012	12.00% PIK	—	9/5/2022	148,498	148,498	148,498	3.8%	(39)
		Common Stock (99,900 shares)	5/3/2019		—	N/A	—	45,118	201,701	5.1%	(16)
								294,761	451,344	11.6%
Kickapoo Ranch Pet Resort	Diversified Consumer Services	Membership Interest (100%)	8/26/2019		—	N/A	—	2,378	3,833	0.1%	(16)
								2,378	3,833	0.1%
MITY, Inc. (25)	Commercial Services & Supplies	Senior Secured Note A	9/19/2013	10.00% (3ML+ 7.00%)	3.00	4/30/2025	30,637	30,637	30,637	0.8%	(10)(39)
		Senior Secured Note B	6/23/2014	10.00% (3ML+ 7.00%) plus 10.00% PIK	3.00	4/30/2025	16,935	16,935	16,935	0.4%	(10)(39)
		Subordinated Unsecured Note to Broda Enterprises ULC	9/19/2013	10.00%	—	1/1/2028	5,829	7,200	4,114	0.1%	(14)
		Common Stock (42,053 shares)	9/19/2013		—	N/A	—	27,349	—	—%	(16)
								82,121	51,686	1.3%

See notes to consolidated financial statements.

8

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value	Amortized Cost	Fair Value(2)	% of Net Assets
Control Investments (greater than 25.00% voting control)(40)
National Property REIT Corp. (26)	Equity Real Estate Investment Trusts (REITs) / Online Lending / Structured Finance	Senior Secured Term Loan A	12/31/2018	4.44% (3ML+ 1.44%) plus 3.53% PIK	3.00	12/31/2023	$453,166	$453,166	$453,166	11.4%	(10)(39)
		Senior Secured Term Loan B	12/31/2018	5.00% (3ML+ 2.00%) plus 5.50% PIK	3.00	12/31/2023	2,700	2,700	2,700	0.1%	(10)(39)
		Senior Secured Term Loan C	10/31/2019	11.00% (3ML+ 10.00%) plus 2.25% PIK	1.00	12/31/2023	90,200	90,200	90,200	2.3%	(10)(39)
		Senior Secured Term Loan D	6/19/2020	3.50% (3ML+ 0.50%) plus 2.50% PIK	3.00	12/31/2023	183,425	183,425	183,425	4.7%	(10)(39)
		Residual Profit Interest	12/31/2018		—	N/A	—	—	40,428	1.0%	(35)
		Common Stock (3,254,594 shares)	12/31/2013		—	N/A	—	210	469,677	11.9%	(45)
								729,701	1,239,596	31.4%
Nationwide Loan Company LLC (27)	Consumer Finance	First Lien Term Loan	6/18/2014	10.00% plus 10.00% PIK	—	6/18/2022	20,260	20,260	20,260	0.5%	(14)(39)
		Class A Units (38,550,460 units)	1/31/2013		—	N/A	—	20,846	27,295	0.7%	(14)(16)
								41,106	47,555	1.2%
NMMB, Inc. (28)	Media	Delayed Draw Term Loan - $10,000 Commitment	3/25/2020	10.50% (3ML+ 8.50%)	2.00	12/30/2024	—	—	—	—%	(10)(15)
		Senior Secured Note	12/30/2019	10.50% (3ML+ 8.50%)	2.00	12/30/2024	4,836	4,836	4,836	0.1%	(3)(10)
		Common Stock (21,418 shares)	12/30/2019		—	N/A	—	12,869	58,890	1.5%	(16)
								17,705	63,726	1.6%
Pacific World Corporation (36)	Personal Products	Revolving Line of Credit - $26,000 Commitment	9/26/2014	8.25% (1ML+ 7.25%)	1.00	9/26/2025	22,825	22,825	22,825	0.6%	(10)(15)
		Senior Secured Term Loan A	12/31/2014	6.25% PIK (1ML+ 5.25%)	1.00	9/26/2025	42,308	42,308	42,308	1.1%	(10)(39)
		Convertible Preferred Equity (291,710 shares)	6/15/2018		—	N/A	—	186,795	5,637	0.1%	(16)
		Common Stock (6,778,414 shares)	9/29/2017		—	N/A	—	—	—	—%	(16)
								251,928	70,770	1.8%
R-V Industries, Inc.	Machinery	Senior Secured Term Loan	12/15/2020	10.00% (3ML+ 9.00%)	1.00	12/15/2028	28,622	28,622	28,622	0.6%	(3)(10)
		Common Stock (745,107 shares)	6/26/2007		—	N/A	—	6,866	23,938	0.6%	(16)
								35,488	52,560	1.2%
Universal Turbine Parts, LLC (34)	Trading Companies & Distributors	Delayed Draw Term Loan - $6,965 Commitment	2/28/2019	10.25% (1ML+ 7.75%)	2.50	4/5/2024	3,165	3,165	3,165	—%	(10)(15)
		Senior Secured Term Loan A	7/22/2016	6.75% (3ML+ 5.75%)	1.00	4/5/2024	29,575	29,575	24,352	0.6%	(10)
		Preferred Units (47,244,213 units)	3/31/2021		—	N/A	—	32,500	—	—%	(16)
		Common Stock (10,000 units)	12/10/2018		—	N/A	—	—	—	—%	(16)
								65,240	27,517	0.6%
USES Corp. (30)	Commercial Services & Supplies	Senior Secured Term Loan A	3/31/2014	9.00% PIK	—	7/29/2024	56,395	30,651	27,434	0.7%	(9)
		Senior Secured Term Loan B	3/31/2014	15.50% PIK	—	7/29/2024	80,594	35,568	—	—%	(9)
		Senior Secured Term Loan	12/30/2020	10.00% (1ML+ 9.00%)	1.00	7/29/2024	2,000	2,000	2,000	0.1%	(10)
		Common Stock (268,962 shares)	6/15/2016		—	N/A	—	—	—	—%	(16)
								68,219	29,434	0.8%
Valley Electric Company, Inc. (31)	Construction & Engineering	Senior Secured Note to Valley Electric Co. of Mt. Vernon, Inc.	12/31/2012	8.00% (3ML+ 5.00%) plus 2.50% PIK	3.00	12/31/2024	10,430	10,430	10,430	0.3%	(3)(10)(39)
		Senior Secured Note	6/24/2014	8.00% plus 10.00% PIK	—	6/23/2024	33,301	33,301	33,301	0.8%	(39)
		Consolidated Revenue Interest (2.0%)	6/22/2018		—	N/A	—	—	1,702	—%	(12)
		Common Stock (50,000 shares)	12/31/2012		—	N/A	—	26,204	97,486	2.5%
								69,935	142,919	3.6%
Total Control Investments (Level 3)								$2,486,474	$3,046,090	77.2%

See notes to consolidated financial statements.

9

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Affiliate Investments (5.00% to 24.99% voting control)(41)
Nixon, Inc. (32)	Textiles, Apparel & Luxury Goods	Common Stock (857 units)	5/12/2017		—	N/A	$	—	$	—	$	—	—	%	(16)
									—		—		—	%
PGX Holdings, Inc. (6)	Diversified Consumer Services	First Lien Term Loan	7/21/2021	9.25% (1ML+ 7.75%)	1.50	7/21/2026	48,510		48,510		48,510		1.2	%	(3)(8)(10)
		Second Lien Term Loan	7/21/2021	13.25% (1ML+ 11.75%)	1.50	7/27/2027	153,931		153,931		153,931		3.9	%	(3)(10)
		Common Stock (40,780,359 shares)	5/27/2020		—	N/A	—		—		127,036		3.2	%	(16)
									202,441		329,477		8.3	%
RGIS Services, LLC	Commercial Services & Supplies	Senior Secured Term Loan	6/25/2020	8.50% (2ML+ 7.50%)	1.00	6/25/2025	3,680		3,680		3,680		0.1%		(8)(10)
		Membership Interest (5.11%)	6/25/2020		—	N/A	—		10,303		14,602		0.4%		(16)
									13,983		18,282		0.5%
Targus Cayman HoldCo Limited (33)	Textiles, Apparel & Luxury Goods	Common Stock (7,383,395 shares)	2/12/2016		—	N/A	—		2,805		31,298		0.8	%	(16)
									2,805		31,298		0.8	%
Total Affiliate Investments (Level 3)									$	219,229	$	379,057	9.6	%

See notes to consolidated financial statements.

10

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
8th Avenue Food & Provisions, Inc.	Food Products	Second Lien Term Loan	9/21/2018	7.84% (1ML+ 7.75%)	—	10/1/2026	$	32,133	$	31,937	$	32,133	0.8	%	(3)(8)(10)
									31,937		32,133		0.8	%
ACE Cash Express, Inc.	Consumer Finance	Senior Secured Note	12/8/2017	12.00%	—	12/15/2022	39,998		37,872		38,794		1.0	%	(8)(46)
									37,872		38,794		1.0	%
AmeriLife Holdings, LLC	Insurance	Second Lien Term Loan	3/18/2020	9.50% (6ML+ 8.50%)	1.00	3/18/2028	22,280		21,925		22,280		0.6	%	(3)(8)(10)
									21,925		22,280		0.6	%
Apidos CLO XI	Structured Finance	Subordinated Structured Note	12/6/2012	Residual Interest, current yield 10.89%	—	4/17/2034	67,783		37,497		29,747		0.8	%	(5)(14)
									37,497		29,747		0.8	%
Apidos CLO XII	Structured Finance	Subordinated Structured Note	3/15/2013	Residual Interest, current yield 9.31%	—	4/15/2031	52,203		37,129		30,346		0.8	%	(5)(14)
									37,129		30,346		0.8	%
Apidos CLO XV	Structured Finance	Subordinated Structured Note	9/13/2013	Residual Interest, current yield 9.20%	—	4/21/2031	48,515		38,254		29,419		0.7	%	(5)(14)
									38,254		29,419		0.7	%
Apidos CLO XXII	Structured Finance	Subordinated Structured Note	9/16/2015	Residual Interest, current yield 10.75%	—	4/21/2031	35,855		30,387		25,982		0.7	%	(5)(14)
									30,387		25,982		0.7	%
Atlantis Health Care Group (Puerto Rico), Inc.	Health Care Providers & Services	Revolving Line of Credit - $3,000 Commitment	2/21/2013	10.75% (3ML+ 8.75%)	2.00	4/29/2022	—		—		—		—	%	(10)(15)
		Senior Secured Term Loan	2/21/2013	10.75% (3ML+ 8.75%)	2.00	4/29/2022	65,960		65,960		65,960		1.7	%	(3)(10)
									65,960		65,960		1.7	%
Barings CLO 2018-III	Structured Finance	Subordinated Structured Note	10/9/2014	Residual Interest, current yield 4.48%	—	7/20/2029	83,098		42,389		32,133		0.8	%	(5)(14)
									42,389		32,133		0.8	%
BCPE North Star US Holdco 2, Inc.	Food Products	Delayed Draw Term Loan - $5,185 Commitment	6/7/2021	8.00% (3ML+ 7.25%)	0.75	6/10/2023	—		—		—		—	%	(8)(10)(15)
		Second Lien Term Loan	6/7/2021	8.00% (3ML+ 7.25%)	0.75	6/11/2029	29,815		29,529		29,815		0.8	%	(3)(8)(10)
									29,529		29,815		0.8	%
Broder Bros., Co.	Textiles, Apparel & Luxury Goods	Senior Secured Note	12/4/2017	9.75% (3ML+ 8.50%)	1.25	12/2/2022	186,585		186,585		186,585		4.7	%	(3)(10)
									186,585		186,585		4.7	%
Brookside Mill CLO Ltd.	Structured Finance	Subordinated Structured Note	4/25/2013	Residual Interest, current yield 0.00%	—	1/17/2028	36,300		14,762		9,188		0.2	%	(5)(14)(17)
									14,762		9,188		0.2	%
California Street CLO IX Ltd.	Structured Finance	Subordinated Structured Note	4/19/2012	Residual Interest, current yield 14.33%	—	7/16/2032	58,915		42,991		29,919		0.8	%	(5)(14)
									42,991		29,919		0.8	%
Candle-Lite Company, LLC	Household Products	Senior Secured Term Loan A	1/23/2018	6.75% (3ML+ 5.50%)	1.25	1/23/2023	10,175		10,175		10,175		0.3	%	(3)(10)
		Senior Secured Term Loan B	1/23/2018	10.75% (3ML+ 9.50%)	1.25	1/23/2023	10,949		10,949		10,949		0.3	%	(3)(10)
									21,124		21,124		0.6	%
Capstone Logistics Acquisition, Inc.	Commercial Services & Supplies	Second Lien Delayed Draw Term Loan - $1,500 Commitment	11/12/2020	9.75% (1ML+ 8.75%)	1.00	11/13/2028	—		—		—		—	%	(8)(10)(15)
		Second Lien Term Loan	11/12/2020	9.75% (1ML+ 8.75%)	1.00	11/13/2028	8,500		8,216		8,500		0.2	%	(3)(8)(10)
									8,216		8,500		0.2	%
Carlyle C17 CLO Limited	Structured Finance	Subordinated Structured Note	1/24/2013	Residual Interest, current yield 14.66%	—	4/30/2031	24,870		15,719		13,565		0.3	%	(5)(14)
									15,719		13,565		0.3	%
Carlyle Global Market Strategies CLO 2014-4-R, Ltd.	Structured Finance	Subordinated Structured Note	4/7/2017	Residual Interest, current yield 14.57%	—	7/15/2030	25,534		19,641		16,748		0.4	%	(5)(14)
									19,641		16,748		0.4	%

See notes to consolidated financial statements.

11

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Carlyle Global Market Strategies CLO 2016-3, Ltd.	Structured Finance	Subordinated Structured Note	8/9/2016	Residual Interest, current yield 10.92%	—	7/20/2034	$	32,200	$	32,051	$	27,546	0.7	%	(5)(14)
									32,051		27,546		0.7	%
CCS-CMGC Holdings, Inc.	Health Care Providers & Services	First Lien Term Loan	5/13/2019	5.58% (1ML+ 5.50%)	—	10/1/2025	9,501		9,404		9,501		0.2	%	(3)(8)(10)
		Second Lien Term Loan	9/25/2018	9.08% (1ML+ 9.00%)	—	10/1/2026	37,000		36,554		37,000		1.0	%	(3)(8)(10)
									45,958		46,501		1.2	%
Cent CLO 21 Limited	Structured Finance	Subordinated Structured Note	5/15/2014	Residual Interest, current yield 9.20%	—	7/29/2030	49,552		38,905		30,716		0.8	%	(5)(14)
									38,905		30,716		0.8	%
CIFC Funding 2013-III-R, Ltd.	Structured Finance	Subordinated Structured Note	8/2/2013	Residual Interest, current yield 11.12%	—	4/24/2031	44,100		28,736		20,917		0.5	%	(5)(14)
									28,736		20,917		0.5	%
CIFC Funding 2013-IV, Ltd.	Structured Finance	Subordinated Structured Note	10/22/2013	Residual Interest, current yield 13.88%	—	4/28/2031	45,500		32,473		29,969		0.8	%	(5)(14)
									32,473		29,969		0.8	%
CIFC Funding 2014-IV-R, Ltd.	Structured Finance	Subordinated Structured Note	8/5/2014	Residual Interest, current yield 8.67%	—	10/17/2030	44,467		29,744		22,329		0.6	%	(5)(14)
									29,744		22,329		0.6	%
CIFC Funding 2016-I, Ltd.	Structured Finance	Subordinated Structured Note	12/9/2016	Residual Interest, current yield 10.59%	—	10/21/2031	34,000		30,196		28,688		0.7	%	(5)(14)
									30,196		28,688		0.7	%
Collections Acquisition Company, Inc.	Diversified Financial Services	Senior Secured Term Loan	12/3/2019	10.15% (3ML+ 7.65%)	2.50	6/3/2024	30,165		30,165		30,165		0.8	%	(3)(10)
									30,165		30,165		0.8	%
Columbia Cent CLO 27 Limited	Structured Finance	Subordinated Structured Note	12/18/2013	Residual Interest, current yield 0.00%	—	10/25/2028	40,275		21,037		18,933		0.5	%	(5)(14)(17)
									21,037		18,933		0.5	%
Curo Group Holdings Corp.	Consumer Finance	Senior Secured Note	7/16/2021	7.50%	—	8/1/2028	35,000		35,006		35,448		0.9	%	(8)(14)(47)
									35,006		35,448		0.9	%
Digital Room, LLC	Commercial Services & Supplies	First Lien Term Loan	5/14/2019	5.08% (1ML+ 5.00%)	—	5/21/2026	9,775		9,701		9,775		0.2	%	(3)(8)(10)
		Second Lien Term Loan	5/14/2019	9.08% (1ML+ 9.00%)	—	5/21/2027	70,000		70,000		70,000		1.8	%	(3)(8)(10)
									79,701		79,775		2.0	%
Dunn Paper, Inc.	Paper & Forest Products	First Lien Term Loan	11/18/2019	6.25% (1ML+ 5.25%)	1.00	8/26/2022	4,468		4,429		4,452		0.1	%	(3)(8)(10)
		Second Lien Term Loan	8/26/2016	10.25% (1ML+ 9.25%)	1.00	8/26/2023	11,500		11,437		11,283		0.3	%	(3)(8)(10)
									15,866		15,735		0.4	%
Easy Gardener Products, Inc.	Household Durables	Third Lien Term Loan	6/11/2020	10.25% (3ML+ 10.00%)	0.25	9/30/2024	3,950		3,950		3,940		0.1	%	(10)
		Class A Units of EZG Holdings, LLC (200 units)	6/11/2020		—	N/A	—		313		781		—	%	(16)
		Class B Units of EZG Holdings, LLC (12,525 units)	6/11/2020		—	N/A	—		1,688		5,244		0.1	%	(16)
									5,951		9,965		0.2	%
Edmentum (22)	Diversified Consumer Services	Escrow Receivable	12/11/2020		—	N/A	—		—		—		—	%	(16)
									—		—		—	%
Engine Group, Inc. (7)	Media	Senior Secured Term Loan	11/17/2020	5.75% (1ML+ 4.75%)	1.00	11/17/2023	7,913		7,913		7,401		0.2	%	(8)(10)
		Senior Secured Term Loan	11/17/2020	7.00% (PRIME+ 3.75%)	1.00	11/17/2023	690		690		646		—	%	(8)(10)
		Class B Common Units (1,039,554 units)	11/17/2020		—	N/A	—		26,991		178		—	%	(8)
									35,594		8,225		0.2	%
Engineered Machinery Holdings, Inc.	Machinery	Incremental Amendment No. 2 Term Loan	5/12/2021	7.25% (3ML+ 6.50%)	0.75	5/21/2029	5,000		4,977		5,000		0.1	%	(3)(8)(10)
		Incremental Amendment No. 3 Term Loan	8/12/2021	6.75% (3ML+ 6.00%)	0.75	5/21/2029	5,000		5,000		5,000		0.1	%	(3)(8)(10)
									9,977		10,000		0.2	%

See notes to consolidated financial statements.

12

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Enseo Acquisition, Inc.	IT Services	Revolving Line of Credit - $5,000 Commitment	6/2/2021	9.00% (3ML+ 8.00%)	1.00	10/4/2021	$	—	$	—	$	—	—	%	(10)(15)
		First Lien Term Loan	6/2/2021	9.00% (3ML+ 8.00%)	1.00	6/2/2026	54,863		54,863		54,863		1.4	%	(3)(10)
									54,863		54,863		1.4	%
EXC Holdings III Corp	Technology Hardware, Storage & Peripherals	Second Lien Term Loan	11/17/2017	8.50% (3ML+ 7.50%)	1.00	12/1/2025	12,500		12,435		12,500		0.3	%	(3)(8)(10)
									12,435		12,500		0.3	%
Eze Castle Integration, Inc. (f/k/a/ H.I.G. ECI Merger Sub, Inc.)	IT Services	Delayed Draw Term Loan - $1,786 Commitment	7/15/2020	10.00% (1ML+ 8.50%)	1.50	7/15/2025	—		—		—		—	%	(10)(15)
		First Lien Term Loan	7/15/2020	10.00% (1ML+ 8.50%)	1.50	7/15/2025	47,102		47,102		47,102		1.2	%	(3)(10)
									47,102		47,102		1.2	%
First Brands Group	Auto Components	First Lien Term Loan	3/24/2021	6.00% (3ML+ 5.00%)	1.00	3/30/2027	16,666		16,528		16,666		0.4	%	(3)(8)(10)
		Second Lien Term Loan	3/24/2021	9.50% (3ML+ 8.50%)	1.00	3/30/2028	32,000		31,441		32,000		0.8	%	(3)(8)(10)
									47,969		48,666		1.2	%
Galaxy XV CLO, Ltd.	Structured Finance	Subordinated Structured Note	2/13/2013	Residual Interest, current yield 11.37%	—	10/15/2030	50,524		35,471		27,100		0.7	%	(5)(14)
									35,471		27,100		0.7	%
Galaxy XXVII CLO, Ltd.	Structured Finance	Subordinated Structured Note	9/30/2013	Residual Interest, current yield 10.97%	—	5/16/2031	24,575		16,837		12,146		0.3	%	(5)(14)
									16,837		12,146		0.3	%
Galaxy XXVIII CLO, Ltd.	Structured Finance	Subordinated Structured Note	5/30/2014	Residual Interest, current yield 8.97%	—	7/15/2031	39,905		29,148		17,438		0.4	%	(5)(14)
									29,148		17,438		0.4	%
Global Tel*Link Corporation	Diversified Telecommunication Services	First Lien Term Loan	8/7/2019	4.33% (1ML+ 4.25%)	—	11/29/2025	9,728		9,455		9,728		0.2	%	(3)(8)(10)
		Second Lien Term Loan	11/20/2018	8.33% (1ML+ 8.25%)	—	11/29/2026	42,670		41,852		42,670		1.1	%	(3)(8)(10)
									51,307		52,398		1.3	%
Halcyon Loan Advisors Funding 2012-1 Ltd.	Structured Finance	Subordinated Structured Note	8/7/2012	Residual Interest, current yield 0.00%	—	8/15/2023	23,188		3,704		26		—	%	(5)(14)(17)
									3,704		26		—	%
Halcyon Loan Advisors Funding 2013-1 Ltd.	Structured Finance	Subordinated Structured Note	3/8/2013	Residual Interest, current yield 0.00%	—	4/15/2025	40,400		19,984		45		—	%	(5)(14)(17)
									19,984		45		—	%
Halcyon Loan Advisors Funding 2014-1 Ltd.	Structured Finance	Subordinated Structured Note	2/7/2014	Residual Interest, current yield 0.00%	—	4/20/2026	24,500		11,822		94		—	%	(5)(14)(17)
									11,822		94		—	%
Halcyon Loan Advisors Funding 2014-2 Ltd.	Structured Finance	Subordinated Structured Note	4/14/2014	Residual Interest, current yield 0.00%	—	4/28/2025	41,164		21,322		133		—	%	(5)(14)(17)
									21,322		133		—	%
Halcyon Loan Advisors Funding 2015-3 Ltd.	Structured Finance	Subordinated Structured Note	7/23/2015	Residual Interest, current yield 0.00%	—	10/18/2027	39,598		29,557		3,693		0.1	%	(5)(14)(17)
									29,557		3,693		0.1	%
HarbourView CLO VII-R, Ltd.	Structured Finance	Subordinated Structured Note	6/5/2015	Residual Interest, current yield 0.00%	—	7/18/2031	19,025		13,024		5,273		0.1	%	(5)(14)(17)
									13,024		5,273		0.1	%
Help/Systems Holdings, Inc.	Software	Second Lien Term Loan	11/14/2019	7.50% (3ML+ 6.75%)	0.75	11/19/2027	22,500		22,253		22,500		0.6	%	(3)(8)(10)
									22,253		22,500		0.6	%
Interventional Management Services, LLC	Health Care Providers & Services	Revolving Line of Credit - $5,000 Commitment	2/22/2021	9.50% (3ML+ 8.50%)	1.00	2/22/2025	2,000		2,000		2,000		0.1	%	(10)(15)
		Senior Secured Term Loan	2/22/2021	9.50% (3ML+ 8.50%)	1.00	2/20/2026	69,443		69,443		69,443		1.8	%	(3)(10)
									71,443		71,443		1.9	%
Jefferson Mill CLO Ltd.	Structured Finance	Subordinated Structured Note	6/26/2015	Residual Interest, current yield 7.58%	—	10/20/2031	23,594		19,619		13,087		0.3	%	(5)(14)
									19,619		13,087		0.3	%

See notes to consolidated financial statements.

13

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
K&N Parent, Inc.	Auto Components	First Lien Term Loan	2/20/2020	5.75% (3ML+ 4.75%)	1.00	10/20/2023	$	1,878	$	1,725	$	1,878	—	%	(8)(10)
		Second Lien Term Loan	10/19/2016	9.75% (3ML+ 8.75%)	1.00	10/21/2024	25,887		25,635		25,887		0.7	%	(8)(10)
									27,360		27,765		0.7	%
Keystone Acquisition Corp. (4)	Health Care Providers & Services	Second Lien Term Loan	5/10/2017	10.25% (3ML+ 9.25%)	1.00	5/1/2025	50,000		50,000		50,000		1.3	%	(3)(8)(10)
									50,000		50,000		1.3	%
KM2 Solutions LLC	IT Services	First Lien Term Loan	12/17/2020	9.00% (3ML+ 8.00%)	1.00	12/17/2025	24,813		24,813		24,813		0.6	%	(3)(10)
									24,813		24,813		0.6	%
LCM XIV Ltd.	Structured Finance	Subordinated Structured Note	6/25/2013	Residual Interest, current yield 7.58%	—	7/21/2031	49,934		28,352		20,194		0.5	%	(5)(14)
									28,352		20,194		0.5	%
Legility, LLC	Professional Services	First Lien Term Loan	2/25/2020	7.00% (1ML+ 6.00%)	1.00	12/17/2025	18,813		18,528		18,813		0.5	%	(3)(8)(10)
		First Lien Term Loan	2/25/2020	7.00% (6ML+ 6.00%)	1.00	12/17/2025	387		381		387		—	%	(3)(8)(10)
									18,909		19,200		0.5	%
LGC US FINCO, LLC	Machinery	First Lien Term Loan	1/17/2020	8.50% (1ML+ 7.50%)	1.00	12/20/2025	28,950		28,310		28,950		0.7	%	(3)(8)(10)
									28,310		28,950		0.7	%
Mamba Purchaser, Inc.	Health Care Providers & Services	Second Lien Term Loan	9/29/2021	7.00% (3ML+ 6.50%)	0.50	10/14/2029	5,000		4,975		4,950		0.1	%	(8)(10)
									4,975		4,950		0.1	%
Maverick Healthcare Equity, LLC	Health Care Providers & Services	Preferred Units (1,250,000 units)	10/31/2007		—	N/A	—		—		—		—	%	(16)
		Class A Common Units (1,250,000 units)	10/31/2007		—	N/A	—		—		—		—	%	(16)
									—		—		—	%
Medusind Acquisition, Inc. (19)	Health Care Providers & Services	First Lien Term Loan	9/30/2019	7.50% (3ML+ 6.50%)	1.00	4/8/2024	24,011		23,801		23,793		0.6	%	(3)(10)
									23,801		23,793		0.6	%
Mountain View CLO 2013-I Ltd.	Structured Finance	Subordinated Structured Note	4/17/2013	Residual Interest, current yield 4.78%	—	10/15/2030	43,650		28,673		16,195		0.4	%	(5)(14)
									28,673		16,195		0.4	%
Mountain View CLO IX Ltd.	Structured Finance	Subordinated Structured Note	5/13/2015	Residual Interest, current yield 12.86%	—	7/15/2031	47,830		28,084		25,923		0.7	%	(5)(14)
									28,084		25,923		0.7	%
Octagon Investment Partners XV, Ltd.	Structured Finance	Subordinated Structured Note	1/24/2013	Residual Interest, current yield 9.72%	—	7/19/2030	42,064		31,763		24,490		0.6	%	(5)(14)
									31,763		24,490		0.6	%
Octagon Investment Partners 18-R Ltd.	Structured Finance	Subordinated Structured Note	8/12/2015	Residual Interest, current yield 13.31%	—	4/16/2031	46,015		24,386		18,142		0.5	%	(5)(14)
									24,386		18,142		0.5	%
OneTouchPoint Corp	Professional Services	Senior Secured Term Loan	2/19/2021	9.00% (3ML+ 8.00%)	1.00	2/19/2026	40,095		40,095		40,095		1.0	%	(3)(10)
									40,095		40,095		1.0	%
Orva Buyer, LLC	Specialty Retail	Senior Secured Term Loan	12/23/2020	9.50% (1ML+ 7.50%)	2.00	12/23/2025	39,893		39,893		39,893		1.0	%	(3)(10)
									39,893		39,893		1.0	%
Pearl Intermediate Parent LLC	Health Care Providers & Services	Second Lien Term Loan	2/1/2018	6.33% (1ML+ 6.25%)	—	2/15/2026	5,000		4,986		5,000		0.1	%	(3)(8)(10)
									4,986		5,000		0.1	%

See notes to consolidated financial statements.

14

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
PeopleConnect Holdings, LLC (11)	Interactive Media & Services	Revolving Line of Credit - $8,918 Commitment	1/22/2020	10.00% (1ML+ 8.25%)	1.75	1/22/2025	$	—	$	—	$	—	—	%	(10)(15)
		Senior Secured Term Loan	1/22/2020	10.00% (3ML+ 8.25%)	1.75	1/22/2025	174,977		174,977		174,977		4.4	%	(3)(10)
									174,977		174,977		4.4	%
PlayPower, Inc.	Leisure Products	First Lien Term Loan	5/7/2019	5.63% (3ML+ 5.50%)	—	5/10/2026	5,889		5,846		5,709		0.1	%	(3)(8)(10)
									5,846		5,709		0.1	%
RC Buyer, Inc.	Auto Components	Second Lien Term Loan	7/26/2021	7.50% (3ML+ 6.75%)	0.75	7/30/2029	20,000		19,902		20,000		0.5	%	(3)(8)(10)
									19,902		20,000		0.5	%
Redstone Holdco 2 LP (22)	IT Services	Second Lien Term Loan	4/16/2021	8.50% (3ML+ 7.75%)	0.75	4/27/2029	50,000		49,157		49,647		1.3	%	(3)(8)(10)
									49,157		49,647		1.3	%
Research Now Group, Inc. & Survey Sampling International LLC	Professional Services	First Lien Term Loan	12/8/2017	6.50% (6ML+ 5.50%)	1.00	12/20/2024	9,625		9,376		9,625		0.2	%	(3)(8)(10)
		Second Lien Term Loan	12/8/2017	10.50% (6ML+ 9.50%)	1.00	12/20/2025	50,000		48,166		50,000		1.3	%	(3)(8)(10)
									57,542		59,625		1.5	%
Rising Tide Holdings, Inc.	Diversified Consumer Services	Second Lien Term Loan	5/26/2021	9.00% (1ML+ 8.25%)	0.75	6/1/2029	23,000		22,669		23,000		0.6	%	(3)(8)(10)
									22,669		23,000		0.6	%
RME Group Holding Company	Media	Senior Secured Term Loan A	5/4/2017	8.00% (3ML+ 7.00%)	1.00	5/4/2022	26,708		26,708		26,708		0.7	%	(3)(10)
		Senior Secured Term Loan B	5/4/2017	13.00% (3ML+ 12.00%)	1.00	5/4/2022	22,036		22,036		22,036		0.6	%	(3)(10)
									48,744		48,744		1.3	%
Romark WM-R Ltd.	Structured Finance	Subordinated Structured Note	4/11/2014	Residual Interest, current yield 6.88%	—	4/21/2031	27,725		22,480		15,270		0.5	%	(5)(14)
									22,480		15,270		0.5	%
Rosa Mexicano	Hotels, Restaurants & Leisure	Revolving Line of Credit - $500 Commitment	3/29/2018	8.75% (3ML+ 7.50%)	1.25	3/29/2023	500		500		489		—	%	(10)(15)(39)
		Senior Secured Term Loan	3/29/2018	8.75% (3ML+ 7.50%)	1.25	3/29/2023	23,777		23,777		23,241		0.6	%	(10)(39)
									24,277		23,730		0.6	%
Securus Technologies Holdings, Inc.	Communications Equipment	First Lien Term Loan	8/2/2019	5.50% (3ML+ 4.50%)	1.00	11/1/2024	9,772		9,167		9,614		0.2	%	(8)(10)
		Second Lien Term Loan	6/20/2017	9.25% (3ML+ 8.25%)	1.00	11/1/2025	50,662		50,560		50,048		1.3	%	(3)(8)(10)
									59,727		59,662		1.5	%
SEOTownCenter, Inc.	IT Services	Senior Secured Term Loan A	4/10/2018	9.50% (3ML+ 7.50%)	2.00	4/7/2023	23,985		23,985		23,985		0.6	%	(3)(10)
		Senior Secured Term Loan B	4/10/2018	14.50% (3ML+ 12.50%)	2.00	4/7/2023	19,027		19,027		19,027		0.5	%	(3)(10)
									43,012		43,012		1.1	%
Shearer’s Foods, LLC	Food Products	Second Lien Term Loan	9/15/2020	8.75% (1ML+ 7.75%)	1.00	9/23/2028	5,000		4,913		5,000		0.1	%	(3)(8)(10)
									4,913		5,000		0.1	%
Shutterfly, LLC	Internet & Direct Marketing Retail	2021 Refinancing Term B Loan	7/1/2021	5.75% (1ML+ 5.00%)	0.75	9/25/2026	20,500		20,402		20,505		0.5	%	(8)(10)(47)
									20,402		20,505		0.5	%
Sorenson Communications, LLC	Diversified Telecommunication Services	First Lien Term Loan	3/12/2021	6.25% (3ML+ 5.50%)	0.75	3/17/2026	17,100		16,938		17,100		0.4	%	(3)(8)(10)
									16,938		17,100		0.4	%
Southern Veterinary Partners	Health Care Providers & Services	Second Lien Term Loan	10/2/2020	8.75% (6ML+ 7.75%)	1.00	10/5/2028	8,000		7,929		8,000		0.2	%	(3)(8)(10)
									7,929		8,000		0.2	%
Spectrum Holdings III Corp	Health Care Equipment & Supplies	Second Lien Term Loan	1/26/2018	8.00% (6ML+ 7.00%)	1.00	1/31/2026	7,500		7,480		6,970		0.2	%	(3)(8)(10)
									7,480		6,970		0.2	%
Staples, Inc.	Distributors	First Lien Term Loan	11/18/2019	5.13% (3ML+ 5.00%)	—	4/16/2026	8,842		8,778		8,494		0.2	%	(3)(8)(10)(47)
									8,778		8,494		0.2	%

See notes to consolidated financial statements.

15

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Strategic Materials	Household Durables	Second Lien Term Loan	10/27/2017	8.75% (3ML+ 7.75%)	1.00	11/1/2025	$	7,000	$	6,964	$	5,739	0.1	%	(8)(10)
									6,964		5,739		0.1	%
Stryker Energy, LLC	Energy Equipment & Services	Overriding Royalty Interests	12/4/2006		—	N/A	—		—		—		—	%	(13)(16)
									—		—		—	%
Sudbury Mill CLO Ltd.	Structured Finance	Subordinated Structured Note	11/14/2013	Residual Interest, current yield 0.00%	—	1/19/2026	28,200		13,178		5,960		0.2	%	(5)(14)(17)
									13,178		5,960		0.2	%
Symphony CLO XIV, Ltd.	Structured Finance	Subordinated Structured Note	5/6/2014	Residual Interest, current yield 0.00%	—	7/14/2026	49,249		25,275		15,903		0.4	%	(5)(14)(17)
									25,275		15,903		0.4	%
Symphony CLO XV, Ltd.	Structured Finance	Subordinated Structured Note	10/17/2014	Residual Interest, current yield 9.75%	—	1/19/2032	63,830		45,359		27,788		0.7	%	(5)(14)
									45,359		27,788		0.7	%
The Octave Music Group, Inc.	Entertainment	First Lien Term Loan	2/26/2020	6.25% (1ML+ 5.25%) plus 0.75% PIK	1.00	5/29/2025	34,851		34,578		34,851		0.9	%	(3)(8)(10)(39)
									34,578		34,851		0.9	%
Town & Country Holdings, Inc.	Distributors	First Lien Term Loan	1/26/2018	10.00% (3ML+ 8.50%)	1.50	1/26/2023	159,686		159,686		159,686		4.0	%	(3)(10)
									159,686		159,686		4.0	%
TPS, LLC	Machinery	First Lien Term Loan	11/30/2020	10.00% (3ML+ 9.00%) plus 1.50% PIK	1.00	11/30/2025	28,933		28,933		28,933		0.7	%	(3)(10)(39)
									28,933		28,933		0.7	%
Transplace Holdings, Inc.	Transportation Infrastructure	Second Lien Term Loan	10/2/2017	9.75% (6ML+ 8.75%)	1.00	10/6/2025	30,900		30,415		30,900		0.8	%	(3)(8)(10)
									30,415		30,900		0.8	%
United Sporting Companies, Inc. (18)	Distributors	Second Lien Term Loan	9/28/2012	13.25% (1ML+ 11.00%) plus 2.00% PIK	2.25	11/16/2019	144,692		103,730		6,912		0.2	%	(9)(10)
									103,730		6,912		0.2	%
Universal Fiber Systems, LLC	Textiles, Apparel & Luxury Goods	Second Lien Term Loan	10/2/2015	10.50% (1ML+ 9.50%)	1.00	10/2/2022	37,000		36,894		35,790		0.9	%	(3)(8)(10)
									36,894		35,790		0.9	%
Upstream Newco, Inc.	Health Care Providers & Services	Second Lien Term Loan	11/20/2019	8.58% (1ML+ 8.50%)	—	11/20/2027	22,000		21,842		22,000		0.6	%	(3)(8)(10)
									21,842		22,000		0.6	%
USG Intermediate, LLC	Leisure Products	Revolving Line of Credit - $3,000 Commitment	4/15/2015	10.25% (1ML+ 9.25%)	1.00	8/24/2024	3,000		3,000		3,000		0.1	%	(10)(15)
		Senior Secured Term Loan B	4/15/2015	12.75% (1ML+ 11.75%)	1.00	8/24/2024	22,855		22,855		22,855		0.6	%	(3)(10)
		Equity	4/15/2015		—	N/A	—		1		—		—	%	(16)
									25,856		25,855		0.7	%
VC GB Holdings I Corp	Household Durables	Second Lien Term Loan	6/30/2021	7.25% (3ML+ 6.75%)	0.50	7/23/2029	23,000		22,775		22,807		0.6	%	(8)(10)
									22,775		22,807		0.6	%
Venio LLC (48)	Professional Services	First Lien Term Loan	2/19/2014	1.00% PIK	—	2/19/2020	14,444		14,444		12,200		0.3	%	(39)
									14,444		12,200		0.3	%
Vision Solutions, Inc. (29)	IT Services	Second Lien Term Loan	4/23/2021	8.00% (3ML+ 7.25%)	0.75	4/23/2029	60,000		59,456		60,000		1.5	%	(3)(8)(10)
									59,456		60,000		1.5	%
Voya CLO 2012-4, Ltd.	Structured Finance	Subordinated Structured Note	11/5/2012	Residual Interest, current yield 9.07%	—	10/15/2030	40,613		30,490		24,732		0.6	%	(5)(14)
									30,490		24,732		0.6	%
Voya CLO 2014-1, Ltd.	Structured Finance	Subordinated Structured Note	2/5/2014	Residual Interest, current yield 6.56%	—	4/18/2031	40,773		29,696		18,082		0.5	%	(5)(14)
									29,696		18,082		0.5	%
Voya CLO 2016-3, Ltd.	Structured Finance	Subordinated Structured Note	9/30/2016	Residual Interest, current yield 10.19%	—	10/20/2031	28,100		25,046		20,087		0.5	%	(5)(14)
									25,046		20,087		0.5	%
Voya CLO 2017-3, Ltd.	Structured Finance	Subordinated Structured Note	6/13/2017	Residual Interest, current yield 13.41%	—	4/20/2034	44,884		49,570		42,823		1.1	%	(5)(14)
									49,570		42,823		1.1	%

See notes to consolidated financial statements.

16

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF SEPTEMBER 30, 2021 (Unaudited)

(in thousands, except share data)

							September 30, 2021 (Unaudited)
Portfolio Company	Industry	Investments(1)(37)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
VT Topco, Inc.	Commercial Services & Supplies	Second Lien Term Loan	8/14/2018	6.83% (1ML+ 6.75%)	—	8/17/2026	$	7,000	$	6,979	$	6,878	0.2	%	(3)(8)(10)
		2021 Term Loans	7/30/2021	7.50% (1ML+ 6.75%)	0.75	8/17/2026	13,250		13,154		13,129		0.3	%	(3)(8)(10)
									20,133		20,007		0.5	%
Total Non-Control/Non-Affiliate Investments (Level 3)									$	3,444,630	$	3,005,560	76.3	%
Total Portfolio Investments (Level 3)									$	6,150,333	$	6,430,707	163.1	%

See notes to consolidated financial statements.

17

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(46)
CP Energy Services Inc. (20)	Energy Equipment & Services	Senior Secured Term Loan	10/1/2017	12.00% (3ML+ 11.00%)	1.00	1/31/2024	$	41,422	$	41,422	$	41,422	1.0%	(10)(39)
		Senior Secured Term Loan A to Spartan Energy Services, LLC	10/20/2014	9.00% (1ML+ 8.00%)	1.00	12/31/2022	15,656		15,656		15,656		0.4%	(10)
		Series A Preferred Units to Spartan Energy Holdings, Inc. (10,000 shares)	9/25/2020		—	N/A	—		26,193		11,210		0.3%	(16)
		Series B Convertible Preferred Stock (790 shares)	10/30/2015		—	N/A	—		63,225		3,199		0.1%	(16)
		Common Stock (102,924 shares)	8/2/2013		—	N/A	—		86,239		—		—%	(16)
									232,735		71,487		1.8%
Credit Central Loan Company, LLC (21)	Consumer Finance	Subordinated Term Loan	12/28/2012	10.00% plus 10.00% PIK	—	6/26/2024	68,137		65,599		68,137		1.7%	(14)(39)
		Class A Units (14,867,312 units)	12/28/2012		—	N/A	—		19,331		9,886		0.3%	(14)(16)
		Net Revenues Interest (25% of Net Revenues)	1/28/2015		—	N/A	—		—		—		—%	(14)(16)
									84,930		78,023		2.0%
Echelon Transportation, LLC	Aerospace & Defense	Senior Secured Term Loan	3/31/2014	11.75% (1ML+ 9.75%) plus 2.25% PIK	2.00	3/31/2022	52,457		52,457		52,457		1.3%	(10)(39)
		Senior Secured Term Loan	12/9/2016	11.00% (1ML+ 9.00%) plus 1.00% PIK	2.00	12/7/2024	22,949		22,949		22,949		0.6%	(10)(39)
		Membership Interest (100%)	3/31/2014		—	N/A	—		22,738		8,834		0.2%	(16)
									98,144		84,240		2.1%
First Tower Finance Company LLC (23)	Consumer Finance	First Lien Term Loan	6/24/2014	10.00% plus 12.00% PIK	—	6/24/2024	324,708		324,708		324,708		8.2%	(14)(39)
		Class A Units (95,709,910 units)	6/14/2012		—	N/A	—		31,146		267,648		6.8%	(14)(16)
									355,854		592,356		15.0%
Freedom Marine Solutions, LLC (24)	Energy Equipment & Services	Membership Interest (100%)	11/9/2006		—	N/A	—		44,492		11,717		0.3%	(16)
									44,492		11,717		0.3%
InterDent, Inc.	Health Care Providers & Services	Senior Secured Term Loan A/B	8/1/2018	11.85% (1ML+ 9.85%)	2.00	9/5/2022	14,249		14,249		14,249		0.4%	(10)
		Senior Secured Term Loan A	8/3/2012	6.50% (1ML+ 5.50%)	1.00	9/5/2022	79,242		79,242		79,242		2.0%	(10)
		Senior Secured Term Loan B	8/3/2012	12.00% PIK	—	9/5/2022	144,080		144,080		144,080		3.7%	(39)
		Common Stock (99,900 shares)	5/3/2019		—	N/A	—		45,118		174,768		4.4%	(16)
									282,689		412,339		10.5%
Kickapoo Ranch Pet Resort	Diversified Consumer Services	Membership Interest (100%)	8/26/2019		—	N/A	—		2,378		3,833		0.1%	(16)
									2,378		3,833		0.1%
MITY, Inc. (25)	Commercial Services & Supplies	Senior Secured Note A	9/19/2013	10.00% (3ML+ 7.00%)	3.00	4/30/2025	29,867		29,867		29,867		0.8%	(10)(39)
		Senior Secured Note B	6/23/2014	10.00% (3ML+ 7.00%) plus 10.00% PIK	3.00	4/30/2025	16,098		16,098		16,098		0.4%	(10)(39)
		Subordinated Unsecured Note to Broda Enterprises ULC	9/19/2013	10.00%	—	1/1/2028	5,949		7,200		3,715		0.1%	(14)
		Common Stock (42,053 shares)	9/19/2013		—	N/A	—		27,349		—		—%	(16)
									80,514		49,680		1.3%

See notes to consolidated financial statements.

18

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Control Investments (greater than 25.00% voting control)(46)
National Property REIT Corp. (26)	Equity Real Estate Investment Trusts (REITs) / Online Lending / Structured Finance	Senior Secured Term Loan A	12/31/2018	4.44% (3ML+ 1.44%) plus 3.53% PIK	3.00	12/31/2023	$	473,276	$	473,276	$	473,276	12.0%	(10)(39)
		Senior Secured Term Loan B	12/31/2018	5.00% (3ML+ 2.00%) plus 5.50% PIK	3.00	12/31/2023	6,600		6,600		6,600		0.2%	(10)(39)
		Senior Secured Term Loan C	10/31/2019	11.00% (3ML+ 10.00%) plus 2.25% PIK	1.00	12/31/2023	90,200		90,200		90,200		2.3%	(10)(39)
		Senior Secured Term Loan D	6/19/2020	3.50% (3ML+ 0.50%) plus 2.50% PIK	3.00	12/31/2023	183,425		183,425		183,425		4.6%	(10)(39)
		Residual Profit Interest	12/31/2018		—	N/A	—		—		34,507		0.9%	(35)
		Common Stock (3,254,594 shares)	12/31/2013		—	N/A	—		210		401,747		10.2%	(45)
									753,711		1,189,755		30.2%
Nationwide Loan Company LLC (27)	Consumer Finance	First Lien Term Loan	6/18/2014	10.00% plus 10.00% PIK	—	6/18/2022	20,260		20,260		20,260		0.5%	(14)(39)
		Class A Units (38,550,460 units)	1/31/2013		—	N/A	—		20,846		27,733		0.7%	(14)(16)
									41,106		47,993		1.2%
NMMB, Inc. (28)	Media	Delayed Draw Term Loan - $10,000 Commitment	3/25/2020	10.50% (3ML+ 8.50%)	2.00	12/30/2024	—		—		—		—%	(10)(15)
		Senior Secured Note	12/30/2019	10.50% (3ML+ 8.50%)	2.00	12/30/2024	4,874		4,874		4,874		0.1%	(3)(10)
		Common Stock (21,418 shares)	12/30/2019		—	N/A	—		12,869		42,014		1.1%
									17,743		46,888		1.2%
Pacific World Corporation (36)	Personal Products	Revolving Line of Credit - $26,000 Commitment	9/26/2014	8.25% (1ML+ 7.25%)	1.00	9/26/2025	20,825		20,825		20,825		0.5%	(10)(15)
		Senior Secured Term Loan A	12/31/2014	6.25% PIK (1ML+ 5.25%)	1.00	9/26/2025	41,625		41,625		41,625		1.1%	(10)(39)
		Convertible Preferred Equity (287,021 shares)	6/15/2018		—	N/A	—		186,795		8,647		0.2%	(16)
		Common Stock (6,778,414 shares)	9/29/2017		—	N/A	—		—		—		—%	(16)
									249,245		71,097		1.8%
R-V Industries, Inc.	Machinery	Senior Secured Term Loan	12/15/2020	10.00% (3ML+ 9.00%)	1.00	12/15/2028	28,622		28,622		28,622		0.7%	(3)(10)
		Common Stock (745,107 shares)	6/26/2007		—	N/A	—		6,866		21,071		0.5%	(16)
									35,488		49,693		1.2%
Universal Turbine Parts, LLC (34)	Trading Companies & Distributors	Delayed Draw Term Loan - $5,000 Commitment	2/28/2019	10.25% (1ML+ 7.75%)	2.50	4/5/2024	3,173		3,173		3,173		0.1%	(10)(15)
		Senior Secured Term Loan A	7/22/2016	6.75% (3ML+ 5.75%)	1.00	4/5/2024	29,575		29,575		23,933		0.6%	(10)
		Preferred Units (47,244,213 units)	3/31/2021		—	N/A	—		32,500		—		—%	(16)
		Common Stock (10,000 units)	12/10/2018		—	N/A	—		—		—		—%	(16)
									65,248		27,106		0.7%
USES Corp. (30)	Commercial Services & Supplies	Senior Secured Term Loan A	3/31/2014	9.00% PIK	—	7/29/2024	55,117		30,651		31,815		0.8%	(9)
		Senior Secured Term Loan B	3/31/2014	15.50% PIK	—	7/29/2024	77,483		35,568		—		—%	(9)
		Senior Secured Term Loan	12/30/2020	10.00% (1ML+ 9.00%)	1.00	7/29/2024	2,000		2,000		2,000		0.1%	(10)
		Common Stock (268,962 shares)	6/15/2016		—	N/A	—		—		—		—%	(16)
									68,219		33,815		0.9%
Valley Electric Company, Inc. (31)	Construction & Engineering	Senior Secured Note to Valley Electric Co. of Mt. Vernon, Inc.	12/31/2012	8.00% (3ML+ 5.00%) plus 2.50% PIK	3.00	12/31/2024	10,430		10,430		10,430		0.3%	(3)(10)(39)
		Senior Secured Note	6/24/2014	8.00% plus 10.00% PIK	—	6/23/2024	33,301		33,301		33,301		0.8%	(39)
		Consolidated Revenue Interest (2.0%)	6/22/2018		—	N/A	—		—		1,857		—%	(12)
		Common Stock (50,000 shares)	12/31/2012		—	N/A	—		26,204		104,107		2.6%
									69,935		149,695		3.7%
Total Control Investments (Level 3)									$	2,482,431	$	2,919,717	74.0%

See notes to consolidated financial statements.

19

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Affiliate Investments (5.00% to 24.99% voting control)(47)
Nixon, Inc. (32)	Textiles, Apparel & Luxury Goods	Common Stock (857 units)	5/12/2017		—	N/A	$	—	$	—	$	—	—%	(16)
									—		—		—%
PGX Holdings, Inc. (6)	Diversified Consumer Services	First Lien Term Loan	11/13/2020	6.25% (12ML+ 5.25%) plus 4.25% PIK	1.00	9/29/2023	47,746		45,720		47,746		1.2%	(3)(10)(39)
		1.5 Lien Term Loan	5/27/2020	14.50% PIK (12ML+ 13.50%)	1.00	6/28/2024	18,164		18,164		18,164		0.5%	(10)(39)
		Second Lien Term Loan	9/29/2014	15.75% PIK (1ML+ 14.75%)	1.00	9/29/2024	122,272		122,272		122,272		3.1%	(10)(39)
		Common Stock (40,780,359 shares)	5/27/2020		—	N/A	—		—		124,907		3.2%	(16)
									186,156		313,089		8.0%
RGIS Services, LLC	Commercial Services & Supplies	Senior Secured Term Loan	6/25/2020	8.50% (1ML+ 7.50%)	1.00	6/25/2025	3,680		3,680		3,680		0.1%	(8)(10)
		Membership Interest (5.11%)	6/25/2020		—	N/A	—		10,302		13,760		0.3%	(16)
									13,982		17,440		0.4%
Targus Cayman HoldCo Limited (33)	Textiles, Apparel & Luxury Goods	Common Stock (7,383,395 shares)	2/12/2016		—	N/A	—		2,805		26,205		0.6%	(16)
									2,805		26,205		0.6%
Total Affiliate Investments (Level 3)									$	202,943	$	356,734	9.0%

See notes to consolidated financial statements.

20

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
8th Avenue Food & Provisions, Inc.	Food Products	Second Lien Term Loan	9/21/2018	7.84% (1ML+ 7.75%)	—	10/1/2026	$	27,133	$	26,980	$	27,133	0.7	%	(3)(8)(10)
									26,980		27,133		0.7	%
ACE Cash Express, Inc.	Consumer Finance	Senior Secured Note	12/8/2017	12.00%	—	12/15/2022	39,998		37,429		38,041		1.0	%	(8)(46)
									37,429		38,041		1.0	%
AmeriLife Holdings, LLC	Insurance	Second Lien Term Loan	3/18/2020	9.50% (6ML+ 8.50%)	1.00	3/18/2028	22,280		21,911		22,280		0.6	%	(3)(8)(10)
									21,911		22,280		0.6	%
Apidos CLO XI	Structured Finance	Subordinated Structured Note	12/6/2012	Residual Interest, current yield 12.33%	—	4/17/2034	67,783		37,651		29,680		0.8	%	(5)(14)
									37,651		29,680		0.8	%
Apidos CLO XII	Structured Finance	Subordinated Structured Note	3/15/2013	Residual Interest, current yield 11.99%	—	4/15/2031	52,203		37,818		30,505		0.8	%	(5)(14)
									37,818		30,505		0.8	%
Apidos CLO XV	Structured Finance	Subordinated Structured Note	9/13/2013	Residual Interest, current yield 12.46%	—	4/21/2031	48,515		39,005		29,579		0.7	%	(5)(14)
									39,005		29,579		0.7	%
Apidos CLO XXII	Structured Finance	Subordinated Structured Note	9/16/2015	Residual Interest, current yield 13.92%	—	4/21/2031	35,855		30,483		26,070		0.7	%	(5)(14)
									30,483		26,070		0.7	%
Atlantis Health Care Group (Puerto Rico), Inc.	Health Care Providers & Services	Revolving Line of Credit - $3,000 Commitment	2/21/2013	10.75% (3ML+ 8.75%)	2.00	4/29/2022	—		—		—		—	%	(10)(15)
		Senior Secured Term Loan	2/21/2013	10.75% (3ML+ 8.75%)	2.00	4/29/2022	66,164		66,164		66,164		1.7	%	(3)(10)
									66,164		66,164		1.7	%
Barings CLO 2018-III	Structured Finance	Subordinated Structured Note	10/9/2014	Residual Interest, current yield 6.65%	—	7/20/2029	83,098		44,174		32,346		0.8	%	(5)(14)
									44,174		32,346		0.8	%
BCPE North Star US Holdco 2, Inc.	Food Products	Delayed Draw Term Loan - $5,185 Commitment	6/7/2021	8.00% (3ML+ 7.25%)	0.75	6/10/2023	—		—		—		—	%	(8)(10)(15)
		Second Lien Term Loan	6/7/2021	8.00% (3ML+ 7.25%)	0.75	6/11/2029	29,815		29,520		29,815		0.8	%	(8)(10)
									29,520		29,815		0.8%
Broder Bros., Co.	Textiles, Apparel & Luxury Goods	Senior Secured Note	12/4/2017	9.75% (3ML+ 8.50%)	1.25	12/2/2022	162,639		162,639		162,639		4.1	%	(3)(10)
									162,639		162,639		4.1	%
Brookside Mill CLO Ltd.	Structured Finance	Subordinated Structured Note	4/25/2013	Residual Interest, current yield 0.00%	—	1/17/2028	36,300		15,168		10,018		0.3	%	(5)(14)(17)
									15,168		10,018		0.3	%
California Street CLO IX Ltd.	Structured Finance	Subordinated Structured Note	4/19/2012	Residual Interest, current yield 13.70%	—	7/16/2032	58,915		42,626		29,610		0.8	%	(5)(14)
									42,626		29,610		0.8	%
Candle-Lite Company, LLC	Household Products	Senior Secured Term Loan A	1/23/2018	6.75% (3ML+ 5.50%)	1.25	1/23/2023	10,237		10,237		10,237		0.3	%	(3)(10)
		Senior Secured Term Loan B	1/23/2018	10.75% (3ML+ 9.50%)	1.25	1/23/2023	10,949		10,949		10,949		0.3	%	(3)(10)
									21,186		21,186		0.6	%
Capstone Logistics Acquisition, Inc.	Commercial Services & Supplies	Second Lien Delayed Draw Term Loan - $1,500 Commitment	11/12/2020	9.75% (1ML+ 8.75%)	1.00	11/13/2028	—		—		—		—%		(8)(10)(15)
		Second Lien Term Loan	11/12/2020	9.75% (1ML+ 8.75%)	1.00	11/13/2028	8,500		8,206		8,500		0.2%		(3)(8)(10)
									8,206		8,500		0.2%
Carlyle C17 CLO Limited	Structured Finance	Subordinated Structured Note	1/24/2013	Residual Interest, current yield 17.47%	—	4/30/2031	24,870		15,736		13,618		0.3	%	(5)(14)
									15,736		13,618		0.3	%

See notes to consolidated financial statements.

21

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Carlyle Global Market Strategies CLO 2014-4-R, Ltd.	Structured Finance	Subordinated Structured Note	4/7/2017	Residual Interest, current yield 17.07%	—	7/15/2030	$	25,534	$	19,980	$	16,864	0.4	%	(5)(14)
									19,980		16,864		0.4	%
Carlyle Global Market Strategies CLO 2016-3, Ltd.	Structured Finance	Subordinated Structured Note	8/9/2016	Residual Interest, current yield 11.48%	—	7/20/2034	32,200		32,932		27,521		0.7	%	(5)(14)
									32,932		27,521		0.7	%
CCS-CMGC Holdings, Inc.	Health Care Providers & Services	First Lien Term Loan	5/13/2019	5.60% (1ML+ 5.50%)	—	10/1/2025	9,526		9,422		9,526		0.2	%	(3)(8)(10)
		Second Lien Term Loan	9/25/2018	9.10% (1ML+ 9.00%)	—	10/1/2026	37,000		36,532		37,000		0.9	%	(3)(8)(10)
									45,954		46,526		1.1	%
Cent CLO 21 Limited	Structured Finance	Subordinated Structured Note	5/15/2014	Residual Interest, current yield 11.63%	—	7/29/2030	49,552		39,865		30,885		0.8	%	(5)(14)
									39,865		30,885		0.8	%
CIFC Funding 2013-III-R, Ltd.	Structured Finance	Subordinated Structured Note	8/2/2013	Residual Interest, current yield 13.87%	—	4/24/2031	44,100		29,312		20,974		0.5	%	(5)(14)
									29,312		20,974		0.5	%
CIFC Funding 2013-IV, Ltd.	Structured Finance	Subordinated Structured Note	10/22/2013	Residual Interest, current yield 15.99%	—	4/28/2031	45,500		32,985		30,202		0.8	%	(5)(14)
									32,985		30,202		0.8	%
CIFC Funding 2014-IV-R, Ltd.	Structured Finance	Subordinated Structured Note	8/5/2014	Residual Interest, current yield 10.75%	—	10/17/2030	44,467		30,604		22,322		0.6	%	(5)(14)
									30,604		22,322		0.6	%
CIFC Funding 2016-I, Ltd.	Structured Finance	Subordinated Structured Note	12/9/2016	Residual Interest, current yield 11.69%	—	10/21/2031	34,000		30,275		28,829		0.7	%	(5)(14)
									30,275		28,829		0.7	%
Cinedigm DC Holdings, LLC	Entertainment	Senior Secured Term Loan	2/28/2013	11.00% (3ML+ 9.00%) plus 2.50% PIK	2.00	3/31/2022	3,031		2,981		3,031		0.1	%	(10)(39)
									2,981		3,031		0.1	%
Collections Acquisition Company, Inc.	Diversified Financial Services	Senior Secured Term Loan	12/3/2019	10.15% (3ML+ 7.65%)	2.50	6/3/2024	30,165		30,165		30,165		0.8	%	(3)(10)
									30,165		30,165		0.8	%
Columbia Cent CLO 27 Limited	Structured Finance	Subordinated Structured Note	12/18/2013	Residual Interest, current yield 3.38%	—	10/25/2028	40,275		22,044		19,078		0.5	%	(5)(14)
									22,044		19,078		0.5	%
Curo Group Holdings Corp.	Consumer Finance	Second Lien Term Loan	7/30/2020	0.0825	—	9/1/2025	14,621		12,525		15,188		0.4	%	(14)(47)
									12,525		15,188		0.4	%
Digital Room, LLC	Commercial Services & Supplies	First Lien Term Loan	5/14/2019	5.20% (6ML+ 5.00%)	—	5/21/2026	9,800		9,718		9,800		0.2	%	(3)(8)(10)
		Second Lien Term Loan	5/14/2019	9.20% (6ML+ 9.00%)	—	5/21/2027	70,000		70,000		70,000		1.8	%	(3)(8)(10)
									79,718		79,800		2.0	%
Dunn Paper, Inc.	Paper & Forest Products	First Lien Term Loan	11/18/2019	6.25% (1ML+ 5.25%)	1.00	8/26/2022	4,468		4,418		4,468		0.1	%	(3)(8)(10)
		Second Lien Term Loan	8/26/2016	10.25% (1ML+ 9.25%)	1.00	8/26/2023	11,500		11,429		11,347		0.3	%	(3)(8)(10)
									15,847		15,815		0.4	%
Easy Gardener Products, Inc.	Household Durables	Third Lien Term Loan	6/11/2020	10.25% (3ML+ 10.00%)	0.25	9/30/2024	3,950		3,950		3,950		0.1	%	(10)
		Class A Units of EZG Holdings, LLC (200 units)	6/11/2020		—	N/A	—		313		781		—	%	(16)
		Class B Units of EZG Holdings, LLC (12,525 units)	6/11/2020		—	N/A	—		1,688		5,043		0.1	%	(16)
									5,951		9,774		0.2	%
Edmentum (22)	Diversified Consumer Services	Escrow Receivable	12/11/2020		—	N/A	—		—		—		—	%	(16)
									—		—		—	%

See notes to consolidated financial statements.

22

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Engine Group, Inc. (7)	Media	Senior Secured Term Loan	11/17/2020	5.75% (1ML+ 4.75%)	1.00	11/17/2023	$	12,229	$	12,229	$	11,255	0.3	%	(8)(10)
		Class B Common Units (1,039,554 units)	11/17/2020		—	N/A	—		26,991		707		—	%	(8)
									39,220		11,962		0.3	%
Engineered Machinery Holdings, Inc.	Machinery	Second Lien Term Loan	5/6/2021	7.25% (3ML+ 6.50%)	0.75	5/21/2029	5,000		4,976		4,973		0.1	%	(3)(8)(10)
									4,976		4,973		0.1	%
Enseo Acquisition, Inc.	IT Services	Revolving Line of Credit - $5,000 Commitment	6/2/2021	9.00% (1ML+ 8.00%)	1.00	10/4/2021	—		—		—		—	%	(10)(15)
		First Lien Term Loan	6/2/2021	9.00% (1ML+ 8.00%)	1.00	6/2/2026	55,000		55,000		55,000		1.4	%	(3)(10)
									55,000		55,000		1.4	%
EXC Holdings III Corp	Technology Hardware, Storage & Peripherals	Second Lien Term Loan	11/17/2017	8.50% (3ML+ 7.50%)	1.00	12/1/2025	12,500		12,431		12,500		0.3	%	(3)(8)(10)
									12,431		12,500		0.3	%
Eze Castle Integration, Inc. (f/k/a/ H.I.G. ECI Merger Sub, Inc.)	IT Services	Delayed Draw Term Loan - $1,786 Commitment	7/15/2020	10.00% (1ML+ 8.50%)	1.50	7/15/2025	—		—		—		—	%	(10)(15)
		First Lien Term Loan	7/15/2020	10.00% (1ML+ 8.50%)	1.50	7/15/2025	47,222		47,222		47,222		1.2	%	(3)(10)
									47,222		47,222		1.2	%
First Brands Group	Auto Components	First Lien Term Loan	3/24/2021	6.00% (1ML+ 5.00%)	1.00	3/30/2027	16,750		16,597		16,750		0.4	%	(3)(8)(10)
		Second Lien Term Loan	3/24/2021	9.50% (1ML+ 8.50%)	1.00	3/30/2028	32,000		31,401		32,000		0.8	%	(3)(8)(10)
									47,998		48,750		1.2	%
Galaxy XV CLO, Ltd.	Structured Finance	Subordinated Structured Note	2/13/2013	Residual Interest, current yield 12.98%	—	10/15/2030	50,525		35,486		26,987		0.7	%	(5)(14)
									35,486		26,987		0.7	%
Galaxy XXVII CLO, Ltd.	Structured Finance	Subordinated Structured Note	9/30/2013	Residual Interest, current yield 13.22%	—	5/16/2031	24,575		17,050		12,121		0.3	%	(5)(14)
									17,050		12,121		0.3	%
Galaxy XXVIII CLO, Ltd.	Structured Finance	Subordinated Structured Note	5/30/2014	Residual Interest, current yield 10.69%	—	7/15/2031	39,905		29,231		17,306		0.4	%	(5)(14)
									29,231		17,306		0.4	%
GEON Performance Solutions, LLC	Chemicals	Revolving Line of Credit - $3,621 Commitment	12/12/2019	7.88% (2ML+ 6.25%)	1.63	10/25/2024	—		—		—		—	%	(10)(15)
		First Lien Term Loan	12/12/2019	7.88% (2ML+ 6.25%)	1.63	10/25/2024	28,863		28,745		28,863		0.7	%	(3)(10)
									28,745		28,863		0.7	%
Global Tel*Link Corporation	Diversified Telecommunication Services	First Lien Term Loan	8/7/2019	4.35% (1ML+ 4.25%)	—	11/29/2025	9,728		9,439		9,728		0.2	%	(3)(8)(10)
		Second Lien Term Loan	11/20/2018	8.35% (1ML+ 8.25%)	—	11/29/2026	40,170		39,515		40,170		1.0	%	(3)(8)(10)
									48,954		49,898		1.2	%
GlobalTranz Enterprises, Inc.	Air Freight & Logistics	Second Lien Term Loan	5/15/2019	8.35% (1ML+ 8.25%)	—	5/15/2027	12,500		12,500		12,500		0.3	%	(3)(8)(10)
									12,500		12,500		0.3	%
Halcyon Loan Advisors Funding 2012-1 Ltd.	Structured Finance	Subordinated Structured Note	8/7/2012	Residual Interest, current yield 0.00%	—	8/15/2023	23,188		3,704		22		—	%	(5)(14)(17)
									3,704		22		—	%
Halcyon Loan Advisors Funding 2013-1 Ltd.	Structured Finance	Subordinated Structured Note	3/8/2013	Residual Interest, current yield 0.00%	—	4/15/2025	40,400		19,984		—		—	%	(5)(14)(17)
									19,984		—		—	%

See notes to consolidated financial statements.

23

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Halcyon Loan Advisors Funding 2014-1 Ltd.	Structured Finance	Subordinated Structured Note	2/7/2014	Residual Interest, current yield 0.00%	—	4/20/2026	$	24,500	$	11,822	$	—	—	%	(5)(14)(17)
									11,822		—		—	%
Halcyon Loan Advisors Funding 2014-2 Ltd.	Structured Finance	Subordinated Structured Note	4/14/2014	Residual Interest, current yield 0.00%	—	4/28/2025	41,164		21,322		—		—	%	(5)(14)(17)
									21,322		—		—	%
Halcyon Loan Advisors Funding 2015-3 Ltd.	Structured Finance	Subordinated Structured Note	7/23/2015	Residual Interest, current yield 0.00%	—	10/18/2027	39,598		29,557		4,825		0.1	%	(5)(14)(17)
									29,557		4,825		0.1	%
HarbourView CLO VII-R, Ltd.	Structured Finance	Subordinated Structured Note	6/5/2015	Residual Interest, current yield 1.09%	—	7/18/2031	19,025		13,024		5,180		0.1	%	(5)(14)
									13,024		5,180		0.1	%
Help/Systems Holdings, Inc.	Software	Second Lien Term Loan	11/14/2019	7.50% (3ML+ 6.75%)	0.75	11/19/2027	22,500		22,240		22,500		0.6	%	(3)(8)(10)
									22,240		22,500		0.6	%
Interventional Management Services, LLC	Health Care Providers & Services	Revolving Line of Credit - $5,000 Commitment	2/22/2021	9.50% (3ML+ 8.50%)	1.00	2/22/2025	2,000		2,000		2,000		0.1	%	(10)(15)
		Senior Secured Term Loan	2/22/2021	9.50% (3ML+ 8.50%)	1.00	2/20/2026	69,795		69,795		69,795		1.8	%	(3)(10)
									71,795		71,795		1.9	%
Jefferson Mill CLO Ltd.	Structured Finance	Subordinated Structured Note	6/26/2015	Residual Interest, current yield 9.31%	—	10/20/2031	23,594		19,858		13,083		0.3	%	(5)(14)
									19,858		13,083		0.3	%
K&N Parent, Inc.	Auto Components	First Lien Term Loan	2/20/2020	5.75% (3ML+ 4.75%)	1.00	10/20/2023	1,883		1,710		1,883		—	%	(3)(8)(10)
		Second Lien Term Loan	10/19/2016	9.75% (3ML+ 8.75%)	1.00	10/21/2024	25,887		25,615		25,887		0.7	%	(3)(8)(10)
									27,325		27,770		0.7	%
Keystone Acquisition Corp. (4)	Health Care Providers & Services	Second Lien Term Loan	5/10/2017	10.25% (3ML+ 9.25%)	1.00	5/1/2025	50,000		50,000		50,000		1.3	%	(3)(8)(10)
									50,000		50,000		1.3	%
KM2 Solutions LLC	IT Services	First Lien Term Loan	12/17/2020	9.00% (3ML+ 8.00%)	1.00	12/17/2025	24,875		24,875		24,875		0.6	%	(3)(10)
									24,875		24,875		0.6	%
LCM XIV Ltd.	Structured Finance	Subordinated Structured Note	6/25/2013	Residual Interest, current yield 10.26%	—	7/21/2031	49,934		28,910		20,281		0.5	%	(5)(14)
									28,910		20,281		0.5	%
Legility, LLC	Professional Services	First Lien Term Loan	2/25/2020	7.00% (6ML+ 6.00%)	1.00	12/17/2025	18,963		18,661		18,963		0.5	%	(3)(8)(10)
		First Lien Term Loan	2/25/2020	7.00% (1ML+ 6.00%)	1.00	12/17/2025	387		381		387		—	%	(3)(8)(10)
									19,042		19,350		0.5	%
LGC US FINCO, LLC	Machinery	First Lien Term Loan	1/17/2020	8.50% (1ML+ 7.50%)	1.00	12/20/2025	29,100		28,422		28,049		0.7	%	(3)(8)(10)
									28,422		28,049		0.7	%
Maverick Healthcare Equity, LLC	Health Care Providers & Services	Preferred Units (1,250,000 units)	10/31/2007		—	N/A	—		—		—		—	%	(16)
		Class A Common Units (1,250,000 units)	10/31/2007		—	N/A	—		—		—		—	%	(16)
									—		—		—	%

See notes to consolidated financial statements.

24

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Medusind Acquisition, Inc. (19)	Health Care Providers & Services	First Lien Term Loan	9/30/2019	9.00% (3ML+ 8.00%)	1.00	4/8/2024	$	24,136	$	23,906	$	24,136	0.6	%	(3)(10)
									23,906		24,136		0.6	%
Mountain View CLO 2013-I Ltd.	Structured Finance	Subordinated Structured Note	4/17/2013	Residual Interest, current yield 5.79%	—	10/15/2030	43,650		28,800		16,135		0.4	%	(5)(14)
									28,800		16,135		0.4	%
Mountain View CLO IX Ltd.	Structured Finance	Subordinated Structured Note	5/13/2015	Residual Interest, current yield 14.82%	—	7/15/2031	47,830		28,628		26,301		0.7	%	(5)(14)
									28,628		26,301		0.7	%
Octagon Investment Partners XV, Ltd.	Structured Finance	Subordinated Structured Note	1/24/2013	Residual Interest, current yield 10.32%	—	7/19/2030	42,064		32,164		25,683		0.7	%	(5)(14)
									32,164		25,683		0.7	%
Octagon Investment Partners 18-R Ltd.	Structured Finance	Subordinated Structured Note	8/12/2015	Residual Interest, current yield 16.44%	—	4/16/2031	46,016		24,976		18,289		0.5	%	(5)(14)
									24,976		18,289		0.5	%
OneTouchPoint Corp	Professional Services	Senior Secured Term Loan	2/19/2021	9.00% (3ML+ 8.00%)	1.00	2/19/2026	40,298		40,298		40,298		1.0	%	(3)(10)
									40,298		40,298		1.0	%
Orva Buyer, LLC	Specialty Retail	Senior Secured Term Loan	12/23/2020	9.50% (1ML+ 7.50%)	2.00	12/23/2025	40,095		40,095		40,095		1.0	%	(3)(10)
									40,095		40,095		1.0	%
Pearl Intermediate Parent LLC	Health Care Providers & Services	Second Lien Term Loan	2/1/2018	6.35% (1ML+ 6.25%)	—	2/15/2026	5,000		4,985		5,000		0.1	%	(3)(8)(10)
									4,985		5,000		0.1	%
PeopleConnect Holdings, LLC (11)	Interactive Media & Services	Revolving Line of Credit - $8,918 Commitment	1/22/2020	10.00% (1ML+ 8.25%)	1.75	1/22/2025	—		—		—		—	%	(10)(15)
		Senior Secured Term Loan	1/22/2020	10.00% (3ML+ 8.25%)	1.75	1/22/2025	180,127		180,127		180,127		4.6	%	(3)(10)
									180,127		180,127		4.6	%
PlayPower, Inc.	Leisure Products	First Lien Term Loan	5/7/2019	5.65% (3ML+ 5.50%)	—	5/10/2026	5,906		5,860		5,906		0.1	%	(3)(8)(10)
									5,860		5,906		0.1	%
Redstone Holdco 2 LP (49)	IT Services	Delayed Draw Term Loan - $18,200 Commitment	4/16/2021	8.50% (3ML+ 7.75%)	0.75	4/27/2029	—		—		—		—	%	(8)(10)(15)
		Second Lien Term Loan	4/16/2021	8.50% (3ML+ 7.75%)	0.75	4/27/2029	31,778		31,233		31,490		0.8	%	(3)(8)(10)
									31,233		31,490		0.8	%
Research Now Group, Inc. & Survey Sampling International LLC	Professional Services	First Lien Term Loan	12/8/2017	6.50% (6ML+ 5.50%)	1.00	12/20/2024	9,650		9,383		9,650		0.2	%	(3)(8)(10)
		Second Lien Term Loan	12/8/2017	10.50% (6ML+ 9.50%)	1.00	12/20/2025	50,000		48,057		50,000		1.3	%	(3)(8)(10)
									57,440		59,650		1.5	%
Rising Tide Holdings, Inc.	Diversified Consumer Services	Second Lien Term Loan	5/26/2021	9.00% (1ML+ 8.25%)	0.75	6/1/2029	23,000		22,659		22,711		0.6	%	(8)(10)
									22,659		22,711		0.6	%
RME Group Holding Company	Media	Senior Secured Term Loan A	5/4/2017	8.00% (3ML+ 7.00%)	1.00	5/4/2022	26,896		26,896		26,896		0.7	%	(3)(10)
		Senior Secured Term Loan B	5/4/2017	13.00% (3ML+ 12.00%)	1.00	5/4/2022	22,099		22,099		22,073		0.6	%	(3)(10)
									48,995		48,969		1.3	%
Romark WM-R Ltd.	Structured Finance	Subordinated Structured Note	4/11/2014	Residual Interest, current yield 9.08%	—	4/21/2031	27,725		22,883		15,346		0.4	%	(5)(14)
									22,883		15,346		0.4	%
Rosa Mexicano	Hotels, Restaurants & Leisure	Revolving Line of Credit - $500 Commitment	3/29/2018	8.75% (3ML+ 7.50%)	1.25	3/29/2023	524		524		505		—	%	(10)(15)(39)
		Senior Secured Term Loan	3/29/2018	8.75% (3ML+ 7.50%)	1.25	3/29/2023	23,978		23,978		23,119		0.6	%	(10)(39)
									24,502		23,624		0.6	%

See notes to consolidated financial statements.

25

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
Securus Technologies Holdings, Inc.	Communications Equipment	First Lien Term Loan	8/2/2019	5.50% (3ML+ 4.50%)	1.00	11/1/2024	$	9,797	$	9,151	$	9,556	0.2	%	(8)(10)
		Second Lien Term Loan	6/20/2017	9.25% (3ML+ 8.25%)	1.00	11/1/2025	50,662		50,558		49,325		1.3	%	(3)(8)(10)
									59,709		58,881		1.5	%
SEOTownCenter, Inc.	IT Services	Senior Secured Term Loan A	4/10/2018	9.50% (3ML+ 7.50%)	2.00	4/7/2023	24,104		24,104		24,104		0.6	%	(3)(10)
		Senior Secured Term Loan B	4/10/2018	14.50% (3ML+ 12.50%)	2.00	4/7/2023	19,027		19,027		19,027		0.5	%	(3)(10)
									43,131		43,131		1.1	%
Shearer’s Foods, LLC	Food Products	Second Lien Term Loan	9/15/2020	8.75% (1ML+ 7.75%)	1.00	9/23/2028	5,000		4,909		5,000		0.1	%	(3)(8)(10)
									4,909		5,000		0.1	%
Shutterfly, LLC	Internet & Direct Marketing Retail	First Lien Term Loan	11/14/2019	7.00% (1ML+ 6.00%)	1.00	9/25/2026	16,019		14,582		16,019		0.4	%	(3)(8)(10)(47)
									14,582		16,019		0.4	%
Sorenson Communications, LLC	Diversified Telecommunication Services	First Lien Term Loan	3/12/2021	6.25% (3ML+ 5.50%)	0.75	3/17/2026	17,550		17,379		17,550		0.4	%	(3)(8)(10)
									17,379		17,550		0.4	%
Southern Veterinary Partners	Health Care Providers & Services	Second Lien Term Loan	10/2/2020	8.75% (6ML+ 7.75%)	1.00	10/5/2028	8,000		7,927		8,000		0.2	%	(3)(8)(10)
									7,927		8,000		0.2	%
Spectrum Holdings III Corp	Health Care Equipment & Supplies	Second Lien Term Loan	1/26/2018	8.00% (6ML+ 7.00%)	1.00	1/31/2026	7,500		7,478		6,721		0.2	%	(3)(8)(10)
									7,478		6,721		0.2	%
Staples, Inc.	Distributors	First Lien Term Loan	11/18/2019	5.18% (3ML+ 5.00%)	—	4/16/2026	8,864		8,797		8,687		0.2	%	(3)(8)(10)(47)
									8,797		8,687		0.2	%
Strategic Materials	Household Durables	Second Lien Term Loan	10/27/2017	8.75% (3ML+ 7.75%)	1.00	11/1/2025	7,000		6,962		5,629		0.1	%	(3)(8)(10)
									6,962		5,629		0.1	%
Stryker Energy, LLC	Energy Equipment & Services	Overriding Royalty Interests	12/4/2006		—	N/A	—		—		—		—	%	(13)(16)
									—		—		—	%
Sudbury Mill CLO Ltd.	Structured Finance	Subordinated Structured Note	11/14/2013	Residual Interest, current yield 0.00%	—	1/19/2026	28,200		13,875		6,868		0.2	%	(5)(14)(17)
									13,875		6,868		0.2	%
Symphony CLO XIV, Ltd.	Structured Finance	Subordinated Structured Note	5/6/2014	Residual Interest, current yield 0.00%	—	7/14/2026	49,249		26,645		15,846		0.4	%	(5)(14)(17)
									26,645		15,846		0.4	%
Symphony CLO XV, Ltd.	Structured Finance	Subordinated Structured Note	10/17/2014	Residual Interest, current yield 11.95%	—	1/19/2032	63,830		45,451		27,674		0.7	%	(5)(14)
									45,451		27,674		0.7	%
The Octave Music Group, Inc.	Entertainment	First Lien Term Loan	2/26/2020	6.25% (1ML+ 5.25%) plus 0.75% PIK	1.00	5/29/2025	37,897		37,604		37,897		1.0	%	(3)(8)(10)(39)
									37,604		37,897		1.0	%
Town & Country Holdings, Inc.	Distributors	First Lien Term Loan	1/26/2018	10.00% (3ML+ 8.50%)	1.50	1/26/2023	160,145		160,145		160,145		4.1	%	(3)(10)
									160,145		160,145		4.1	%

See notes to consolidated financial statements.

26

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2021

(in thousands, except share data)

							June 30, 2021
Portfolio Company	Industry	Investments(1)(38)	Acquisition Date(44)	Coupon/Yield	Floor	Legal Maturity	Principal Value		Amortized Cost		Fair Value(2)		% of  Net Assets
LEVEL 3 PORTFOLIO INVESTMENTS
Non-Control/Non-Affiliate Investments (less than 5.00% voting control)
TPS, LLC	Machinery	First Lien Term Loan	11/30/2020	10.00% (3ML+ 9.00%) plus 1.50% PIK	1.00	11/30/2025	$	28,967	$	28,967	$	28,967	0.7	%	(3)(10)(39)
									28,967		28,967		0.7	%
Transplace Holdings, Inc.	Transportation Infrastructure	Second Lien Term Loan	10/2/2017	9.75% (6ML+ 8.75%)	1.00	10/6/2025	30,900		30,384		30,900		0.8	%	(3)(8)(10)
									30,384		30,900		0.8	%
United Sporting Companies, Inc. (18)	Distributors	Second Lien Term Loan	9/28/2012	13.25% (1ML+ 11.00%) plus 2.00% PIK	2.25	11/16/2019	144,692		103,730		6,936		0.2	%	(9)(10)
									103,730		6,936		0.2	%
Universal Fiber Systems, LLC	Textiles, Apparel & Luxury Goods	Second Lien Term Loan	10/2/2015	10.50% (1ML+ 9.50%)	1.00	10/2/2022	37,000		36,868		36,515		0.9	%	(3)(8)(10)
									36,868		36,515		0.9	%
Upstream Newco, Inc.	Health Care Providers & Services	First Lien Term Loan	11/20/2019	4.60% (1ML+ 4.50%)	—	11/20/2026	8,147		8,114		8,147		0.2	%	(3)(8)(10)
		Second Lien Term Loan	11/20/2019	8.60% (1ML+ 8.50%)	—	11/20/2027	22,000		21,835		22,000		0.6	%	(3)(8)(10)
									29,949		30,147		0.8	%
USG Intermediate, LLC	Leisure Products	Revolving Line of Credit - $3,000 Commitment	4/15/2015	10.25% (1ML+ 9.25%)	1.00	8/24/2024	1,000		1,000		1,000		—	%	(10)(15)
		Senior Secured Term Loan B	4/15/2015	12.75% (1ML+ 11.75%)	1.00	8/24/2024	13,381		13,381		13,381		0.3	%	(3)(10)
		Equity	4/15/2015		—	N/A	—		1		—		—	%	(16)
									14,382		14,381		0.3	%
Venio LLC (48)	Professional Services	First Lien Term Loan	2/19/2014	4.00% plus 10.00% PIK (3ML + 7.50%)	2.50	2/19/2020	15,235		15,235		12,760		0.3	%	(10)(39)
									15,235		12,760		0.3	%
Vision Solutions, Inc. (29)	IT Services	Second Lien Term Loan	4/23/2021	8.00% (3ML+ 7.25%)	0.75	4/23/2029	60,000		59,438		60,000		1.5	%	(3)(8)(10)
									59,438		60,000		1.5	%
Voya CLO 2012-4, Ltd.	Structured Finance	Subordinated Structured Note	11/5/2012	Residual Interest, current yield 9.72%	—	10/15/2030	40,612		30,665		24,830		0.6	%	(5)(14)
									30,665		24,830		0.6	%
Voya CLO 2014-1, Ltd.	Structured Finance	Subordinated Structured Note	2/5/2014	Residual Interest, current yield 8.31%	—	4/18/2031	40,772		30,555		18,151		0.5	%	(5)(14)
									30,555		18,151		0.5	%
Voya CLO 2016-3, Ltd.	Structured Finance	Subordinated Structured Note	9/30/2016	Residual Interest, current yield 11.32%	—	10/20/2031	28,100		25,390		20,221		0.5	%	(5)(14)
									25,390		20,221		0.5	%
Voya CLO 2017-3, Ltd.	Structured Finance	Subordinated Structured Note	6/13/2017	Residual Interest, current yield 13.22%	—	4/20/2034	44,884		49,537		42,859		1.1	%	(5)(14)
									49,537		42,859		1.1	%
VT Topco, Inc.	Commercial Services & Supplies	Second Lien Term Loan	8/14/2018	7.10% (1ML+ 7.00%)	—	8/17/2026	7,000		6,978		6,882		0.2	%	(3)(8)(10)
									6,978		6,882		0.2	%
Total Non-Control/Non-Affiliate Investments (Level 3)									$	3,372,750	$	2,925,327	74.2	%
Total Portfolio Investments (Level 3)									$	6,058,124	$	6,201,778	157.2	%

See notes to consolidated financial statements.

27

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021

(1)The terms “Prospect,” “the Company,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise. The securities in which Prospect has invested were acquired in transactions that were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These securities may be resold only in transactions that are exempt from registration under the Securities Act.

(2)Fair value is determined by or under the direction of our Board of Directors. Unless otherwise indicated by endnote 47 below, all of our investments are valued using significant unobservable inputs. In accordance with ASC 820, such investments are classified as Level 3 within the fair value hierarchy. See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.

(3)Security, or a portion thereof, is held by Prospect Capital Funding LLC (“PCF”), our wholly owned subsidiary and a bankruptcy remote special purpose entity, and is pledged as collateral for the Revolving Credit Facility and such security is not available as collateral to our general creditors (see Note 4). The fair values of the investments held by PCF at September 30, 2021 and June 30, 2021 were $1,860,102 and $1,797,733, respectively, representing 28.9% and 29.0% of our total investments, respectively.

(4)Keystone Acquisition Corp. is the parent borrower on the second lien term loan. Other joint borrowers on this debt investment include Keystone Peer Review Organization, Inc., KEPRO Acquisitions, Inc., APS Healthcare Bethesda, Inc., Ohio KEPRO, Inc., and APS Healthcare Quality Review, Inc.

(5)This investment is in the equity class of the collateralized loan obligation (“CLO”) security, which is referred to as “Subordinated Structured Note,” or “SSN”. The SSN investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield, calculated using amortized cost, is based on the current projections of this excess cash flow taking into account assumptions which have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.

(6)During the year ended June 30, 2020, we increased our investment in PGX Holdings, Inc. (“PGX”) through a new 1.5 Lien Term Loan in the aggregate principal amount of $1,981. Attached to the incremental term loan investment were shares of common stock representing an 11.4% equity interest in PGX. As a result, our investment in PGX was transferred from non-control/non-affiliate to affiliate classification as of June 30, 2020. On July 21, 2021, we funded total commitments of $202,931, comprised of a $49,000 first lien senior secured floating rate term loan and a $153,931 second lien senior secured floating rate term loan, to support the refinancing of PGX. In connection with the refinancing, our $47,773 first lien senior secured term loan, $18,164 1.5 lien senior secured term loan and $122,271 second lien senior secured term loan outstanding with PGX were fully repaid at par.

(7)Engine Group, Inc., EMX Digital, Inc. (f/k/a Clearstream.TV, Inc.), and Engine International, Inc., are joint borrowers on the senior secured and the second lien term loans.

(8)Syndicated investment which was originated by a financial institution and broadly distributed.

(9)Investment on non-accrual status as of the reporting date (See Note 2).

(10)Certain variable rate securities in our portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread. The 1-Month LIBOR, or “1ML”, was 0.08% as of September 30, 2021 and 0.10% as of June 30, 2021. The 2-Month LIBOR, or “2ML”, was 0.11% as of September 30, 2021 and 0.13% as of June 30, 2021. The 3-Month LIBOR, or “3ML”, was 0.13% as of September 30, 2021 and 0.15    % as of June 30, 2021. The 6-Month LIBOR, or “6ML”, was 0.16% as of September 30, 2021 and 0.16% as of June 30, 2021. The 12-Month LIBOR, or “12ML”, was 0.24% as of September 30, 2021 and 0.25% as of June 30, 2021.

(11)PeopleConnect Holdings, Inc. and Pubrec Holdings, Inc. are joint borrowers.

(12)The consolidated revenue interest is equal to the lesser of (i) 2.0% of consolidated revenue for the twelve-month period ending on the last day of the prior fiscal quarter (or portion thereof) and (ii) 25% of the amount of interest accrued on the Notes at the cash interest rate for such fiscal quarter (or portion thereof).

(13)The overriding royalty interests held receive payments at the stated rates based upon operations of the borrower.

See notes to consolidated financial statements.

28

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(14)Investment has been designated as an investment not “qualifying” under Section 55(a) of the Investment Company Act of 1940 (the “1940 Act”). Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2021 and June 30, 2021, our qualifying assets, as a percentage of total assets, stood at 76.34% and 76.31%, respectively. We monitor the status of these assets on an ongoing basis.

(15)Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%. As of September 30, 2021 and June 30, 2021, we had $41,564 and $67,385, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.

(16)Represents non-income producing security that has not paid a dividend in the year preceding the reporting date.

(17)The effective yield has been estimated to be 0% as expected future cash flows are anticipated to not be sufficient to repay the investment at cost. If the expected investment proceeds increase, there is a potential for future investment income from the investment. Distributions, once received, will be recognized as return of capital, and when called, any remaining unamortized investment costs will be written off if the actual distributions are less than the amortized investment cost. To the extent that the cost basis of the SSN is fully recovered, any future distributions will be recorded as realized gains.

(18)Ellett Brothers, LLC, Evans Sports, Inc., Jerry’s Sports, Inc., Simmons Gun Specialties, Inc., Bonitz Brothers, Inc., and Outdoor Sports Headquarters, Inc. are joint borrowers on the second lien term loan. United Sporting Companies, Inc. (“USC”) is a parent guarantor of this debt investment, and is 100% owned by SportCo Holdings, Inc. (“SportCo”). In June 2019, USC filed for Chapter 11 bankruptcy and began liquidating its remaining assets.

(19)Medusind Acquisition, Inc., Medusind Intermediate, Inc., Medusind Solutions Inc. and Medusind Inc. are joint borrowers.

(20)CP Holdings of Delaware LLC (“CP Holdings”), a consolidated entity in which we own 100% of the membership interests, owns 99.8% of CP Energy Services Inc. (“CP Energy”) as of September 30, 2021 and June 30, 2021. CP Energy owns directly or indirectly 100% of each of CP Well Testing, LLC; Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. We report CP Energy as a separate controlled company. In June 2019, CP Energy purchased a controlling interest in the common equity of Spartan Energy Holdings, Inc. (“Spartan Holdings”), which owns 100% of Spartan Energy Services, LLC (“Spartan”), a portfolio company of Prospect with $15,656 in senior secured term loans (the “Spartan Term Loans”) due to us as of September 30, 2021. As a result of CP Energy’s purchase, and given Prospect’s controlling interest in CP Energy, our Spartan Term Loans are presented as control investments under CP Energy beginning June 30, 2019. Spartan remains the direct borrower and guarantor to Prospect for the Spartan Term Loans. In September 2020, we made a new $26,193 Series A preferred stock investment in Spartan Energy Holdings, Inc., which equates to 100% of the Series A non-voting non-convertible preferred stock outstanding. In September 2020, Spartan Energy Services, LLC fully repaid the $26,193 Senior Secured Term Loan B receivable to us at par. We recorded a realized gain of $2,832 in our Consolidated Statement of Operations for the quarter ended September 30, 2020 as a result of this transaction.

(21)Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a consolidated entity in which we own 100% of the membership interests, owns 99.01% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC (“Credit Central”)) as of September 30, 2021 and June 30, 2021. Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC, the operating companies. We report Credit Central as a separate controlled company.

(22)Redstone Holdco 2 LP is the parent borrower on the second lien term loan. Redstone Buyer, LLC, Redstone Intermediate (Archer) HoldCo LLC, Redstone Intermediate (FRI) HoldCo LLC, Redstone Intermediate (NetWitness) HoldCo, LLC, and Redstone Intermediate (SecurID) HoldCo, LLC are joint borrowers on the Second Lien Term Loan.

(23)First Tower Holdings of Delaware LLC (“First Tower Delaware”), a consolidated entity in which we own 100% of the membership interests, owns 80.1% of First Tower Finance Company LLC (“First Tower Finance”), which owns 100% of First Tower, LLC, the operating company as of September 30, 2021 and June 30, 2021. We report First Tower Finance as a separate controlled company. Effective March 17, 2021, the First Tower, LLC lenders were granted a first priority security interest in First Tower Finance’s assets and our investment became classified as a First Lien Term Loan. Effective June 30, 2021, we increased our investment in our first lien term loan in the aggregate principal amount of $50,000 and that proceeds were returned to us as a distribution on our equity investment in First Tower, LLC.

See notes to consolidated financial statements.

29

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(24)Energy Solutions Holdings Inc., a consolidated entity in which we own 100% of the equity, owns 100% of Freedom Marine Solutions, LLC (“Freedom Marine”), which owns Vessel Company, LLC, Vessel Company II, LLC and Vessel Company III, LLC. We report Freedom Marine as a separate controlled company.

(25)MITY Holdings of Delaware Inc. (“MITY Delaware”), a consolidated entity in which we own 100% of the common stock, owns 100% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”). MITY owns 100% of each of MITY-Lite, Inc. (“Mity-Lite”); Broda Enterprises USA, Inc.; and Broda Enterprises ULC (“Broda Canada”). We report MITY as a separate controlled company. Our subordinated unsecured note issued and outstanding to Broda Canada is denominated in Canadian Dollars (“CAD”). As of September 30, 2021 and June 30, 2021, the principal balance of this note was CAD 7,371. In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), this note was remeasured into our functional currency, US Dollars (USD), and is presented on our Consolidated Schedule of Investments in USD. We formed a separate legal entity domiciled in the United States, MITY FSC, Inc., (“MITY FSC”) in which Prospect owns 100% of the equity. MITY FSC does not have material operations. This entity earns commission payments from MITY-Lite based on its sales to foreign customers, and distributes it to its shareholder. 

(26)NPH Property Holdings, LLC (“NPH”), a consolidated entity in which we own 100% of the membership interests, owns 100% of the common equity of National Property REIT Corp. (“NPRC”) (f/k/a National Property Holdings Corp.), a property REIT which holds investments in several real estate properties. Additionally, NPRC invests in online consumer loans and rated secured structured notes through American Consumer Lending Limited (“ACLL”) and National General Lending Limited (“NGL”), respectively, its wholly owned subsidiaries. We report NPRC as a separate controlled company. See Note 3 for further discussion of the investments held by NPRC.

(27)Nationwide Acceptance Holdings LLC (“Nationwide Holdings”), a consolidated entity in which we own 100% of the membership interests, owns 94.48% of Nationwide Loan Company LLC, the operating company, as of September 30, 2021 and June 30, 2021. We report Nationwide Loan Company LLC as a separate controlled company. Prospect has a first priority security interest in the assets of Nationwide.

(28)NMMB Holdings, Inc. (“NMMB Holdings”), a consolidated entity in which we own 100% of the equity, owns 95.17% and 94.82% of the fully diluted equity of NMMB, Inc. (“NMMB”) as of September 30, 2021 and June 30, 2021, respectively. NMMB owns 100% of Refuel Agency, Inc., which owns 100% of Armed Forces Communications, Inc. We report NMMB as a separate controlled company.

(29)Vision Solutions, Inc. and Precisely Software Incorporate (f/k/a Syncsort Incorporated) are joint borrowers on the Second Lien Term Loan.

(30)Prospect owns 99.96% of the equity of USES Corp. as of September 30, 2021 and June 30, 2021.

(31)Valley Electric Holdings I, Inc., a consolidated entity in which we own 100% of the common stock, owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), another consolidated entity. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”). Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. We report Valley Electric as a separate controlled company.

(32)As of September 30, 2021 and June 30, 2021, Prospect owns 8.57% of the equity in Encinitas Watches Holdco, LLC (f/k/a Nixon Holdco, LLC), the parent company of Nixon, Inc.

(33)Prospect owns 9.19% of the equity in Targus Cayman HoldCo Limited (“Targus”), the parent company of Targus International LLC (“Targus International”), as of September 30, 2021 and June 30, 2021.

(34)On December 10, 2018, UTP Holdings Group, Inc. (“UTP Holdings”) purchased all of the voting stock of Universal Turbine Parts, LLC (“UTP”) and appointed a new Board of Directors to UTP Holdings, consisting of three employees of the Investment Advisor. At the time UTP Holdings acquired UTP, UTP Holdings (f/k/a Harbortouch Holdings of Delaware) was a wholly-owned holding company controlled by Prospect and therefore Prospect’s investment in UTP became classified as a control investment during the year ended June 30, 2019.

(35)As of September 30, 2021 and June 30, 2021, the residual profit interest includes both (i) 8.33% of New TLA and TLD residual profit and (ii) 100% of TLC residual profits, with both calculated quarterly in arrears.

(36)Prospect owns 100% of the preferred equity of Pacific World Corporation (“Pacific World”), which represents a 99.97% ownership interest of Pacific World as of September 30, 2021 and June 30, 2021, respectively. As a result, Prospect’s investment in Pacific World is classified as a control investment.

See notes to consolidated financial statements.

30

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(37)The following shows the composition of our investment portfolio at cost by control designation, investment type and by industry as of September 30, 2021:

Industry	1st Lien Term Loan		2nd Lien Term Loan		3rd Lien Term Loan		Subordinated Structured Notes		Subordinated Unsecured Debt		Equity (B)		Cost Total
Control Investments
Aerospace & Defense	$	80,510	$	—	$	—	$	—	$	—	$	22,738	$	103,248
Commercial Services & Supplies	115,791		—		—		—		7,200		27,349		150,340
Construction & Engineering	43,731		—		—		—		—		26,204		69,935
Consumer Finance	348,437		67,491		—		—		—		71,323		487,251
Diversified Consumer Services	—		—		—		—		—		2,378		2,378
Energy Equipment & Services	58,348		—		—		—		—		220,151		278,499
Equity Real Estate Investment Trusts (REITs)	636,591		—		—		—		—		210		636,801
Health Care Providers & Services	249,643		—		—		—		—		45,118		294,761
Machinery	28,622		—		—		—		—		6,866		35,488
Media	4,836		—		—		—		—		12,869		17,705
Online Lending	2,700		—		—		—		—		—		2,700
Personal Products	65,133		—		—		—		—		186,795		251,928
Trading Companies & Distributors	32,740		—		—		—		—		32,500		65,240
Structured Finance (A)	90,200		—		—		—		—		—		90,200
Total Control Investments	$	1,757,282	$	67,491	$	—	$	—	$	7,200	$	654,501	$	2,486,474
Affiliate Investments
Commercial Services & Supplies	$	3,680	$	—	$	—	$	—	$	—	$	10,303	$	13,983
Diversified Consumer Services	48,510		153,931		—		—		—		—		202,441
Textiles, Apparel & Luxury Goods	—		—		—		—		—		2,805		2,805
Total Affiliate Investments	$	52,190	$	153,931	$	—	$	—	$	—	$	13,108	$	219,229
Non-Control/Non-Affiliate Investments
Auto Components	$	18,253	$	76,978	$	—	$	—	$	—	$	—	$	95,231
Commercial Services & Supplies	9,701		98,349		—		—		—		—		108,050
Communications Equipment	9,167		50,560		—		—		—		—		59,727
Consumer Finance	72,878		—		—		—		—		—		72,878
Distributors	168,464		103,730		—		—		—		—		272,194
Diversified Consumer Services	—		22,669		—		—		—		—		22,669
Diversified Financial Services	30,165		—		—		—		—		—		30,165
Diversified Telecommunication Services	26,393		41,852		—		—		—		—		68,245
Entertainment	34,578		—		—		—		—		—		34,578
Food Products	—		66,379		—		—		—		—		66,379
Health Care Equipment & Supplies	—		7,480		—		—		—		—		7,480
Health Care Providers & Services	170,608		126,286		—		—		—		—		296,894
Hotels, Restaurants & Leisure	24,277		—		—		—		—		—		24,277
Household Durables	—		29,739		3,950		—		—		2,001		35,690
Household Products	21,124		—		—		—		—		—		21,124
Insurance	—		21,925		—		—		—		—		21,925
Interactive Media & Services	174,977		—		—		—		—		—		174,977
Internet & Direct Marketing Retail	60,295		—		—		—		—		—		60,295
IT Services	169,790		108,613		—		—		—		—		278,403
Leisure Products	31,701		—		—		—		—		1		31,702
Machinery	57,243		9,977		—		—		—		—		67,220
Media	57,347		—		—		—		—		26,991		84,338
Paper & Forest Products	4,429		11,437		—		—		—		—		15,866
Professional Services	82,824		48,166		—		—		—		—		130,990
Software	—		22,253		—		—		—		—		22,253
Technology Hardware, Storage & Peripherals	—		12,435		—		—		—		—		12,435
Textiles, Apparel & Luxury Goods	186,585		36,894		—		—		—		—		223,479

See notes to consolidated financial statements.

31

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

Industry	1st Lien Term Loan		2nd Lien Term Loan		3rd Lien Term Loan		Subordinated Structured Notes		Subordinated Unsecured Debt		Equity (B)		Cost Total
Transportation Infrastructure	—		30,415		—		—		—		—		30,415
Structured Finance (A)	—		—		—		1,074,751		—		—		1,074,751
Total Non-Control/Non-Affiliate	$	1,410,799	$	926,137	$	3,950	$	1,074,751	$	—	$	28,993	$	3,444,630
Total Portfolio Investment Cost	$	3,220,271	$	1,147,559	$	3,950	$	1,074,751	$	7,200	$	696,602	$	6,150,333

The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of September 30, 2021:

Industry	1st Lien Term Loan			2nd Lien Term Loan			3rd Lien Term Loan			Subordinated Structured Notes			Subordinated Unsecured Debt			Equity (B)			Fair Value Total			Fair Value % of Net Assets Attributable to Common Stock
Control Investments
Aerospace & Defense	$	80,510		$	—		$	—		$	—		$	—		$	1,111		$	81,621		2.1	%
Commercial Services & Supplies	77,006			—			—			—			4,114			—			81,120			2.1	%
Construction & Engineering	43,731			—			—			—			—			99,188			142,919			3.6	%
Consumer Finance	348,437			69,893			—			—			—			328,922			747,252			19.0	%
Diversified Consumer Services	—			—			—			—			—			3,833			3,833			0.1	%
Energy Equipment & Services	58,348			—			—			—			—			25,484			83,832			2.1	%
Equity Real Estate Investment Trusts (REITs)	636,591			—			—			—			—			510,105			1,146,696			29.0	%
Health Care Providers & Services	249,643			—			—			—			—			201,701			451,344			11.4	%
Machinery	28,622			—			—			—			—			23,938			52,560			1.3	%
Media	4,836			—			—			—			—			58,890			63,726			1.6	%
Online Lending	2,700			—			—			—			—			—			2,700			0.1	%
Personal Products	65,133			—			—			—			—			5,637			70,770			1.8	%
Trading Companies & Distributors	27,517			—			—			—			—			—			27,517			0.7	%
Structured Finance (A)	90,200			—			—			—			—			—			90,200			2.3	%
Total Control Investments	$	1,713,274		$	69,893		$	—		$	—		$	4,114		$	1,258,809		$	3,046,090		77.2	%
Fair Value % of Net Assets	43.4		%	1.8		%	—		%	—		%	0.1		%	31.9		%	77.2		%

See notes to consolidated financial statements.

32

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

Industry	1st Lien Term Loan			2nd Lien Term Loan			3rd Lien Term Loan			Subordinated Structured Notes			Subordinated Unsecured Debt			Equity (B)			Fair Value Total			Fair Value % of Net Assets Attributable to Common Stock
Affiliate Investments
Commercial Services & Supplies	$	3,680		$	—		$	—		$	—		$	—		$	14,602		$	18,282		0.5	%
Diversified Consumer Services	48,510			153,931			—			—			—			127,036			329,477			8.3	%
Textiles, Apparel & Luxury Goods	—			—			—			—			—			31,298			31,298			0.8	%
Total Affiliate Investments	$	52,190		$	153,931		$	—		$	—		$	—		$	172,936		$	379,057		9.6	%
Fair Value % of Net Assets	1.3		%	3.9		%	—		%	—		%	—		%	4.4		%	9.6		%
Non-Control/Non-Affiliate Investments
Auto Components	$	18,544		$	77,887		$	—		$	—		$	—		$	—		$	96,431		2.5	%
Commercial Services & Supplies	9,775			98,507			—			—			—			—			108,282			2.8	%
Communications Equipment	9,614			50,048			—			—			—			—			59,662			1.5	%
Consumer Finance	74,242			—			—			—			—			—			74,242			1.9	%
Distributors	168,180			6,912			—			—			—			—			175,092			4.4	%
Diversified Consumer Services	—			23,000			—			—			—			—			23,000			0.6	%
Diversified Financial Services	30,165			—			—			—			—			—			30,165			0.8	%
Diversified Telecommunication Services	26,828			42,670			—			—			—			—			69,498			1.8	%
Entertainment	34,851			—			—			—			—			—			34,851			0.9	%
Food Products	—			66,948			—			—			—			—			66,948			1.7	%
Health Care Equipment & Supplies	—			6,970			—			—			—			—			6,970			0.2	%
Health Care Providers & Services	170,697			126,950			—			—			—			—			297,647			7.5	%
Hotels, Restaurants & Leisure	23,730			—			—			—			—			—			23,730			0.6	%
Household Durables	—			28,546			3,940			—			—			6,025			38,511			1.0	%
Household Products	21,124			—			—			—			—			—			21,124			0.5	%
Insurance	—			22,280			—			—			—			—			22,280			0.6	%
Interactive Media & Services	174,977			—			—			—			—			—			174,977			4.4	%
Internet & Direct Marketing Retail	60,398			—			—			—			—			—			60,398			1.5	%
IT Services	169,790			109,647			—			—			—			—			279,437			7.1	%
Leisure Products	31,564			—			—			—			—			—			31,564			0.8	%
Machinery	57,883			10,000			—			—			—			—			67,883			1.7	%
Media	56,791			—			—			—			—			178			56,969			1.4	%
Paper & Forest Products	4,452			11,283			—			—			—			—			15,735			0.4	%
Professional Services	81,120			50,000			—			—			—			—			131,120			3.4	%
Software	—			22,500			—			—			—			—			22,500			0.6	%
Technology Hardware, Storage & Peripherals	—			12,500			—			—			—			—			12,500			0.3	%
Textiles, Apparel & Luxury Goods	186,585			35,790			—			—			—			—			222,375			5.6	%
Transportation Infrastructure	—			30,900			—			—			—			—			30,900			0.8	%
Structured Finance (A)	—			—			—			750,769			—			—			750,769			19.0	%
Total Non-Control/Non-Affiliate	$	1,411,310		$	833,338		$	3,940		$	750,769		$	—		$	6,203		$	3,005,560		76.3	%
Fair Value % of Net Assets	35.8		%	21.1		%	0.1		%	19.0		%	—		%	0.2		%	76.3		%
Total Portfolio	$	3,176,774		$	1,057,162		$	3,940		$	750,769		$	4,114		$	1,437,948		$	6,430,707		163.1	%
Fair Value % of Net Assets	80.5		%	26.8		%	0.1		%	19.0		%	0.1		%	36.5		%	163.1		%

(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.

(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

(38)The following table shows the composition of our investment portfolio at cost by control designation, investment type and by industry as of June 30, 2021:

Industry	1st Lien Term Loan		1.5 Lien Term Loan		2nd Lien Term Loan		3rd Lien Term Loan		Subordinated Structured Notes		Subordinated Unsecured Debt		Equity (B)		Cost Total
Control Investments
Aerospace & Defense	$	75,406	$	—	$	—	$	—	$	—	$	—	$	22,738	$	98,144
Commercial Services & Supplies	114,184		—		—		—		—		7,200		27,349		148,733
Construction & Engineering	43,731		—		—		—		—		—		26,204		69,935
Consumer Finance	344,968		—		65,599		—		—		—		71,323		481,890
Diversified Consumer Services	—		—		—		—		—		—		2,378		2,378
Energy Equipment & Services	57,078		—		—		—		—		—		220,149		277,227
Equity Real Estate Investment Trusts (REITs)	656,701		—		—		—		—		—		210		656,911
Health Care Providers & Services	237,571		—		—		—		—		—		45,118		282,689
Machinery	28,622		—		—		—		—		—		6,866		35,488
Media	4,874		—		—		—		—		—		12,869		17,743
Online Lending	6,600		—		—		—		—		—		—		6,600
Personal Products	62,450		—		—		—		—		—		186,795		249,245
Trading Companies & Distributors	32,748		—		—		—		—		—		32,500		65,248
Structured Finance (A)	90,200		—		—		—		—		—		—		90,200
Total Control Investments	$	1,755,133	$	—	$	65,599	$	—	$	—	$	7,200	$	654,499	$	2,482,431
Affiliate Investments
Commercial Services & Supplies	$	3,680	$	—	$	—	$	—	$	—	$	—	$	10,302	$	13,982
Diversified Consumer Services	45,720		18,164		122,272		—		—		—		—		186,156
Textiles, Apparel & Luxury Goods	—		—		—		—		—		—		2,805		2,805
Total Affiliate Investments	$	49,400	$	18,164	$	122,272	$	—	$	—	$	—	$	13,107	$	202,943
Non-Control/Non-Affiliate Investments
Air Freight & Logistics	$	—	$	—	$	12,500	$	—	$	—	$	—	$	—	$	12,500
Auto Components	18,307		—		57,016		—		—		—		—		75,323
Chemicals	28,745		—		—		—		—		—		—		28,745
Commercial Services & Supplies	9,718		—		85,184		—		—		—		—		94,902
Communications Equipment	9,151		—		50,558		—		—		—		—		59,709
Consumer Finance	37,429		—		12,525		—		—		—		—		49,954
Distributors	168,942		—		103,730		—		—		—		—		272,672
Diversified Consumer Services	—		—		22,659		—		—		—		—		22,659
Diversified Financial Services	30,165		—		—		—		—		—		—		30,165
Diversified Telecommunication Services	26,818		—		39,515		—		—		—		—		66,333
Entertainment	40,585		—		—		—		—		—		—		40,585
Food Products	—		—		61,409		—		—		—		—		61,409
Health Care Equipment & Supplies	—		—		7,478		—		—		—		—		7,478
Health Care Providers & Services	179,401		—		121,279		—		—		—		—		300,680
Hotels, Restaurants & Leisure	24,502		—		—		—		—		—		—		24,502
Household Durables	—		—		6,962		3,950		—		—		2,001		12,913
Household Products	21,186		—		—		—		—		—		—		21,186
Insurance	—		—		21,911		—		—		—		—		21,911
Interactive Media & Services	180,127		—		—		—		—		—		—		180,127
Internet & Direct Marketing Retail	54,677		—		—		—		—		—		—		54,677
IT Services	170,228		—		90,671		—		—		—		—		260,899
Leisure Products	20,241		—		—		—		—		—		1		20,242
Machinery	57,389		—		4,976		—		—		—		—		62,365
Media	61,224		—		—		—		—		—		26,991		88,215
Paper & Forest Products	4,418		—		11,429		—		—		—		—		15,847
Professional Services	83,958		—		48,057		—		—		—		—		132,015
Software	—		—		22,240		—		—		—		—		22,240
Technology Hardware, Storage & Peripherals	—		—		12,431		—		—		—		—		12,431
Textiles, Apparel & Luxury Goods	162,639		—		36,868		—		—		—		—		199,507
Transportation Infrastructure	—		—		30,384		—		—		—		—		30,384
Structured Finance	—		—		—		—		1,090,175		—		—		1,090,175
Total Non-Control/Non-Affiliate	$	1,389,850	$	—	$	859,782	$	3,950	$	1,090,175	$	—	$	28,993	$	3,372,750
Total Portfolio Investment Cost	$	3,194,383	$	18,164	$	1,047,653	$	3,950	$	1,090,175	$	7,200	$	696,599	$	6,058,124

See notes to consolidated financial statements.

33

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of June 30, 2021:

Industry	1st Lien Term Loan			1.5 Lien Term Loan			2nd Lien Term Loan			3rd Lien Term Loan			Subordinated Structured Notes			Subordinated Unsecured Debt			Equity (B)			Fair Value Total			Fair Value % of Net Assets
Control Investments
Aerospace & Defense	$	75,406		$	—		$	—		$	—		$	—		$	—		$	8,834		$	84,240		2.1	%
Commercial Services & Supplies	79,780			—			—			—			—			3,715			—			83,495			2.1	%
Construction & Engineering	43,731			—			—			—			—			—			105,964			149,695			3.8	%
Consumer Finance	344,968			—			68,137			—			—			—			305,267			718,372			18.2	%
Diversified Consumer Services	—			—			—			—			—			—			3,833			3,833			0.1	%
Energy Equipment & Services	57,078			—			—			—			—			—			26,126			83,204			2.1	%
Equity Real Estate Investment Trusts (REITs)	656,701			—			—			—			—			—			436,254			1,092,955			27.6	%
Health Care Providers & Services	237,571			—			—			—			—			—			174,768			412,339			10.5	%
Machinery	28,622			—			—			—			—			—			21,071			49,693			1.3	%
Media	4,874			—			—			—			—			—			42,014			46,888			1.2	%
Online Lending	6,600			—			—			—			—			—			—			6,600			0.2	%
Personal Products	62,450			—			—			—			—			—			8,647			71,097			1.8	%
Trading Companies & Distributors	27,106			—			—			—			—			—			—			27,106			0.7	%
Structured Finance (A)	90,200			—			—			—			—			—			—			90,200			2.3	%
Total Control Investments	$	1,715,087		$	—		$	68,137		$	—		$	—		$	3,715		$	1,132,778		$	2,919,717		74.0	%
Fair Value % of Net Assets	43.5		%	—		%	1.7		%	—		%	—		%	0.1		%	28.7		%	74.0		%
Affiliate Investments
Commerical Sevices & Supplies	$	3,680		$	—		$	—		$	—		$	—		$	—		$	13,760		$	17,440		0.4	%
Diversified Consumer Services	47,746			18,164			122,272			—			—			—			124,907			313,089			7.9	%
Textiles, Apparel & Luxury Goods	—			—			—			—			—			—			26,205			26,205			0.7	%
Total Affiliate Investments	$	51,426		$	18,164		$	122,272		$	—		$	—		$	—		$	164,872		$	356,734		9.0	%
Fair Value % of Net Assets	1.3		%	0.5		%	3.1		%	—		%	—		%	—		%	4.1		%	9.0		%
Non-Control/Non-Affiliate Investments
Air Freight & Logistics	$	—		$	—		$	12,500		$	—		$	—		$	—		$	—		$	12,500		0.3	%
Auto Components	18,633			—			57,887			—			—			—			—			76,520			1.9	%
Commercial Services & Supplies	9,800			—			85,382			—			—			—			—			95,182			2.4	%
Communications Equipment	9,556			—			49,325			—			—			—			—			58,881			1.5	%
Chemicals	28,863			—			—			—			—			—			—			28,863			0.7	%
Consumer Finance	38,041			—			15,188			—			—			—			—			53,229			1.3	%
Distributors	168,832			—			6,936			—			—			—			—			175,768			4.5	%
Diversified Consumer Services	—			—			22,711			—			—			—			—			22,711			0.6	%
Diversified Financial Services	30,165			—			—			—			—			—			—			30,165			0.8	%
Diversified Telecommunication Services	27,278			—			40,170			—			—			—			—			67,448			1.7	%
Entertainment	40,928			—			—			—			—			—			—			40,928			1.0	%
Food Products	—			—			61,948			—			—			—			—			61,948			1.6	%
Health Care Equipment & Supplies	—			—			6,721			—			—			—			—			6,721			0.2	%
Health Care Providers & Services	179,768			—			122,000			—			—			—			—			301,768			7.6	%
Hotels, Restaurants & Leisure	23,624			—			—			—			—			—			—			23,624			0.6	%
Household Durables	—			—			5,629			3,950			—			—			5,824			15,403			0.4	%
Household Products	21,186			—			—			—			—			—			—			21,186			0.5	%
Insurance	—			—			22,280			—			—			—			—			22,280			0.6	%

See notes to consolidated financial statements.

34

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

Industry	1st Lien Term Loan			1.5 Lien Term Loan			2nd Lien Term Loan			3rd Lien Term Loan			Subordinated Structured Notes			Subordinated Unsecured Debt			Equity (B)			Fair Value Total			Fair Value % of Net Assets
Interactive Media & Services	180,127			—			—			—			—			—			—			180,127			4.6	%
Internet & Direct Marketing Retail	56,114			—			—			—			—			—			—			56,114			1.5	%
IT Services	170,228			—			91,490			—			—			—			—			261,718			6.7	%
Leisure Products	20,287			—			—			—			—			—			—			20,287			0.5	%
Machinery	57,016			—			4,973			—			—			—			—			61,989			1.6	%
Media	60,224			—			—			—			—			—			707			60,931			1.5	%
Paper & Forest Products	4,468			—			11,347			—			—			—			—			15,815			0.4	%
Professional Services	82,058			—			50,000			—			—			—			—			132,058			3.3	%
Software	—			—			22,500			—			—			—			—			22,500			0.6	%
Technology Hardware, Storage & Peripherals	—			—			12,500			—			—			—			—			12,500			0.3	%
Textiles, Apparel & Luxury Goods	162,639			—			36,515			—			—			—			—			199,154			5.0	%
Transportation Infrastructure	—			—			30,900			—			—			—			—			30,900			0.8	%
Structured Finance	—			—			—			—			756,109			—			—			756,109			19.2	%
Total Non-Control/Non-Affiliate	$	1,389,835		$	—		$	768,902		$	3,950		$	756,109		$	—		$	6,531		$	2,925,327		74.2	%
Fair Value % of Net Assets	35.2		%	—		%	19.5		%	0.1		%	19.2		%	—		%	0.2		%	74.2		%
Total Portfolio	$	3,156,348		$	18,164		$	959,311		$	3,950		$	756,109		$	3,715		$	1,304,181		$	6,201,778		157.2	%
Fair Value % of Net Assets	80.0		%	0.5		%	24.3		%	0.1		%	19.2		%	0.1		%	33.0		%	157.2		%

(A) Our SSN investments do not have industry concentrations and as such have been separated in the tables above.

(B) Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

See notes to consolidated financial statements.

35

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(39)The interest rate on these investments, excluding those on non-accrual, contains a paid in kind (“PIK”) provision, whereby the issuer has either the option or the obligation to make interest payments with the issuance of additional securities. The interest rate in the schedule represents the current interest rate in effect for these investments.

The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for three months ended September 30, 2021:

Security Name	PIK Rate - Capitalized		PIK Rate - Paid as cash		Maximum Current PIK Rate
CP Energy Services Inc. - Senior Secured Term Loan	12.00	%	—	%	12.00	%	(A)
Credit Central Loan Company, LLC - Subordinated Term Loan	10.00	%	—	%	10.00	%	(B)
Echelon Transportation, LLC - Senior Secured Term Loan	2.25	%	—	%	2.25	%	(C)
Echelon Transportation, LLC - Senior Secured Term Loan	1.00	%	—	%	1.00	%	(D)
First Tower Finance Company LLC - Senior Secured Term Loan	4.53	%	7.47	%	12.00	%
InterDent, Inc. - Senior Secured Term Loan B	12.00	%	—	%	12.00	%
MITY, Inc. - Senior Secured Note A	10.00	%	—	%	—	%	(E)
MITY, Inc. - Senior Secured Note B	20.00	%	—	%	10.00	%	(E)
National Property REIT Corp. - Senior Secured Term Loan A	—	%	3.53	%	3.53	%
National Property REIT Corp. - Senior Secured Term Loan B	—	%	5.50	%	5.50	%
National Property REIT Corp. - Senior Secured Term Loan C	—	%	2.25	%	2.25	%
National Property REIT Corp. - Senior Secured Term Loan D	—	%	2.50	%	2.50	%
Nationwide Loan Company LLC - Senior Subordinated Term Loan	—	%	10.00	%	10.00	%
Pacific World Corporation - Senior Secured Term Loan A	6.25	%	—	%	6.25	%
The Octave Music Group, Inc. (fka Touchtunes) - First Lien Term Loan	—	%	0.75	%	0.75	%
TPS, LLC - First Lien Term Loan	1.50	%	—	%	1.50	%
Valley Electric Co. of Mt. Vernon, Inc. - Senior Secured Note	—	%	2.50	%	2.50	%
Valley Electric Company, Inc. - Senior Secured Note	—	%	10.00	%	10.00	%
Venio LLC - First Lien Term Loan	1.00	%	—	%	1.00	%

(A) On September 30, 2021, the CP Energy Thirteenth Amendment to Loan Agreement was amended to allow 100% of the September 30, 2021 interest accruing in cash to be payable in kind resulting in a current PIK rate capitalized of 12.00%.

(B) On December 17, 2018, the Credit Central Senior Subordinated Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 20.00%.

(C) On January 31, 2018, the Echelon Fourth Amended and Restated Credit Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 14.00%.

(D) On January 31, 2018, the Echelon Fourth Amended and Restated Credit Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 12.00%.

(E) On March 23, 2021, the Mity Amendment No. 1 and Waiver to Note Purchase Agreement was amended to allow Senior Secured Note A and Senior Secured Note B interest accruing in cash to be payable in kind resulting in a maximum current TLA PIK rate of 10% and TLB PIK rate of 20.00%.

See notes to consolidated financial statements.

36

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for three months ended June 30, 2021:

Security Name	PIK Rate - Capitalized	PIK Rate - Paid as cash	Maximum Current PIK Rate
Cinedigm DC Holdings, LLC - Senior Secured Term Loan	—%	2.50%	2.50%
CP Energy Services Inc. - Senior Secured Term Loan	12.00%	—%	12.00%	(A)
Credit Central Loan Company, LLC - Subordinated Term Loan	—%	10.00%	10.00%	(B)
Echelon Transportation, LLC - Senior Secured Term Loan	2.25%	—%	2.25%	(C)
Echelon Transportation, LLC - Senior Secured Term Loan	1.00%	—%	1.00%	(D)
First Tower Finance Company LLC - First Lien Term Loan	3.69%	8.31%	12.00%
InterDent, Inc. - Senior Secured Term Loan B	12.00%	—%	12.00%
MITY, Inc. - Senior Secured Note A	10.00%	—%	—%	(E)
MITY, Inc. - Senior Secured Note B	20.00%	—%	10.00%	(E)
National Property REIT Corp. - Senior Secured Term Loan A	—%	3.53%	3.53%
National Property REIT Corp. - Senior Secured Term Loan B	—%	5.50%	5.50%
National Property REIT Corp. - Senior Secured Term Loan C	—%	2.25%	2.25%
National Property REIT Corp. - Senior Secured Term Loan D	—%	2.50%	2.50%
Nationwide Loan Company LLC - Senior Secured Term Loan	—%	10.00%	10.00%
Pacific World Corporation - Senior Secured Term Loan A	6.25%	—%	6.25%
PGX Holdings, Inc. - Second Lien Term Loan	15.75%	—%	15.75%
PGX Holdings, Inc. - 1.5 Lien	14.50%	—%	14.50%
PGX Holdings, Inc. - First Lien Term Loan	4.25%	—%	4.25%
Rosa Mexicano - Revolving Line of Credit	4.50%	—%	4.50%	(F)
Rosa Mexicano - Senior Secured Term Loan	4.50%	—%	4.50%	(F)
The Octave Music Group, Inc. (fka Touchtunes) - First Lien Term Loan	—%	0.75%	0.75%
TPS, LLC - First Lien Term Loan	1.50%	—%	1.50%
Valley Electric Co. of Mt. Vernon, Inc. - Senior Secured Note	—%	2.50%	2.50%
Valley Electric Company, Inc. - Senior Secured Note	—%	10.00%	10.00%
Venio LLC - First Lien Term Loan	10.00%	—%	10.00%

(A) On June 29, 2021, the CP Energy Eleventh Amendment to Loan Agreement was amended to allow 100% of the June 30, 2021 interest accruing in cash to be payable in kind resulting in a current PIK rate capitalized of 12.00%.

(B) On December 17, 2018, the Credit Central Senior Subordinated Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 20.00%.

(C) On January 31, 2018, the Echelon Fourth Amended and Restated Credit Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 14.00%.

(D) On January 31, 2018, the Echelon Fourth Amended and Restated Credit Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 12.00%.

(E) On March 23, 2021, the Mity Amendment No. 1 and Waiver to Note Purchase Agreement was amended to allow Senior Secured Note A and Senior Secured Note B interest accruing in cash to be payable in kind resulting in a maximum current TLA PIK rate of 10% and TLB PIK rate of 20.00%.

(F) On September 30, 2020, the Rosa Mexicano Sixth Amendment to Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 4.50% after the end of the Delayed Incremental Required Equity Contribution Period. The option for the interest accruing in cash to be payable in kind expired on June 30, 2021.

See notes to consolidated financial statements.

37

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(40)As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the three months ended September 30, 2021 with these controlled investments were as follows:

Portfolio Company	Fair Value at June 30, 2021		Gross Additions (Cost)(A)		Gross Reductions (Cost)(B)		Net unrealized gains (losses)		Fair Value at September 30, 2021		Interest income		Dividend income		Other income		Net realized gains (losses)
CP Energy Services Inc.	$	44,621	$	1,271	$	—	$	(643)	$	45,249	$	1,271	$	—	$	—	$	—
CP Energy - Spartan Energy Services, LLC	26,866		—		—		—		26,866		360		—		6		—
Credit Central Loan Company, LLC	78,023		1,892		—		8,554		88,469		3,650		—		—		—
Echelon Transportation LLC	84,240		5,104		—		(7,723)		81,621		2,701		—		—		—
First Tower Finance Company LLC	592,356		3,777		(308)		15,403		611,228		18,338		—		7,234		—
Freedom Marine Solutions, LLC	11,717		—		—		—		11,717		—		—		—		—
InterDent, Inc.	412,339		12,196		(123)		26,932		451,344		6,328		—		—		—
Kickapoo Ranch Pet Resort	3,833		—		—		—		3,833		—		—		—		—
MITY, Inc.	49,680		1,607		—		399		51,686		1,757		—		—		3
National Property REIT Corp.	1,189,755		9,890		(33,900)		73,851		1,239,596		15,997		—		9,625		—
Nationwide Loan Company LLC	47,993		—		—		(438)		47,555		1,036		1,250		—		—
NMMB, Inc.	46,888		—		(38)		16,876		63,726		131		—		—		—
Pacific World Corporation	71,097		2,683		—		(3,010)		70,770		1,124		—		—		—
R-V Industries, Inc.	49,693		—		—		2,867		52,560		716		—		—		—
Universal Turbine Parts, LLC	27,106		—		(8)		419		27,517		593		—		—		—
USES Corp.	33,815		—		—		(4,381)		29,434		51		—		—		—
Valley Electric Company, Inc.	149,695		—		—		(6,776)		142,919		1,778		—		167		—
Total	$	2,919,717	$	38,420	$	(34,377)	$	122,330	$	3,046,090	$	55,831	$	1,250	$	17,032	$	3

(A) Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, OID accretion and PIK interest, and any transfer of investments.

(B) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.

(41)As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the three months ended September 30, 2021 with these affiliated investments were as follows:

Portfolio Company	Fair Value at June 30, 2021		Gross Additions (Cost)(A)		Gross Reductions (Cost)(B)		Net unrealized gains (losses)		Fair Value at September 30, 2021		Interest income		Dividend income		Other income		Net realized gains (losses)
Nixon, Inc.	—		—		—		—		—		—		—		—		—
PGX Holdings, Inc.	313,089		204,983		(188,698)		103		329,477		9,997		—		3,816		—
RGIS Services, LLC	17,440		1		—		841		18,282		80		—		—		—
Targus Cayman HoldCo Limited	26,205		—		—		5,093		31,298		—		—		—		—
Total	$	356,734	$	204,984	$	(188,698)	$	6,037	$	379,057	$	10,077	$	—	$	3,816	$	—

(A) Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, PIK interest, and any transfer of investments.

(B) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.

See notes to consolidated financial statements.

38

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(42)As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2021 with these controlled investments were as follows:

Portfolio Company	Fair Value at June 30, 2020		Gross Additions (Cost)(A)		Gross Reductions (Cost)(B)		Net unrealized gains (losses)		Fair Value at June 30, 2021		Interest income		Dividend income		Other income		Net realized gains (losses)
CP Energy Services Inc.	$	51,174	$	4,678	$	(1)	$	(11,230)	$	44,621	$	4,680	$	—	$	—	$	—
CP Energy - Spartan Energy Services, LLC	18,711		28,694		(23,361)		2,822		26,866		1,252		—		25		2,832
Credit Central Loan Company, LLC	75,685		9,493		(3,764)		(3,391)		78,023		14,139		—		—		—
Echelon Transportation LLC	85,627		9,935		—		(11,322)		84,240		9,765		—		—		—
First Tower Finance Company LLC	508,465		3,001		(5,362)		86,252		592,356		60,928		—		21,081		—
Freedom Marine Solutions, LLC	12,351		600		—		(1,234)		11,717		—		—		—		—
InterDent, Inc.	230,757		15,637		—		165,945		412,339		22,479		—		—		—
Kickapoo Ranch Pet Resort	3,286		—		—		547		3,833		—		—		—		—
MITY, Inc.	51,905		7,208		850		(10,283)		49,680		10,078		—		66		2
National Property REIT Corp.	878,733		225,742		(83,450)		168,730		1,189,755		57,296		—		39,924		—
Nationwide Loan Company LLC	37,238		173		384		10,198		47,993		4,105		2,381		405		—
NMMB, Inc.	33,668		—		(152)		13,372		46,888		528		—		—		—
Pacific World Corporation	59,907		2,542		—		8,648		71,097		4,317		—		—		—
R-V Industries, Inc.	38,565		—		—		11,128		49,693		2,862		—		—		—
Universal Turbine Parts, LLC	26,599		316		(518)		709		27,106		2,347		—		—		121
USES Corp.	17,325		2,000		—		14,490		33,815		102		—		—		—
Valley Electric Company, Inc.	129,296		—		1,061		19,338		149,695		7,105		2,261		666		—
Total	$	2,259,292	$	310,019	$	(114,313)	$	464,719	$	2,919,717	$	201,983	$	4,642	$	62,167	$	2,955

(A) Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, PIK interest, and any transfer of investments.

(B) Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.

(43)As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2021 with these affiliated investments were as follows:

Portfolio Company	Fair Value at June 30, 2020		Gross Additions (Cost)(A)		Gross Reductions (Cost)(B)		Net unrealized gains (losses)		Fair Value at June 30, 2021		Interest income		Dividend income		Other income		Net realized gains (losses)
Edmentum Ultimate Holdings, LLC	$	59,618	$	9,278	$	(63,425)	$	(5,471)	$	—	$	8,955	$	—	$	33	$	4,469
Nixon, Inc.	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
PGX Holdings, Inc.	$	106,711	$	81,113	$	(1,489)	$	126,754	$	313,089	$	22,016	$	—	$	76	$	—
RGIS Services, LLC	$	—	$	19,276	$	(5,294)	$	3,458	$	17,440	$	—	$	378	$	—	$	—
Targus Cayman HoldCo Limited	$	21,208	$	—	$	—	$	4,997	$	26,205	$	—	$	—	$	—	$	—
	187,537		109,667		(70,208)		129,738		356,734		30,971		378		109		4,469

(A)    Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, PIK interest, and any transfer of investments.

(B)    Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales, impairments, and any transfer of investments.

See notes to consolidated financial statements.

39

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(44)Acquisition date represents the date of PSEC's initial investment. Follow-on acquisitions have occurred on the following dates to arrive at PSEC's current investment (excluding effects of capitalized PIK interest, premium/original issue discount amortization/accretion, and partial repayments) (See endnote 45 for NPRC equity follow-on acquisitions):

Portfolio Company	Investment	Follow-On Acquisition Dates	Follow-On Acquisitions (Excluding initial investment cost)
8th Avenue Food & Provisions, Inc.	Second Lien Term Loan	11/17/2020, 9/17/2021	$	7,051
ACE Cash Express, Inc.	Senior Secured Note	5/24/2019, 7/16/2019, 12/20/2019, 8/27/2020, 9/30/2020, 11/5/2020, 11/13/2020, 11/18/2020	18,105
Amerilife Group, LLC	Second Lien Term Loan	9/3/2020, 12/2/2020, 6/10/2021	12,060
Apidos CLO XI	Subordinated Structured Note	11/2/2016, 4/8/2021	7,559
Apidos CLO XII	Subordinated Structured Note	1/26/2018	4,070
Apidos CLO XV	Subordinated Structured Note	3/29/2018	6,480
Apidos CLO XXII	Subordinated Structured Note	2/24/2020	1,912
Atlantis Health Care Group (Puerto Rico), Inc.	Revolving Line of Credit	4/15/2013, 5/21/2013, 3/11/2014, 6/26/2017, 9/29/2017, 10/12/2017, 10/31/2017	7,500
Atlantis Health Care Group (Puerto Rico), Inc.	Senior Secured Term Loan	12/9/2016	42,000
Barings CLO 2018-III	Subordinated Structured Note	5/18/2018	9,255
Broder Bros., Co.	Senior Secured Note	1/29/2019, 2/28/2019, 9/10/2021, 9/30/2021	25,370
Brookside Mill CLO Ltd.	Subordinated Structured Note	1/29/2018	3,605
California Street CLO IX Ltd.	Subordinated Structured Note	9/6/2016, 10/17/2016	6,842
CCS-CMGC Holdings, Inc.	First Lien Term Loan	10/8/2019	4,692
CCS-CMGC Holdings, Inc.	Second Lien Term Loan	8/20/2019	1,993
Cent CLO 21 Limited	Subordinated Structured Note	7/12/2018	1,024
CIFC Funding 2014-IV-R, Ltd.	Subordinated Structured Note	10/12/2018	1,158
CP Energy Services Inc.	Senior Secured Term Loan A to Spartan Energy Services, LLC	4/9/2021	2,500
CP Energy Services Inc.	Common Stock	10/11/2013, 12/26/2013, 4/6/2018, 12/31/2019	69,586
Credit Central Loan Company, LLC	Class A Units	12/28/2012, 3/28/2014, 6/26/2014, 9/28/2016, 8/21/2019	11,975
Credit Central Loan Company, LLC	Subordinated Term Loan	6/26/2014, 9/28/2016	41,335
Curo Group Holdings Corp.	Second Lien Term Loan	7/31/2020, 10/6/2020, 10/8/2020, 10/19/2020, 11/12/2020, 11/18/2020, 11/20/2020	10,252
Curo Group Holdings Corp.	First Lien Term Loan	8/31/2021	5,006
Echelon Transportation, LLC	Membership Interest	3/31/2014, 9/30/2014, 12/9/2016	22,488
Echelon Transportation, LLC	Senior Secured Term Loan	11/14/2018, 7/9/2019, 5/5/2020, 10/9/2020, 1/21/2021, 3/18/2021	5,465
First Tower Finance Company LLC	Class A Units	12/30/2013, 6/24/2014, 12/15/2015, 11/21/2016, 3/9/2018	39,885
First Tower Finance Company LLC	Subordinated Term Loan to First Tower, LLC	12/15/2015, 3/9/2018	20,924
Freedom Marine Solutions, LLC	Membership Interest	10/1/2009, 12/22/2009, 1/13/2010, 3/30/2010, 5/13/2010, 2/14/2011, 4/28/2011, 7/7/2011, 10/20/2011, 10/30/2015, 1/7/2016, 4/11/2016, 8/11/2016, 1/30/2017, 4/20/2017, 6/13/2017, 8/30/2017, 1/17/2018, 2/15/2018, 5/8/2018, 10/31/2018, 5/14/2021	40,468
Galaxy XV CLO, Ltd.	Subordinated Structured Note	8/21/2015, 3/10/2017	9,161
Galaxy XXVII CLO, Ltd.	Subordinated Structured Note	6/11/2015	1,460
GEON Performance Solutions, LLC	Revolving Line of Credit	12/12/2019, 1/10/2020, 2/3/2020, 2/6/2020, 3/2/2020, 3/6/2020, 4/9/2020, 5/7/2020, 6/3/2020	3,796
Global Tel*Link Corporation	Second Lien Term Loan	4/10/2019, 8/22/2019, 9/20/2019, 9/14/2021, 9/17/2021	16,993
Help/Systems Holdings, Inc.	Second Lien Term Loan	5/10/2018, 3/11/2019, 11/22/2019, 5/11/2021	24,649
Interdent, Inc.	Senior Secured Term Loan A	2/11/2014, 4/21/2014, 11/25/2014, 12/23/2014, 7/14/2021	83,903
Interdent, Inc.	Senior Secured Term Loan B	2/11/2014, 4/21/2014, 11/25/2014, 12/23/2014	76,125
Interventional Management Services, LLC	Revolving Line of Credit	2/25/2021	2,000
Jefferson Mill CLO Ltd.	Subordinated Structured Note	9/21/2018	2,047
K&N Parent, Inc.	Second Lien Term Loan	8/14/2018, 9/5/2018, 9/7/2018, 9/10/2018, 9/24/2018, 11/12/2020	13,111
Kickapoo Ranch Pet Resort	Membership Interest	10/21/2019, 12/4/2019	28
LCM XIV Ltd.	Subordinated Structured Note	9/25/2015, 5/18/2018	9,422
MITY, Inc.	Common Stock	6/23/2014	7,200

See notes to consolidated financial statements.

40

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

Portfolio Company	Investment	Follow-On Acquisition Dates	Follow-On Acquisitions (Excluding initial investment cost)
MITY, Inc.	Senior Secured Note A	1/17/2017, 3/23/2021	10,650
MITY, Inc.	Senior Secured Note B	1/17/2017, 6/3/2019	11,000
Nationwide Loan Company LLC	Class A Units	3/28/2014, 6/18/2014, 9/30/2014, 6/29/2015, 3/31/2016, 8/31/2016, 5/31/2017, 10/31/2017	20,469
Nationwide Loan Company LLC	Senior Subordinated Term Loan to Nationwide Acceptance LLC	12/28/2015, 8/31/2016	1,999
National Property REIT Corp.	Senior Secured Term Loan A	4/3/2020, 5/15/2020, 6/10/2020, 7/29/2020, 8/14/2020, 9/15/2020,10/15/2020, 10/30/2020, 11/10/2020, 11/13/2020, 11/19/2020, 12/11/2020, 1/27/2021, 2/25/2021, 3/11/2021, 5/14/2021, 6/14/2021, 6/25/2021, 8/16/2021	232,942
National Property REIT Corp.	Senior Secured Term Loan C	10/23/2019, 1/23/2020, 3/31/2020, 4/8/2020, 8/4/2020	101,200
NMMB, Inc.	Senior Secured Term Loan	12/30/2019	15,100
Octagon Investment Partners XV, Ltd.	Subordinated Structured Note	4/27/2015, 8/3/2015, 6/27/2017	10,516
Octagon Investment Partners 18-R Ltd.	Subordinated Structured Note	3/23/2018	8,908
Pacific World Corporation	Revolving Line of Credit	10/21/2014, 12/19/2014, 4/7/2015, 4/22/2015, 8/12/2016, 10/18/2016, 2/7/2017, 2/21/2017, 4/26/2017, 10/11/2017, 10/17/2017, 1/16/2018, 12/27/2018, 3/15/2019, 7/2/2019, 8/15/2019, 9/1/2021	38,825
Pacific World Corporation	Convertible Preferred Equity	4/3/2019, 4/29/2019, 6/3/2019, 10/4/2019, 11/12/2019, 12/20/2019, 1/7/2020, 3/5/2020	20,100
PeopleConnect Holdings, LLC	Revolving Line of Credit	1/31/2020	1,115
PGX Holdings, Inc.	First Lien Term Loan	12/1/2020,12/14/2020,12/23/2020, 12/26/2020, 3/5/2021, 4/23/2021, 4/27/2021, 5/4/2021, 6/28/2021	34,589
PGX Holdings, Inc.	1.5 Lien Loan	9/18/2020, 12/31/2020	14,362
PGX Holdings, Inc.	Second Lien Term Loan	12/23/2016, 12/28/2016	15,034
Redstone Holdco 2 LP	Second Lien Term Loan	9/10/2021	17,903
Romark WM-R Ltd.	Subordinated Structured Note	3/29/2018	5,125
Rosa Mexicano	Revolving Line of Credit	3/27/2020	500
R-V Industries, Inc.	Common Stock	12/27/2016	1,854
Securus Technologies Holdings, Inc.	Second Lien Term Loan	11/13/2017, 11/24/2017, 8/6/2018, 8/24/2018, 3/18/2019	22,750
SEOTownCenter, Inc.	Senior Secured Term Loan A	11/2/2018	3,000
SEOTownCenter, Inc.	Senior Secured Term Loan B	11/2/2018	2,000
Shutterfly, LLC	First Lien Term Loan	9/17/2021	3,969
Symphony CLO XV, Ltd.	Subordinated Structured Note	12/7/2018	2,655
Town & Country Holdings, Inc.	First Lien Term Loan	7/13/2018, 7/16/2018	105,000
Transplace Holdings, Inc.	Second Lien Term Loan	1/4/2018, 11/3/2020	6,131
United Sporting Companies, Inc.	Second Lien Term Loan	3/7/2013	58,650
Universal Turbine Parts, LLC	Delayed Draw Term Loan	10/24/2019, 2/7/2020, 2/26/2020, 4/5/2021	3,216
USES Corp.	Senior Secured Term Loan A	6/15/2016, 6/29/2016, 2/22/2017, 4/27/2017, 5/4/2017, 8/30/2017, 10/11/2017, 12/11/2018, 8/30/2019	14,100
USG Intermediate, LLC	Revolving Line of Credit	7/2/2015, 9/23/2015, 9/14/2017, 8/21/2019, 9/17/2020, 9/8/2021	9,200
USG Intermediate, LLC	Senior Secured Term Loan B	8/24/2017, 7/30/2021	12,975
Valley Electric Company, Inc.	Common Stock	12/31/2012, 6/24/2014	18,502
Valley Electric Company, Inc.	Senior Secured Note	6/30/2014, 8/31/2018	5,129
Vision Solutions, Inc.	Second Lien Term Loan	5/28/2021, 6/24/2021	39,631
Voya CLO 2014-1, Ltd.	Subordinated Structured Note	3/29/2018	3,943

See notes to consolidated financial statements.

41

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

(45)Since Prospect's initial common equity investment in NPRC on December 31, 2013, we have made numerous additional follow-on investments that have been used to invest in new and existing properties as well as online consumer loans and rated secured structured notes. These follow-on acquisitions are summarized by fiscal year below (excluding effects of return of capital distributions). Details of specific transactions are included in the respective fiscal year Form 10-K filing (refer to endnote 44 for NPRC term loan follow-on investments):

Fiscal Year	Follow-On Investments (NPRC Common Stock, excluding cost of initial investment)
2014	$	4,555
2015	68,693
2016	93,857
2017	116,830
2018	137,024
2019	11,582
2020	19,800

(46)Investment changed from non-qualifying to qualifying as of December 31, 2020.

(47)This investment represents a Level 2 security in the ASC 820 table as of September 30, 2021. See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.

(48)During the year ended June 30, 2021, Venio, LLC repaid in full third-party first lien senior secured debt and, as a result of such repayment, our second lien secured term loan that was previously contractually subordinated to such third-party first lien senior secured debt was re-characterized to a first lien senior secured term loan. In December 2020, Venio, LLC completed the sale of a majority of its assets and we received $3,693 in proceeds, which was applied to the outstanding principal balance of our first lien term loan. As of September 30, 2021, $14,444 in aggregate principal remained outstanding. We expect to receive additional distributions from remaining assets and legal claims against a third party.

See notes to consolidated financial statements.

42

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of September 30, 2021 (Unaudited) and June 30, 2021 (Continued)

Note 1. Organization

In this report, the terms “Prospect,” “the Company,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise.

Prospect is a financial services company that primarily lends to and invests in middle market privately-held companies. We are a closed-end investment company incorporated in Maryland. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As a BDC, we have elected to be treated as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986 (the “Code”). We were organized on April 13, 2004, and were funded in an initial public offering completed on July 27, 2004.

On May 15, 2007, we formed a wholly owned subsidiary Prospect Capital Funding LLC (“PCF”), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. Our wholly owned subsidiary Prospect Small Business Lending, LLC (“PSBL”) was formed on January 27, 2014, and purchased small business whole loans from online small business loan originators, including On Deck Capital, Inc. (“OnDeck”). On September 30, 2014, we formed a wholly-owned subsidiary Prospect Yield Corporation, LLC (“PYC”) and effective October 23, 2014, PYC holds a portion of our collateralized loan obligations (“CLOs”), which we also refer to as subordinated structured notes (“SSNs”). Each of these subsidiaries have been consolidated since operations commenced.

We consolidate certain of our wholly owned and substantially wholly owned holding companies formed by us in order to facilitate our investment strategy. The following companies are included in our consolidated financial statements and are collectively referred to as the “Consolidated Holding Companies”: CP Holdings of Delaware LLC (“CP Holdings”); Credit Central Holdings of Delaware, LLC; Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC (“First Tower Delaware”); MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc. (“NMMB Holdings”); NPH Property Holdings, LLC (“NPH”); Prospect Opportunity Holdings I, Inc. (“POHI”); SB Forging Company, Inc. (“SB Forging”); STI Holding, Inc.; UTP Holdings Group Inc. (“UTP Holdings”); Valley Electric Holdings I, Inc. (“Valley Holdings I”); and Valley Electric Holdings II, Inc. (“Valley Holdings II”).

We are externally managed by our investment adviser, Prospect Capital Management L.P. (“Prospect Capital Management” or the “Investment Adviser”). Prospect Administration LLC (“Prospect Administration” or the “Administrator”), a wholly-owned subsidiary of the Investment Adviser, provides administrative services and facilities necessary for us to operate.

Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. We invest primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. We work with the management teams or financial sponsors to identify investments with historical cash flows, asset collateral or contracted pro forma cash flows for investment.

Note 2. Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) pursuant to the requirements for reporting on Form 10-Q, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6, 10 and 12 of Regulation S-X. Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Our consolidated financial statements include the accounts of Prospect, PCF, PSBL, PYC, and the Consolidated Holding Companies. All intercompany balances and transactions have been eliminated in consolidation. The financial results of our non-substantially wholly-owned holding companies and operating portfolio company investments are not consolidated in the financial statements. Any operating companies owned by the Consolidated Holding Companies are not consolidated.

Reclassifications

Certain reclassifications have been made in the presentation of prior consolidated financial statements and accompanying notes to conform to the presentation as of and for the three months ended September 30, 2021.

See notes to consolidated financial statements.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except share and per share data)

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income, expenses, and gains and losses during the reported period. Changes in the economic environment, financial markets, creditworthiness of the issuers of our investment portfolio and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

Investment Classification

We are a non-diversified company within the meaning of the 1940 Act. As required by 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 more than 25% of the voting securities of an investee company. Under the 1940 Act, “Affiliate Investments” 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. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.

As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). As of September 30, 2021 and June 30, 2021, our qualifying assets as a percentage of total assets, stood at 76.34% and 76.31%, respectively.

Investment Transactions

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. Specifically, we record all security transactions on a trade date basis. 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. Amounts for investments traded but not yet settled are reported in Due to Broker or Due from Broker, in the Consolidated Statements of Assets and Liabilities.

Foreign Currency

Foreign currency amounts are translated into US Dollars (USD) on the following basis:

i.fair value of investment securities, other assets and liabilities—at the spot exchange rate on the last business day of the period; and

ii.purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such investment transactions, income or expenses.

We do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held or disposed of during the period. Such fluctuations are included within the net realized and net change in unrealized gains or losses from investments in the Consolidated Statements of Operations.

Investment Risks

Our investments are subject to a variety of risks. Those risks include the following:

Market Risk

Market risk represents the potential loss that can be caused by a change in the fair value of the financial instrument.

Credit Risk

Credit risk represents the risk that we would incur if the counterparties failed to perform pursuant to the terms of their agreements with us.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Liquidity Risk

Liquidity risk represents the possibility that we may not be able to rapidly adjust the size of our investment positions in times of high volatility and financial stress at a reasonable price.

Interest Rate Risk

Interest rate risk represents a change in interest rates, which could result in an adverse change in the fair value of an interest-bearing financial instrument.

Prepayment Risk

Many of our debt investments allow for prepayment of principal without penalty. Downward changes in interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the security and making us less likely to fully earn all of the expected income of that security and reinvesting in a lower yielding instrument.

Structured Credit Related Risk

CLO investments may be riskier and less transparent to us than direct investments in underlying companies. CLOs typically will have no significant assets other than their underlying senior secured loans. Therefore, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans. 

Foreign Currency

Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Investment Valuation

As a BDC, and in accordance with the 1940 Act, we fair value our investment portfolio on a quarterly basis, with any unrealized gains and losses reflected in net increase (decrease) in net assets resulting from operations on our Consolidated Statement of Operations. To value our investments, we follow the guidance of ASC 820, Fair Value Measurement (“ASC 820”), that defines fair value, establishes a framework for measuring fair value in conformity with GAAP, and requires disclosures about fair value measurements. 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.

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

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Unobservable inputs for the asset or liability.

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.

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.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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.

1.Each portfolio company or investment is reviewed by our investment professionals with independent valuation firms engaged by our Board of Directors.

2.The independent valuation firms prepare independent valuations for each investment based on their own independent assessments and issue their report.

3.The Audit Committee of our Board of Directors reviews and discusses with the independent valuation firms the valuation reports, and then makes a recommendation to the Board of Directors of the value for each investment.

4.The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the Audit Committee.

Our non-CLO investments are valued utilizing a yield technique, enterprise value (“EV”) technique, net asset value technique, asset recovery technique, discounted cash flow technique, or a combination of techniques, as appropriate. The yield technique uses loan spreads for loans and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the EV technique, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation). To determine the EV, we typically use a market (multiples) valuation approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent merger and acquisitions transactions, and/or a discounted cash flow technique. The net asset value technique, an income approach, is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The asset recovery technique is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow technique converts future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The fair value measurement is based on the net present value indicated by current market expectations about those future amounts.

In applying these methodologies, additional factors that we consider in valuing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors.

Our investments in CLOs are classified as Level 3 fair value measured securities under ASC 820 and are valued using a discounted multi-path cash flow model. The CLO structures are analyzed to identify the risk exposures and to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations, which is a simulation used to model the probability of different outcomes, to generate probability-weighted (i.e., multi-path) cash flows from the underlying assets and liabilities.  These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market as well as certain benchmark credit indices are considered, to determine the value of each CLO investment.  In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the multi-path cash flows. We are not responsible for and have no influence over the asset management of the portfolios underlying the CLO investments we hold, as those portfolios are managed by non-affiliated third-party CLO collateral managers. The main risk factors are default risk, prepayment risk, interest rate risk, downgrade risk, and credit spread risk.

Valuation of Other Financial Assets and Financial Liabilities

ASC 825, Financial Instruments, specifically ASC 825-10-25, permits an entity to choose, at specified election dates, to measure eligible items at fair value (the “Fair Value Option”). We have not elected the Fair Value Option to report selected financial assets and financial liabilities. See Note 8 for the disclosure of the fair value of our outstanding debt and the market observable inputs used in determining fair value.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Convertible Notes

We have recorded the Convertible Notes at their contractual amounts. We have determined that the embedded conversion options in the Convertible Unsecured Notes are not required to be separately accounted for as a derivative under ASC 815, Derivatives and Hedging. See Note 5 for further discussion on our Convertible Notes outstanding.

Revenue Recognition

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. Original issue discounts and market discounts are capitalized and accreted into interest income over the respective terms of the applicable loans using the effective interest method or straight-line, as applicable, and adjusted only for material amendments or prepayments. Upon a prepayment of a loan, prepayment premiums, original issue discount, or market discounts are recorded as interest income.

Loans are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Unpaid accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans are either applied to the cost basis or interest income, depending upon management’s judgment of the collectibility of the loan receivable. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, is likely to remain current and future principal and interest collections when due are probable. Interest received and applied against cost while a loan is on non-accrual, and PIK interest capitalized but not recognized while on non-accrual, is recognized prospectively on the effective yield basis through maturity of the loan when placed back on accrual status, to the extent deemed collectible by management. As of September 30, 2021, approximately 0.5% of our total assets at fair value are in non-accrual status.

Some of our loans and other investments may have contractual payment-in-kind (“PIK”) interest or dividends. PIK income computed at the contractual rate is accrued into income and reflected as receivable up to the capitalization date. PIK investments offer issuers the option at each payment date of making payments in cash or in additional securities. When additional securities are received, they typically have the same terms, including maturity dates and interest rates as the original securities issued. On these payment dates, we capitalize the accrued interest (reflecting such amounts in the basis as additional securities received). PIK generally becomes due at maturity of the investment or upon the investment being called by the issuer. At the point that we believe PIK is not fully expected to be realized, the PIK investment will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are reversed from the related receivable through interest or dividend income, respectively. We do not reverse previously capitalized PIK interest or dividends. Upon capitalization, PIK is subject to the fair value estimates associated with their related investments. PIK investments on non-accrual status are restored to accrual status if we believe that PIK is expected to be realized.

Interest income from investments in Subordinated Structured Notes (typically preferred shares, income notes or subordinated notes of CLO funds) and “equity” class of security of securitized trust is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets. We monitor the expected cash inflows from our CLO and securitized trust equity investments, including the expected residual payments, and the effective yield is determined and updated periodically.

Dividend income is recorded on the ex-dividend date.

Other income generally includes amendment fees, commitment fees, administrative agent fees and structuring fees which are recorded when earned. Excess deal deposits, net profits interests and overriding royalty interests are included in other income. See Note 10 for further discussion.

Federal and State Income Taxes

We have elected to be treated as a RIC and intend to continue to comply with the requirements of the Code applicable to RICs. 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.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income and 98.2% of our capital gains 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 ordinary income and 98.2% of our capital gains exceed 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 of September 30, 2021, we do not expect to have any excise tax due for the 2021 calendar year. Thus, we have not accrued any excise tax for this period.

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 income tax 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 applicable to qualified dividend income 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 stockholders our accumulated earnings and profits attributable to non-RIC years. 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 five 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 consolidated 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. As of September 30, 2021, we did not record any unrecognized tax benefits or liabilities. 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. Although we file both federal and state income tax returns, our major tax jurisdiction is federal. Our federal tax returns for the tax years ended August 31, 2018 and thereafter remain subject to examination by the Internal Revenue Service.

Dividends and Distributions to Common Shareholders

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 future taxable earnings. Net realized capital gains, if any, are distributed at least annually.

Our distributions may exceed our earnings, and therefore, portions of the distributions that we make may be a return of the money originally invested and represent a return of capital distribution to shareholders for tax purposes.

Financing Costs

We record origination expenses related to our Revolving Credit Facility, and Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Unsecured Notes”) as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method over the stated life of the obligation for our Revolving Credit Facility and for our Prospect Capital InterNotes®. The effective interest method is used to amortize deferred financing costs for our remaining Unsecured Notes over the respective expected life or maturity. In the event that we modify or extinguish our debt before maturity, we follow the guidance in ASC 470-50, Modification and Extinguishments (“ASC 470-50”). For modifications to or exchanges of our Revolving Credit Facility, any unamortized deferred costs relating to lenders who are not part of the new lending group are expensed. For extinguishments of our Unsecured Notes, any unamortized deferred costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.

Unamortized deferred financing costs are presented as a direct deduction to the respective Unsecured Notes (see Notes 5, 6, and 7).

We may record registration expenses related to shelf filings as prepaid expenses. These expenses consist principally of the Securities and Exchange Commission (“SEC”) registration fees, legal fees and accounting fees incurred. These prepaid expenses are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

completed. As of September 30, 2021 and June 30, 2021, there are no prepaid expenses related to registration expenses and all amounts incurred have been expensed.

Guarantees and Indemnification Agreements

We follow ASC 460, Guarantees (“ASC 460”). ASC 460 elaborates on the disclosure requirements of a guarantor in its interim and annual consolidated 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.

Per Share Information

In accordance with ASC 946, senior equity securities, such as preferred stock, are not considered in the calculation of net asset value per share. Net asset value per share also excludes the effects of assumed conversion of outstanding convertible securities, regardless of whether their conversion would have a diluting effect. Therefore, our net asset value is presented on the basis of per common share outstanding as of the applicable period end.

We compute earnings per common share in accordance with ASC 260, Earnings Per Share (“ASC 260”). Basic earnings per common share is calculated by dividing the net increase (decrease) in net assets resulting from operations attributable to common stockholders by the weighted average number of shares of common stock outstanding. Diluted earnings per common share reflects the assumed conversion of dilutive securities.

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The standard is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the optional guidance on the Company’s consolidated financial statements and disclosures. The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the three months ended September 30, 2021.

In August 2020, FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, after adoption, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted. We are currently evaluating the impact, if any, of adopting this ASU on our consolidated financial statements and disclosures.

Note 3. Portfolio Investments

At September 30, 2021, we had investments in 124 long-term portfolio investments and CLOs, which had an amortized cost of $6,150,333 and a fair value of $6,430,707. At June 30, 2021, we had investments in 124 long-term portfolio investments and CLOs, which had an amortized cost of $6,058,124 and a fair value of $6,201,778.

The original cost basis of debt placement and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $424,668 and $177,141 during the three months ended September 30, 2021 and September 30, 2020, respectively. Debt repayments and considerations from sales of equity securities of approximately $324,000 and $145,410 were received during the three months ended September 30, 2021 and September 30, 2020, respectively.

49

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following table shows the composition of our investment portfolio as of September 30, 2021 and June 30, 2021:

	September 30, 2021				June 30, 2021
	Cost		Fair Value		Cost		Fair Value
Revolving Line of Credit	$	31,490	$	31,479	$	27,522	$	27,503
Senior Secured Debt	3,188,781		3,145,295		3,166,861		3,128,845
Subordinated Secured Debt	1,151,509		1,061,102		1,069,767		981,425
Subordinated Unsecured Debt	7,200		4,114		7,200		3,715
Subordinated Structured Notes	1,074,751		750,769		1,090,175		756,109
Equity	696,602		1,437,948		696,599		1,304,181
Total Investments	$	6,150,333	$	6,430,707	$	6,058,124	$	6,201,778

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

In the previous table and throughout the remainder of this footnote, we aggregate our portfolio investments by type of investment, which may differ slightly from the nomenclature used by the constituent instruments defining the rights of holders of the investment, as disclosed on our Consolidated Schedules of Investments (“SOI”). The following investments are included in each category:

•Revolving Line of Credit includes our investments in delayed draw term loans.

•Senior Secured Debt includes investments listed on the SOI such as senior secured term loans, senior term loans, secured promissory notes, senior demand notes, and first lien term loans.

•Subordinated Secured Debt includes investments listed on the SOI such as subordinated secured term loans, subordinated term loans, senior subordinated notes, 1.5 lien term loans, second lien term loans, and third lien term loans.

•Subordinated Unsecured Debt includes investments listed on the SOI such as subordinated unsecured notes and senior unsecured notes.

•Subordinated Structured Notes includes our investments in the “equity” security class of CLO funds such as income notes, preference shares, and subordinated notes.

•Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of September 30, 2021:

	Level 1		Level 2		Level 3		Total
Revolving Line of Credit	$	—	$	—	$	31,479	$	31,479
Senior Secured Debt	—		64,447		3,080,848		3,145,295
Subordinated Secured Debt	—		—		1,061,102		1,061,102
Subordinated Unsecured Debt	—		—		4,114		4,114
Subordinated Structured Notes	—		—		750,769		750,769
Equity	—		—		1,437,948		1,437,948
Total Investments	$	—	$	64,447	$	6,366,260	$	6,430,707

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of June 30, 2021:

	Level 1		Level 2		Level 3		Total
Revolving Line of Credit	$	—	$	—	$	27,503	$	27,503
Senior Secured Debt	—		24,706		3,104,139		3,128,845
Subordinated Secured Debt	—		15,188		966,237		981,425
Subordinated Unsecured Debt	—		—		3,715		3,715
Subordinated Structured Notes	—		—		756,109		756,109
Equity	—		—		1,304,181		1,304,181
Total Investments	$	—	$	39,894	$	6,161,884	$	6,201,778

The following tables show the aggregate changes in the fair value of our Level 3 investments during the three months ended September 30, 2021:

	Fair Value Measurements Using Unobservable Inputs (Level 3)
	Control Investments		Affiliate Investments		Non-Control/ Non-Affiliate Investments		Total
Fair value as of June 30, 2021	$	2,919,717	$	356,734	$	2,885,433	$	6,161,884
Net realized gains on investments	3		—		—		3
Net change in unrealized gains	122,330		6,037		12,082		140,449
Net realized and unrealized gains	122,333		6,037		12,082		140,452
Purchases of portfolio investments	19,668		202,931		127,875		350,474
Payment-in-kind interest	18,615		27		148		18,790
Accretion (amortization) of discounts and premiums, net	137		2,026		(14,163)		(12,000)
Repayments and sales of portfolio investments	(34,380)		(188,698)		(70,262)		(293,340)
Fair value as of September 30, 2021	$	3,046,090	$	379,057	$	2,941,113	$	6,366,260

	Revolving Line of Credit		Senior Secured Debt		Subordinated Secured Debt		Subordinated Unsecured Debt		Subordinated Structured Notes		Equity		Total
Fair value as of June 30, 2021	$	27,503	$	3,104,139	$	966,237	$	3,715	$	756,109	$	1,304,181	$	6,161,884
Net realized gains on investments	—		—		—		3		—		—		3
Net change in unrealized gains (losses)	8		(4,403)		594		399		10,084		133,767		140,449
Net realized and unrealized gains (losses)	8		(4,403)		594		402		10,084		133,767		140,452
Purchases of portfolio investments	4,000		101,588		244,886		—		—		—		350,474
Payment-in-kind interest	—		17,037		1,753		—		—		—		18,790
Accretion (amortization) of discounts and premiums, net	—		2,856		568		—		(15,424)		—		(12,000)
Repayments and sales of portfolio investments	(32)		(140,369)		(152,936)		(3)		—		—		(293,340)
Fair value as of September 30, 2021	$	31,479	$	3,080,848	$	1,061,102	$	4,114	$	750,769	$	1,437,948	$	6,366,260

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following tables show the aggregate changes in the fair value of our Level 3 investments during the three months ended September 30, 2020:

	Fair Value Measurements Using Unobservable Inputs (Level 3)
	Control Investments		Affiliate Investments		Non-Control/ Non-Affiliate Investments		Total
Fair value as of June 30, 2020	$	2,259,292	$	187,537	$	2,785,499	$	5,232,328
Net realized gains on investments	2,832		—		—		2,832
Net change in unrealized gains	13,535		66,473		27,836		107,844
Net realized and unrealized gains	16,367		66,473		27,836		110,676
Purchases of portfolio investments	64,939		808		91,053		156,800
Payment-in-kind interest	13,660		5,694		987		20,341
Accretion of discounts and premiums, net	101		1,663		12,718		14,482
Repayments and sales of portfolio investments	(46,787)		—		(101,455)		(148,242)
Fair Value as of September 30, 2020	$	2,307,572	$	262,175	$	2,816,638	$	5,386,385

	Revolving Line of Credit		Senior Secured Debt		Subordinated Secured Debt		Subordinated Unsecured Debt		Subordinated Structured Notes		Equity		Total
Fair value as of June 30, 2020	$	36,944	$	2,422,523	$	1,269,398	$	51,079	$	708,961	$	743,423	$	5,232,328
Net realized gains on investments	—		2,832		—		—		—		—		2,832
Net change in unrealized gains (losses)(1)	35		60,684		16,380		(629)		9,692		21,682		107,844
Net realized and unrealized gains (losses)	35		63,516		16,380		(629)		9,692		21,682		110,676
Purchases of portfolio investments	2,000		115,998		12,607		—		—		26,195		156,800
Payment-in-kind interest	116		10,689		8,242		1,294		—		—		20,341
Accretion of discounts and premiums, net	—		507		451		1,663		11,861		—		14,482
Repayments and sales of portfolio investments	(777)		(132,401)		(14,918)		(145)		—		(1)		(148,242)
Transfers within Level 3	—		(45,117)		—		—		—		45,117		—
Fair Value as of September 30, 2020	$	38,318	$	2,435,715	$	1,292,160	$	53,262	$	730,514	$	836,416	$	5,386,385

(1)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred.

For the three months ended September 30, 2021 and September 30, 2020, the net change in unrealized gains (losses) on the investments that use Level 3 inputs was $142,676 and $54,481 for investments still held as of September 30, 2021 and September 30, 2020, respectively.

Impact of the novel coronavirus (“COVID-19”) pandemic

On March 11, 2020, the World Health Organization declared the novel coronavirus (the "COVID-19") as a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. COVID-19 has had a devastating impact on the global economy, including the U.S. economy, and has resulted in a global economic recession.

The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, or the reintroduction of business shutdowns, cancellations of and restrictions on events and travel, significant reductions in demand for certain goods and services, reductions in and restrictions on business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. While several countries, as well as certain states, counties and cities in the United States, have begun to lift the public health restrictions with a view to reopening their economies, recurring COVID-19 outbreaks due to the delta variant have led to the re-introduction of such restrictions in certain states in the United States and globally and could continue to lead to the re-introduction of such restrictions elsewhere. Additionally, any delays or pauses in vaccine distributions, or inability to achieve “herd immunity”, could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time. Further, the extent and strength of any economic recovery after the COVID-19 pandemic abates, including following any "second wave", “third wave” or other intensifying of the pandemic, is uncertain and subject to various factors and conditions. Even after the COVID-19 pandemic subsides, the U.S. economy and most other major global economies may continue to experience a recession.

The COVID-19 pandemic (including the preventative measures taken in response thereto) has to date (i) created significant business disruption issues for certain of our portfolio companies, and (ii) materially and adversely impacted the value and performance of certain of our portfolio companies and SSN investments. The COVID-19 pandemic continues to have a

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

particularly adverse impact on industries in which certain of our portfolio companies operate, including energy, hospitality, travel, retail and restaurants. Certain of our portfolio companies in other industries have also been significantly impacted. The COVID-19 pandemic is continuing as of the filing date of this Quarterly Report, and its extended duration may have further adverse impacts on our portfolio companies and SSN investments after September 30, 2021, including for the reasons described herein. As a result of this disruption and the pressures on their liquidity, certain of our portfolio companies have been, or may continue to be, incentivized to draw on most, if not all, of the unfunded portion of any revolving or delayed draw term loans made by us, subject to availability under the terms of such loans.

As a BDC, we are required to carry our investments at fair value as determined in good faith by our Board of Directors. Depending on market conditions, we could incur substantial losses in future periods, which could have a material adverse impact on our business, financial condition, and results of operations.     

Although it is difficult to predict the extent of the impact of the COVID-19 outbreak on the underlying CLO vehicles we invest in, CLO vehicles in which we invest may fail to satisfy certain financial covenants, including with respect to adequate collateralization and/or interest coverage tests. Such failure could cause the assets of the CLO vehicle to not receive full par credit for purposes of calculation of the CLO vehicle’s overcollateralization tests and as a consequence, may lead to a reduction in such CLO vehicle’s payments to us because holders of debt senior to us may be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO vehicle or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.

The COVID-19 pandemic has adversely impacted the fair value of some of our investments as of September 30, 2021, and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments. The impact of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments as our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that is often from a time period earlier, generally two to three months, than the quarter for which we are reporting. Additionally, we may not have yet received information or certifications from our portfolio companies that indicate any or the full extent of declining performance or non-compliance with debt covenants, as applicable, as a result of the COVID-19 pandemic. As a result, our valuations at September 30, 2021 may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition, write downs in the value of some of our investments have reduced, and any additional write downs may further reduce, our net asset value (and, as a result, our asset coverage calculation). Accordingly, we may incur net unrealized losses or may incur realized losses after September 30, 2021, which could have a material adverse effect on our business, financial condition and results of operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of September 30, 2021 were as follows:

				Unobservable Input
Asset Category	Fair Value		Primary Valuation Approach or Technique	Input	Range	Weighted Average
Senior Secured Debt	$	1,386,853	Discounted cash flow (Yield analysis)	Market yield	4.3% to 19.1%	9.2%
Senior Secured Debt	417,096		Enterprise value waterfall (Market approach)	EBITDA multiple	5.5x to 10.5x	9.4x
Senior Secured Debt	137,740		Enterprise value waterfall (Market approach)	Revenue multiple	0.7x to 1.3x	1.1x
Senior Secured Debt	80,510		Enterprise value waterfall (Discounted cash flow)	Discount rate	7.9% to 9.9%	8.9%
Senior Secured Debt	12,200		Asset recovery analysis	Recoverable amount	n/a	n/a
Senior Secured Debt (1)	2,700		Enterprise value waterfall	Loss-adjusted discount rate Projected loss rates	3.9% to 8.6% 0.0% to 2.3%	7.6% 0.1%
Senior Secured Debt (2)	90,200		Enterprise value waterfall	Discount rate (3)	6.7% to 12.3%	9.1%
Senior Secured Debt	328,177		Enterprise value waterfall (Market approach)	Tangible book value multiple Earnings multiple Discount rate	3.0x to 3.5x 6.0x to 7.0x 12.7% to 13.7%	3.3x 6.5x 13.2%
Senior Secured Debt	20,260		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.2x to 1.4x	1.3x
Senior Secured Debt	636,591		Enterprise value waterfall (NAV analysis)	Capitalization Rate	3.8% to 7.8%	5.8%
Subordinated Secured Debt	980,357		Discounted cash flow (Yield analysis)	Market yield	6.5% to 21.1%	10.8%
Subordinated Secured Debt	3,940		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x to 0.5x	0.5x
Subordinated Secured Debt	69,893		Enterprise value waterfall (Market approach)	Tangible book value multiple Earnings multiple	2.3x to 2.7x 5.5x to 6.5x	2.5x 6.0x
Subordinated Secured Debt	6,912		Asset recovery analysis	Recoverable amount	n/a	n/a
Subordinated Unsecured Debt	4,114		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x to 0.5x	0.5x
Subordinated Structured Notes	750,769		Discounted cash flow	Discount rate (3)	1.0% to 32.2%	20.4%
Preferred Equity	19,404		Enterprise value waterfall (Market approach)	Revenue multiple	0.8x to 1.6x	1.3x
Common Equity/Interests/Warrants	540,527		Enterprise value waterfall (Market approach)	EBITDA multiple	5.5x to 11.5x	9.0x
Common Equity/Interests/Warrants	20,627		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x to 1.1x	0.8x
Common Equity/Interests/Warrants (1)	4,695		Enterprise value waterfall	Loss-adjusted discount rate Projected loss rates	3.9% to 8.6% 0.0% to 2.3%	7.6% 0.1%
Common Equity/Interests/Warrants (2)	20,277		Enterprise value waterfall	Discount rate (3)	6.7% to 12.3%	9.1%
Common Equity/Interests/Warrants (4)	40,428		Enterprise value waterfall (NAV analysis)	Capitalization Rate	3.8% to 7.8%	5.8%
Common Equity/Interests/Warrants	283,051		Enterprise value waterfall (Market approach)	Tangible book value multiple Earnings multiple Discount rate	3.0x to 3.5x 6.0x to 7.0x 12.7% to 13.7%	3.3x 6.5x 13.2%
Common Equity/Interests/Warrants	18,576		Enterprise value waterfall (Market approach)	Tangible book value multiple Earnings multiple	2.3x to 2.7x 5.5x to 6.5x	2.5x 6.0x
Common Equity/Interests/Warrants	27,295		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.2x to 1.4x	1.3x
Common Equity/Interests/Warrants	444,705		Enterprise value waterfall (NAV analysis)	Capitalization Rate	3.8% to 7.8%	5.8%
Common Equity/Interests/Warrants	6,646		Enterprise value waterfall (Discounted cash flow)	Discount rate	7.9% to 30.0%	19.8%
Common Equity/Interests/Warrants	11,717		Asset recovery analysis	Recoverable amount	21% to 26%	26%
Total Level 3 Investments	$	6,366,260

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

(1)Represents an investment in a Real Estate Investment Trust subsidiary. The Enterprise Value analysis includes the fair value of our investments in such indirect subsidiary’s consumer loans purchased from online consumer lending platforms, which are valued using a discounted cash flow valuation technique.

(2)Represents an investment in a Real Estate Investment Trust subsidiary. The Enterprise Value analysis includes the fair value of our investments in such indirect subsidiary’s rated secured structured notes, which are valued using a discounted cash flow valuation technique. The key unobservable input to the discounted cash flow analysis is noted above.

(3)Represents the implied discount rate based on our internally generated single-cash flow model that is derived from the fair value estimated by the corresponding multi-path cash flow model utilized by the independent valuation firm.

(4)Represents Residual Profit Interests in Real Estate Investments.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of June 30, 2021 were as follows:

				Unobservable Input
Asset Category	Fair Value		Primary Valuation Approach or Technique	Input	Range	Weighted Average
Senior Secured Debt	$	1,403,795	Discounted cash flow (Yield analysis)	Market yield	4.4% to 19.5%	9.2%
Senior Secured Debt	436,000		Enterprise value waterfall (Market approach)	EBITDA multiple	5.5x to 11.5x	9.7x
Senior Secured Debt	105,212		Enterprise value waterfall (Market approach)	Revenue multiple	0.8x to 1.6x	1.3x
Senior Secured Debt	75,406		Enterprise value waterfall (Discounted cash flow)	Discount rate	7.7% to 9.7%	8.7%
Senior Secured Debt	12,760		Asset recovery analysis	Recoverable amount	n/a	n/a
Senior Secured Debt (1)	6,600		Enterprise value waterfall	Loss-adjusted discount rate	3.9% to 9.5%	7.8%
				Projected loss rates	0.0% to 2.4%	0.1%
Senior Secured Debt (2)	90,200		Enterprise value waterfall	Discount rate (3)	6.8% to 12.4%	9.2%
Senior Secured Debt	324,708		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.9x to 3.1x	3.0x
				Earnings multiple	6.5x to 7.5x	7.0x
				Discount rate	13.0% to 14.0%	13.5%
Senior Secured Debt	20,260		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.2x to 1.4x	1.3x
Senior Secured Debt	656,701		Enterprise value waterfall (NAV analysis)	Capitalization Rate	3.8% to 8.1%	5.9%
Subordinated Secured Debt	887,214		Discounted cash flow (Yield analysis)	Market yield	4.9% to 25.0%	10.1%
Subordinated Secured Debt	3,950		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x to 0.5x	0.5x
Subordinated Secured Debt	68,137		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.2x to 2.6x	2.4x
				Earnings multiple	6.0x to 7.0x	6.5x
Subordinated Secured Debt	6,936		Asset recovery analysis	Recoverable amount	n/a	n/a
Subordinated Unsecured Debt	3,715		Enterprise value waterfall (Market approach)	EBITDA multiple	7.5x to 8.5x	8.0x
Subordinated Structured Notes	756,109		Discounted cash flow	Discount rate (3)	0.1% to 31.0%	21.8%
Preferred Equity	19,857		Enterprise value waterfall (Market approach)	Revenue multiple	0.8x to 1.4x	1.1x
Preferred Equity	3,199		Enterprise value waterfall (Market approach)	EBITDA multiple	7.1x to 9.1x	8.1x
Common Equity/Interests/Warrants	507,539		Enterprise value waterfall (Market approach)	EBITDA multiple	5.5x to 11.5x	9.1x
Common Equity/Interests/Warrants	5,824		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x to 0.5x	0.5x
Common Equity/Interests/Warrants (1)	4,068		Enterprise value waterfall	Loss-adjusted discount rate	3.9% to 9.5%	7.8%
				Projected loss rates	0.0% to 2.4%	0.1%
Common Equity/Interests/Warrants (2)	18,108		Enterprise value waterfall	Discount rate (3)	6.8% to 12.4%	9.2%
Common Equity/Interests/Warrants	379,572		Enterprise value waterfall (NAV analysis)	Capitalization Rate	3.8% to 8.1%	5.9%
Common Equity/Interests/Warrants	267,648		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.9x to 3.1x	3.0x
				Earnings multiple	6.5x to 7.5x	7.0x
				Discount rate	13.0% to 14.0%	13.5%
Common Equity/Interests/Warrants	9,886		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.2x to 2.6x	2.4x
				Earnings multiple	6.0x to 7.0x	6.5x
Common Equity/Interests/Warrants	27,733		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.2x to 1.4x	1.3x
Common Equity/Interests/Warrants (4)	34,507		Enterprise value waterfall (NAV analysis)	Capitalization Rate	3.8% to 8.1%	5.9%

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

				Unobservable Input
Asset Category	Fair Value		Primary Valuation Approach or Technique	Input	Range	Weighted Average
Common Equity/Interests/Warrants	14,524		Enterprise value waterfall (Discounted cash flow)	Discount rate	7.7% to 30.0%	13.8%
Common Equity/Interests/Warrants	11,717		Asset recovery analysis	Recoverable amount	n/a	n/a
Total Level 3 Investments	$	6,161,884

(1)Represents an investment in a Real Estate Investment Trust subsidiary. The Enterprise Value analysis includes the fair value of our investments in such indirect subsidiary’s consumer loans purchased from online consumer lending platforms, which are valued using a discounted cash flow valuation technique.

(2)Represents an investment in a Real Estate Investment Trust subsidiary. The Enterprise Value analysis includes the fair value of our investments in such indirect subsidiary’s rated secured structured notes, which are valued using a discounted cash flow valuation technique. The key unobservable input to the discounted cash flow analysis is noted above.

(3)Represents the implied discount rate based on our internally generated single-cash flow model that is derived from the fair value estimated by the corresponding multi-path cash flow model utilized by the independent valuation firm.

(4)Represents Residual Profit Interests in Real Estate Investments.

Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, management and the independent valuation firm look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. In determining the range of values for debt instruments where market quotations are not available, except CLOs and debt investments in controlling portfolio companies, management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data. A discounted cash flow technique was then applied using the appropriate yield to maturity as the discount rate, to determine a range of values. In determining the range of values for debt investments of controlled companies and equity investments, the enterprise value was determined by applying a market approach such as using earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions and/or an income approach, such as the discounted cash flow technique. The enterprise value technique may also be used to value debt investments which are credit impaired. For stressed debt and equity investments, asset recovery analysis was used.

In determining the range of values for our investments in CLOs, the independent valuation firm uses a discounted multi-path cash flow model. The valuations were accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations to generate probability-weighted (i.e., multi-path) cash flows for the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market and certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the corresponding multi-path cash flow model.

Our portfolio consists of residual interests and debt investments in CLOs, which involve a number of significant risks. CLOs are typically very highly levered (10 - 14 times), and therefore the residual interest tranches that we invest in are subject to a higher degree of risk of total loss. In particular, investors in CLO residual interests indirectly bear risks of the underlying loan investments held by such CLOs. We generally have the right to receive payments only from the CLOs, and generally do not have direct rights against the underlying borrowers or the entity that sponsored the CLOs. While the CLOs we target generally enable the investor to acquire interests in a pool of senior loans without the expenses associated with directly holding the same investments, the prices of indices and securities underlying our CLOs will rise or fall. These prices (and, therefore, the prices of the CLOs) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. The failure by a CLO investment in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that a CLO fails certain tests, holders of debt senior to us would be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The interests we have acquired in CLOs are generally thinly traded or have only a limited trading market. CLOs are typically privately offered and sold, even in the secondary market. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO residual interests carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) our investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO investment or unexpected investment results. Our net asset value may also decline over time if our principal recovery with respect to CLO residual interests is less than the cost of those investments. Our CLO investments and/or the CLOs’ underlying senior secured loans may prepay more quickly than expected, which could have an adverse impact on our value.

An increase in LIBOR would materially increase the CLO’s financing costs. Since most of the collateral positions within the CLOs have LIBOR floors, there may not be corresponding increases in investment income (if LIBOR increases but stays below the LIBOR floor rate of such investments) resulting in materially smaller distribution payments to the residual interest investors.

On March 5, 2021, the FCA announced that (i) 24 LIBOR settings would cease to exist immediately after December 31, 2021 (all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, 1-week, 2-month, and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings); (ii) the overnight and 12-month US LIBOR settings would cease to exist after June 30, 2023; and (iii) the FCA would consult on whether the remaining nine LIBOR settings should continue to be published on a synthetic basis for a certain period using the FCA’s proposed new powers that the UK government is legislating to grant to them.

We hold more than a 10% interest in certain foreign corporations that are treated as controlled foreign corporations (“CFC”) for U.S. federal income tax purposes (including our residual interest tranche investments in CLOs). Therefore, we are treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporations in an amount equal to our pro rata share of the corporation’s income for that tax year (including both ordinary earnings and capital gains). We are required to include such deemed distributions from a CFC in our taxable income and we are required to distribute at least 90% of such income to maintain our RIC status, regardless of whether or not the CFC makes an actual distribution during such year.

If we acquire shares in “passive foreign investment companies” (“PFICs”) (including residual interest tranche investments in CLOs that are PFICs), we may be subject to federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend to our stockholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions, but such elections (if available) will generally require us to recognize our share of the PFIC’s income for each year regardless of whether we receive any distributions from such PFICs. We must nonetheless distribute such income to maintain our status as a RIC.

Legislation known as FATCA and regulations thereunder impose a withholding tax of 30% on payments of U.S. source interest and dividends, to certain non-U.S. entities, including certain non-U.S. financial institutions and investment funds, unless such non-U.S. entity complies with certain reporting requirements regarding its United States account holders and its United States owners. Most CLOs in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO in which we invest fails to properly comply with these reporting requirements, it could reduce the amounts available to distribute to residual interest and junior debt holders in such CLO vehicle, which could materially and adversely affect our operating results and cash flows.

If we are required to include amounts in income prior to receiving distributions representing such income, we may have to sell some of our investments at times and/or at prices management would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose.

The significant unobservable input used to value our investments based on the yield technique and discounted cash flow technique is the market yield (or applicable discount rate) used to discount the estimated future cash flows expected to be received from the underlying investment, which includes both future principal and interest/dividend payments. Increases or decreases in the market yield (or applicable discount rate) would result in a decrease or increase, respectively, in the fair value measurement. Management and the independent valuation firms consider the following factors when selecting market yields or discount rates: risk of default, rating of the investment and comparable company investments, and call provisions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The significant unobservable inputs used to value our investments based on the EV analysis may include market multiples of specified financial measures such as EBITDA, net income, or book value of identified guideline public companies, implied valuation multiples from precedent M&A transactions, and/or discount rates applied in a discounted cash flow technique. The independent valuation firm identifies a population of publicly traded companies with similar operations and key attributes to that of the portfolio company. Using valuation and operating metrics of these guideline public companies and/or as implied by relevant precedent transactions, a range of multiples of the latest twelve months EBITDA, or other measure such as net income or book value, is typically calculated. The independent valuation firm utilizes the determined multiples to estimate the portfolio company’s EV generally based on the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Increases or decreases in the multiple would result in an increase or decrease, respectively, in EV which would result in an increase or decrease in the fair value measurement of the debt of controlled companies and/or equity investment, as applicable. In certain instances, a discounted cash flow analysis may be considered in estimating EV, in which case, discount rates based on a weighted average cost of capital and application of the capital asset pricing model may be utilized.

The significant unobservable input used to value our private REIT investments based on the net asset value analysis is the capitalization rate applied to the earnings measure of the underlying property. Increases or decreases in the capitalization rate would result in a decrease or increase, respectively, in the fair value measurement.

Changes in market yields, discount rates, capitalization rates or EBITDA multiples, each in isolation, may change the fair value measurement of certain of our investments. Generally, an increase in market yields, discount rates or capitalization rates, or a decrease in EBITDA (or other) multiples may result in a decrease in the fair value measurement of certain of our investments.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the currently assigned valuations.

During the three months ended September 30, 2021, the valuation methodology for Global Tel*Link Corporation (“Global Tel”) for the First Lien Term Loan changed to incorporate Markit quotes. As a result of a decrease in the quoted price of the First Lien Term Loan, the fair value of our investment in Global Tel First Lien Term Loan decreased to $9,728 as of September 30, 2021, a premium of $273 from its amortized cost, compared to the $289 unrealized appreciation recorded at June 30, 2021.

During the three months ended September 30, 2021, the valuation methodology for Transplace Holdings, Inc. (“Transplace”) changed to incorporate the take-out technique. As a result of tightened market spreads and the stability of the market, the fair value of our investment in Transplace remained at $30,900 as of September 30, 2021, a premium of $485 from its amortized cost, compared to the $516 unrealized appreciation recorded at June 30, 2021.

During the three months ended September 30, 2021, we received partial repayments of $33,900 of our loans previously outstanding with NPRC and provided $9,890 of debt financing to NPRC to provide working capital.

The online consumer loan investments held by certain of NPRC’s wholly owned subsidiaries are unsecured obligations of individual borrowers that are issued in amounts ranging from $1 to $50, with fixed terms ranging from 36 to 84 months. As of September 30, 2021, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 1,140 individual loans and residual interest in two securitizations, and had an aggregate fair value of $6,701. The average outstanding individual loan balance is approximately $4 and the loans mature on dates ranging from October 1, 2021 to April 19, 2025 with a weighted-average outstanding term of 16 months as of September 30, 2021. Fixed interest rates range from 6.0% to 36.0% with a weighted-average current interest rate of 20.3%. As of September 30, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $2,700.

As of September 30, 2021, based on outstanding principal balance, 20.7% of the portfolio was invested in super prime loans (borrowers with a Fair Isaac Corporation (“FICO”) score, of 720 or greater), 40.2% of the portfolio in prime loans (borrowers with a FICO score of 660 to 719) and 39.1% of the portfolio in near prime loans (borrowers with a FICO score of 580 to 659, a portion of which are considered sub-prime).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Loan Type	Outstanding Principal Balance		Fair Value		Interest Rate Range	Weighted Average Interest Rate*
Super Prime	$	987	$	969	7.0% - 20.5%	12.3%
Prime	1,914		1,840		6.0% - 32.0%	18.1%
Near Prime	1,863		1,872		6.0% - 36.0%	26.8%

*Weighted by outstanding principal balance of the online consumer loans.

The rated secured structured note investments held by certain of NPRC’s wholly owned subsidiaries are subordinated debt interests in broadly syndicated loans managed by established collateral management teams with many years of experience in the industry. As of September 30, 2021, the outstanding investment in rated secured structured notes by certain of NPRC’s wholly owned subsidiaries was comprised of 37 investments with a fair value of $212,520 and face value of $221,942. The average outstanding note is approximately $5,998 with an expected maturity date ranging from April 2026 to April 2029 and weighted-average expected maturity of 6 years as of September 30, 2021. Coupons range from three-month LIBOR (“3ML”) plus 5.45% to 9.45% with a weighted-average coupon of 3ML + 7.16%. As of September 30, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to rated secured structured notes had a fair value of $90,200.

As of September 30, 2021, based on outstanding notional balance, 24% of the portfolio was invested in Single - B rated tranches and 76% of the portfolio in BB rated tranches.

As of September 30, 2021, our investment in NPRC and its wholly owned subsidiaries had an amortized cost of $729,701 and a fair value of $1,239,596, including our investment in online consumer lending and rated secured structured notes as discussed above. The fair value of $1,146,696 related to NPRC’s real estate portfolio was comprised of fifty-one multi-family properties, eight student housing properties and three commercial properties. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of September 30, 2021.

No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
1	Filet of Chicken	Forest Park, GA	10/24/2012	$	7,400	$	—
2	Arlington Park Marietta, LLC	Marietta, GA	5/8/2013	14,850		13,493
3	Cordova Regency, LLC	Pensacola, FL	11/15/2013	13,750		10,878
4	Crestview at Oakleigh, LLC	Pensacola, FL	11/15/2013	17,500		13,240
5	Inverness Lakes, LLC	Mobile, AL	11/15/2013	29,600		23,620
6	Kings Mill Pensacola, LLC	Pensacola, FL	11/15/2013	20,750		16,783
7	Plantations at Pine Lake, LLC	Tallahassee, FL	11/15/2013	18,000		13,476
8	Verandas at Rocky Ridge, LLC	Birmingham, AL	11/15/2013	15,600		18,410
9	Crestview at Cordova, LLC	Pensacola, FL	1/17/2014	8,500		12,952
10	Taco Bell, OK	Yukon, OK	6/4/2014	1,719		—
11	Taco Bell, MO	Marshall, MO	6/4/2014	1,405		—
12	Canterbury Green Apartments Holdings LLC	Fort Wayne, IN	9/29/2014	85,500		83,694
13	Abbie Lakes OH Partners, LLC	Canal Winchester, OH	9/30/2014	12,600		15,277
14	Kengary Way OH Partners, LLC	Reynoldsburg, OH	9/30/2014	11,500		15,443
15	Lakeview Trail OH Partners, LLC	Canal Winchester, OH	9/30/2014	26,500		29,461
16	Lakepoint OH Partners, LLC	Pickerington, OH	9/30/2014	11,000		16,764
17	Sunbury OH Partners, LLC	Columbus, OH	9/30/2014	13,000		16,998
18	Heatherbridge OH Partners, LLC	Blacklick, OH	9/30/2014	18,416		24,309
19	Jefferson Chase OH Partners, LLC	Blacklick, OH	9/30/2014	13,551		18,909
20	Goldenstrand OH Partners, LLC	Hilliard, OH	10/29/2014	7,810		11,531
21	SSIL I, LLC	Aurora, IL	11/5/2015	34,500		25,715
22	Vesper Tuscaloosa, LLC	Tuscaloosa, AL	9/28/2016	54,500		43,045
23	Vesper Iowa City, LLC	Iowa City, IA	9/28/2016	32,750		24,825
24	Vesper Corpus Christi, LLC	Corpus Christi, TX	9/28/2016	14,250		10,800
25	Vesper Campus Quarters, LLC	Corpus Christi, TX	9/28/2016	18,350		14,175
26	Vesper College Station, LLC	College Station, TX	9/28/2016	41,500		32,058
27	Vesper Kennesaw, LLC	Kennesaw, GA	9/28/2016	57,900		51,063

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

No.	Property Name	City	Acquisition Date	Purchase Price	Mortgage Outstanding
28	Vesper Statesboro, LLC	Statesboro, GA	9/28/2016	7,500	7,480
29	Vesper Manhattan KS, LLC	Manhattan, KS	9/28/2016	23,250	14,679
30	9220 Old Lantern Way, LLC	Laurel, MD	1/30/2017	187,250	153,580
31	7915 Baymeadows Circle Owner, LLC	Jacksonville, FL	10/31/2017	95,700	76,560
32	8025 Baymeadows Circle Owner, LLC	Jacksonville, FL	10/31/2017	15,300	12,240
33	23275 Riverside Drive Owner, LLC	Southfield, MI	11/8/2017	52,000	54,680
34	23741 Pond Road Owner, LLC	Southfield, MI	11/8/2017	16,500	18,974
35	150 Steeplechase Way Owner, LLC	Largo, MD	1/10/2018	44,500	36,668
36	Laurel Pointe Holdings, LLC	Forest Park, GA	5/9/2018	33,005	26,302
37	Bradford Ridge Holdings, LLC	Forest Park, GA	5/9/2018	12,500	9,963
38	Olentangy Commons Owner LLC	Columbus, OH	6/1/2018	113,000	92,876
39	Villages of Wildwood Holdings LLC	Fairfield, OH	7/20/2018	46,500	39,525
40	Falling Creek Holdings LLC	Richmond, VA	8/8/2018	25,000	25,374
41	Crown Pointe Passthrough LLC	Danbury, CT	8/30/2018	108,500	89,400
42	Ashwood Ridge Holdings LLC	Jonesboro, GA	9/21/2018	9,600	7,300
43	Lorring Owner LLC	Forestville, MD	10/30/2018	58,521	47,680
44	Hamptons Apartments Owner, LLC	Beachwood, OH	1/9/2019	96,500	79,520
45	5224 Long Road Holdings, LLC	Orlando, FL	6/28/2019	26,500	21,200
46	Druid Hills Holdings LLC	Atlanta, GA	7/30/2019	96,000	79,104
47	Bel Canto NPRC Parcstone LLC	Fayetteville, NC	10/15/2019	45,000	42,793
48	Bel Canto NPRC Stone Ridge LLC	Fayetteville, NC	10/15/2019	21,900	21,545
49	Sterling Place Holdings LLC	Columbus, OH	10/28/2019	41,500	34,196
50	SPCP Hampton LLC	Dallas, TX	11/2/2020	36,000	27,590
51	Palmetto Creek Holdings LLC	North Charleston, SC	11/10/2020	33,182	25,865
52	Valora at Homewood Holdings LLC	Homewood, AL	11/19/2020	81,250	63,844
53	NPRC Fairburn LLC	Fairburn, GA	12/14/2020	52,140	43,900
54	NPRC Grayson LLC	Grayson, GA	12/14/2020	47,860	40,500
55	NPRC Taylors LLC	Taylors, SC	1/27/2021	18,762	14,075
56	Parkside at Laurel West Owner LLC	Spartanburg, SC	2/26/2021	57,005	42,025
57	Willows at North End Owner LLC	Spartanburg, SC	2/26/2021	23,255	19,000
58	SPCP Edge CL Owner LLC	Webster, TX	3/12/2021	34,000	25,496
59	Jackson Pear Orchard LLC	Ridgeland, MS	6/28/2021	50,900	38,175
60	Jackson Lakeshore Landing LLC	Ridgeland, MS	6/28/2021	22,600	16,950
61	Jackson Reflection Pointe LLC	Flowood, MS	6/28/2021	45,100	31,050
62	Jackson Crosswinds LLC	Pearl, MS	6/28/2021	41,400	33,825
				2,322,181	1,970,853

On September 28, 2020, Spartan Energy Services, LLC fully repaid the $26,193 Senior Secured Term Loan B receivable to us at par. We recorded a realized gain of $2,832 as a result of this transaction.

As of September 30, 2021, $3,523,871 of our loans to portfolio companies, at fair value, bear interest at floating rates and have LIBOR floors ranging from 0.0% - 3.25%. As of September 30, 2021, $718,119 of our loans to portfolio companies, at fair value, bear interest at fixed rates ranging from 1.0% - 22.0%. As of June 30, 2021, $3,462,243 of our loans to portfolio companies, at fair value, bore interest at floating rates and have LIBOR floors ranging from 0.0% to 3.0%. As of June 30, 2021, $679,245 of our loans to portfolio companies, at fair value, bore interest at fixed rates ranging from 8.25% to 22.0%.

As of September 30, 2021 and June 30, 2021, the cost basis of our loans on non-accrual status amounted to $169,949 and $169,949, respectively, with fair value of $34,346 and $38,751, respectively. The fair values of these investments represent approximately 0.5% and 0.6% of our total assets at fair value as of September 30, 2021 and June 30, 2021, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%. As of September 30, 2021 and June 30, 2021, we had $41,564 and $67,385, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies. The fair value of our undrawn committed revolvers and delayed draw term loans was zero as of September 30, 2021 and June 30, 2021.

We have guaranteed $2,737 in standby letters of credit issued through a financial intermediary and $2,152 of equipment lease obligations on behalf of InterDent, Inc. (“InterDent”) as of September 30, 2021. Under these arrangements, we would be required to make payments to the financial intermediary or equipment lease provider, respectively, if InterDent was to default on their related payment obligations. As of September 30, 2021, we have not recorded a liability on the statement of assets and liabilities for these guarantees as the likelihood of default on the standby letters of credit or equipment lease is deemed to be remote.

Unconsolidated Significant Subsidiaries

Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Regulation S-X 3-09 and Regulation S-X 4-08(g), we must determine which of our unconsolidated controlled portfolio companies are considered “significant subsidiaries,” if any, as defined in Rule 1-02(w)(2) for BDC’s and closed end investment companies. Regulation S-X 3-09 requires separate audited financial statements of an unconsolidated subsidiary in an annual report. Regulation S-X 4-08(g) requires summarized financial information in an annual report.

Pursuant to Regulation S-X 10-01(b), Interim Financial Statements, summarized interim income statement information is required for an unconsolidated subsidiary within a quarterly report if the unconsolidated subsidiary would otherwise require separate audited financial statements within an annual report pursuant to Regulation S-X 3-09.

During the three months ended September 30, 2021, NPRC was deemed to be a significant subsidiary. The following table shows summarized income statement information for NPRC for the periods included in this quarterly report:

	Three Months Ended September 30,
Summary Statement of Operations	2021		2020
Total revenue	$	94,370	$	70,474
Operating expenses	46,153		34,554
Operating income	48,217		35,920
Interest expense	(51,732)		(41,588)
Depreciation and amortization	(29,165)		(16,356)
Fair value adjustment	2,132		506
Net loss	$	(30,548)	$	(21,518)

Note 4. Revolving Credit Facility

On August 29, 2014, we renegotiated our previous credit facility and closed an expanded five and a half year revolving credit facility (the “2014 Facility”). The lenders had extended commitments of $885,000 under the 2014 Facility as of June 30, 2018. The 2014 Facility included an accordion feature which allowed commitments to be increased up to $1,500,000 in the aggregate. Interest on borrowings under the 2014 Facility was one-month LIBOR plus 225 basis points. Additionally, the lenders charged a fee on the unused portion of the 2014 Facility equal to either 50 basis points if at least 35% of the credit facility was drawn or 100 basis points otherwise.

On August 1, 2018, we renegotiated the 2014 Facility and closed an expanded five and a half year revolving credit facility (the “2018 Facility”). The lenders have extended commitments of $1,132,500 as of June 30, 2019. The 2018 Facility included an accordion feature which allowed commitments to be increased up to $1,500,000 in the aggregate.

On September 9, 2019, we amended the 2018 Facility and closed an expanded revolving credit facility (the “2019 Facility”). The lenders had extended commitments of $1,077,500 as of March 31, 2021. The 2019 Facility included an accordion feature which allowed commitments to be increased up to $1,500,000 in the aggregate.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

On April 28, 2021, we amended the 2019 Facility and closed an expanded five year revolving credit facility (the “2021 Facility” and collectively with the 2014 Facility, the 2018 Facility, and the 2019 Facility, the “Revolving Credit Facility”). The lenders had extended commitments of $1,277,500 as of September 30, 2021. The 2021 Facility includes an accordion feature which allows commitments to be increased up to $1,500,000 in the aggregate. The Revolving Credit Facility matures on April 27, 2026. It includes a revolving period that extends through April 27, 2025, followed by an additional one-year amortization period, with distributions allowed to Prospect 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 Revolving Credit 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 Revolving Credit 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 Revolving Credit Facility. The Revolving Credit Facility also requires the maintenance of a minimum liquidity requirement. As of September 30, 2021, we were in compliance with the applicable covenants.

Interest on borrowings under the 2021 Facility is one-month LIBOR plus 205 basis points. Additionally, the lenders charge a fee on the unused portion of the credit facility equal to either 40 basis points if more than 60% of the credit facility is drawn, or 70 basis points if more than 35% and an amount less than or equal to 60% of the credit facility is drawn, or 150 basis points if an amount less than or equal to 35% of the credit facility is drawn. The 2021 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.

For the three months ended September 30, 2021 and September 30, 2020, the average stated interest rate (i.e., rate in effect plus the spread) and average outstanding borrowings for the Revolving Credit Facility were as follows:

	Three Months Ended September 30,
	2021	2020
Average stated interest rate	2.14%	2.37%
Average outstanding balance	$436,780	$377,113

As of September 30, 2021 and June 30, 2021, we had $1,021,769 and $640,853, respectively, available to us for borrowing under the Revolving Credit Facility, net of $84,537 and $356,937 outstanding borrowings as of the respective balance sheet dates. As of September 30, 2021, the investments, including cash and cash equivalents, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,871,007, which represents 28.9% of our total investments, including cash and cash equivalents. These assets are held and owned by PCF, a bankruptcy remote special purpose entity, and, as such, these investments are not available to our general creditors. As additional eligible investments are transferred to PCF and pledged under the Revolving Credit Facility, PCF will generate additional availability up to the current commitment amount of $1,277,500. The release of any assets from PCF requires the approval of the facility agent.

In connection with the origination and amendments of the Revolving Credit Facility, we incurred $15,978 of new fees and $7,509 were carried over from the previous facilities, all of which are being amortized over the term of the facility in accordance with ASC 470-50. As of September 30, 2021, $10,945 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $4,569 and $4,633, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Note 5. Convertible Notes

2022 Notes

On April 11, 2017, we issued $225,000 aggregate principal amount of convertible notes that mature on July 15, 2022 (the “Original 2022 Notes”), unless previously converted or repurchased in accordance with their terms. The Original 2022 Notes bear interest at a rate of 4.95% per year, payable semi-annually on January 15 and July 15 each year, beginning July 15, 2017. Total proceeds from the issuance of the Original 2022 Notes, net of underwriting discounts and offering costs, were $218,010. On May 18, 2018, we issued an additional $103,500 aggregate principal amount of convertible notes that mature on July 15, 2022 (the “Additional 2022 Notes,” and together with the Original 2022 Notes, the “2022 Notes”), unless previously converted or repurchased in accordance with their terms. The Additional 2022 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2022 Notes and bear interest at a rate of 4.95% per year, payable semi-annually on January 15 and July 15 each year, beginning July 15, 2018. Total proceeds from the issuance of the Additional 2022 Notes, net of underwriting discounts and offering costs, were $100,749.

On October 18, 2019, we repurchased $22,941 aggregate principal amount of the 2022 Notes at a price of $102.8 including commissions. As a result of this transaction, we recorded a loss of $1,072 in the amount of the difference between the reacquisition price and the net carrying amount of the 2022 Notes, net of the proportionate amount of unamortized debt issuance costs. On November 7, 2019, we commenced a tender offer to purchase for cash up to $50,000 aggregate principal amount of the 2022 Notes (“2022 Notes November Tender Offer”). On December 7, 2019, $13,432 aggregate principal amount of the 2022 Notes, representing 4.4% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes November Tender Offer resulted in our recognizing a loss of $599, in the amount of the difference between the reacquisition price and the net carrying amount of the 2022 Notes, net of the proportionate amount of unamortized debt issuance costs.

On December 23, 2019, we commenced a tender offer to purchase for cash up to $25,000 aggregate principal amount of the 2022 Notes (“2022 Notes December Tender Offer”). On January 22, 2020, $1,302 aggregate principal amount of the 2022 Notes, representing 0.5% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes December Tender Offer resulted in our recognizing a loss of $51 during the three months ended March 31, 2020. During the three months ended March 31, 2020, we repurchased an additional $32,585 aggregate principal amount of the 2022 Notes at a weighted average price of 89.1 including commissions. As a result of this transaction, we recorded a gain of $3,045, in the amount of the difference between the reacquisition price and the net carrying amount of the 2022 Notes, net of the proportionate amount of unamortized debt issuance costs.

On July 23, 2020, we commenced a tender offer to purchase for cash up to $100,000 aggregate principal amount of the 2022 Notes (“2022 Notes July Tender Offer”). On August 19, 2020, $29,420 aggregate principal amount of the 2022 Notes, representing 11.4% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes July Tender Offer resulted in our recognizing a loss of $396 during the three months ended September 30, 2020.

On September 3, 2020, we commenced a tender offer to purchase for cash up to $228,820 aggregate principal amount of the 2022 Notes at the purchase price of $101.00, plus accrued and unpaid interest (“2022 Notes September Tender Offer”). On October 1, 2020, $6,035 aggregate principal amount of the 2022 Notes, representing 2.64% of the previously outstanding 2022 Notes, were validly tendered and accepted. On October 19, 2020, we commenced a tender offer to purchase for cash any and all of the $222,785 aggregate principal amount outstanding of the 2022 Notes at the purchase price of $102.625, plus accrued and unpaid interest (“2022 Notes October Tender Offer”). On November 16, 2020, $59,863 aggregate principal amount of the 2022 Notes, representing 26.87% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes September Tender Offer and the 2022 Notes October Tender Offer resulted in our recognizing a loss of $2,433 during the three months ended December 31, 2020.

On December 16, 2020, we commenced a tender offer to purchase for cash any and all of the $162,922 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $103.50, plus accrued and unpaid interest (“2022 Notes December 2020 Tender Offer”). On January 15, 2021, $26,694 aggregate principal amount of the 2022 Notes, representing 16.38% of the previously outstanding 2022 Notes, were validly tendered and accepted. On February 1, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $103.00, plus accrued and unpaid interest (“2022 Notes February 2021 Tender Offer”). On March 2, 2021, $25,123 aggregate principal amount of the 2022 Notes, representing 18.44% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes December 2020 Tender Offer and the 2022 Notes February 2021 Tender Offer resulted in our recognizing a loss of $2,225 during the three months ended March 31, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

On March 16, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $102.00, plus accrued and unpaid interest (“2022 Notes March 2021 Tender Offer”). On April 13, 2021, $50 aggregate principal amount of the 2022 Notes, representing 0.05% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes March 2021 Tender Offer resulted in our recognizing a loss of $1.

On August 26, 2021, we commenced a tender offer to purchase for cash up to $60,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $102.50, plus accrued and unpaid interest (“2022 Notes August 2021 Tender Offer”). On September 24, 2021, $50,554 aggregate principal amount of the 2022 Notes, representing 45.52% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes August 2021 Tender Offer resulted in our recognizing a loss of $1,584. As of September 30, 2021, the outstanding aggregate principal amount of the 2022 Notes is $60,501.

2025 Notes

On March 1, 2019, we issued $175,000 aggregate principal amount of senior convertible notes that mature on March 1, 2025 (the “2025 Notes”), unless previously converted or repurchased in accordance with their terms. We granted the underwriters a 13-day over-allotment option to purchase up to an additional $26,250 aggregate principal amount of the 2025 Notes. The underwriters fully exercised the over-allotment option on March 11, 2019 and we issued $26,250 aggregate principal amount of 2025 Notes at settlement on March 13, 2019. The 2025 Notes bear interest at a rate of 6.375% per year, payable semi-annually on March 1 and September 1 each year, beginning September 1, 2019. Total proceeds from the issuance of the 2025 Notes, net of underwriting discounts and offering costs, were $198,674.

On December 28, 2020, we commenced a tender offer to purchase for cash up to $20,000 aggregate principal amount of the 2025 Notes at the purchase price of $111.00, plus accrued and unpaid interest (“2025 Notes December 2020 Tender Offer”). On January 27, 2021, $20,000 aggregate principal amount of the 2025 Notes, representing 9.94% of the previously outstanding 2025 Notes, were validly tendered and accepted. The 2025 Notes December 2020 Tender Offer resulted in our recognizing a loss of $2,676 during the three months ended March 31, 2021. On February 16, 2021, we repurchased an additional $25,082 aggregate principal amount of the 2025 Notes, representing 13.84% of the previously outstanding 2025 Notes, at a price of $107.50, including commissions. As a result of this transaction, we recorded a loss of $2,466, in the amount of the difference between the reacquisition price and the net carrying amount of the 2025 Notes, net of the proportionate amount of unamortized debt issuance costs. As of September 30, 2021, the outstanding aggregate principal amount of the 2025 Notes is $156,168.

Certain key terms related to the convertible features for the 2022 Notes, and the 2025 Notes (collectively, the “Convertible Notes”) are listed below.

	2022 Notes		2025 Notes
Initial conversion rate(1)	100.2305		110.7420
Initial conversion price	$	9.98	$	9.03
Conversion rate at September 30, 2021(1)(2)	100.2305		110.7420
Conversion price at September 30, 2021(2)(3)	$	9.98	$	9.03
Last conversion price calculation date	4/11/2021		3/1/2021
Dividend threshold amount (per share)(4)	$	0.083330	$	0.060000

(1)Conversion rates denominated in shares of common stock per $1 principal amount of the Convertible Notes converted. 

(2)Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date.

(3)The conversion price will increase only if the current monthly dividends (per share) exceed the dividend threshold amount (per share).

(4)The conversion rate is increased if monthly cash dividends paid to common shares exceed the monthly dividend threshold amount, subject to adjustment. Current dividend rates are at or below the minimum dividend threshold amount for further conversion rate adjustments for all bonds.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Interest accrues from the date of the original issuance of the Convertible Notes or from the most recent date to which interest has been paid or duly provided. Upon conversion, 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 Convertible Notes. If a holder converts the Convertible Notes after a record date for an interest payment but prior to the corresponding interest payment date, the holder will receive shares of our common stock based on the conversion formula described above, a cash payment representing accrued and unpaid interest through the record date in the normal course and a separate cash payment representing accrued and unpaid interest from the record date to the conversion date.

No holder of 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 Convertible 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 Convertible Notes upon a fundamental change at a price equal to 100% of the principal amount of the Convertible 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 Convertible Notes through and including the maturity date.

In connection with the issuance of the Convertible Notes, we recorded a discount of $3,369 and debt issuance costs of $9,035 which are being amortized over the terms of the Convertible Notes. As of September 30, 2021, $1,905 of the original issue discount and $1,511 of the debt issuance costs remain to be amortized and is included as a reduction within Convertible Notes on the Consolidated Statement of Assets and Liabilities.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $4,235 and $6,865, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.

Note 6. Public Notes

2023 Notes

On March 15, 2013, we issued $250,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “Original 2023 Notes”). The Original 2023 Notes bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2013. Total proceeds from the issuance of the Original 2023 Notes, net of underwriting discounts and offering costs, were $243,641. On June 20, 2018, we issued an additional $70,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “Additional 2023 Notes”, and together with the Original 2023 Notes, the “2023 Notes”). The Additional 2023 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2023 Notes and bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2018. Total proceeds from the issuance of the Additional 2023 Notes, net of underwriting discounts, were $69,403.

On November 17, 2020, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 2023 Notes at the purchase price of $105.00, plus accrued and unpaid interest (“2023 Notes November Tender Offer”). On December 15, 2020, $36,644 aggregate principal amount of the 2023 Notes were tendered, of which, $30,000 aggregate principal amount, representing 9.38% of the previously outstanding 2023 Notes, were validly accepted pursuant to the applicable 2023 Notes November Tender Offer (applying a proration factor of approximately 82.27%). The 2023 Notes November Tender Offer resulted in our recognizing a loss of $1,694 during the three months ended December 31, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

On March 9, 2021, we commenced a tender offer to purchase for cash any and all of the $290,000 aggregate principal amount of the 2023 Notes at the purchase price of $104.25, plus accrued and unpaid interest (“2023 Notes March 9, 2021 Tender Offer”). On March 15, 2021, $4,219 aggregate principal amount of the 2023 Notes were tendered, representing 1.45% of the previously outstanding 2023 Notes. On March 23, 2021, we commenced a tender offer to purchase for cash any and all of the $285,781 aggregate principal amount of the 2023 Notes at the purchase price of $104.20, plus accrued and unpaid interest (“2023 Notes March 23, 2021 Tender Offer”). On March 29, 2021, $726 aggregate principal amount of the 2023 Notes were tendered, representing 0.25% of the previously outstanding 2023 Notes. The 2023 Notes March 9, 2021 Tender Offer and the 2023 Notes March 23, 2021 Tender Offer resulted in our recognizing a loss of $234 during the three months ended March 31, 2021.

On April 7, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 2023 Notes at the purchase price of $104.15, plus accrued and unpaid interest (“2023 Notes April 2021 Tender Offer”). On May 4, 2021, $836 aggregate principal amount of the 2023 Notes were tendered, representing 0.29% of the previously outstanding 2023 Notes. The 2023 Notes April 2021 Tender Offer resulted in our recognizing a loss of $43 during the three months ended June 30, 2021. As of September 30, 2021, the outstanding aggregate principal amount of the 2023 Notes is $284,219.

2024 Notes

On December 10, 2015, we issued $160,000 aggregate principal amount of unsecured notes that mature on June 15, 2024 (the “2024 Notes”). The 2024 Notes bore interest at a rate of 6.25% per year, payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2016. Total proceeds from the issuance of the 2024 Notes, net of underwriting discounts and offering costs, were $155,043. On June 16, 2016, we entered into an at-the-market (“ATM”) program with FBR Capital Markets & Co., through which we could sell, by means of ATM offerings, from time to time, up to $100,000 in aggregate principal amount of our existing 2024 Notes (“Initial 2024 Notes ATM”). Following the Initial 2024 Notes ATM, the aggregate principal amount of the 2024 Notes issued was $199,281 for net proceeds of $193,253, after commissions and offering costs. On July 2, 2018, we entered into a second ATM program with B. Riley FBR, Inc. and BB&T Capital Markets, and on August 31, 2018 with Comerica Securities, Inc., through which we could sell, by means of ATM offerings, up to $100,000 in aggregate principal amount of the 2024 Notes (“Second 2024 Notes ATM”). Prior to the February 2021 full redemption discussed below, the 2024 Notes were listed on the New York Stock Exchange (“NYSE”) and traded thereon under the ticker “PBB”.

During the year ended June 30, 2019, we issued an additional $35,162 aggregate principal amount under the Second 2024 Notes ATM, for net proceeds of $34,855, after commissions and offering costs. On March 20, 2020, we commenced a tender offer to purchase for cash any and all of the $234,443 aggregate principal amount of the 2024 Notes (“2024 Notes March Tender Offer”). On March 31, 2020, $655 aggregate principal amount of the 2024 Notes, representing 0.3% of the previously outstanding 2024 Notes, were validly tendered and accepted. The 2024 Notes March Tender Offer resulted in our recognizing a gain of $203 during the three months ended March 31, 2020.

On February 16, 2021, we redeemed $233,788 of the aggregate principal amount of the 2024 Notes. The transaction resulted in our recognizing a loss of $3,391 during the three months ended March 31, 2021. Following the redemption, none of the 2024 Notes remained outstanding.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

2028 Notes

On June 7, 2018, we issued $55,000 aggregate principal amount of unsecured notes that mature on June 15, 2028 (the “2028 Notes”). The 2028 Notes bear interest at a rate of 6.25% per year, payable quarterly on March 15, June 15, September 15, and December 15 of each year, beginning September 15, 2018. Total proceeds from the issuance of the 2028 Notes, net of underwriting discounts and offering costs were $53,119. On July 2, 2018, we entered into an ATM program with B. Riley FBR, Inc. and BB&T Capital Markets, and on August 31, 2018 with Comerica Securities, Inc., through which we could sell, by means of ATM offerings, up to $100,000 in aggregate principal amount of our existing 2028 Notes (“2028 Notes ATM” or “2028 Notes Follow-on Program”). The 2028 Notes are listed on the NYSE and trade thereon under the ticker “PBY.” During the year ended June 30, 2019, we issued an additional $15,761 aggregate principal amount under the 2028 Notes ATM, for net proceeds of $15,530, after commissions and offering costs.

On June 15, 2021, we redeemed $70,761 of the aggregate principal amount of the 2028 Notes. The transaction resulted in our recognizing a loss of $1,934 during the three months ended June 30, 2021. Following the redemption, none of the 2028 Notes remained outstanding.

6.375% 2024 Notes

On October 1, 2018, we issued $100,000 aggregate principal amount of unsecured notes that mature on January 15, 2024 (the “6.375% 2024 Notes”). The 6.375% 2024 Notes bear interest at a rate of 6.375% per year, payable semi-annually on January 15 and July 15 of each year, beginning January 15, 2019. Total proceeds from the issuance of the 6.375% 2024 Notes, net of underwriting discounts and offering costs, were $98,985.

On November 17, 2020, we commenced a tender offer to purchase for cash up to $10,000 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $108.00, plus accrued and unpaid interest (“6.375% 2024 Notes November Tender Offer”). On December 15, 2020, $11,848 aggregate principal amount of the 6.375% 2024 Notes were tendered, of which, $10,000 aggregate principal amount, representing 10% of the previously outstanding 6.375% 2024 Notes, were validly accepted pursuant to the applicable 6.375% 2024 Notes Tender Offer (applying a proration factor of approximately 84.56%). The 6.375% 2024 Notes November Tender Offer resulted in our recognizing a loss of $866 during the three months ended December 31, 2020.

On March 2, 2021, we commenced a tender offer to purchase for cash any and all of the $90,000 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $109.00, plus accrued and unpaid interest (“6.375% 2024 Notes March 2, 2021 Tender Offer”). On March 8, 2021, $7,738 aggregate principal amount of the 6.375% 2024 Notes, representing 8.60% of the previously outstanding 6.375% 2024 Notes, were validly tendered and accepted. On March 16, 2021, we commenced a tender offer to purchase for cash any and all of the $82,262 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $108.75, plus accrued and unpaid interest (“6.375% 2024 Notes March 16, 2021 Tender Offer”). On March 22, 2021, $647 aggregate principal amount of the 6.375% 2024 Notes, representing 0.79% of the previously outstanding 6.375% 2024 Notes, were validly tendered and accepted. The 6.375% 2024 Notes March 2, 2021 Tender Offer and the 6.375% 2024 Notes March 16, 2021 Tender Offer resulted in our recognizing a loss of $806 during the three months ended March 31, 2021.

On April 7, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $107.50, plus accrued and unpaid interest (“6.375% 2024 Notes April 2021 Tender Offer”). On May 4, 2021, $226 aggregate principal amount of the 6.375% 2024 notes, representing 0.28% of the previously outstanding 6.375% 2024 Notes, were validly tendered and accepted. The 6.375% 2024 Notes April 2021 Tender Offer resulted in our recognizing a loss of $18 during the three months ended June 30, 2021. As of September 30, 2021, the outstanding aggregate principal amount of the 6.375% 2024 Notes is $81,389.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

2029 Notes

On December 5, 2018, we issued $50,000 aggregate principal amount of unsecured notes that mature on June 15, 2029 (the “2029 Notes”). The 2029 Notes bear interest at a rate of 6.875% per year, payable quarterly on March 15, June 15, September 15, and December 15 of each year, beginning March 15, 2019. Total proceeds from the issuance of the 2029 Notes, net of underwriting discounts and offering costs, were $48,057. On February 9, 2019, we entered into an ATM program with B. Riley FBR, Inc., BB&T Capital Markets, and Comerica Securities, Inc., through which we could sell, by means of ATM offerings, up to $100,000 in aggregate principal amount of our existing 2029 Notes (“2029 Notes ATM” or “2029 Notes Follow-on Program”). The 2029 Notes are listed on the NYSE and trade thereon under the ticker “PBC.” During the year ended June 30, 2019, we issued an additional $19,170 aggregate principal amount under the 2029 Notes ATM, for net proceeds of $18,523, after commissions and offering costs. As of September 30, 2021, the outstanding aggregate principal amount of the 2029 Notes is $69,170.

2026 Notes

On January 22, 2021, we issued $325,000 aggregate principal amount of unsecured notes that mature on January 22, 2026 (the “Original 2026 Notes”). The Original 2026 Notes bear interest at a rate of 3.706% per year, payable semi-annually on July 22, and January 22 of each year, beginning on July 22, 2021. Total proceeds from the issuance of the 2026 Notes, net of underwriting discounts and offering costs, were $317,720. On February 19, 2021, we issued an additional $75,000 aggregate principal amount of unsecured notes that mature on January 22, 2026 (the “Additional 2026 Notes”, and together with the Original 2026 Notes, the “2026 Notes”). The Additional 2026 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2026 Notes and bear interest at a rate of 3.706% per year, payable semi-annually on July 22 and January 22 of each year, beginning July 22, 2021. Total proceeds from the issuance of the Additional 2026 Notes, net of underwriting discounts and offering costs, were $74,061. As of September 30, 2021, the outstanding aggregate principal amount of the 2026 Notes is $400,000.

3.364% 2026 Notes

On May 27, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on November 15, 2026 (the “3.364% 2026 Notes”). The 3.364% 2026 Notes bear interest at a rate of 3.364% per year, payable semi-annually on November 15, and May 15 of each year, beginning on November 15, 2021. Total proceeds from the issuance of the 3.364% 2026 Notes, net of underwriting discounts and offering costs, were $293,283. As of September 30, 2021, the outstanding aggregate principal amount of the 3.364% 2026 Notes is $300,000.

3.437% 2028 Notes

On September 30, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on October 15, 2028 (the “3.437% 2028 Notes”). The 3.437% 2028 Notes bear interest at a rate of 3.437% per year, payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2022. Total proceeds from the issuance of the 3.437% 2028 Notes, net of underwriting discounts and offering costs, were $291,798. As of September 30, 2021, the outstanding aggregate principal amount of the 3.437% 2028 Notes is $300,000.

The 2023 Notes, the 6.375% 2024 Notes, the 2029 Notes, the 2026 Notes, the 3.364% 2026 Notes, and the 3.437% 2028 Notes (collectively, the “Public Notes”) are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding.

In connection with the issuance of the Public Notes we recorded a discount of $16,318 and debt issuance costs of $19,008, which are being amortized over the term of the notes. As of September 30, 2021, $13,486 of the original issue discount and $13,882 of the debt issuance costs remain to be amortized and are included as a reduction within Public Notes on the Consolidated Statement of Assets and Liabilities.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $13,932 and $12,843, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense.

Note 7. Prospect Capital InterNotes® 

On February 16, 2012, we entered into a selling agent agreement (the “Original Selling Agent Agreement”) with InspereX LLC (formerly known as “Incapital LLC”), as purchasing agent for our issuance and sale from time to time of up to $500,000 of Prospect Capital InterNotes®, which was increased to $1,500,000 in May 2014. On May 10, 2019, the Original Selling Agent

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “May 2019 Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $1,000,000 of Prospect Capital InterNotes®.

On September 16, 2019, the May 2019 Selling Agent Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “September 2019 Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $500,000 of Prospect Capital InterNotes®. We sold approximately $1,700,000 in aggregate principal amount of Prospect Capital InterNotes® under the Original Selling Agent Agreement, May 2019 Selling Agent Agreement, and September 2019 Selling Agent Agreement (collectively the “Previous Selling Agent Agreements”).

On February 13, 2020, the September 2019 Selling Agent Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $1,000,000 of Prospect Capital InterNotes® (collectively with the previously authorized selling agent agreements, the “InterNotes® Offerings”). Additional agents may be appointed by us from time to time in connection with the InterNotes® Offering and become parties to the Selling Agent Agreement. We have, from time to time, repurchased certain notes issued through the InterNotes® Offerings and, therefore, as of September 30, 2021, $382,164 aggregate principal amount of Prospect Capital InterNotes® were outstanding.

These notes are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding. Each series of notes will be issued by a separate trust. These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.

During the three months ended September 30, 2021, we issued $87,657 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $85,472. These notes were issued with stated interest rates ranging from 2.25% to 4.00% with a weighted average interest rate of 3.35%. These notes will mature between July 15, 2026 and September 15, 2051. The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2021:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range		Weighted Average Interest Rate	Maturity Date Range
5	$	15,681	2.25% – 2.50%		2.42%	July 15, 2026 – September 15, 2026
7	17,016		2.75% – 3.00%		2.96%	July 15, 2028 – September 15, 2028
10	17,027		3.15% – 3.40%		3.29%	July 15, 2031 – September 15, 2031
12	2,422		3.70	%	3.70%	July 15, 2033
15	12,317		3.50% – 4.00%		3.82%	July 15, 2036 – September 15, 2036
30	23,194		4.00	%	4.00%	July 15, 2051 – September 15, 2051
	$	87,657

During the three months ended September 30, 2020, we issued $38,657 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $38,070. These notes were issued with stated interest rates ranging from 4.75% to 6.00% with a weighted average interest rate of 5.42%. These notes mature between July 15, 2025 and October 15, 2030 . The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2020:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate	Maturity Date Range
5	$	24,906	4.75% – 5.50%	5.31%	July 15, 2025 – October 15, 2025
7	5,884		5.00% – 5.75%	5.49%	July 15, 2027 – October 15, 2027
10	7,867		5.25% – 6.00%	5.75%	July 15, 2030 – October 15, 2030
	$	38,657

During the three months ended September 30, 2021, we repaid $671 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. In order to replace short maturity debt with longer-term debt, we redeemed $213,533 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.10%. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2021 was $3,719.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following table summarizes the Prospect Capital InterNotes® outstanding as of September 30, 2021:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range		Weighted Average Interest Rate		Maturity Date Range
3	$	662	1.50	%	1.50	%	January 15, 2024
5	45,974		2.25% – 3.00%		2.80%		January 15, 2026 – September 15, 2026
6	15,107		3.00	%	3.00%		June 15, 2027 – July 15, 2027
7	25,339		2.75% – 4.00%		3.15	%	January 15, 2028 – September 15, 2028
8	3,511		3.40% – 3.50%		3.45%		June 15, 2029 – July 15, 2029
10	72,600		3.15% – 6.00%		3.88%		November 15, 2025 – September 15, 2031
12	16,854		3.70% – 6.00%		4.17%		November 15, 2025 – July 15, 2033
15	29,118		3.50% – 6.00%		4.96%		May 15, 2028 – September 15, 2036
18	18,467		4.50% – 6.25%		5.59%		December 15, 2030 – August 15, 2031
20	3,777		5.75% – 6.00%		5.89%		November 15, 2032 – October 15, 2033
25	30,209		6.25% – 6.50%		6.39%		August 15, 2038 – May 15, 2039
30	120,546		4.00% – 6.75%		5.82%		November 15, 2042 – September 15, 2051
	$	382,164

During the three months ended September 30, 2020, we repaid $565 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2020 was $14.

The following table summarizes the Prospect Capital InterNotes® outstanding as of September 30, 2020:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
5	$	243,146	3.75% – 5.75%	4.86	%	September 15, 2023 – October 15, 2025
7	110,348		4.00% – 6.00%	5.13	%	July 15, 2024 – October 15, 2027
8	24,325		4.50% – 5.75%	4.67	%	August 15, 2025 – July 15, 2026
10	167,479		3.75% – 6.25%	5.34	%	January 15, 2024 – October 15, 2030
12	2,978		6.00%	6.00	%	November 15, 2025 – December 15, 2025
15	16,851		5.75% – 6.00%	5.79	%	May 15, 2028 – November 15, 2028
18	18,721		4.50% – 6.25%	5.58	%	December 15, 2030 – August 15, 2031
20	3,812		5.75% – 6.00%	5.89	%	November 15, 2032 – October 15, 2033
25	30,710		6.25% – 6.50%	6.39	%	August 15, 2038 – May 15, 2039
30	99,951		5.50% – 6.75%	6.25	%	November 15, 2042 – October 15, 2043
	$	718,321

In connection with the issuance of Prospect Capital InterNotes®, we incurred $26,776 of fees which are being amortized over the term of the notes, of which $8,814 remains to be amortized and is included as a reduction within Prospect Capital InterNotes® on the Consolidated Statement of Assets and Liabilities as of September 30, 2021.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $5,302 and $9,708, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Note 8. Fair Value and Maturity of Debt Outstanding 

As of September 30, 2021, our asset coverage ratio stood at 302.7% based on our outstanding senior securities representing indebtedness of $2,118,148 and our asset coverage ratio on our senior securities that are stock was 258.2%. As of June 30, 2021, our asset coverage ratio stood at 274.0% based on our outstanding senior securities representing indebtedness of $2,267,649 and our asset coverage ratio on our senior securities that are stock was 258.4%. Refer to Note 9, EquityOfferings, Offering Expenses and Distributions for additional discussion on our senior securities that are stock.

Information about our senior securities is shown in the following table as of the end of each of the last ten fiscal years and as of September 30, 2021. (All figures in this item are in thousands except per unit data)

	Total Amount Outstanding(1)		Asset Coverage per Unit(2)		Involuntary Liquidating Preference per Unit(3)	Average Market Value per Unit(4)
Credit Facility
Fiscal 2022 (as of September 30, 2021)	$	84,537	$	75,837	—	—
Fiscal 2021 (as of June 30, 2021)	356,937		17,408		—	—
Fiscal 2020 (as of June 30, 2020)	237,536		22,000		—	—
Fiscal 2019 (as of June 30, 2019)	167,000		34,298		—	—
Fiscal 2018 (as of June 30, 2018)	37,000		155,503		—	—
Fiscal 2017 (as of June 30, 2017)	—		—		—	—
Fiscal 2016 (as of June 30, 2016)	—		—		—	—
Fiscal 2015 (as of June 30, 2015)	368,700		18,136		—	—
Fiscal 2014 (as of June 30, 2014)	92,000		69,470		—	—
Fiscal 2013 (as of June 30, 2013)	124,000		34,996		—	—
Fiscal 2012 (as of June 30, 2012)	96,000		22,668		—	—
2015 Notes(5)
Fiscal 2015 (as of June 30, 2015)	$	150,000	$	2,241	—	—
Fiscal 2014 (as of June 30, 2014)	150,000		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	150,000		2,578		—	—
Fiscal 2012 (as of June 30, 2012)	150,000		3,277		—	—
2016 Notes(6)
Fiscal 2016 (as of June 30, 2016)	$	167,500	$	2,269	—	—
Fiscal 2015 (as of June 30, 2015)	167,500		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	167,500		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	167,500		2,578		—	—
Fiscal 2012 (as of June 30, 2012)	167,500		3,277		—	—
2017 Notes(7)
Fiscal 2017 (as of June 30, 2017)	$	50,734	$	2,251	—	—
Fiscal 2016 (as of June 30, 2016)	129,500		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	130,000		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	130,000		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	130,000		2,578		—	—
Fiscal 2012 (as of June 30, 2012)	130,000		3,277		—	—
2018 Notes(8)
Fiscal 2017 (as of June 30, 2017)	$	85,419	$	2,251	—	—
Fiscal 2016 (as of June 30, 2016)	200,000		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	200,000		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	200,000		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	200,000		2,578		—	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

2019 Notes(10)
Fiscal 2018 (as of June 30, 2018)	$	101,647	$	2,452	—	—
Fiscal 2017 (as of June 30, 2017)	200,000		2,251		—	—
Fiscal 2016 (as of June 30, 2016)	200,000		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	200,000		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	200,000		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	200,000		2,578		—	—
5.00% 2019 Notes(11)
Fiscal 2018 (as of June 30, 2018)	$	153,536	$	2,452	—	—
Fiscal 2017 (as of June 30, 2017)	300,000		2,251		—	—
Fiscal 2016 (as of June 30, 2016)	300,000		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	300,000		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	300,000		2,305		—	—
2020 Notes (14)
Fiscal 2019 (as of June 30, 2019)	$	224,114	$	2,365	—	—
Fiscal 2018 (as of June 30, 2018)	392,000		2,452		—	—
Fiscal 2017 (as of June 30, 2017)	392,000		2,251		—	—
Fiscal 2016 (as of June 30, 2016)	392,000		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	392,000		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	400,000		2,305		—	—
6.95% 2022 Notes(9)
Fiscal 2014 (as of June 30, 2014)	$	100,000	$	2,305	—	$	1,038
Fiscal 2013 (as of June 30, 2013)	100,000		2,578		—	1,036
Fiscal 2012 (as of June 30, 2012)	100,000		3,277		—	996
2022 Notes
Fiscal 2022 (as of September 30, 2021)	$	60,501	$	3,027	—	—
Fiscal 2021 (as of June 30, 2021)	111,055		2,740		—	—
Fiscal 2020 (as of June 30, 2020)	258,240		2,408		—	—
Fiscal 2019 (as of June 30, 2019)	328,500		2,365		—	—
Fiscal 2018 (as of June 30, 2018)	328,500		2,452		—	—
Fiscal 2017 (as of June 30, 2017)	225,000		2,251		—	—
2023 Notes(12)
Fiscal 2022 (as of September 30, 2021)	$	284,219	$	3,027	—	—
Fiscal 2021 (as of June 30, 2021)	284,219		2,740		—	—
Fiscal 2020 (as of June 30, 2020)	319,145		2,408		—	—
Fiscal 2019 (as of June 30, 2019)	318,863		2,365		—	—
Fiscal 2018 (as of June 30, 2018)	318,675		2,452		—	—
Fiscal 2017 (as of June 30, 2017)	248,507		2,251		—	—
Fiscal 2016 (as of June 30, 2016)	248,293		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	248,094		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	247,881		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	247,725		2,578		—	—
2024 Notes(15)
Fiscal 2020 (as of June 30, 2020)	$	233,788	$	2,408	—	$	959
Fiscal 2019 (as of June 30, 2019)	234,443		2,365		—	1,002
Fiscal 2018 (as of June 30, 2018)	199,281		2,452		—	1,029
Fiscal 2017 (as of June 30, 2017)	199,281		2,251		—	1,027
Fiscal 2016 (as of June 30, 2016)	161,364		2,269		—	951

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

6.375% 2024 Notes(12)
Fiscal 2022 (as of September 30, 2021)	$	81,389	$	3,027	—	—
Fiscal 2021 (as of June 30, 2021)	81,389		2,740		—	—
Fiscal 2020 (as of June 30, 2020)	99,780		2,408		—	—
Fiscal 2019 (as of June 30, 2019)	99,726		2,365		—	—
2025 Notes
Fiscal 2022 (as of September 30, 2021)	$	156,168	$	3,027	—	—
Fiscal 2021 (as of June 30, 2021)	156,168		2,740		—	—
Fiscal 2020 (as of June 30, 2020)	201,250		2,408		—	—
Fiscal 2019 (as of June 30, 2019)	201,250		2,365		—	—
2026 Notes
Fiscal 2022 (as of September 30, 2021)	$	400,000	$	3,027	—	—
Fiscal 2021 (as of June 30, 2021)	400,000		2,740		—	—
3.364% 2026 Notes
Fiscal 2022 (as of September 30, 2021)	$	300,000	$	3,027	—	—
Fiscal 2021 (as of June 30, 2021)	300,000		2,740		—	—
3.437% 2028 Notes
Fiscal 2022 (as of September 30, 2021)	$	300,000	$	3,027	—	—
2028 Notes(16)
Fiscal 2020 (as of June 30, 2020)	$	70,761	$	2,408	—	$	950
Fiscal 2019 (as of June 30, 2019)	70,761		2,365		—	984
Fiscal 2018 (as of June 30, 2018)	55,000		2,452		—	1,004
2029 Notes
Fiscal 2022 (as of September 30, 2021)	$	69,170	$	3,027	—	$	1,017
Fiscal 2021 (as of June 30, 2021)	69,170		2,740		—	1,028
Fiscal 2020 (as of June 30, 2020)	69,170		2,408		—	970
Fiscal 2019 (as of June 30, 2019)	69,170		2,365		—	983
Prospect Capital InterNotes®
Fiscal 2022 (as of September 30, 2021)	$	382,164	$	3,027	—	—
Fiscal 2021 (as of June 30, 2021)	508,711		2,740		—	—
Fiscal 2020 (as of June 30, 2020)	680,229		2,408		—	—
Fiscal 2019 (as of June 30, 2019)	707,699		2,365		—	—
Fiscal 2018 (as of June 30, 2018)	760,924		2,452		—	—
Fiscal 2017 (as of June 30, 2017)	980,494		2,251		—	—
Fiscal 2016 (as of June 30, 2016)	908,808		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	827,442		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	785,670		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	363,777		2,578		—	—
Fiscal 2012 (as of June 30, 2012)	20,638		3,277		—	—
Preferred Stock
Fiscal 2022 (as of September 30, 2021)	$	365,037	$	2,582	—	—
Fiscal 2021 (as of June 30, 2021)	137,040		2,584		—	—

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

All Senior Securities(12)(13)
Fiscal 2022 (as of September 30, 2021)	$	2,483,185	$	2,582	—	—
Fiscal 2021 (as of June 30, 2021)	2,404,689		2,584		—	—
Fiscal 2020 (as of June 30, 2020)	2,169,899		2,408		—	—
Fiscal 2019 (as of June 30, 2019)	2,421,526		2,365		—	—
Fiscal 2018 (as of June 30, 2018)	2,346,563		2,452		—	—
Fiscal 2017 (as of June 30, 2017)	2,681,435		2,251		—	—
Fiscal 2016 (as of June 30, 2016)	2,707,465		2,269		—	—
Fiscal 2015 (as of June 30, 2015)	2,983,736		2,241		—	—
Fiscal 2014 (as of June 30, 2014)	2,773,051		2,305		—	—
Fiscal 2013 (as of June 30, 2013)	1,683,002		2,578		—	—
Fiscal 2012 (as of June 30, 2012)	664,138		3,277		—	—

(1)     Except as noted, the total amount of each class of senior securities outstanding at the end of the year/period presented (in 000’s).

(2)The asset coverage ratio for a class of secured senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by secured senior securities representing indebtedness. The asset coverage ratio for a class of unsecured senior securities is inclusive of all senior securities. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage Per Unit.

(3)This column is inapplicable.

(4)This column is inapplicable, except for the 6.95% 2022 Notes, the 2024 Notes, the 2028 Notes and the 2029 Notes. The average market value per unit is calculated as an average of quarter-end prices and shown as the market value per $1,000 of indebtedness.

(5)We repaid the outstanding principal amount of the 2015 Notes on December 15, 2015.

(6)We repaid the outstanding principal amount of the 2016 Notes on August 15, 2016.

(7)We repaid the outstanding principal amount of the 2017 Notes on October 15, 2017.

(8)We repaid the outstanding principal amount of the 2018 Notes on March 15, 2018.

(9)We redeemed the 6.95% 2022 Notes on May 15, 2015.

(10)We repaid the outstanding principal amount of the 2019 Notes on January 15, 2019.

(11)We redeemed the 5.00% 2019 Notes on September 26, 2018.

(12)For the fiscal years ended June 30, 2020 or prior, the 2023 Notes and 6.375% 2024 Notes are presented net of unamortized discount.

(13)While we do not consider commitments to fund under revolving arrangements to be Senior Securities, if we were to elect to treat such unfunded commitments, which were $41,564 as of September 30, 2021 as Senior Securities for purposes of Section 18 of the 1940 Act, our asset coverage per unit would be $2,539.

(14)We repaid the outstanding principal amount of the 2020 Notes on April 15, 2020.

(15)We redeemed the 2024 Notes on February 16, 2021.

(16)We redeemed the 2028 Notes on June 15, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following table shows our outstanding debt as of September 30, 2021.

	Principal Outstanding		Unamortized Discount & Debt Issuance Costs		Net Carrying Value			Fair Value(1)			Effective Interest Rate
Revolving Credit Facility(2)	$	84,537	$	10,945	$	84,537	(3)	$	84,537		1ML+2.05%	(6)
2022 Notes	60,501		324		60,177			62,014		(4)	5.64%	(7)
2025 Notes	156,168		3,092		153,076			170,759		(4)	6.63%	(7)
Convertible Notes	216,669				213,253			232,773
6.375% 2024 Notes	81,389		426		80,963			88,238		(4)	6.57%	(7)
2023 Notes	284,219		1,202		283,017			301,778		(4)	6.07%	(7)
2026 Notes	400,000		8,469		391,531			412,060		(4)	3.98%	(7)
3.364% 2026 Notes	300,000		6,969		293,031			305,097		(4)	3.60%	(7)
3.437% 2028 Notes	300,000		8,202		291,798			291,852		(4)	3.60%	(7)
2029 Notes	69,170		2,100		67,070			70,346		(4)	7.38%	(7)
Public Notes	1,434,778				1,407,410			1,469,371
Prospect Capital InterNotes®	382,164		8,814		373,350			445,191		(5)	6.17%	(8)
Total	$	2,118,148			$	2,078,550		$	2,231,872

(1)As permitted by ASC 825-10-25, we have not elected to value our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® at fair value. The fair value of these debt obligations are categorized as Level 2 under ASC 820 as of September 30, 2021.

(2)The maximum draw amount of the Revolving Credit facility as of September 30, 2021 is $1,277,500.

(3)Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility. See Note 2 for accounting policy details.

(4)We use available market quotes to estimate the fair value of the Convertible Notes and Public Notes.

(5)The fair value of Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates plus spread based on observable market inputs.

(6)Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are amortized on a straight-line method over the stated life of the obligation.

(7)The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs. For the 2029 Notes, the rate presented is a combined effective interest rate of their respective original Note issuances and Note Follow-on Programs.

(8)For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate. Interest expense and deferred debt issuance costs, which are amortized on a straight-line method over the stated life of the obligation which approximates level yield, are weighted against the average year-to-date principal balance.

77

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following table shows our outstanding debt as of June 30, 2021:

	Principal Outstanding		Unamortized Discount & Debt Issuance Costs		Net Carrying Value			Fair Value (1)			Effective Interest Rate
Revolving Credit Facility(2)	$	356,937	$	11,141	$	356,937	(3)	$	356,937		1ML+2.05%		(6)
2022 Notes	111,055		825		110,230			113,799		(4)	5.69	%	(7)
2025 Notes	156,168		3,298		152,870			171,590		(4)	6.63	%	(7)
Convertible Notes	267,223				263,100			285,389
6.375% 2024 Notes	81,389		467		80,922			88,996		(4)	6.57	%	(7)
2023 Notes	284,219		1,397		282,822			302,616		(4)	6.07	%	(7)
2026 Notes	400,000		8,768		391,232			413,032		(4)	3.94	%	(7)
3.364% 2026 Notes	300,000		7,279		292,721			300,693		(4)	3.57	%	(7)
2029 Notes	69,170		2,150		67,020			71,336		(4)	7.38	%	(7)
Public Notes	1,134,778				1,114,717			1,176,673
Prospect Capital InterNotes®	508,711		10,496		498,215			591,013		(5)	6.17	%	(8)
Total	$	2,267,649			$	2,232,969		$	2,410,012

(1)As permitted by ASC 825-10-25, we have not elected to value our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® at fair value. The fair value of these debt obligations are categorized as Level 2 under ASC 820 as of June 30, 2021.

(2)The maximum draw amount of the Revolving Credit facility as of June 30, 2021 is $1,107,500.

(3)Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility. See Note 2 for accounting policy details.

(4)We use available market quotes to estimate the fair value of the Convertible Notes and Public Notes.

(5)The fair value of Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates plus spread based on observable market inputs.

(6)Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are amortized on a straight-line method over the stated life of the obligation.

(7)The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs. For the 2029 Notes, the rate presented is a combined effective interest rate of their respective original Note issuances and Note Follow-on Programs.

(8)For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate. Interest expense and deferred debt issuance costs, which are amortized on a straight-line method over the stated life of the obligation which approximates level yield, are weighted against the average year-to-date principal balance.

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of September 30, 2021:

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	84,537	—		$	—	$	84,537	$	—
Convertible Notes	216,669		60,501		—		156,168		—
Public Notes	1,434,778		—		365,608		400,000		669,170
Prospect Capital InterNotes®	382,164		—		662		48,454		333,048
Total Contractual Obligations	$	2,118,148	$	60,501	$	366,270	$	689,159	$	1,002,218

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of June 30, 2021:

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	356,937	$	—	$	—	$	356,937	$	—
Convertible Notes	267,223		—		111,055		156,168		—
Public Notes	1,134,778		—		365,608		400,000		369,170
Prospect Capital InterNotes®	508,711		—		11,744		51,822		445,145
Total Contractual Obligations	$	2,267,649	$	—	$	488,407	$	964,927	$	814,315

We may from time to time seek to cancel or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. The amounts involved may be material. In addition, we may from time to time enter into additional debt facilities, increase the size of existing facilities or issue additional debt securities, including secured debt, unsecured debt and/or debt securities convertible into common stock. Any such purchases or exchanges of outstanding debt would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.

Note 9. Stock Repurchase Program, Equity Offerings, Offering Expenses, and Distributions

On February 13, 2020, we filed a registration statement on Form N-2 (File No. 333-236415) that was effective upon filing pursuant to Rule 462(e) under the Securities Act as permitted under the Small Business Credit Availability Act. The registration statement permits us to issue, through one or more transactions, an indeterminate amount of securities, consisting of common stock, preferred stock, debt securities, subscription rights to purchase our securities, warrants representing rights to purchase our securities or separately tradeable units combining two or more of our securities.

Preferred Stock

On August 3, 2020, we entered into a Dealer Manager Agreement with Preferred Capital Securities, LLC (“PCS”), pursuant to which PCS has agreed to serve as the Company’s agent, principal distributor and dealer manager for the Company’s offering of up to 40,000,000 shares, par value $0.001 per share, of preferred stock, with a liquidation preference of $25.00 per share. Such preferred stock will initially be issued in multiple series, including the 5.50% Series A1 Preferred Stock (“Series A1 Preferred Stock”), the 5.50% Series M1 Preferred Stock (“Series M1 Preferred Stock”), and the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”, and together with the Series M1 Preferred Stock, the “Series M Preferred Stock”). In connection with such offering, on August 3, 2020, we filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland (“SDAT”), reclassifying and designating 120,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as “Convertible Preferred Stock.” On October 30, 2020, we entered into a Dealer Manager Agreement with InspereX LLC, pursuant to which InspereX LLC has agreed to serve as the Company’s agent and dealer manager for the Company’s offering of up to 10,000,000 shares, par value $0.001 per share, of 5.50% Series AA1 Preferred Stock, with a liquidation preference of $25.00 per share (the “Series AA1 Preferred Stock”). In connection with such offering, on October 30, 2020, we filed Articles Supplementary with the SDAT, reclassifying and designating an additional 20,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as Convertible Preferred Stock. On May 19, 2021, we entered into an Underwriting Agreement with UBS Securities LLC, relating to the offer and sale of 187,000 shares, par value $0.001 per share, of 5.50% Series A2 Preferred Stock, with a liquidation preference of $25.00 per share (the “Series A2 Preferred Stock”, and together with the Series A1 Preferred Stock, Series M1 Preferred Stock, Series M2 Preferred Stock and Series AA1 Preferred Stock, the “5.50% Preferred Stock”). The issuance of the Series A2 Preferred Stock settled on May 26, 2021. In connection with such offering, on May 19, 2021, we filed Articles Supplementary with the SDAT, reclassifying and designating an additional 1,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as Convertible Preferred Stock.

In connection with the offerings of the 5.50% Preferred Stock, we adopted and amended, respectively, a preferred stock dividend reinvestment plan (the “Preferred Stock Plan” or the “Preferred Stock DRIP”), pursuant to which holders of the 5.50% Preferred Stock will have dividends on their 5.50% Preferred Stock automatically reinvested in additional shares of such 5.50% Preferred Stock at a price per share of $25.00, if they elect.

Each series of 5.50% Preferred Stock ranks (with respect to the payment of dividends and rights upon liquidation, dissolution or winding up) (a) senior to our common stock, (b) on parity with each other series of our preferred stock, and (c) junior to our

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

existing and future secured and unsecured indebtedness. See Note 8, Fair Value and Maturity of Debt Outstanding for further discussion on our senior securities.

At any time prior to the listing of the 5.50% Preferred Stock on a national securities exchange, shares of the 5.50% Preferred Stock are convertible, at the option of the holder of the 5.50% Preferred Stock (the “Holder Optional Conversion”). We will settle any Holder Optional Conversion by paying or delivering, as the case may be, (A) any portion of the Settlement Amount (as defined below) that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the Settlement Amount, minus (b) any portion of the Settlement Amount that we elect to pay in cash, divided by (2) the arithmetic average of the daily volume weighted average price of shares of our common stock over each of the five consecutive trading days ending on the Holder Conversion Exercise Date (such arithmetic average, the “5-day VWAP”). For the Series A1 Preferred Stock, the Series AA1 Preferred Stock, and the Series A2 Preferred Stock, “Settlement Amount” means (A) $25.00 per share (the “Stated Value”), plus (B) unpaid dividends accrued to, but not including, the Holder Conversion Exercise Date, minus (C) the applicable 5.50% Holder Optional Conversion Fee for the respective Holder Conversion Deadline. For the Series M Preferred Stock, “Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the Holder Conversion Exercise Date, minus (C) the applicable Series M Clawback, if any. “Series M Clawback”, if applicable, means an amount equal to the aggregate amount of all dividends, whether paid or accrued, on such share of Series M Stock in the three full months prior to the Holder Conversion Exercise Date. Subject to certain limited exceptions, we will not pay any portion of the Settlement Amount in cash (other than cash in lieu of fractional shares of our common stock) until the five year anniversary of the date on which a share of 5.50% Preferred Stock has been issued. Beginning on the five year anniversary of the date on which a share of 5.50% Preferred Stock is issued, we may elect to settle all or a portion of any Holder Optional Conversion in cash without limitation or restriction. The right of holders to convert a share of 5.50% Preferred Stock will terminate upon the listing of such share on a national securities exchange.

Subject to certain limited exceptions allowing earlier redemption, beginning on the earlier of the five year anniversary of the date on which a share of 5.50% Preferred Stock has been issued, or, for listed shares of 5.50% Preferred Stock, five years from the earliest date on which any series that has been listed was first issued (the earlier of such dates, the “Redemption Eligibility Date”), such share of 5.50% Preferred Stock may be redeemed at any time or from time to time at our option (the “Issuer Optional Redemption”), at a redemption price of 100% of the Stated Value of the shares of 5.50% Preferred Stock to be redeemed plus unpaid dividends accrued to, but not including, the date fixed for redemption.

Subject to certain limitations, each share of 5.50% Preferred Stock may be converted at our option (the “Issuer Optional Conversion”). We will settle any Issuer Optional Conversion by paying or delivering, as the case may be, (A) any portion of the IOC Settlement Amount (as defined below) that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the IOC Settlement Amount, minus (b) any portion of the IOC Settlement Amount that we elect to pay in cash, divided by (2) the 5-day VWAP, subject to our ability to obtain or maintain any stockholder approval that may be required under the 1940 Act to permit us to sell our common stock below net asset value if the 5-day VWAP represents a discount to our net asset value per share of common stock. For the 5.50% Preferred Stock, “IOC Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the date fixed for conversion. In connection with an Issuer Optional Conversion, we will use commercially reasonable efforts to obtain or maintain any stockholder approval that may be required under the 1940 Act to permit us to sell our common stock below net asset value. If we do not have or obtain any required stockholder approval under the 1940 Act to sell our common stock below net asset value and the 5-day VWAP is at a discount to our net asset value per share of common stock, we will settle any conversions in connection with an Issuer Optional Conversion by paying or delivering, as the case may be, (A) any portion of the IOC Settlement Amount that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the IOC Settlement Amount, minus (b) any portion of the IOC Settlement Amount that we elect to pay in cash, divided by (2) the NAV per share of common stock at the close of business on the business day immediately preceding the date of conversion. We will not pay any portion of the IOC Settlement Amount from an Issuer Optional Conversion in cash (other than cash in lieu of fractional shares of our common stock) until the Redemption Eligibility Date. Beginning on the Redemption Eligibility Date, we may elect to settle any Issuer Optional Conversion in cash without limitation or restriction. In the event that we exercise an Issuer Optional Conversion with respect to any shares of 5.50% Preferred Stock, the holder of such 5.50% Preferred Stock may instead elect a Holder Optional Conversion with respect to such 5.50% Preferred Stock provided that the date of conversion for such Holder Optional Conversion would occur prior to the date of conversion for an Issuer Optional Conversion.

On July 12, 2021, we entered into an underwriting agreement by and among us, Prospect Capital Management L.P., Prospect Administration LLC, and Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and UBS Securities LLC, as representatives of the underwriters, relating to the offer and sale of 6,000,000 shares, or $150,000 in aggregate liquidation preference, of our 5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock” or “5.35% Preferred Stock”), at a public offering price of $25.00 per share. Pursuant to the Underwriting Agreement, we also

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

granted the underwriters a 30-day option to purchase up to an additional 900,000 shares of Series A Preferred Stock solely to cover over-allotments. The offer settled on July 19, 2021, and no additional shares of Series A Preferred Stock were issued pursuant to the option. In connection with such offering, on July 15, 2021, we filed Articles Supplementary with SDAT, reclassifying and designating 6,900,000 shares of the Company’s authorized and unissued shares of Common Stock into shares of Series A Preferred Stock.

The Series A Preferred Stock ranks (with respect to the payment of dividends and rights upon liquidation, dissolution or winding up) (a) senior to our common stock, (b) on parity with each other series of our preferred stock, and (c) junior to our existing and future secured and unsecured indebtedness. See Note 8, Fair Value and Maturity of Debt Outstanding for further discussion on our senior securities.

Subject to certain limited exceptions allowing earlier redemption, at any time after the close of business on July 19, 2026 (any such date, an “Optional Redemption Date”), at our sole option, we may redeem the Series A Preferred Stock in whole or, from time to time, in part, out of funds legally available for such redemption, at a price per share equal to the liquidation preference of $25.00 per share, plus an amount equal to all unpaid dividends on such shares (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the date fixed for redemption. We may also redeem the Series A Preferred Stock at any time, in whole or, from time to time, in part, including prior to the Optional Redemption Date, pro rata, based on liquidation preference, with all other series of our then outstanding preferred stock, in the event that our Board determines to redeem any series of our preferred stock, in whole or, from time to time, in part, because such redemption is deemed necessary by the Board to comply with the asset coverage requirements of the 1940 Act or for us to maintain RIC status.

In the event of a Change of Control Triggering Event (as defined below), we may, at our option, exercise our special optional redemption right to redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control Triggering Event has occurred by paying the liquidation preference, plus an amount equal to all unpaid dividends on such shares (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the date fixed for such redemption. To the extent that we exercise our optional redemption right or our special optional redemption right relating to the Series A Preferred Stock, the holders of Series A Preferred Stock will not be permitted to exercise the conversion right described below in respect of their shares called for redemption.

Except to the extent that we have elected to exercise our optional redemption right or our special optional redemption right by providing notice of redemption prior to the Change of Control Conversion Date (as defined below), upon the occurrence of a Change of Control Triggering Event, each holder of Series A Preferred Stock will have the right to convert some or all of the Series A Preferred Stock held by such holder on the Change of Control Conversion Date into a number of our shares of common stock per Series A Preferred Stock to be converted equal to the lesser of:

•the quotient obtained by dividing (i) the sum of the Liquidation Preference per share plus an amount equal to all unpaid dividends thereon (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Record Date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (ii) the Common Stock Price (as defined below); and

•6.03865, subject to certain adjustments,

subject, in each case, to provisions for the receipt of alternative consideration upon conversion as described in the applicable prospectus supplement.

If we have provided or provide a redemption notice with respect to some or all of the Series A Preferred Stock, holders of any Series A Preferred Stock that we have called for redemption will not be permitted to exercise their Change of Control Conversion Right in respect of any of their Series A Preferred Stock that have been called for redemption, and any Series A Preferred Stock subsequently called for redemption that have been tendered for conversion will be redeemed on the applicable date of redemption instead of converted on the Change of Control Conversion Date.

For purposes of the foregoing discussion of a redemption upon the occurrence of a Change of Control Triggering Event, the following definitions are applicable:

“Change of Control Triggering Event” means the occurrence of any of the following:

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

•the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation and other than an Excluded Transaction) in one or a series of related transactions, of all or substantially all of the assets of the Company and its Controlled Subsidiaries taken as a whole to any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than to any Permitted Holders); provided that, for the avoidance of doubt, a pledge of assets pursuant to any of our secured debt instruments or the secured debt instruments of our Controlled Subsidiaries shall not be deemed to be any such sale, lease, transfer, conveyance or disposition; or

•the consummation of any transaction (including, without limitation, any merger or consolidation and other than an Excluded Transaction) the result of which is that any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than any Permitted Holders) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of our outstanding Voting Stock, measured by voting power rather than number of shares.

Notwithstanding the foregoing, the consummation of any of the transactions referred to in the bullet points above will not be deemed a Change of Control Triggering Event if we or the acquiring or surviving consolidated entity has or continues to have a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE American or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or NASDAQ, or is otherwise listed or quoted on a national securities exchange.

The “Change of Control Conversion Date” is the date the shares of Series A Preferred Stock are to be converted, which will be a business day selected by us that is no fewer than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Series A Preferred Stock.

The “Common Stock Price” will be (i) if the consideration to be received in the Change of Control Triggering Event by the holders of our common stock is solely cash, the amount of cash consideration per share of our common stock or (ii) if the consideration to be received in the Change of Control Triggering Event by holders of our common stock is other than solely cash (x) the average of the closing sale prices per share of our common stock (or, if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control Triggering Event as reported on the principal U.S. securities exchange on which our common stock is then traded, or (y) the average of the last quoted bid prices for our common stock in the over-the-counter market as reported by OTC Markets Group Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control Triggering Event, if our common stock is not then listed for trading on a U.S. securities exchange.

“Controlled Subsidiary” means any of our subsidiaries, 50% or more of the outstanding equity interests of which are owned by us and our direct or indirect subsidiaries and of which we possess, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting equity interests, by agreement or otherwise.

“Excluded Transaction” means (i) any transaction that does not result in any reclassification, conversion, exchange or cancellation of all or substantially all of the outstanding shares of our Voting Stock; (ii) any changes resulting from a subdivision or combination or a change solely in par value; (iii) any transaction where the shares of our Voting Stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving “person” (as that term is used in Section 13(d)(3) of the Exchange Act) or any direct or indirect parent company of the surviving “person” (as that term is used in Section 13(d)(3) of the Exchange Act) immediately after giving effect to such transaction; (iv) any transaction if (A) we become a direct or indirect wholly-owned subsidiary of a holding company and (B)(1) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of our Voting Stock immediately prior to that transaction or (2) immediately following that transaction no “person” (as that term is used in Section 13(d)(3) of the Exchange Act) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company; or (v) any transaction primarily for the purpose of changing our jurisdiction of incorporation or form of organization.

“Permitted Holders” means (i) us, (ii) one or more of our Controlled Subsidiaries and (iii) Prospect Capital Management or any affiliate of Prospect Capital Management that is organized under the laws of a jurisdiction located in the United States of America and in the business of managing or advising clients.

“Voting Stock” as applied to stock of any person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such person having ordinary voting power for the election of the directors (or the equivalent) of such person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Except as provided above in connection with a Change of Control Triggering Event, the Series A Preferred Stock is not convertible into or exchangeable for any other securities or property.

For so long as the Series A Preferred Stock is outstanding, we will not exercise any option we have to convert any other series of our outstanding preferred stock to common stock, including the Issuer Optional Conversion, or any other security ranking junior to such preferred stock. As a result, and in accordance with ASC 480, we have presented both our 5.50% Preferred Stock and Series A Preferred Stock within temporary equity on our Consolidated Statement of Assets and Liabilities as of September 30, 2021.

During the three months ended September 30, 2021, we issued 2,946,568 shares of our Series A1 Preferred Stock for net proceeds of $66,614, 173,506 shares of our Series M1 Preferred Stock for net proceeds of $4,234, and 6,000,000 shares of our Series A Preferred Stock for net proceeds of $145,275, each excluding offering costs and preferred stock dividend reinvestments.

Shares of the 5.50% Preferred Stock will pay a monthly dividend, when and if declared by the Board, at a fixed annual rate of 5.50% per annum of the Stated Value of $25.00 per share (computed on the basis of a 360-day year consisting of twelve 30-day months), payable in cash or through the issuance of additional 5.50% Preferred Stock through the 5.50% Preferred Stock DRIP.

Shares of the Series A Preferred Stock will pay a quarterly dividend, when and if declared by the Board, at a fixed annual rate of 5.35% per annum of the Stated Value of $25.00 per share (computed on the basis of a 360-day year consisting of twelve 30-day months), payable in cash

During the three months ended September 30, 2021, we distributed approximately $2,407 to our 5.50% Preferred Stock holders, as summarized in the following table:

Declaration Date	Record Date	Payment Date	Monthly Amount ($ per share), before pro ration for partial periods		Amount Distributed
5/7/2021	7/21/2021	8/2/2021	$	0.114583	$	680
5/7/2021	8/18/2021	9/1/2021	0.114583		786
8/24/2021	9/15/2021	10/1/2021	0.114583		941
					$	2,407

The above table includes dividends paid during the three months ended September 30, 2021. It does not include distributions previously declared to the 5.50% Preferred Stock holders of record for any future dates, as those amounts are not yet determinable. The following dividends were previously declared and will be recorded and paid subsequent to September 30, 2021:

•$0.114583 per share (before pro ration for partial period holders of record) for holders of record on October 20, 2021 with a payment date of November 1, 2021

•$0.114583 per share (before pro ration for partial period holders of record) for holders of record on November 17, 2021 with a payment date of December 1, 2021

During the three months ended September 30, 2021, we made no distributions to our Series A Preferred Stock holders. On August 25, 2021 we declared $0.382674 per share for Series A Preferred Stock holders of record on October 20, 2021 with a payment date of November 1, 2021.

During the three months ended September 30, 2021, we issued 1,907 shares of our Series A1 Preferred Stock and 48 shares of our Series M1 Preferred Stock, in connection with the Preferred Stock Plan.

During the three months ended September 30, 2021, 2,150 shares of our Series A1 Preferred Stock were converted to 5,972 shares of our common stock, in connection with Holder Optional Conversions.

The conversion rights discussed above are accounted for as share settled redemption features and are determined to be clearly and closely related to the preferred stock host instruments. As such, we determined that no bifurcation was necessary.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Common Stock

Our common stockholders’ equity accounts as of September 30, 2021 and September 30, 2020 reflect cumulative shares issued as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our common stock dividend reinvestment plan in connection with the acquisition of certain controlled portfolio companies and in connection with our 5.50% Preferred Stock Holder Optional Conversion. 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 August 24, 2011, our Board of Directors approved a share repurchase plan (the “Repurchase Program”) under which we may repurchase up to $100,000 of our common stock at prices below our net asset value per share. Prior to any repurchase, we are required to notify stockholders of our intention to purchase our common stock.

We did not repurchase any shares of our common stock under the Repurchase Program for the three months ended September 30, 2021 and September 30, 2020. As of September 30, 2021, the approximate dollar value of shares that may yet be purchased under the Repurchase Program is $65,860.

On June 12, 2020, we entered into equity distribution agreements with each of RBC Capital Markets, LLC, Barclays Capital Inc., and KeyBanc Capital Markets Inc. pursuant to which we may offer and sell, by means of at-the-market offerings, up to 50,000,000 shares of our $0.001 par value Common Stock (“Common Stock ATM”).

Excluding common stock dividend reinvestments and shares issued in connection with the 5.50% Preferred Stock Holder Optional Conversion, during the three months ended September 30, 2021 and September 30, 2020, we did not issue any shares of our common stock.

On February 9, 2016, we amended our common stock dividend reinvestment plan that provided for reinvestment of our dividends or distributions on behalf of our stockholders, unless a stockholder elects to receive cash, to add the ability of stockholders to purchase additional common shares by making optional cash investments. Under the revised dividend reinvestment and direct common stock repurchase plan, stockholders may elect to purchase additional common shares through our transfer agent in the open market or in negotiated transactions.

On April 17, 2020, our Board of Directors approved further amendments to our common stock dividend reinvestment plan, effective May 21, 2020, that principally provide for the number of newly-issued shares of our common stock to be credited to a stockholder’s account shall be determined by dividing the total dollar amount of the distribution payable to such common stockholder by 95% of the market price per share of our common stock at the close of regular trading on the Nasdaq Global Select Market on the date fixed by the Board of Directors for such distribution.

On June 11, 2021, at a special meeting of our stockholders, our stockholders authorized us to sell shares of our common stock (during the next 12 months) at a price or prices below our net asset value per share at the time of sale in one or more offerings, subject to certain conditions as set forth in the proxy statement relating to the special meeting (including that the number of shares sold on any given date does not exceed 25% of its outstanding common stock immediately prior to such sale).

During the three months ended September 30, 2021 and September 30, 2020, we distributed approximately $70,043 and $67,861, respectively, to our common stockholders. The following table summarizes our distributions declared and payable for the three months ended September 30, 2020 and September 30, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Declaration Date	Record Date	Payment Date	Amount Per Share		Amount Distributed (in thousands)
5/8/2020	7/31/2020	8/20/2020	$	0.06	$	22,515
5/8/2020	8/31/2020	9/17/2020	0.06		22,619
8/25/2020	9/30/2020	10/22/2020	0.06		22,727
Total declared and payable for the three months ended September 30, 2020					$	67,861
5/7/2021	7/28/2021	8/19/2021	$	0.06	$	23,325
5/7/2021	8/27/2021	9/23/2021	0.06		23,348
8/25/2020	9/28/2021	10/21/2021	0.06		23,370
Total declared and payable for the three months ended September 30, 2021					$	70,043

Dividends and distributions to common stockholders are recorded on the ex-dividend date. As such, the table above includes distributions with record dates during three months ended September 30, 2021 and September 30, 2020. It does not include distributions previously declared to common stockholders of record on any future dates, as those amounts are not yet determinable. The following dividends were previously declared and will be recorded and payable subsequent to September 30, 2021:

•$0.06 per share for October 2021 holders of record on October 27, 2021 with a payment date of November 18, 2021

During the three months ended September 30, 2021 and September 30, 2020, we issued 1,079,168 and 5,238,459 shares of our common stock, respectively, in connection with the common stock dividend reinvestment plan.

During the three months ended September 30, 2021, Prospect officers and directors purchased 24,959 shares of our common stock, or 0.01% of total outstanding shares as of September 30, 2021, through shares issued in connection with our common stock dividend reinvestment plan.

As of September 30, 2021, we have reserved 23,358,402 shares of our common stock for issuance upon conversion of the Convertible Notes (see Note 5) and 1,000,000,000 shares of our common stock for issuance upon conversion of the 5.50% Preferred Stock.

Note 10. Other Income

Other income consists of structuring fees, overriding royalty interests, revenue receipts related to net profit interests, deal deposits, administrative agent fees, and other miscellaneous and sundry cash receipts. The following table shows income from such sources during the three months ended September 30, 2021 and September 30, 2020.

	Three Months Ended September 30,
	2021		2020
Structuring, advisory, and amendment fees	$	11,822	$	1,426
Royalty and net revenue interests	9,946		9,066
Administrative agent fees	168		124
Total other income	$	21,936	$	10,616

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Note 11. Net Increase (Decrease) in Net Assets per Common Share

Earnings per share is calculated in accordance with ASC 260, “Earnings per Share”. Basic earnings per share is calculated by dividing the net increase (decrease) in net assets resulting from operations, less preferred dividends, by the weighted average number of common shares outstanding. Diluted earnings per share gives effect to all dilutive potential common shares outstanding using the if-converted method for Preferred Stock (Refer to Note 9). Diluted earnings per share excludes all dilutive potential common shares if their effect is anti-dilutive. During the three months ended September 30, 2021 and September 30, 2020, we did not have potential common shares that would be anti-dilutive.

The following information sets forth the computation of basic and diluted earnings per common share for the three and three months ended September 30, 2021 and September 30, 2020:

	For the Three Months Ended September 30, 2021
	Basic		Diluted
Net increase in net assets resulting from operations attributable to Common Stockholders	$	209,724	$	212,131
Weighted average common shares outstanding	388,886,142		409,052,821
Earnings per share	$	0.54	$	0.52

	For the Three Months Ended September 30, 2020
	Basic		Diluted
Net increase in net assets resulting from operations attributable to Common Stockholders	$	167,746	$	167,746
Weighted average common shares outstanding	375,910,891		375,910,891
Earnings per share	$	0.45	$	0.45

Note 12. Income Taxes

While our fiscal year end for financial reporting purposes is June 30 of each year, our tax year end is August 31 of each year. The information presented in this footnote is based on our tax year end for each period presented, unless otherwise specified.

For income tax purposes, dividends paid and distributions made to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of dividends paid to stockholders during the tax years ended August 31, 2021, 2020, and 2019 were as follows:

	Tax Year Ended August 31,
	2021			2020		2019
Ordinary income	$	252,388		$	169,041	$	263,773
Capital gain	—			—		—
Return of capital	26,958			96,720		—
Total dividends paid to stockholders	$	279,346	(1)	$	265,761	$	263,773

(1)Final determination of tax character will not be final until we file our return for the tax year ended August 31, 2021.

As of August 26, 2020 when our prior Form 10-K was filed for the year ended June 30, 2020, we estimated our distributions for the fiscal and tax years disclosed therein to be distributions of ordinary income. Subsequent to our filing date, we obtained more information from our underlying investments as to the character of the distributions for the tax year ended August 31, 2020, which resulted in changes to distributions previously disclosed in our Form 10-K filing. As a result of the change, our total distributable loss on our Consolidated Statement of Assets and Liabilities for the year ended June 30, 2020 changed from $1,015,387 to $930,930, with $84,457 being reclassified to distributions from capital. The remaining reclassification of tax distributions classified as return of capital for the tax year ended August 31, 2020 have been adjusted in the fiscal year ended June 30, 2021. This adjustment resulted in an increase to distributable earnings of $12,263 for the three months ended September 30, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

We generate certain types of income that may be exempt from U.S. withholding tax when distributed to non-U.S. stockholders. Under IRC Section 871(k), a RIC is permitted to designate distributions of qualified interest income and short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. stockholders with proper documentation. For the 2021 calendar year, 41.36% of our distributions as of September 30, 2021 qualified as interest related dividends which are exempt from U.S. withholding tax applicable to non-U.S. stockholders.

For the tax year ending August 31, 2021, the tax character of dividends paid to stockholders through August 30, 2021 is expected to be ordinary income and return of capital however due to the difference between our fiscal and tax year ends, the final determination of the tax character of dividends between ordinary income, capital gains, and return of capital will not be made until we file our tax return for the tax year ended August 31, 2021.

Taxable income generally differs from net increase in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized. The following reconciles the net increase in net assets resulting from operations to taxable income for the tax years ended August 31, 2021, 2020, and 2019:

	Tax Year Ended August 31,
	2021			2020		2019
Net increase (decrease) in net assets resulting from operations	$	428,106		$	(78,949)	$	93,093
Net realized (gains) losses on investments	16,172			10,139		(5,923)
Net unrealized (gains) losses on investments	(143,654)			328,997		217,159
Other temporary book-to-tax differences	(48,520)			(91,368)		(87,511)
Permanent differences	(17)			57		78
Taxable income before deductions for distributions	$	252,087	(1)	$	168,876	$	216,896

(1)Final determination of permanent differences will not be final until we file our return for the tax year ended August 31, 2021.

Capital losses in excess of capital gains earned in a tax year may generally be carried forward and used to offset capital gains, subject to certain limitations. As of August 31, 2021, we had capital loss carryforwards of approximately $129,669 available for use in later tax years. The unused balance each year will be carried forward and utilized as gains are realized, subject to limitations. While our ability to utilize losses in the future depends upon a variety of factors that cannot be known in advance, some of the Company’s capital loss carryforwards may become permanently unavailable due to limitations by the Code.

For the tax year ended August 31, 2021, we had no cumulative taxable income in excess of cumulative distributions.

As of September 30, 2021, the cost basis of investments for tax purposes was $6,141,678 resulting in an estimated net unrealized gain of $289,029. As of September 30, 2021, the gross unrealized gains and losses were $1,336,832 and $1,047,803, respectively. As of June 30, 2021, the cost basis of investments for tax purposes was $6,050,304 resulting in an estimated net unrealized gain of $151,474. As of June 30, 2021, the gross unrealized gains and losses were $1,208,128 and $1,056,654, respectively. Due to the difference between our fiscal year end and tax year end, the cost basis of our investments for tax purposes as of September 30, 2021 and June 30, 2021 was calculated based on the book cost of investments as of September 30, 2021 and June 30, 2021, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2021 and 2020, respectively.

In general, we may make certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which may include merger-related items, differences in the book and tax basis of certain assets and liabilities, and nondeductible federal excise taxes, among other items. During the tax year ended August 31, 2021, we increased overdistributed net investment income by $17 and increased capital in excess of par value by $17. During the tax year ended August 31, 2020, we decreased overdistributed net investment income by $57 and decreased capital in excess of par value by $57. Due to the difference between our fiscal and tax year end, the reclassifications for the taxable year ended August 31, 2020 is being recorded in the fiscal year ending June 30, 2021 and the reclassifications for the taxable year ended August 31, 2019 were recorded in the fiscal year ended June 30, 2020. The reclassifications, if any, for the taxable year ended August 31, 2021 will be recorded in the fiscal year ending June 30, 2022 once we file our tax return for the tax year ending August 31, 2021.

87

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Note 13. Related Party Agreements and Transactions

Investment Advisory Agreement

We have entered into an investment advisory and management agreement with the Investment Adviser (the “Investment Advisory Agreement”) under which the Investment Adviser, subject to the overall supervision of our Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, us. Under the terms of the Investment Advisory Agreement, the 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.

The Investment Adviser’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 total assets. 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 gross base management fee incurred to the favor of the Investment Adviser was $32,203 and $26,850 during the three months ended September 30, 2021 and September 30, 2020, 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 less preferred dividends 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 gains or losses. 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: 

•No incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate;

•100.00% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate); and

•20.00% of the amount of our pre-incentive fee net investment income, if any, that exceeds 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate).

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.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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 our portfolio. For the purpose of this calculation, an “investment” is defined as the total of all rights and claims which may be 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, equal the sum of the differences between the aggregate net sales price of each investment and the aggregate amortized 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 amortized 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 amortized 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 paid since inception.

The total income incentive fee incurred was $19,740 and $14,386 during the three months ended September 30, 2021 and September 30, 2020, respectively. No capital gains incentive fee was incurred during the three months ended September 30, 2021 and September 30, 2020.

Administration Agreement

We have also entered into an administration agreement (the “Administration Agreement”) with 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 Financial Officer and Chief Compliance Officer and her staff, including the internal legal staff. 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 (see Managerial Assistance section below). 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 the 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. Our payments to Prospect Administration are reviewed quarterly by our Board of Directors.

The allocation of net overhead expense from Prospect Administration was $4,526 and $4,657 for the three months ended September 30, 2021 and September 30, 2020, respectively. Prospect Administration received estimated payments of $2,298 and $66 directly from our portfolio companies, and certain funds managed by the Investment Adviser for legal services during the three months ended September 30, 2021 and September 30, 2020, respectively. We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration. Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by this amount.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Managerial Assistance

As a BDC, we are obligated under the 1940 Act to make available to certain of our portfolio companies significant managerial assistance. “Making available significant managerial assistance” refers to any arrangement whereby we provide significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company. We are also deemed to be providing managerial assistance to all portfolio companies that we control, either by ourselves or in conjunction with others. The nature and extent of significant managerial assistance provided by us to controlled and non-controlled portfolio companies will vary according to the particular needs of each portfolio company. Examples of such activities include (i) advice on recruiting, hiring, management and termination of employees, officers and directors, succession planning and other human resource matters; (ii) advice on capital raising, capital budgeting, and capital expenditures; (iii) advice on advertising, marketing, and sales; (iv) advice on fulfillment, operations, and execution; (v) advice on managing relationships with unions and other personnel organizations, financing sources, vendors, customers, lessors, lessees, lawyers, accountants, regulators and other important counterparties; (vi) evaluating acquisition and divestiture opportunities, plant expansions and closings, and market expansions; (vii) participating in audit committee, nominating committee, board and management meetings; (viii) consulting with and advising board members and officers of portfolio companies (on overall strategy and other matters); and (ix) providing other organizational, operational, managerial and financial guidance.

Prospect Administration, when performing a managerial assistance agreement executed with each portfolio company to which we provide managerial assistance, arranges for the provision of such managerial assistance on our behalf. When doing so, Prospect Administration utilizes personnel of our Investment Adviser. We, on behalf of Prospect Administration, invoice portfolio companies receiving and paying for managerial assistance, and we remit to Prospect Administration its cost of providing such services, including the charges deemed appropriate by our Investment Adviser for providing such managerial assistance. No income is recognized by Prospect.

During the three months ended September 30, 2021 and September 30, 2020, we received payments of $1,835 and $1,848, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration.

Co-Investments

On January 13, 2020, we received an exemptive order from the SEC (the “Order”), which superseded a prior co-investment exemptive order granted on February 10, 2014, that gave us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by the Investment Adviser or certain affiliates, including Priority Income Fund, Inc. and Prospect Flexible Income Fund, Inc. (f/k/a TP Flexible Income Fund, Inc.), where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions included therein. 

Under the terms of the Order, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. In certain situations where a co-investment with one or more funds managed or owned by the Investment Adviser or its affiliates is not covered by the Order, such as when there is an opportunity to invest in different securities of the same issuer, the personnel of the Investment Adviser or its affiliates will need to decide which fund will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations. Moreover, except in certain circumstances, when relying on the Order, we will be unable to invest in any issuer in which one or more funds managed by the Investment Adviser or its affiliates has previously invested.

We reimburse CLO investment valuation services fees initially incurred by Priority Income Fund, Inc. During the three months ended September 30, 2021 and September 30, 2020, we recognized expenses that were reimbursed for valuation services of $31 and $31, respectively. Conversely, Priority Income Fund, Inc. and Prospect Flexible Income Fund, Inc. (f/k/a TP Flexible Income Fund, Inc.) reimburse us for software fees, expenses which were initially incurred by Prospect.

Note 14. Transactions with Controlled Companies

The descriptions below detail the transactions which Prospect Capital Corporation (“Prospect”) has entered into with each of our controlled companies. Certain of the controlled entities discussed below were consolidated effective July 1, 2014 (see Note 1). As such, transactions with these Consolidated Holding Companies are presented on a consolidated basis.

90

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

CP Energy Services Inc.

Prospect owns 100% of the equity of CP Holdings of Delaware LLC (“CP Holdings”), a Consolidated Holding Company. CP Holdings owns 99.8% of the equity of CP Energy Services, Inc. (“CP Energy”), and the remaining equity is owned by CP Energy management. CP Energy owns directly or indirectly 100% of each of CP Well; Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. CP Energy provides oilfield flowback services and fluid hauling and disposal services through its subsidiaries. On April 6, 2018, Arctic Oilfield Equipment USA, Inc. (“Arctic Equipment”), a previously controlled portfolio company, merged with and into CP Energy, with CP Energy continuing as the surviving corporation. In June 2019, CP Energy purchased a controlling interest in the common equity of Spartan Energy Holdings, Inc. (“Spartan Holdings”), which owns 100% of Spartan Energy Services, LLC (“Spartan”) a portfolio company of Prospect with $34,399 in senior secured term loans (the “Spartan Term Loans”) due to us as of June 30, 2019. As a result of CP Energy’s purchase, and given Prospect’s controlling interest in CP Energy, our Spartan Term Loans are presented as control investments under CP Energy beginning June 30, 2019. Spartan remains the direct borrow and guarantor to Prospect for the Spartan Term Loans.

In December 2019, Wolf Energy Holdings, Inc. (“Wolf Energy Holdings”), our Consolidated Holding Company that previously owned 100% of Appalachian Energy LLC (“AEH”); Wolf Energy Services Company, LLC (“Wolf Energy Services”); and Wolf Energy, LLC (collectively our previously controlled membership interest and net profit interest investments in “Wolf Energy”), merged with and into CP Energy, with CP Energy continuing as the surviving entity. CP Energy acquired 100% of our equity investment in Wolf Energy, which is reflected in our valuation of the CP Energy common stock as of December 31, 2019.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income
Interest Income from CP Energy	$	1,271	$	1,127
Interest Income from Spartan	360		303
Total Interest Income	$	1,631	$	1,430
Other Income
Administrative Agent	$	6	$	6
Total Other Income	$	6	$	6
Realized Gain	$	—	$	2,832

	Three Months Ended
	September 30, 2021		September 30, 2020
Additions	$	—	$	26,193
Interest Income Capitalized as PIK	1,271		1,127
Repayment of Loan Receivable	—		23,361
Return of Capital	—		1

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (1)	$	18	$	18
Other Receivables (2)	33		27

(1) Interest income recognized but not yet paid.

(2) Represents amounts due from CP Energy and Spartan to Prospect for reimbursement of expenses paid by Prospect on behalf of CP Energy and Spartan.

91

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Credit Central Loan Company, LLC

Prospect owns 100% of the equity of Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a Consolidated Holding Company. Credit Central Delaware owns 99.01% of the equity of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC) (“Credit Central”), with entities owned by Credit Central management owning the remaining equity. Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC. Credit Central is a branch-based provider of installment loans.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	3,650	$	3,370
Managerial Assistance (1)	175		175

(1) No income recognized by Prospect. MA payments were paid from Credit Central to Prospect and subsequently remitted to PA.

	Three Months Ended
	September 30, 2021		September 30, 2020
Accreted Original Issue Discount	$	137	$	101
Interest Income Capitalized as PIK	1,755		3,268

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (2)	$	39	$	38
Other Receivables (3)	1		1

(2) Interest income recognized but not yet paid.

(3) Represents amounts due from Credit Central to Prospect for reimbursement of expenses paid by Prospect on behalf of Credit Central.

Echelon Transportation LLC (f/k/a Echelon Aviation LLC)

Prospect owns 100% of the membership interests of Echelon Transportation LLC (“Echelon”). Echelon owns 60.7% of the equity of AerLift Leasing Limited (“AerLift”).

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	2,701	$	2,338
Managerial Assistance (1)	63		—

(1) No income recognized by Prospect. MA payments were paid from Credit Central to Prospect and subsequently remitted to PA..

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income Capitalized as PIK	$	5,104	$	4,325

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (2)	$	1,887	$	4,290
Other Receivables (3)	1		1

(2) Interest income recognized but not yet paid.

(3) Represents amounts due from Echelon to Prospect for reimbursement of expenses paid by Prospect on behalf of Echelon.

92

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Energy Solutions Holdings Inc.

Prospect owns 100% of the equity of Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings Inc.) (“Energy Solutions”), a Consolidated Holding Company. Energy Solutions owns 100% of each of Change Clean Energy Company, LLC (f/k/a Change Clean Energy Holdings, LLC) (“Change Clean”); Freedom Marine Solutions, LLC (f/k/a Freedom Marine Services Holdings, LLC) (“Freedom Marine”); and Yatesville Coal Company, LLC (f/k/a Yatesville Coal Holdings, LLC) (“Yatesville”). Change Clean owns 100% of each of Change Clean Energy, LLC and Down East Power Company, LLC, and 50.1% of BioChips LLC. Freedom Marine owns 100% of each of Vessel Company, LLC (f/k/a Vessel Holdings, LLC) (“Vessel”); Vessel Company II, LLC (f/k/a Vessel Holdings II, LLC) (“Vessel II”); and Vessel Company III, LLC (f/k/a Vessel Holdings III, LLC) (“Vessel III”). Yatesville owns 100% of North Fork Collieries, LLC.

Energy Solutions owns interests in companies operating in the energy sector. These include companies operating offshore supply vessels, ownership of a non-operating biomass electrical generation plant and several coal mines. Energy Solutions subsidiaries formerly owned interests in gathering and processing business in east Texas.

Transactions between Prospect and Freedom Marine are separately discussed below under “Freedom Marine Solutions, LLC.”

First Tower Finance Company LLC

Prospect owns 100% of the equity of First Tower Holdings of Delaware LLC (“First Tower Delaware”), a Consolidated Holding Company. First Tower Delaware owns 80.1% of First Tower Finance Company LLC (f/k/a First Tower Holdings LLC) (“First Tower Finance”). First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	18,338	$	15,480
Other Income
Structuring Fee	$	7,234	$	—
Total Other Income	$	7,234	$	—
Managerial Assistance (1)	$	600	$	600

(1) No income recognized by Prospect. MA payments were paid from First Tower to Prospect and subsequently remitted to PA.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income Capitalized as PIK	$	3,777	$	—
Repayment of loan receivable	308		4,911

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (2)	$	201	$	198
Other Receivables (3)	1		1

(2) Interest income recognized but not yet paid.

(3) Represents amounts due from First Tower to Prospect for reimbursement of expenses paid by Prospect on behalf of First Tower.

Freedom Marine Solutions, LLC

As discussed above, Prospect owns 100% of the equity of Energy Solutions, a Consolidated Holding Company. Energy Solutions owns 100% of Freedom Marine. Freedom Marine owns 100% of each of Vessel, Vessel II, and Vessel III.

93

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

	As of
	September 30, 2021		June 30, 2021
Other Receivables	$	4	$	1

InterDent, Inc.

During the year ended June 30, 2018, Prospect exercised its rights and remedies under its loan documents to exercise the shareholder voting rights in respect of the stock of InterDent, Inc. (“InterDent”) and to appoint a new Board of Directors of InterDent, all the members of which are our Investment Adviser’s professionals. As a result, Prospect’s investment in InterDent is classified as a control investment.

Effective September 30, 2020, we restructured our investment in InterDent whereby we contributed 100% of the outstanding aggregate principal amount of our Senior Secured Term Loan C and Senior Secured Term Loan D to the capital of InterDent. The principal contributions were made gross of all previously accrued and unpaid interest paid-in-kind.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	6,328	$	4,937

	Three Months Ended
	September 30, 2021		September 30, 2020
Additions	$	7,778	$	—
Interest Income Capitalized as PIK	4,418		3,282
Repayment of loan receivable	123		—

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (1)	$	72	$	67
Other Receivables (2)	11		11

(1) Interest income recognized but not yet paid.

(2) Represents amounts due from InterDent to Prospect for reimbursement of expenses paid by Prospect on behalf of InterDent.

Kickapoo Ranch Pet Resort

Prospect owns 100% of the membership interest of Kickapoo Ranch Pet Resort (“Kickapoo”). Kickapoo is a luxury pet boarding facility.

	As of
	September 30, 2021		June 30, 2021
Other Receivables (1)	$	7	$	7

(1) Represents amounts due from Kickapoo to Prospect for reimbursement of expenses paid by Prospect on behalf of Kickapoo.

MITY, Inc.

Prospect owns 100% of the equity of MITY Holdings of Delaware Inc. (“MITY Delaware”), a Consolidated Holding Company.

MITY Delaware owns 100% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”). MITY owns 100% of each of MITY-Lite, Inc. (“MITY-Lite”); Broda USA, Inc. (f/k/a Broda Enterprises USA, Inc.) (“Broda USA”); and Broda Enterprises ULC (“Broda Canada”). MITY is a designer, manufacturer and seller of multipurpose room furniture and specialty healthcare seating products.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

During the three months ended December 31, 2016, Prospect formed a separate legal entity, MITY FSC, Inc., (“MITY FSC”) in which Prospect owns 100% of the equity. MITY FSC does not have material operations. This entity earns commission payments from MITY-Lite based on its sales to foreign customers, and distributes it to its shareholder. We recognize such commission, if any, as other income.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income
Interest Income from MITY-Lite	$	1,757	$	2,373
Interest Income from Broda Canada	—		—
Total Interest Income	$	1,757	$	2,373
Managerial Assistance (1)	$	—	$	75
Realized Gain	3		—

(1) No income recognized by Prospect. MA payments were paid from MITY to Prospect and subsequently remitted to PA.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income Capitalized as PIK	$	1,607	$	851
Repayment of loan receivable	—		145

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (2)	$	19	$	19
Other Receivables (3)	2		—

(2) Interest income recognized but not yet paid.

(3) Represents amounts due from MITY to Prospect for reimbursement of expenses paid by Prospect on behalf of MITY.

National Property REIT Corp.

Prospect owns 100% of the equity of NPH Property Holdings, LLC (“NPH”), a consolidated holding company. NPH owns 100% of the common equity of National Property REIT Corp. (“NPRC”).

NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, NPRC issued 125 shares of Series A Cumulative Non-Voting Preferred Stock to 125 accredited investors. The preferred stockholders are entitled to receive cumulative dividends semi-annually at an annual rate of 12.5% and do not have the ability to participate in the management or operation of NPRC.

NPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”). Additionally, through its wholly owned subsidiaries, NPRC invests in online consumer loans and rated secured structured notes (“RSSN”).

Effective October 31, 2019, we amended the terms of our credit agreement to increase our investment in NPRC and its wholly-owned subsidiaries through a new Senior Secured Term Loan C (“TLC”). During the three months ended December 31, 2019, we provided $51,428 and $12,857 in TLC and equity financing, respectively. NPRC used the proceeds to fund purchases of rated secured structured notes.

Effective June 19, 2020, we amended and restated the terms of our credit agreement with NPRC, as part of the amendment we increased our investment through a new Term Loan D secured note in the aggregate principal amount of $183,425 and the proceeds were returned to us as a return of capital, reducing our equity investment in NPRC. We received structuring fees of $3,669 as a result of the amendment.

95

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

During the three months ended September 30, 2021, we received partial repayments of $33,900 of our loans previously outstanding with NPRC and provided $9,890 of debt financing to NPRC to provide working capital.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	15,997	$	13,402
Other Income
Royalty/Net Interest	$	9,625	$	8,898
Total Other Income	$	9,625	$	8,898
Managerial Assistance (1)	$	525	$	525
Reimbursement of Legal, Tax, etc.(2)	2,118		164

(1) No income recognized by Prospect. MA payments were paid from NPRC to Prospect and subsequently remitted to PA.

(2) Paid from NPRC to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to NPRC (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).

	Three Months Ended
	September 30, 2021		September 30, 2020
Additions	$	9,890	$	38,746
Repayment of loan receivable	33,900		15,329

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (3)	$	34	$	35
Other Receivables (4)	7		3

(3) Interest income recognized but not yet paid.

(4) Represents amounts due from NPRC to Prospect for reimbursement of expenses paid by Prospect on behalf of NPRC.

Nationwide Loan Company LLC

Prospect owns 100% of the membership interests of Nationwide Acceptance Holdings LLC (“Nationwide Holdings”), a Consolidated Holding Company. Nationwide Holdings owns 94.48% of the equity of Nationwide Loan Company LLC (“Nationwide”), with members of Nationwide management owning the remaining 5.52% of the equity.

On March 24, 2020, Prospect received distributions of $1,500 that were paid from Nationwide Holdings to Prospect and were recognized as a return of capital by Prospect.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	1,036	$	1,033
Dividend Income (1)	1,250		—
Managerial Assistance (2)	100		100

(1) All dividends were paid from earnings and profits of Nationwide.

(2) No income recognized by Prospect. MA payments were paid from Nationwide to Prospect and subsequently remitted to PA.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income Capitalized as PIK	$	—	$	173

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (3)	$	11	$	11
Other Receivables (4)	3		2

(3) Interest income recognized but not yet paid.

(4) Represents amounts due from Nationwide to Prospect for reimbursement of expenses paid by Prospect on behalf of Nationwide.

NMMB, Inc.

Prospect owns 100% of the equity of NMMB Holdings, Inc. (“NMMB Holdings”), a Consolidated Holding Company. NMMB Holdings owns 95.17% and 94.82% of the fully-diluted equity of NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) (“NMMB”) as of September 30, 2021 and June 30, 2021, respectively, with NMMB management owning the remaining equity. NMMB owns 100% of Refuel Agency, Inc. (“Refuel Agency”). Refuel Agency owns 100% of Armed Forces Communications, Inc. (“Armed Forces”). NMMB is an advertising media buying business.

On December 30, 2019, NMMB executed a dividend recapitalization whereby Prospect invested $15,100 of a first lien term loan to repay NMMB’s existing term loan, provide a shareholder distribution, and pay fees and expenses. As part of the recapitalization, Prospect converted its Series A and Series B preferred securities into 92.42% common equity and received a dividend distribution of $2,797.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income
Interest Income from NMMB	$	131	$	135
Total Interest Income	$	131	$	135
Managerial Assistance (1)	$	100	$	100

(1) No income recognized by Prospect. MA payments were paid from NMMB to Prospect and subsequently remitted to PA.

	Three Months Ended
	September 30, 2021		September 30, 2020
Repayment of loan receivable
Repayment from NMMB	$	38	$	38
Total Repayment of loan receivable (2)	$	38	$	38

(2) During the three months ended September 30, 2021 and September 30, 2020, Prospect received partial repayments totaling $38 and $38, respectively, for our Senior Secured Notes outstanding with NMMB, Inc.

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (3)	$	1	$	1
Other Receivables (4)	1		—

(3) Interest income recognized but not yet paid.

(4) Represents amounts due from NMMB to Prospect for reimbursement of expenses paid by Prospect on behalf of NMMB.

Pacific World Corporation

Prospect owns 100% of the preferred equity of Pacific World Corporation (“Pacific World”), which represents a 99.97% and 99.97% ownership interest of Pacific World as of September 30, 2021 and June 30, 2021, respectively. As a result, Prospect’s investment in Pacific World is classified as a control investment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Effective June 30, 2020, we restructured our investment in Pacific World whereby we contributed 100% of the outstanding aggregate principal amount of our Senior Secured Term Loan B and all but $39,082 of the outstanding aggregate principal amount of our Senior Secured Term Loan A to the capital of Pacific World. The principal contributions were made gross of all previously accrued and unpaid interest paid-in-kind.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	1,124	$	1,141

	Three Months Ended
	September 30, 2021		September 30, 2020
Additions (1)	$	2,000	$	—
Interest Income Capitalized as PIK	683		634

(1) During the three months ended September 30, 2021, Prospect provided $2,000 of debt financing to Pacific World to fund working capital needs.

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (2)	$	334	$	36
Other Receivables (3)	49		37

(2) Interest income recognized but not yet paid.

(3) Represents amounts due from Pacific World to Prospect for reimbursement of expenses paid by Prospect on behalf of Pacific World.

R-V Industries, Inc.

Prospect owns 88.27% of the fully-diluted equity of R-V Industries, Inc. (“R-V”), with R-V management owning the remaining 11.73% of the equity. On December 15, 2020 we restructured our $28,622 Senior Subordinated Note with R-V into a $28,622 Senior Secured Note. No realized gain or loss was recorded as a result of the transaction.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	716	$	716
Managerial Assistance (1)	45		45
Reimbursement of Legal, Tax, etc.(2)	4		—

(1) No income recognized by Prospect. MA payments were paid from R-V to Prospect and subsequently remitted to PA.

(2) Paid from R-V to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to R-V (No direct income recognized by Prospect, but we were given a credit for these payments as a reduction to the administrative services payable by Prospect to PA).

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (3)	$	8	$	8

(3) Interest income recognized but not yet paid.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

SB Forging Company, Inc.

As of June 30, 2014, Prospect owned 79.53% of the fully-diluted common, 85.76% of the Series A Preferred and 100% of the Series B Preferred equity of ARRM Services, Inc. (f/k/a ARRM Holdings, Inc.) (“ARRM”). ARRM owned 100% of the equity of Ajax Rolled Ring & Machine, LLC (f/k/a Ajax Rolled Ring & Machine, Inc.) (“Ajax”). Ajax forges large seamless steel rings on two forging mills in the company’s York, South Carolina facility. The rings are used in a range of industrial applications, including in construction equipment and power turbines. Ajax also provides machining and other ancillary services.

SB Forging Company II, Inc. (f/k/a Gulf Coast Machine & Supply Company)

Prospect owns 100% of the preferred equity of Gulf Coast Machine & Supply Company (“Gulf Coast”). Gulf Coast is a provider of value-added forging solutions to energy and industrial end markets.

On November 14, 2017, we received proceeds of $1,363 from our insurance carrier related to our investment in Gulfco. The $1,363 reimbursed us for covered third-party legal expenses incurred and expensed in prior periods, for which we recorded the amount received as a reduction to our legal fees for the current period. Prospect Administration also received $1,430 from the insurance carrier related to covered legal services provided by Prospect Administration which was recorded as a reduction of allocation of overhead from Prospect Administration.

In June 2018, SB Forging Company II, Inc. received escrow proceeds of $2,050 related to the sale. The escrow proceeds and $154 of excess cash held at SB Forging Company II, Inc. were subsequently distributed and in connection with the liquidation of our investment, we recorded a realized gain of $2,204 in our Consolidated Statement of Operations during the year ended June 30, 2019.

Universal Turbine Parts, LLC

On December 10, 2018, UTP Holdings Group, Inc. (“UTP Holdings”) purchased all of the voting stock of Universal Turbine Parts, LLC (“UTP”) and appointed a new Board of Directors to UTP Holdings, consisting of three employees of the Investment Advisor. At the time UTP Holdings acquired UTP, UTP Holdings (f/k/a Harbortouch Holdings of Delaware) was a wholly-owned holding company controlled by Prospect and therefore Prospect’s investment in UTP is classified as a control investment.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	593	$	594
Managerial Assistance (1)	3		3

(1) No income recognized by Prospect. MA payments were paid from UTP to Prospect and subsequently remitted to PA.

	Three Months Ended
	September 30, 2021		September 30, 2020
Repayment of loan receivable	$	8	$	170

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (2)	$	6	$	6
Other Receivables (3)	4		4

(2) Interest income recognized but not yet paid.

(3) Represents amounts due from UTP to Prospect for reimbursement of expenses paid by Prospect on behalf of UTP.

USES Corp.

On June 15, 2016, we provided additional $1,300 debt financing to USES Corp. (“United States Environmental Services” or “USES”) and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

financing, USES issued to us 99,900 shares of its common stock. On June 29, 2016, we provided additional $2,200 debt financing to USES and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 169,062 shares of its common stock. As a result of such debt financing and recapitalization, as of June 29, 2016, we held 268,962 shares of USES common stock representing a 99.96% common equity ownership interest in USES. As such, USES became a controlled company on June 30, 2016.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income	$	51	$	—

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (1)	$	1	$	1

(1) Interest income recognized but not yet paid.

(2) Represents amounts due from USES to Prospect for reimbursement of expenses paid by Prospect on behalf of USES.

Valley Electric Company, Inc.

Prospect owns 100% of the common stock of Valley Electric Holdings I, Inc. (“Valley Holdings I”), a Consolidated Holding Company. Valley Holdings I owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), a Consolidated Holding Company. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”), with Valley Electric management owning the remaining 5.01% of the equity. Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. (“Valley”), a leading provider of specialty electrical services in the state of Washington and among the top 50 electrical contractors in the United States.

	Three Months Ended
	September 30, 2021		September 30, 2020
Interest Income
Interest Income from Valley	$	280	$	280
Interest Income from Valley Electric	1,498		1,498
Total Interest Income	$	1,778	$	1,778
Other Income
Residual Profit Interest	$	167	$	167
Total Other Income	$	167	$	167
Managerial Assistance (1)	$	150	$	150

(1) No income recognized by Prospect. MA payments were paid from Valley Electric to Prospect and subsequently remitted to PA.

	As of
	September 30, 2021		June 30, 2021
Interest Receivable (2)	$	20	$	20
Other Receivables (3)	2		2

(2) Interest income recognized but not yet paid.

(3) Represents amounts due from Valley Electric to Prospect for reimbursement of expenses paid by Prospect on behalf of Valley Electric.

Wolf Energy, LLC

Prospect owns 100% of the equity of Wolf Energy Holdings Inc. (“Wolf Energy Holdings”), a Consolidated Holding Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Wolf Energy Holdings owns 100% of each of Appalachian Energy LLC (f/k/a Appalachian Energy Holdings, LLC) (“AEH”);

Coalbed, LLC (“Coalbed”); and Wolf Energy, LLC (“Wolf Energy”). AEH owns 100% of C&S Operating, LLC.

Wolf Energy Holdings is a holding company formed to hold 100% of the outstanding membership interests of each of AEH and

Coalbed. The membership interests and associated operating company debt of AEH and Coalbed, which were previously owned

by Manx Energy, Inc. (“Manx”), were assigned to Wolf Energy Holdings effective June 30, 2012. The purpose of assignment was to remove those activities from Manx deemed non-core by the Manx convertible debt investors who were not interested in funding those operations. On June 30, 2012, AEH and Coalbed loans, with a cost basis of $7,991, were assigned by Prospect to Wolf Energy Holdings from Manx.

In December 2019, Wolf Energy Holdings, Inc. (“Wolf Energy Holdings”), our Consolidated Holding Company that previously owned 100% of Appalachian Energy LLC (“AEH”); Wolf Energy Services Company, LLC (“Wolf Energy Services”); and Wolf Energy, LLC (collectively our previously controlled membership interest and net profit interest investments in “Wolf Energy”), merged with and into CP Energy, with CP Energy continuing as the surviving entity. CP Energy acquired 100% of our equity in Wolf Energy, which is reflected in our valuation of CP Energy common stock as of December 31, 2019. During the six months ended December 31, 2019, the cost basis in Wolf Energy Holdings of $3,914 was transferred to CP Energy.

Note 15. Litigation

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 such matters as may 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 material legal proceedings as of September 30, 2021.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Note 16. Financial Highlights

The following is a schedule of financial highlights for the three months ended September 30, 2021 and September 30, 2020:

	Three Months Ended September 30,
	2021				2020
Per Share Data
Net asset value per common share at beginning of period	$	9.81			$	8.18
Net investment income(1)	0.21				0.15
Net realized and change in unrealized gains(1)	0.33				0.30
Net increase from operations	0.54				0.45
Distributions of net investment income to preferred stockholders	(0.01)				—
Distributions of net investment income to common stockholders	(0.18)			(8)	(0.15)			(8)
Return of Capital to common stockholders	—			(8)	(0.03)			(8)
Common stock transactions(2)	(0.01)				(0.05)
Offering costs from issuance of preferred stock	(0.03)				—
Net asset value per common share at end of period	$	10.12			$	8.40
Per common share market value at end of period	$	7.70			$	5.03
Total return based on market value(3)	(6.06		%)		2.15		%
Total return based on net asset value(3)	5.59		%		6.57		%
Shares of common stock outstanding at end of period	389,504,713				378,776,958
Weighted average shares of common stock outstanding	388,886,142				375,910,891
Ratios/Supplemental Data
Net assets at end of period	$	3,943,263			$	3,181,027
Portfolio turnover rate	5.13		%		2.79		%
Annualized ratio of operating expenses to average net assets applicable to common shares(7)	9.09		%		10.95		%
Annualized ratio of net investment income to average net assets applicable to common shares(7)	8.40		%		7.38		%

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The following is a schedule of financial highlights for each of the five years ended in the period ended June 30, 2021:

	Year Ended June 30,
	2021				2020				2019			2018			2017
Per Share Data
Net asset value per common share at beginning of year	$	8.18			$	9.01			$	9.35		$	9.32		$	9.62
Net investment income(1)	0.75				0.72				0.85			0.79			0.85
Net realized and change in unrealized gains (losses)(1)	1.77				(0.76)				(0.46)			0.04			(0.15)
Net increase (decrease) from operations	2.52				(0.04)				0.39			0.83			0.70
Distributions of net investment income to common stockholders	(0.69)			(6)	(0.49)			(6)	(0.72)			(0.77)			(1.00)
Distributions of net investment income to preferred stockholders	—			(4)	—				—			—			—
Return of capital to common stockholders	(0.03)			(8)	(0.23)			(6)	—			—			—
Common stock transactions(2)	(0.11)				(0.07)				(0.01)			(0.03)			—			(4)
Offering costs from issuance of preferred stock	(0.04)				—				—			—			—
Net asset value per common share at end of year	$	9.81		(5)	$	8.18			$	9.01		$	9.35		$	9.32
Per share market value at end of year	$	8.39			$	5.11			$	6.53		$	6.71		$	8.12
Total return based on market value(3)	85.53		%		(11.35		%)		8.23		%	(7.42		%)	16.80		%
Total return based on net asset value(3)	35.52		%		2.84		%		7.17		%	12.39		%	8.98		%
Shares of common stock outstanding at end of year	388,419,573				373,538,499				367,131,025			364,409,938			360,076,933
Weighted average shares of common stock outstanding	382,705,106				368,094,299				365,984,541			361,456,075			358,841,714
Ratios/Supplemental Data
Net assets at end of year	$	3,945,517			$	3,055,861			$	3,306,275		$	3,407,047		$	3,354,952
Portfolio turnover rate	14.64		%		16.46		%		10.86		%	30.70		%	23.65		%
Ratio of operating expenses to average net assets(7)	9.98		%		11.37		%		11.65		%	11.08		%	11.57		%
Ratio of net investment income to average net assets(7)	8.24		%		8.44		%		9.32		%	8.57		%	8.96		%

(1)Per share data amount is based on the basic weighted average number of common shares outstanding for the year/period presented (except for dividends to stockholders which is based on actual rate per share).

(2)Common stock transactions include the effect of our issuance of common stock in public offerings (net of underwriting and offering costs), shares issued in connection with our common stock dividend reinvestment plan, common shares issued to acquire investments, common shares repurchased below net asset value pursuant to our Repurchase Program, and common shares issued pursuant to the Holder Optional Conversion of our 5.50% Preferred Stock.

(3)Total return based on market value is based on the change in market price per share between the opening and ending market prices per share in each period and assumes that common stock dividends are reinvested in accordance with our common stock dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in each period and assumes that dividends are reinvested in accordance with our common stock dividend reinvestment plan. For periods less than a year, total return is not annualized.

(4)Amount is less than $0.01.

(5)Does not foot due to rounding.

(6)The amounts reflected for the respective fiscal periods were updated based on tax information received subsequent to our Form 10-K filing for the year ended June 30, 2020 and our Form 10-Q filing for September 30, 2020. Certain reclassifications have been made in the presentation of prior period amounts. See Note 2 and Note 12 within the accompanying notes to the consolidated financial statements for further discussion.

(7)The amounts reflected for the respective fiscal periods do not reflect the effect of dividend payments to preferred shareholders.

(8)Not finalized for the respective fiscal period. Refer to Note 12.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Note 17. Selected Quarterly Financial Data (Unaudited)

The following table sets forth selected financial data for each quarter within the three years ended June 30, 2022:

	Investment  Income				Net Investment  Income				Net Realized and  Unrealized (Losses) Gains				Net Increase (Decrease) in  Net Assets from Operations Attributable to Common Stockholders
Quarter Ended	Total		Per Share (1)		Total		Per Share (1)		Total		Per Share (1)		Total		Per Share (1)
September 30, 2019	$	161,883	$	0.44	$	71,060	$	0.19	$	(52,995)	$	(0.14)	$	18,065	$	0.05
December 31, 2019	161,917		0.44		67,885		0.18		(79,088)		(0.21)		(11,203)		(0.03)
March 31, 2020	154,501		0.42		68,476		0.19		(254,175)		(0.70)		(185,699)		(0.51)
June 30, 2020	145,229		0.39		58,273		0.16		104,340		0.28		162,613		0.44
September 30, 2020	$	142,880	$	0.38	$	57,545	$	0.15	$	110,201	$	0.30	$	167,746	$	0.45
December 31, 2020	172,292		0.45		81,561		0.21		224,406		0.60		305,921		0.80
March 31, 2021	159,456		0.41		73,402		0.19		173,006		0.45		246,008		0.64
June 30, 2021	157,339		0.41		73,229		0.19		170,457		0.44		242,421		0.62
September 30, 2021	$	169,474	$	0.44	$	81,369	$	0.21	$	130,762	$	0.34	$	209,724	$	0.54

(1)Per share amounts are calculated using the basic weighted average number of common shares outstanding for the period presented and does not reflect the assumed conversion of dilutive securities (basic earnings per common share). The sum of the quarterly per share amounts above will not necessarily equal the per share amounts for the fiscal year.

(2)Amount is less than $0.01.

Note 18. Subsequent Events

Management has evaluated subsequent events through the date of issuance of these financial statements and has determined that there are no subsequent events outside the ordinary scope of business that require adjustment to, or disclosure in, the financial statements other than those disclosed below.

On October 8, 2021, we commenced a tender offer to purchase for cash any and all of the $81,389 aggregate principal amount of our outstanding 6.375% 2024 Notes at a purchase price of $107.750, plus accrued and unpaid interest (the “6.375% 2024 Notes October Tender Offer”). The 6.375% 2024 Notes October Tender Offer expired at 5:00 p.m., New York City time, on October 15, 2021. As of the settlement date, $149 aggregate principal amount of the 6.375% 2024 Notes were validly tendered and accepted. Following settlement of the 6.375% 2024 Notes October Tender Offer on October 20, 2021, approximately $81,240 aggregate principal amount of the 6.375% 2024 Notes remains outstanding.

On October 18, 2021, we provided a new $65,000 First Lien Term Loan investment, a new $22,609 Delayed Draw Term Loan commitment, and a new $4,239 Revolving Line of Credit commitment to BCPE Osprey Buyer, Inc., a provider of marketplace and software solutions to hospitals and health systems. The Delayed Draw Term Loan and Revolving Line of Credit were unfunded at close.

On October 21, 2021, we amended our investment in PeopleConnect Intermediate, LLC whereby we provided an incremental $60,775 Senior Secured Term Loan investment, purchased an additional $21,230 Senior Secured Term Loan investment from a third party, and eliminated our $8,918 unfunded revolving line of credit commitment.

During the period from October 21, 2021 through October 27, 2021, we received partial repayments of $83,581 of our Senior Secured Term Loan A outstanding with NPRC and its wholly-owned subsidiaries.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

On November 8, 2021, we announced the declaration of monthly dividends for our 5.50% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.50% of the Stated Value of $25 per share as set forth in the Articles Supplementary for the Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date (the first business day of the month, with no additional dividend accruing in January as a result), as follows:

Monthly Cash 5.50% Preferred Shareholder Distribution	Record Date	Payment Date	Monthly Amount ($ per share), before pro ration for partial periods
December 2021	12/15/2021	1/3/2022	$0.114583
January 2022	1/19/2022	2/1/2022	$0.114583
February 2022	2/16/2022	3/1/2022	$0.114583

On November 8, 2021, we announced the declaration of quarterly dividends for our 5.35% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.35% of the Stated Value of $25.00 per share as set forth in the Articles Supplementary for the 5.35% Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date, as follows:

Quarterly Cash 5.35% Preferred Shareholder Distribution	Record Date	Payment Date	Amount ($ per share)
November 2021 - January 2022	1/19/2022	2/1/2022	$0.334375

On November 8, 2021, we announced the declaration of monthly dividends on our common stock as follows:

Monthly Cash Common Shareholder Distribution	Record Date	Payment Date	Amount ($ per share)
November 2021	11/26/2021	12/23/2021	$0.0600
December 2021	12/29/2021	1/20/2022	$0.0600
January 2022	1/27/2022	02/17/2022	$0.0600

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(All figures in this item are in thousands except share, per share and other data.)

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report. In addition to historical information, the following discussion and other parts of this Quarterly Report contain forward-looking information that involves risks and uncertainties. Our actual results may differ significantly from any results expressed or implied by these forward-looking statements due to the factors discussed in Part II, “Item 1A. Risk Factors” and “Forward-Looking Statements” appearing elsewhere herein.

Overview

The terms “Prospect,” “the Company,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise.

Prospect is a financial services company that primarily lends to and invests in middle market privately-held companies. We are a closed-end investment company incorporated in Maryland. We have elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). As a BDC, we have elected to be treated as a regulated investment company (“RIC”), under Subchapter M of the Internal Revenue Code of 1986 (the “Code”). We were organized on April 13, 2004, and were funded in an initial public offering completed on July 27, 2004.

On May 15, 2007, we formed a wholly owned subsidiary Prospect Capital Funding LLC (“PCF”), a Delaware limited liability company and a bankruptcy remote special purpose entity, which holds certain of our portfolio loan investments that are used as collateral for the revolving credit facility at PCF. Our wholly owned subsidiary Prospect Small Business Lending, LLC (“PSBL”) was formed on January 27, 2014, and purchased small business whole loans from online small business loan originators, including On Deck Capital, Inc. (“OnDeck”). On September 30, 2014, we formed a wholly-owned subsidiary Prospect Yield Corporation, LLC (“PYC”) and effective October 23, 2014, PYC holds a portion of our collateralized loan obligations (“CLOs”), which we also refer to as subordinated structured notes (“SSNs”). Each of these subsidiaries have been consolidated since operations commenced.

We consolidate certain of our wholly owned and substantially wholly owned holding companies formed by us in order to facilitate our investment strategy. The following companies are included in our consolidated financial statements and are collectively referred to as the “Consolidated Holding Companies”: CP Holdings of Delaware LLC (“CP Holdings”); Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”); Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC (“First Tower Delaware”); MITY Holdings of Delaware Inc. (“MITY Delaware”); Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc. (“NMMB Holdings”); NPH Property Holdings, LLC (“NPH”); Prospect Opportunity Holdings I, Inc. (“POHI”); SB Forging Company, Inc. (“SB Forging”); STI Holding, Inc.; UTP Holdings Group Inc. (“UTP Holdings”); Valley Electric Holdings I, Inc. (“Valley Holdings I”); and Valley Electric Holdings II, Inc. (“Valley Holdings II”).

We are externally managed by our investment adviser, Prospect Capital Management L.P. (“Prospect Capital Management” or the “Investment Adviser”). Prospect Administration LLC (“Prospect Administration”), a wholly-owned subsidiary of the Investment Adviser, provides administrative services and facilities necessary for us to operate.

Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. We invest primarily in senior and subordinated secured debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. 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 currently have four primary strategies that guide our origination of investment opportunities: (1) lending to companies, including companies controlled by private equity sponsors and not controlled by private equity sponsors, and including both directly-originated loans and syndicated loans, (2) lending to companies and purchasing controlling equity positions in such companies, including both operating companies and financial services companies, (3) purchasing controlling equity positions and lending to real estate companies, and (4) investing in structured credit. We may also invest in other strategies and opportunities from time to time that we view as attractive. We continue to evaluate other origination strategies in the ordinary course of business with no specific top-down allocation to any single origination strategy.

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Lending to Companies - We make directly-originated, agented loans to companies, including companies which are controlled by private equity sponsors and companies that are not controlled by private equity sponsors (such as companies that are controlled by the management team, the founder, a family or public shareholders). This debt can take the form of first lien, second lien, unitranche or unsecured loans. These loans typically have equity subordinate to our loan position. We may also purchase selected equity co-investments in such companies. In addition to directly-originated, agented loans, we also invest in senior and secured loans syndicated loans and high yield bonds that have been sold to a club or syndicate of buyers, both in the primary and secondary markets. These investments are often purchased with a long term, buy-and-hold outlook, and we often look to provide significant input to the transaction by providing anchoring orders. Historically, this strategy has comprised approximately 40%-60% of our portfolio.

Lending to Companies and Purchasing Controlling Equity Positions in Such Companies - This strategy involves purchasing senior and secured yield-producing debt and controlling equity positions in operating companies across various industries. We believe this strategy provides enhanced certainty of closure to sellers and the opportunity for management to continue on in their current roles. These investments are often structured in tax-efficient partnerships, enhancing returns. Historically, this strategy has comprised approximately 15%-25% of our portfolio.

Purchasing Controlling Equity Positions and Lending to Real Estate Companies - We purchase debt and controlling equity positions in tax-efficient real estate investment trusts (“REIT” or “REITs”). The real estate investments of National Property REIT Corp. (“NPRC”) are in various classes of developed and occupied real estate properties that generate current yields, including multi-family properties, and student housing. NPRC seeks to identify properties that have historically significant occupancy rates and recurring cash flow generation. NPRC generally co-invests with established and experienced property management teams that manage such properties after acquisition. Additionally, NPRC makes investments in rated secured structured notes (primarily debt of structured credit). NPRC also purchases loans originated by certain consumer loan facilitators. It purchases each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers, and the loans are typically serviced by the facilitators of the loans. Historically, this overall investment strategy has comprised approximately 10%-20% of our business.

Investing in Structured Credit - We make investments in structured credit, often taking a significant position in subordinated structured notes (equity) and rated secured structured notes (debt). The underlying portfolio of each structured credit investment is diversified across approximately 100 to 200 broadly syndicated loans and does not have direct exposure to real estate, mortgages, or consumer-based credit assets. The structured credit portfolios in which we invest are managed by established collateral management teams with many years of experience in the industry. Historically, this overall strategy has comprised approximately 10%-20% of our portfolio.

We invest primarily in first and second lien secured loans and unsecured debt, which in some cases includes an equity component. First and second lien secured loans generally are senior debt instruments that rank ahead of unsecured debt of a given portfolio company. These loans also have the benefit of security interests on the assets of the portfolio company, which may rank ahead of or be junior to other security interests. Our investments in structured credit are subordinated to senior loans and are generally unsecured. We invest in debt and equity positions of structured credit which are a form of securitization in which the cash flows of a portfolio of loans are pooled and passed on to different classes of owners in various tranches. Our structured credit investments are derived from portfolios of corporate debt securities which are generally risk rated from BB to B.

We hold many of our control investments in a two-tier structure consisting of a holding company and one or more related operating companies for tax purposes. These holding companies serve various business purposes including concentration of management teams, optimization of third-party borrowing costs, improvement of supplier, customer, and insurance terms, and enhancement of co-investments by the management teams. In these cases, our investment, which is generally equity in the holding company, the holding company’s equity investment in the operating company and any debt from us directly to the operating company structure represents our total exposure for the investment. As of September 30, 2021, as shown in our Consolidated Schedule of Investments, the cost basis and fair value of our investments in controlled companies was $2,486,474 and $3,046,090, respectively. This structure gives rise to several of the risks described in our public documents and highlighted elsewhere in this Quarterly Report. We consolidate all wholly owned and substantially wholly owned holding companies formed by us for the purpose of holding our controlled investments in operating companies. There is no significant effect of consolidating these holding companies as they hold minimal assets other than their investments in the controlled operating companies. Investment company accounting prohibits the consolidation of any operating companies.

On June 11, 2021, at a special meeting of our stockholders, our stockholders authorized us to sell shares of our common stock (during the next 12 months) at a price or prices below our net asset value per share at the time of sale in one or more offerings, subject to certain conditions as set forth in the proxy statement relating to the special meeting (including that the number of shares sold on any given date does not exceed 25% of its outstanding common stock immediately prior to such sale).

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First Quarter Highlights

Investment Transactions

We seek to be a long-term investor with our portfolio companies. During the three months ended September 30, 2021, we acquired $315,156 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $86,722, funded $4,000 of revolver advances, and recorded PIK interest of $18,790, resulting in gross investment originations of $424,668. During the three months ended September 30, 2021, we received full repayments totaling $269,230, received $32 of revolver paydowns, and received $54,738 in partial prepayments, scheduled principal amortization payments, and return of capital distributions, resulting in net repayments of $324,000.

Debt Issuances and Redemptions

During the three months ended September 30, 2021, we repaid $671 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. In order to replace short maturity debt with longer-term debt, we redeemed $213,533 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.10%. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2021 was $3,719.

During the three months ended September 30, 2021, we issued $87,657 aggregate principal amount of Prospect Capital InterNotes® with a weighted average stated interest rate of 3.35%, to extend our borrowing base. The newly issued notes mature between July 15, 2026 and September 15, 2051 and generated net proceeds of $85,472.

During the three months ended September 30, 2021, we increased total commitments to the Revolving Credit Facility by $170,000 to $1,277,500 in the aggregate.

On August 26, 2021, we commenced a tender offer to purchase for cash up to $60,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $102.50, plus accrued and unpaid interest (“2022 Notes August 2021 Tender Offer”). On September 24, 2021, $50,554 aggregate principal amount of the 2022 Notes, representing 45.52% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes August 2021 Tender Offer resulted in our recognizing a loss of $1,584.

On September 30, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on October 15, 2028 (the “3.437% 2028 Notes”). The 3.437% 2028 Notes bear interest at a rate of 3.437% per year, payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2022. Total proceeds from the issuance of the 3.437% 2028 Notes, net of underwriting discounts and offering costs, were $291,798.

Equity Issuances

On July 12, 2021, we entered into an underwriting agreement by and among us, Prospect Capital Management L.P., Prospect Administration LLC, and Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and UBS Securities LLC, as representatives of the underwriters, relating to the offer and sale of 6,000,000 shares, or $150,000 in aggregate liquidation preference, of our 5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock” or “5.35% Preferred Stock”), at a public offering price of $25.00 per share. Pursuant to the Underwriting Agreement, we also granted the underwriters a 30-day option to purchase up to an additional 900,000 shares of Series A Preferred Stock solely to cover over-allotments. The offering closed on July 19, 2021.

On July 22, 2021, August 19, 2021, and September 23, 2021, we issued 339,245, 360,741, and 379,182 shares of our common stock in connection with the dividend reinvestment plan, respectively.

At any time prior to the listing of the 5.50% Series A1 Preferred Stock (“Series A1 Preferred Stock”), the 5.50% Series M1 Preferred Stock (“Series M1 Preferred Stock”), the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”), the 5.50% Series AA1 Preferred Stock (“Series AA1 Preferred Stock”) and the 5.50% Series A2 Preferred Stock (“Series A2 Preferred Stock,” and collectively, the “5.50% Preferred Stock”) on a national securities exchange, shares of the 5.50% Preferred Stock are convertible, at the option of the holder of the 5.50% Preferred Stock (the “Holder Optional Conversion”). During the three months ended September 30, 2021, 2,150 shares of our Series A1 Preferred Stock were converted to 5,972 shares of our common stock, in connection with Holder Optional Conversions.

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During the three months ended September 30, 2021, we issued 2,946,568 shares of our Series A1 Preferred Stock for net proceeds of $66,614, 173,506 shares of our Series M1 Preferred Stock for net proceeds of $4,234, and 6,000,000 shares of our Series A Preferred Stock for net proceeds of $145,275, each excluding offering costs and preferred stock dividend reinvestments.

Investment Holdings

At September 30, 2021, we have $6,430,707, or 163.1%, of our net assets applicable to common shares invested in 124 long-term portfolio investments and CLOs.

Our annualized current yield was 11.6% and 11.7% as of September 30, 2021 and June 30, 2021, respectively, across all performing interest bearing investments, excluding equity investments and non-accrual loans. Our annualized current yield was 9.0% and 9.2% as of September 30, 2021 and June 30, 2021, respectively, across all investments. Monetization of equity positions that we hold and loans on non-accrual status are 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 are a non-diversified company within the meaning of the 1940 Act. As required by 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. Under the 1940 Act, “Affiliate Investments” 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. “Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.

As of September 30, 2021, we own controlling interests in the following portfolio companies: CP Energy Services Inc. (“CP Energy”); Credit Central Loan Company, LLC (“Credit Central”); Echelon Transportation, LLC (“Echelon”); First Tower Finance Company LLC (“First Tower Finance”); Freedom Marine Solutions, LLC (“Freedom Marine”); InterDent, Inc. (“InterDent”); Kickapoo Ranch Pet Resort (“Kickapoo”); MITY, Inc. (“MITY”); NPRC; Nationwide Loan Company LLC (“Nationwide”); NMMB, Inc. (“NMMB”); Pacific World Corporation (“Pacific World”); R-V Industries, Inc. (“R-V”); Universal Turbine Parts, LLC (“UTP”); USES Corp. (“United States Environmental Services” or “USES”); and Valley Electric Company, Inc. (“Valley Electric”). In June 2019, CP Energy purchased a controlling interest of the common equity of Spartan Energy Holdings, Inc. (“Spartan Holdings”), which owns 100% of Spartan Energy Services, LLC (“Spartan”), a portfolio company of Prospect with $15,656 in senior secured term loans (the “Spartan Term Loan A”) due to us as of September 30, 2021. As a result of CP Energy’s purchase, and given Prospect’s controlling interest in CP Energy, we report our investments in Spartan as control investment. Spartan remains the direct borrow and guarantor to Prospect for the Spartan Term Loan A.

As of September 30, 2021, we also own affiliated interests in Nixon, Inc. (“Nixon”), PGX Holdings, Inc. (“PGX”), RGIS Services, LLC, (“RGIS”), and Targus Cayman HoldCo Limited(“Targus”).

The following shows the composition of our investment portfolio by level of control as of September 30, 2021 and June 30, 2021:

	September 30, 2021								June 30, 2021
Level of Control	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Control Investments	$	2,486,474	40.4	%	$	3,046,090	47.4	%	$	2,482,431	41.0	%	$	2,919,717	47.1	%
Affiliate Investments	219,229		3.6	%	379,057		5.9	%	202,943		3.3	%	356,734		5.8	%
Non-Control/Non-Affiliate Investments	3,444,630		56.0	%	3,005,560		46.7	%	3,372,750		55.7	%	2,925,327		47.1	%
Total Investments	$	6,150,333	100.0	%	$	6,430,707	100.0	%	$	6,058,124	100.0	%	$	6,201,778	100.0	%

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The following shows the composition of our investment portfolio by type of investment as of September 30, 2021 and June 30, 2021:

	September 30, 2021								June 30, 2021
Type of Investment	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Revolving Line of Credit	$	31,490	0.5	%	$	31,479	0.5	%	$	27,522	0.5	%	$	27,503	0.4	%
Senior Secured Debt	3,188,781		51.8	%	3,145,295		48.9	%	3,166,861		52.2	%	3,128,845		50.5	%
Subordinated Secured Debt	1,151,509		18.7	%	1,061,102		16.5	%	1,069,767		17.7	%	981,425		15.8	%
Subordinated Unsecured Debt	7,200		0.1	%	4,114		0.1	%	7,200		0.1	%	3,715		0.1	%
Subordinated Structured Notes	1,074,751		17.6	%	750,769		11.6	%	1,090,175		18.0	%	756,109		12.2	%
Preferred Stock	308,713		5.0	%	19,404		0.3	%	308,713		5.1	%	23,056		0.4	%
Common Stock	207,662		3.4	%	1,010,026		15.7	%	207,661		3.4	%	894,819		14.4	%
Membership Interest	180,227		2.9	%	366,388		5.7	%	180,225		3.0	%	349,942		5.6	%
Participating Interest(1)	—		—	%	42,130		0.7	%	—		—	%	36,364		0.6	%
Total Investments	$	6,150,333	100.0	%	$	6,430,707	100.0	%	$	6,058,124	100.0	%	$	6,201,778	100.0	%

(1)Participating Interest includes our participating equity investments, such as net profits interests, net operating income interests, net revenue interests, and overriding royalty interests.

The following shows our investments in interest bearing securities by type of investment as of September 30, 2021 and June 30, 2021:

	September 30, 2021								June 30, 2021
Type of Investment	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
First Lien	$	3,220,271	59.0	%	$	3,176,774	63.6	%	$	3,194,383	59.7	%	$	3,156,348	64.4	%
1.5 Lien	—		—	%	—		—	%	18,164		0.3	%	18,164		0.4	%
Second Lien	1,147,559		21.0	%	1,057,162		21.2	%	1,047,653		19.5	%	959,311		19.6	%
Third Lien	3,950		0.1	%	3,940		0.1	%	3,950		0.1	%	3,950		0.1	%
Unsecured	7,200		0.1	%	4,114		0.1	%	7,200		0.1	%	3,715		0.1	%
Subordinated Structured Notes	1,074,751		19.8	%	750,769		15.0	%	1,090,175		20.3	%	756,109		15.4	%
Total Interest Bearing Investments	$	5,453,731	100.0	%	$	4,992,759	100.0	%	$	5,361,525	100.0	%	$	4,897,597	100.0	%

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The following shows the composition of our investment portfolio by industry as of September 30, 2021 and June 30, 2021:

	September 30, 2021								June 30, 2021
Industry	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Aerospace & Defense	$	103,248	1.7	%	$	81,621	1.3	%	$	98,144	1.6	%	$	84,240	1.4	%
Air Freight & Logistics	—		—	%	—		—	%	12,500		0.2	%	12,500		0.2	%
Auto Components	95,231		1.5	%	96,431		1.5	%	75,323		1.2	%	76,520		1.2	%
Chemicals	—		—	%	—		—	%	28,745		0.5	%	28,863		0.5	%
Commercial Services & Supplies	272,373		4.4	%	207,684		3.2	%	257,617		4.3	%	196,117		3.3	%
Communications Equipment	59,727		1.0	%	59,662		0.9	%	59,709		1.0	%	58,881		0.9	%
Construction & Engineering	69,935		1.1	%	142,919		2.2	%	69,935		1.2	%	149,695		2.4	%
Consumer Finance	560,129		9.1	%	821,494		12.9	%	531,844		8.8	%	771,601		12.4	%
Distributors	272,194		4.4	%	175,092		2.7	%	272,672		4.5	%	175,768		2.8	%
Diversified Consumer Services	227,488		3.7	%	356,310		5.5	%	211,193		3.5	%	339,633		5.5	%
Diversified Financial Services	30,165		0.5	%	30,165		0.5	%	30,165		0.5	%	30,165		0.5	%
Diversified Telecommunication Services	68,245		1.1	%	69,498		1.1	%	66,333		1.1	%	67,448		1.1	%
Energy Equipment & Services	278,499		4.5	%	83,832		1.3	%	277,227		4.6	%	83,204		1.3	%
Entertainment	34,578		0.6	%	34,851		0.5	%	40,585		0.7	%	40,928		0.7	%
Equity Real Estate Investment Trusts (REITs)	636,801		10.4	%	1,146,696		17.9	%	656,911		10.8	%	1,092,955		17.7	%
Food Products	66,379		1.1	%	66,948		1.0	%	61,409		1.0	%	61,948		1.0	%
Health Care Equipment & Supplies	7,480		0.1	%	6,970		0.1	%	7,478		0.1	%	6,721		0.1	%
Health Care Providers & Services	591,655		9.6	%	748,991		11.7	%	583,369		9.6	%	714,107		11.5	%
Hotels, Restaurants & Leisure	24,277		0.4	%	23,730		0.4	%	24,502		0.4	%	23,624		0.4	%
Household Durables	35,690		0.6	%	38,511		0.6	%	12,913		0.2	%	15,403		0.2	%
Household Products	21,124		0.3	%	21,124		0.3	%	21,186		0.3	%	21,186		0.3	%
Insurance	21,925		0.4	%	22,280		0.3	%	21,911		0.4	%	22,280		0.4	%
Interactive Media & Services	174,977		2.8	%	174,977		2.7	%	180,127		3.0	%	180,127		2.9	%
Internet & Direct Marketing Retail	60,295		1.0	%	60,398		0.9	%	54,677		0.9	%	56,114		0.9	%
IT Services	278,403		4.5	%	279,437		4.4	%	260,899		4.3	%	261,718		4.3	%
Leisure Products	31,702		0.5	%	31,564		0.5	%	20,242		0.3	%	20,287		0.3	%
Machinery	102,708		1.7	%	120,443		1.9	%	97,853		1.6	%	111,682		1.8	%
Media	102,043		1.7	%	120,695		1.9	%	105,958		1.7	%	107,819		1.7	%
Online Lending	2,700		—	%	2,700		—	%	6,600		0.1	%	6,600		0.1	%
Paper & Forest Products	15,866		0.3	%	15,735		0.2	%	15,847		0.3	%	15,815		0.3	%
Personal Products	251,928		4.1	%	70,770		1.1	%	249,245		4.1	%	71,097		1.1	%
Professional Services	130,990		2.1	%	131,120		2.0	%	132,015		2.2	%	132,058		2.1	%
Real Estate Management & Development	—		—	%	—		—	%	—		—	%	—		—	%
Software	22,253		0.4	%	22,500		0.3	%	22,240		0.4	%	22,500		0.4	%
Technology Hardware, Storage & Peripherals	12,435		0.2	%	12,500		0.2	%	12,431		0.2	%	12,500		0.2	%
Textiles, Apparel & Luxury Goods	226,284		3.7	%	253,673		3.9	%	202,312		3.3	%	225,359		3.6	%
Trading Companies & Distributors	65,240		1.1	%	27,517		0.4	%	65,248		1.1	%	27,106		0.4	%
Transportation Infrastructure	30,415		0.5	%	30,900		0.5	%	30,384		0.5	%	30,900		0.5	%
Subtotal	$	4,985,382	81.1	%	$	5,589,738	86.8	%	$	4,877,749	80.5	%	$	5,355,469	86.4	%
Structured Finance(1)	$	1,164,951	18.9	%	$	840,969	13.2	%	$	1,180,375	19.5	%	$	846,309	13.6	%
Total Investments	$	6,150,333	100.0	%	$	6,430,707	100.0	%	$	6,058,124	100.0	%	$	6,201,778	100.0	%

(1) Our SSN investments do not have industry concentrations and as such have been separated in the tables above. As of September 30, 2021 and June 30, 2021, Structured Finance includes $90,200 and $90,200, respectively, of senior secured debt investments held through our investment in NPRC and its wholly-owned subsidiary.

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Portfolio Investment Activity

Our origination efforts are focused primarily on secured lending to non-control investments to reduce the risk in the portfolio by investing primarily in first lien loans, though we also continue to close select junior debt and equity investments. For information regarding investment activity for the three months ended September 30, 2021 and September 30, 2020 are presented below:

	Three months ended September 30,
	2021			2020
Investments made in new portfolio companies	$	315,156		$	101,411
Follow-on investments made in existing portfolio companies (1)	86,722			53,389
Revolver advances	4,000			2,000
PIK interest	18,790			20,341
Total acquisitions	$	424,668		$	177,141
Acquisitions by portfolio composition
1st Lien Term Loan	$	178,026		$	128,695
Subordinated Secured Debt	246,642			20,959
Subordinated Unsecured Debt	—			1,294
Equity	—			26,193
Total acquisitions by portfolio composition	$	424,668		$	177,141
Investments sold	—			$	—
Partial repayments (2)	54,738			47,145
Full repayments	269,230			97,488
Revolver paydowns	32			777
Total dispositions	$	324,000		$	145,410
Dispositions by portfolio composition
1st Lien Term Loan	$	156,443		$	130,346
Subordinated Secured Debt	167,557			14,918
Subordinated Unsecured Debt	—			145
Equity	—			1
Total dispositions by portfolio composition	$	324,000		$	145,410
Weighted average interest rates for new investments by portfolio composition (3)
1st Lien Term Loan	8.10		%	9.54		%
Subordinated Secured Debt	11.47		%	8.61		%

(1) Includes follow-on investments in existing portfolio companies and refinancings, if any.

    (2) Includes partial prepayments of principal, scheduled amortization payments, and refinancings, if any.

(3) Weighted average interest rates for new investments by portfolio composition is calculated with the current rate at the end of the period. In addition, Revolving Line of Credit and Delayed Draw Term Loans are excluded from the calculation.

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Investment Valuation

Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, management and the independent valuation firm look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. In determining the range of values for debt instruments where market quotations are not available, except CLOs and debt investments in controlling portfolio companies, management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data. A discounted cash flow technique was then applied using the appropriate yield to maturity as the discount rate, to determine a range of values. In determining the range of values for debt investments of controlled companies and equity investments, the enterprise value was determined by applying a market approach such as using earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions and/or an income approach, such as the discounted cash flow technique. The enterprise value technique may also be used to value debt investments which are credit impaired. For stressed debt and equity investments, asset recovery analysis was used.

In determining the range of values for our investments in CLOs, the independent valuation firm uses a discounted multi-path cash flow model. The valuations were accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations, which are simulations used to model the probability of different outcomes, to generate probability-weighted (i.e., multi-path) cash flows for the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market and certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the corresponding multi-path cash flow model.

With respect to our online consumer and SME lending initiative, we invest primarily in marketplace loans through marketplace lending platforms.  We do not conduct loan origination activities ourselves. Therefore, our ability to purchase consumer and SME loans, and our ability to grow our portfolio of consumer and SME loans, are directly influenced by the business performance and competitiveness of the marketplace loan origination business of the marketplace lending platforms from which we purchase consumer and SME loans. In addition, our ability to analyze the risk-return profile of consumer and SME loans is significantly dependent on the marketplace platforms’ ability to effectively evaluate a borrower’s credit profile and likelihood of default. If we are unable to effectively evaluate borrowers’ credit profiles or the credit decisioning and scoring models implemented by each platform, we may incur unanticipated losses which could adversely impact our operating results.

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, comparable multiples for recent sales of companies within the industry and discounted cash flow models for our investments in CLOs. The composite of all these various valuation techniques, applied to each investment, was a total valuation of $6,430,707.

Our portfolio companies are generally lower middle-market companies, outside of the financial sector, with less than $100,000 of annual EBITDA. We believe our investment portfolio has experienced less volatility than others because we believe there are more buy and hold investors who own these less liquid investments.

Impact of the novel coronavirus (the “COVID-19”) pandemic

As of September 30, 2021, there remains to be global uncertainty surrounding the COVID-19 pandemic, which has caused severe disruptions in the global economy and has negatively impacted the fair value and performance of certain investments since the pandemic began. For the three months ended September 30, 2021, the aggregate increases in fair value and net unrealized depreciation on investments were driven by the expansion of comparable company trading multiples and/or tightened credit spreads as the level of market volatility generated by the COVID-19 pandemic declined over the three month period. For certain investments in our portfolio, the valuations continue to reflect factors such as specific industry concerns, uncertainty about the duration of business shutdowns and near-term liquidity needs.

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Control Company Investments

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. Equity positions in our portfolio are susceptible to potentially significant changes in value, both increases as well as decreases, due to changes in operating results and market multiples. Our controlled companies discussed below experienced such changes and we recorded corresponding fluctuations in valuations during the three months ended September 30, 2021.

First Tower Finance Company LLC

Prospect owns 100% of the equity of First Tower Delaware, a consolidated holding company. First Tower Delaware owns 80.1% of First Tower Finance. First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company.

The fair value of our investment in First Tower increased to $611,228 as of September 30, 2021, representing a premium of $251,905 to its amortized cost basis compared to a fair value of $592,356 as of June 30, 2021, a premium of $236,502 to its amortized cost. The increase in premium to amortized cost was driven by strong financial performance.

InterDent, Inc.

During the year ended June 30, 2018, Prospect exercised its rights and remedies under its loan documents to exercise the shareholder voting rights in respect of the stock of InterDent and to appoint a new Board of Directors of InterDent, all the members of which are our Investment Adviser’s professionals. As a result, Prospect’s investment in InterDent is classified as a control investment.

The fair value of our investment in InterDent increased to $451,344 as of September 30, 2021, a premium of $156,583 to its amortized cost basis compared to a fair value of $412,339 as of June 30, 2021, a premium of $129,650 to its amortized cost. The increase in premium to amortized cost was driven by strong financial performance.

National Property REIT Corp.

NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. NPRC is held for purposes of investing, operating, financing, leasing, managing and selling a portfolio of real estate assets and engages in any and all other activities that may be necessary, incidental, or convenient to perform the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties, self-storage, and student housing properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity. Additionally, through its wholly owned subsidiaries, NPRC invests in online consumer loans and RSSNs. As of September 30, 2021, we own 100% of the fully-diluted common equity of NPRC.

During the three months ended September 30, 2021, we received partial repayments of $33,900 of our loans previously outstanding with NPRC and provided $9,890 of debt financing to NPRC to provide working capital.

The online consumer loan investments held by certain of NPRC’s wholly owned subsidiaries are unsecured obligations of individual borrowers that are issued in amounts ranging from $1 to $50, with fixed terms ranging from 36 to 84 months. As of September 30, 2021, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 1,140 individual loans and residual interest in two securitizations, and had an aggregate fair value of $6,701. The average outstanding individual loan balance is approximately $4 and the loans mature on dates ranging from October 1, 2021 to April 19, 2025 with a weighted-average outstanding term of 16 months as of September 30, 2021. Fixed interest rates range from 6.0% to 36.0% with a weighted-average current interest rate of 20.3%. As of September 30, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $2,700.

As of September 30, 2021, based on outstanding principal balance, 20.7% of the portfolio was invested in super prime loans (borrowers with a Fair Isaac Corporation (“FICO”) score, of 720 or greater), 40.2% of the portfolio in prime loans (borrowers with a FICO score of 660 to 719) and 39.1% of the portfolio in near prime loans (borrowers with a FICO score of 580 to 659, a portion of which are considered sub-prime).

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Loan Type	Outstanding Principal Balance		Fair Value		Interest Rate Range	Weighted Average Interest Rate*
Super Prime	$	987	$	969	7.0% - 20.5%	12.3%
Prime	1,914		1,840		6.0% - 32.0%	18.1%
Near Prime	1,863		1,872		6.0% - 36.0%	26.8%

*Weighted by outstanding principal balance of the online consumer loans.

The rated secured structured note investments held by certain of NPRC’s wholly owned subsidiaries are subordinated debt interests in broadly syndicated loans managed by established collateral management teams with many years of experience in the industry. As of September 30, 2021, the outstanding investment in rated secured structured notes by certain of NPRC’s wholly owned subsidiaries was comprised of 37 investments with a fair value of $212,520 and face value of $221,942. The average outstanding note is approximately $5,998 with an expected maturity date ranging from April 2026 to April 2029 and weighted-average expected maturity of 6 years as of September 30, 2021. Coupons range from three-month LIBOR (“3ML”) plus 5.45% to 9.45% with a weighted-average coupon of 3ML + 7.16%. As of September 30, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to rated secured structured notes had a fair value of $90,200.

As of September 30, 2021, based on outstanding notional balance, 24% of the portfolio was invested in Single - B rated tranches and 76% of the portfolio in BB rated tranches.

As of September 30, 2021, our investment in NPRC and its wholly-owned subsidiaries had an amortized cost of $729,701 and a fair value of $1,239,596, including our investment in online consumer lending and rated secured structured notes as discussed above. The fair value of $1,146,696 related to NPRC’s real estate portfolio was comprised of fifty-one multi-family properties, eight student housing properties and three commercial properties. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of September 30, 2021.

No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
1	Filet of Chicken	Forest Park, GA	10/24/2012	$	7,400	$	—
2	Arlington Park Marietta, LLC	Marietta, GA	5/8/2013	14,850		13,495
3	Cordova Regency, LLC	Pensacola, FL	11/15/2013	13,750		10,925
4	Crestview at Oakleigh, LLC	Pensacola, FL	11/15/2013	17,500		13,297
5	Inverness Lakes, LLC	Mobile, AL	11/15/2013	29,600		23,722
6	Kings Mill Pensacola, LLC	Pensacola, FL	11/15/2013	20,750		16,855
7	Plantations at Pine Lake, LLC	Tallahassee, FL	11/15/2013	18,000		13,534
8	Verandas at Rocky Ridge, LLC	Birmingham, AL	11/15/2013	15,600		18,410
9	Crestview at Cordova, LLC	Pensacola, FL	1/17/2014	8,500		12,952
10	Taco Bell, OK	Yukon, OK	6/4/2014	1,719		—
11	Taco Bell, MO	Marshall, MO	6/4/2014	1,405		—
12	Canterbury Green Apartments Holdings LLC	Fort Wayne, IN	9/29/2014	85,500		84,048
13	Abbie Lakes OH Partners, LLC	Canal Winchester, OH	9/30/2014	12,600		15,339
14	Kengary Way OH Partners, LLC	Reynoldsburg, OH	9/30/2014	11,500		15,505
15	Lakeview Trail OH Partners, LLC	Canal Winchester, OH	9/30/2014	26,500		29,581
16	Lakepoint OH Partners, LLC	Pickerington, OH	9/30/2014	11,000		16,831
17	Sunbury OH Partners, LLC	Columbus, OH	9/30/2014	13,000		17,066
18	Heatherbridge OH Partners, LLC	Blacklick, OH	9/30/2014	18,416		24,411
19	Jefferson Chase OH Partners, LLC	Blacklick, OH	9/30/2014	13,551		18,984
20	Goldenstrand OH Partners, LLC	Hilliard, OH	10/29/2014	7,810		11,577
21	SSIL I, LLC	Aurora, IL	11/5/2015	34,500		25,821
22	Vesper Tuscaloosa, LLC	Tuscaloosa, AL	9/28/2016	54,500		43,052
23	Vesper Iowa City, LLC	Iowa City, IA	9/28/2016	32,750		24,825
24	Vesper Corpus Christi, LLC	Corpus Christi, TX	9/28/2016	14,250		10,800
25	Vesper Campus Quarters, LLC	Corpus Christi, TX	9/28/2016	18,350		14,175
26	Vesper College Station, LLC	College Station, TX	9/28/2016	41,500		32,058
27	Vesper Kennesaw, LLC	Kennesaw, GA	9/28/2016	57,900		51,087
28	Vesper Statesboro, LLC	Statesboro, GA	9/28/2016	7,500		7,480
29	Vesper Manhattan KS, LLC	Manhattan, KS	9/28/2016	23,250		14,679

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No.	Property Name	City	Acquisition Date	Purchase Price	Mortgage Outstanding
30	9220 Old Lantern Way, LLC	Laurel, MD	1/30/2017	187,250	153,580
31	7915 Baymeadows Circle Owner, LLC	Jacksonville, FL	10/31/2017	95,700	76,560
32	8025 Baymeadows Circle Owner, LLC	Jacksonville, FL	10/31/2017	15,300	12,240
33	23275 Riverside Drive Owner, LLC	Southfield, MI	11/8/2017	52,000	54,722
34	23741 Pond Road Owner, LLC	Southfield, MI	11/8/2017	16,500	18,993
35	150 Steeplechase Way Owner, LLC	Largo, MD	1/10/2018	44,500	36,668
36	Laurel Pointe Holdings, LLC	Forest Park, GA	5/9/2018	33,005	26,400
37	Bradford Ridge Holdings, LLC	Forest Park, GA	5/9/2018	12,500	10,000
38	Olentangy Commons Owner LLC	Columbus, OH	6/1/2018	113,000	92,876
39	Villages of Wildwood Holdings LLC	Fairfield, OH	7/20/2018	46,500	39,525
40	Falling Creek Holdings LLC	Richmond, VA	8/8/2018	25,000	19,335
41	Crown Pointe Passthrough LLC	Danbury, CT	8/30/2018	108,500	89,400
42	Ashwood Ridge Holdings LLC	Jonesboro, GA	9/21/2018	9,600	7,300
43	Lorring Owner LLC	Forestville, MD	10/30/2018	58,521	47,680
44	Hamptons Apartments Owner, LLC	Beachwood, OH	1/9/2019	96,500	79,520
45	5224 Long Road Holdings, LLC	Orlando, FL	6/28/2019	26,500	21,200
46	Druid Hills Holdings LLC	Atlanta, GA	7/30/2019	96,000	79,104
47	Bel Canto NPRC Parcstone LLC	Fayetteville, NC	10/15/2019	45,000	30,127
48	Bel Canto NPRC Stone Ridge LLC	Fayetteville, NC	10/15/2019	21,900	14,662
49	Sterling Place Holdings LLC	Columbus, OH	10/28/2019	41,500	34,196
50	SPCP Hampton LLC	Dallas, TX	11/2/2020	36,000	27,590
51	Palmetto Creek Holdings LLC	North Charleston, SC	11/10/2020	33,182	25,865
52	Valora at Homewood Holdings LLC	Homewood, AL	11/19/2020	81,250	63,844
53	NPRC Fairburn LLC	Fairburn, GA	12/14/2020	52,140	39,105
54	NPRC Grayson LLC	Grayson, GA	12/14/2020	47,860	35,895
55	NPRC Taylors LLC	Taylors, SC	1/27/2021	18,762	14,075
56	Parkside at Laurel West Owner LLC	Spartanburg, SC	2/26/2021	57,005	42,025
57	Willows at North End Owner LLC	Spartanburg, SC	2/26/2021	23,255	19,000
58	SPCP Edge CL Owner LLC	Webster, TX	3/12/2021	34,000	25,496
59	Jackson Pear Orchard LLC	Ridgeland, MS	6/28/2021	50,900	38,175
60	Jackson Lakeshore Landing LLC	Ridgeland, MS	6/28/2021	22,600	16,950
61	Jackson Reflection Pointe LLC	Flowood, MS	6/28/2021	45,100	31,050
62	Jackson Crosswinds LLC	Pearl, MS	6/28/2021	41,400	33,825
				2,322,181	1,937,492

The fair value of our investment in NPRC increased to $1,239,596 as of September 30, 2021, a premium of $509,895 from its amortized cost basis compared to a fair value of $1,189,755 as of June 30, 2021, representing a premium of $436,044. The increase in premium is primarily driven by compression of capitalization rates and, to a lesser extent, growth in net operating income in our real estate portfolio.

NMMB, Inc.

Prospect owns 100% of the equity of NMMB Holdings, Inc. (“NMMB Holdings”), a Consolidated Holding Company. NMMB Holdings owns 95.17% and 94.82% of the fully-diluted equity of NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) (“NMMB”) as of September 30, 2021 and June 30, 2021, respectively, with NMMB management owning the remaining equity. NMMB owns 100% of Refuel Agency, Inc. (“Refuel Agency”). Refuel Agency owns 100% of Armed Forces Communications, Inc. (“Armed Forces”). NMMB is an advertising media buying business.

The fair value of our investment in NMMB increased to $63,726 as of September 30, 2021, representing a premium of $46,021 to its amortized cost basis, compared to a fair value of $46,888 as of June 30, 2021, representing a premium of $29,145 to its amortized cost basis. The increase to the premium was driven by strong financial performance.

Our controlled investments, including those discussed above, are valued at $559,616 above their amortized cost as of September 30, 2021.

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Affiliate and Non-Control Company Investments

We hold three affiliate investments at September 30, 2021 with a total fair value of $379,057, a premium of $159,828 from their combined amortized cost, compared to a fair value of $356,734 as of June 30, 2020, representing a $153,791 premium to its amortized cost. The increase in premium is primarily driven by our investment in Targus Cayman HoldCo Limited (“Targus”), which is valued at a premium of $28,493 as of September 30, 2021 compared to a premium of $23,400 as of June 30, 2021. The increase in Targus’s premium to amortized cost was driven by strong financial performance.

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 generally limited on the high side to each loan’s par value, plus any prepayment premium that could be imposed. However, as of September 30, 2021, two of our non-control/ non-affiliate investments, Engine Group, Inc. (“Engine”) and USC are valued at discounts to amortized cost of $27,369 and $96,818, respectively. As of September 30, 2021, our CLO investment portfolio is valued at a $323,982 discount to amortized cost. Excluding Engine, USC, and the CLO investment portfolio, the fair value of our non-control/non-affiliate investments at September 30, 2021 are valued at $9,099 above their amortized cost and did not experience significant changes in operating performance or value.

Capitalization

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 as of September 30, 2021 consists of: a Revolving Credit Facility availing us of the ability to borrow debt subject to borrowing base determinations; Convertible Notes which we issued in April 2017 (with a follow-on issuance in May 2018) and March 2019; Public Notes which we issued in March 2013, October 2018, December 2018 (and from time to time through our 2029 Notes Follow-on Program), January 2021, May 2021 and September 2021; and Prospect Capital InterNotes® which we issue from time to time. As of September 30, 2021, our equity capital is comprised of common and preferred equity.

The following table shows our outstanding debt as of September 30, 2021.

	Principal Outstanding		Unamortized Discount & Debt Issuance Costs		Net Carrying Value			Fair Value(1)			Effective Interest Rate
Revolving Credit Facility(2)	$	84,537	$	10,945	$	84,537	(3)	$	84,537		1ML+2.05%		(6)
2022 Notes	60,501		324		60,177			62,014		(4)	5.64	%	(7)
2025 Notes	156,168		3,092		153,076			170,759		(4)	6.63	%	(7)
Convertible Notes	216,669				213,253			232,773
6.375% 2024 Notes	81,389		426		80,963			88,238		(4)	6.57	%	(7)
2023 Notes	284,219		1,202		283,017			301,778		(4)	6.07	%	(7)
2026 Notes	400,000		8,469		391,531			412,060		(4)	3.98	%	(7)
3.364% 2026 Notes	300,000		6,969		293,031			305,097		(4)	3.60	%	(7)
3.437% 2028 Notes	300,000		8,202		291,798			291,852		(4)	3.60	%	(7)
2029 Notes	69,170		2,100		67,070			70,346		(4)	7.38	%	(7)
Public Notes	1,434,778				1,407,410			1,469,371
Prospect Capital InterNotes®	382,164		8,814		373,350			445,191		(5)	6.17	%	(8)
Total	$	2,118,148			$	2,078,550		$	2,231,872

(1)As permitted by ASC 825-10-25, we have not elected to value our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® at fair value. The fair value of these debt obligations are categorized as Level 2 under ASC 820 as of September 30, 2021.

(2)The maximum draw amount of the Revolving Credit facility as of September 30, 2021 is $1,277,500.

(3)Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility. See Critical Accounting Policies and Estimates for accounting policy details.

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(4)We use available market quotes to estimate the fair value of the Convertible Notes and Public Notes.

(5)The fair value of Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates plus spread based on observable market inputs.

(6)Represents the rate on drawn down and outstanding balances. Deferred debt issuance costs are amortized on a straight-line method over the stated life of the obligation.

(7)The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs. For the 2029 Notes, the rate presented is a combined effective interest rate of their respective original Note issuances and Note Follow-on Programs.

(8)For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate. Interest expense and deferred debt issuance costs, which are amortized on a straight-line method over the stated life of the obligation which approximates level yield, are weighted against the average year-to-date principal balance.

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of September 30, 2021.

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	84,537	$	—	$	—	$	84,537	$	—
Convertible Notes	216,669		60,501		—		156,168		—
Public Notes	1,434,778		—		365,608		400,000		669,170
Prospect Capital InterNotes®	382,164		—		662		48,454		333,048
Total Contractual Obligations	$	2,118,148	$	60,501	$	366,270	$	689,159	$	1,002,218

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of June 30, 2021:

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	356,937	$	—	$	—	$	356,937	$	—
Convertible Notes	267,223		—		111,055		156,168		—
Public Notes	1,134,778		—		365,608		400,000		369,170
Prospect Capital InterNotes®	508,711		—		11,744		51,822		445,145
Total Contractual Obligations	$	2,267,649	$	—	$	488,407	$	964,927	$	814,315

We may from time to time seek to cancel or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. The amounts involved may be material. In addition, we may from time to time enter into additional debt facilities, increase the size of existing facilities or issue additional debt securities, including secured debt, unsecured debt and/or debt securities convertible into common stock. Any such purchases or exchanges of outstanding debt would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.

Historically, we have funded a portion of our cash needs through borrowings from banks, issuances of senior securities, including secured, unsecured and convertible debt securities, 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, subscription rights, and warrants and units to purchase such securities up to an indeterminate amount. 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.

Each of our Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Unsecured Notes”) are our general, unsecured obligations and rank equal in right of payment with all of our existing and future unsecured indebtedness and will be senior in right of payment to any of our subordinated indebtedness that may be issued in the future. The Unsecured Notes are effectively subordinated to our existing secured indebtedness, such as our credit facility, and future secured

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indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of any of our subsidiaries.

Revolving Credit Facility

On August 29, 2014, we renegotiated our previous credit facility and closed an expanded five and a half year revolving credit facility (the “2014 Facility”). The lenders had extended commitments of $885,000 under the 2014 Facility as of June 30, 2018. The 2014 Facility included an accordion feature which allowed commitments to be increased up to $1,500,000 in the aggregate. Interest on borrowings under the 2014 Facility was one-month LIBOR plus 225 basis points. Additionally, the lenders charged a fee on the unused portion of the 2014 Facility equal to either 50 basis points if at least 35% of the credit facility was drawn or 100 basis points otherwise.

On August 1, 2018, we renegotiated the 2014 Facility and closed an expanded five and a half year revolving credit facility (the “2018 Facility”). The lenders have extended commitments of $1,132,500 as of June 30, 2019. The 2018 Facility included an accordion feature which allowed commitments to be increased up to $1,500,000 in the aggregate.

On September 9, 2019, we amended the 2018 Facility and closed an expanded revolving credit facility (the “2019 Facility”). The lenders had extended commitments of $1,077,500 as of March 31, 2021. The 2019 Facility included an accordion feature which allowed commitments to be increased up to $1,500,000 in the aggregate.

On April 28, 2021, we amended the 2019 Facility and closed an expanded five year revolving credit facility (the “2021 Facility” and collectively with the 2014 Facility, the 2018 Facility, and the 2019 Facility, the “Revolving Credit Facility”). The lenders had extended commitments of $1,277,500 as of September 30, 2021. The 2021 Facility includes an accordion feature which allows commitments to be increased up to $1,500,000 in the aggregate. The Revolving Credit Facility matures on April 27, 2026. It includes a revolving period that extends through April 27, 2025, followed by an additional one-year amortization period, with distributions allowed to Prospect 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 Revolving Credit 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 Revolving Credit 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 Revolving Credit Facility. The Revolving Credit Facility also requires the maintenance of a minimum liquidity requirement. As of September 30, 2021, we were in compliance with the applicable covenants.

Interest on borrowings under the 2021 Facility is one-month LIBOR plus 205 basis points. Additionally, the lenders charge a fee on the unused portion of the credit facility equal to either 40 basis points if more than 60% of the credit facility is drawn, or 70 basis points if more than 35% and an amount less than or equal to 60% of the credit facility is drawn, or 150 basis points if an amount less than or equal to 35% of the credit facility is drawn. The 2021 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.

For the three months ended September 30, 2021 and September 30, 2020, the average stated interest rate (i.e., rate in effect plus the spread) and average outstanding borrowings for the Revolving Credit Facility were as follows:

	Three Months Ended September 30,
	2021		2020
Average stated interest rate	2.14	%	2.37	%
Average outstanding balance	$436,780		$377,113

As of September 30, 2021 and June 30, 2021, we had $1,021,769 and $640,853, respectively, available to us for borrowing under the Revolving Credit Facility, net of $84,537 and $356,937 outstanding borrowings as of the respective balance sheet dates. As of September 30, 2021, the investments, including cash and cash equivalents, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,871,007, which represents 28.9% of our total investments, including cash and cash equivalents. These assets are held and owned by PCF, a bankruptcy remote special purpose entity, and, as such, these investments are not available to our general creditors. As additional eligible investments are transferred to PCF and pledged under the Revolving Credit Facility, PCF will generate additional availability up to the current commitment amount of $1,277,500. The release of any assets from PCF requires the approval of the facility agent.

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In connection with the origination and amendments of the Revolving Credit Facility, we incurred $15,978 of new fees and $7,509 were carried over from the previous facilities, all of which are being amortized over the term of the facility in accordance with ASC 470-50. As of September 30, 2021, $10,945 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $4,569 and $4,633, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.

Convertible Notes

On April 11, 2017, we issued $225,000 aggregate principal amount of convertible notes that mature on July 15, 2022 (the “Original 2022 Notes”), unless previously converted or repurchased in accordance with their terms. The Original 2022 Notes bear interest at a rate of 4.95% per year, payable semi-annually on January 15 and July 15 each year, beginning July 15, 2017. Total proceeds from the issuance of the Original 2022 Notes, net of underwriting discounts and offering costs, were $218,010. On May 18, 2018, we issued an additional $103,500 aggregate principal amount of convertible notes that mature on July 15, 2022 (the “Additional 2022 Notes,” and together with the Original 2022 Notes, the “2022 Notes”), unless previously converted or repurchased in accordance with their terms. The Additional 2022 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2022 Notes and bear interest at a rate of 4.95% per year, payable semi-annually on January 15 and July 15 each year, beginning July 15, 2018. Total proceeds from the issuance of the Additional 2022 Notes, net of underwriting discounts and offering costs, were $100,749.

On October 18, 2019, we repurchased $22,941 aggregate principal amount of the 2022 Notes at a price of $102.8 including commissions. As a result of this transaction, we recorded a loss of $1,072 in the amount of the difference between the reacquisition price and the net carrying amount of the 2022 Notes, net of the proportionate amount of unamortized debt issuance costs. On November 7, 2019, we commenced a tender offer to purchase for cash up to $50,000 aggregate principal amount of the 2022 Notes (“2022 Notes November Tender Offer”). On December 7, 2019, $13,432 aggregate principal amount of the 2022 Notes, representing 4.4% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes November Tender Offer resulted in our recognizing a loss of $599, in the amount of the difference between the reacquisition price and the net carrying amount of the 2022 Notes, net of the proportionate amount of unamortized debt issuance costs.

On December 23, 2019, we commenced a tender offer to purchase for cash up to $25,000 aggregate principal amount of the 2022 Notes (“2022 Notes December Tender Offer”). On January 22, 2020, $1,302 aggregate principal amount of the 2022 Notes, representing 0.5% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes December Tender Offer resulted in our recognizing a loss of $51 during the three months ended March 31, 2020. During the three months ended March 31, 2020, we repurchased an additional $32,585 aggregate principal amount of the 2022 Notes at a weighted average price of 89.1 including commissions. As a result of this transaction, we recorded a gain of $3,045, in the amount of the difference between the reacquisition price and the net carrying amount of the 2022 Notes, net of the proportionate amount of unamortized debt issuance costs.

On July 23, 2020, we commenced a tender offer to purchase for cash up to $100,000 aggregate principal amount of the 2022 Notes (“2022 Notes July Tender Offer”). On August 19, 2020, $29,420 aggregate principal amount of the 2022 Notes, representing 11.4% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes July Tender Offer resulted in our recognizing a loss of $396 during the three months ended September 30, 2020.

On September 3, 2020, we commenced a tender offer to purchase for cash up to $228,820 aggregate principal amount of the 2022 Notes at the purchase price of $101.00, plus accrued and unpaid interest (“2022 Notes September Tender Offer”). On October 1, 2020, $6,035 aggregate principal amount of the 2022 Notes, representing 2.64% of the previously outstanding 2022 Notes, were validly tendered and accepted. On October 19, 2020, we commenced a tender offer to purchase for cash any and all of the $222,785 aggregate principal amount outstanding of the 2022 Notes at the purchase price of $102.625, plus accrued and unpaid interest (“2022 Notes October Tender Offer”). On November 16, 2020, $59,863 aggregate principal amount of the 2022 Notes, representing 26.87% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes September Tender Offer and the 2022 Notes October Tender Offer resulted in our recognizing a loss of $2,433 during the three months ended December 31, 2020.

On December 16, 2020, we commenced a tender offer to purchase for cash any and all of the $162,922 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $103.50, plus accrued and unpaid interest (“2022 Notes December 2020 Tender Offer”). On January 15, 2021, $26,694 aggregate principal amount of the 2022 Notes, representing 16.38% of the previously outstanding 2022 Notes, were validly tendered and accepted. On February 1, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price

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of $103.00, plus accrued and unpaid interest (“2022 Notes February 2021 Tender Offer”). On March 2, 2021, $25,123 aggregate principal amount of the 2022 Notes, representing 18.44% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes December 2020 Tender Offer and the 2022 Notes February 2021 Tender Offer resulted in our recognizing a loss of $2,225 during the three months ended March 31, 2021.

On March 16, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $102.00, plus accrued and unpaid interest (“2022 Notes March 2021 Tender Offer”). On April 13, 2021, $50 aggregate principal amount of the 2022 Notes, representing 0.05% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes March 2021 Tender Offer resulted in our recognizing a loss of $1.

On August 26, 2021, we commenced a tender offer to purchase for cash up to $60,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $102.50, plus accrued and unpaid interest (“2022 Notes August 2021 Tender Offer”). On September 24, 2021, $50,554 aggregate principal amount of the 2022 Notes, representing 45.52% of the previously outstanding 2022 Notes, were validly tendered and accepted. The 2022 Notes August 2021 Tender Offer resulted in our recognizing a loss of $1,584. As of September 30, 2021, the outstanding aggregate principal amount of the 2022 Notes is $60,501.

On March 1, 2019, we issued $175,000 aggregate principal amount of senior convertible notes that mature on March 1, 2025 (the “2025 Notes”), unless previously converted or repurchased in accordance with their terms. We granted the underwriters a 13-day over-allotment option to purchase up to an additional $26,250 aggregate principal amount of the 2025 Notes. The underwriters fully exercised the over-allotment option on March 11, 2019 and we issued $26,250 aggregate principal amount of 2025 Notes at settlement on March 13, 2019. The 2025 Notes bear interest at a rate of 6.375% per year, payable semi-annually on March 1 and September 1 each year, beginning September 1, 2019. Total proceeds from the issuance of the 2025 Notes, net of underwriting discounts and offering costs, were $198,674.

On December 28, 2020, we commenced a tender offer to purchase for cash up to $20,000 aggregate principal amount of the 2025 Notes at the purchase price of $111.00, plus accrued and unpaid interest (“2025 Notes December 2020 Tender Offer”). On January 27, 2021, $20,000 aggregate principal amount of the 2025 Notes, representing 9.94% of the previously outstanding 2025 Notes, were validly tendered and accepted. The 2025 Notes December 2020 Tender Offer resulted in our recognizing a loss of $2,676 during the three months ended March 31, 2021. On February 16, 2021, we repurchased an additional $25,082 aggregate principal amount of the 2025 Notes, representing 13.84% of the previously outstanding 2025 Notes, at a price of $107.50, including commissions. As a result of this transaction, we recorded a loss of $2,466, in the amount of the difference between the reacquisition price and the net carrying amount of the 2025 Notes, net of the proportionate amount of unamortized debt issuance costs. As of September 30, 2021, the outstanding aggregate principal amount of the 2025 Notes is $156,168.

Certain key terms related to the convertible features for the 2022 Notes, and the 2025 Notes (collectively, the “Convertible Notes”) are listed below.

	2022 Notes		2025 Notes
Initial conversion rate(1)	100.2305		110.7420
Initial conversion price	$	9.98	$	9.03
Conversion rate at September 30, 2021(1)(2)	100.2305		110.7420
Conversion price at September 30, 2021(2)(3)	$	9.98	$	9.03
Last conversion price calculation date	4/11/2021		3/1/2021
Dividend threshold amount (per share)(4)	$	0.083330	$	0.060000

(1)Conversion rates denominated in shares of common stock per $1 principal amount of the Convertible Notes converted. 

(2)Represents conversion rate and conversion price, as applicable, taking into account certain de minimis adjustments that will be made on the conversion date.

(3)The conversion price will increase only if the current monthly dividends (per share) exceed the dividend threshold amount (per share).

(4)The conversion rate is increased if monthly cash dividends paid to common shares exceed the monthly dividend threshold amount, subject to adjustment. Current dividend rates are at or below the minimum dividend threshold amount for further conversion rate adjustments for all bonds.

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Interest accrues from the date of the original issuance of the Convertible Notes or from the most recent date to which interest has been paid or duly provided. Upon conversion, 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 Convertible Notes. If a holder converts the Convertible Notes after a record date for an interest payment but prior to the corresponding interest payment date, the holder will receive shares of our common stock based on the conversion formula described above, a cash payment representing accrued and unpaid interest through the record date in the normal course and a separate cash payment representing accrued and unpaid interest from the record date to the conversion date.

No holder of 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 Convertible 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 Convertible Notes upon a fundamental change at a price equal to 100% of the principal amount of the Convertible 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 Convertible Notes through and including the maturity date.

In connection with the issuance of the Convertible Notes, we recorded a discount of $3,369 and debt issuance costs of $9,035 which are being amortized over the terms of the Convertible Notes. As of September 30, 2021, $1,905 of the original issue discount and $1,511 of the debt issuance costs remain to be amortized and is included as a reduction within Convertible Notes on the Consolidated Statement of Assets and Liabilities.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $4,235 and $6,865, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.

Public Notes

On March 15, 2013, we issued $250,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “Original 2023 Notes”). The Original 2023 Notes bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2013. Total proceeds from the issuance of the Original 2023 Notes, net of underwriting discounts and offering costs, were $243,641. On June 20, 2018, we issued an additional $70,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “Additional 2023 Notes”, and together with the Original 2023 Notes, the “2023 Notes”). The Additional 2023 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2023 Notes and bear interest at a rate of 5.875% per year, payable semi-annually on March 15 and September 15 of each year, beginning September 15, 2018. Total proceeds from the issuance of the Additional 2023 Notes, net of underwriting discounts, were $69,403.

On November 17, 2020, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 2023 Notes at the purchase price of $105.00, plus accrued and unpaid interest (“2023 Notes November Tender Offer”). On December 15, 2020, $36,644 aggregate principal amount of the 2023 Notes were tendered, of which, $30,000 aggregate principal amount, representing 9.38% of the previously outstanding 2023 Notes, were validly accepted pursuant to the applicable 2023 Notes November Tender Offer (applying a proration factor of approximately 82.27%). The 2023 Notes November Tender Offer resulted in our recognizing a loss of $1,694 during the three months ended December 31, 2020.

On March 9, 2021, we commenced a tender offer to purchase for cash any and all of the $290,000 aggregate principal amount of the 2023 Notes at the purchase price of $104.25, plus accrued and unpaid interest (“2023 Notes March 9, 2021 Tender Offer”). On March 15, 2021, $4,219 aggregate principal amount of the 2023 Notes were tendered, representing 1.45% of the previously outstanding 2023 Notes. On March 23, 2021, we commenced a tender offer to purchase for cash any and all of the $285,781 aggregate principal amount of the 2023 Notes at the purchase price of $104.20, plus accrued and unpaid interest (“2023 Notes March 23, 2021 Tender Offer”). On March 29, 2021, $726 aggregate principal amount of the 2023 Notes were tendered, representing 0.25% of the previously outstanding 2023 Notes. The 2023 Notes March 9, 2021 Tender Offer and the 2023 Notes March 23, 2021 Tender Offer resulted in our recognizing a loss of $234 during the three months ended March 31, 2021.

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On April 7, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 2023 Notes at the purchase price of $104.15, plus accrued and unpaid interest (“2023 Notes April 2021 Tender Offer”). On May 4, 2021, $836 aggregate principal amount of the 2023 Notes were tendered, representing 0.29% of the previously outstanding 2023 Notes. The 2023 Notes April 2021 Tender Offer resulted in our recognizing a loss of $43 during the three months ended June 30, 2021. As of September 30, 2021, the outstanding aggregate principal amount of the 2023 Notes is $284,219.

On December 10, 2015, we issued $160,000 aggregate principal amount of unsecured notes that mature on June 15, 2024 (the “2024 Notes”). The 2024 Notes bore interest at a rate of 6.25% per year, payable quarterly on March 15, June 15, September 15 and December 15 of each year, beginning March 15, 2016. Total proceeds from the issuance of the 2024 Notes, net of underwriting discounts and offering costs, were $155,043. On June 16, 2016, we entered into an at-the-market (“ATM”) program with FBR Capital Markets & Co., through which we could sell, by means of ATM offerings, from time to time, up to $100,000 in aggregate principal amount of our existing 2024 Notes (“Initial 2024 Notes ATM”). Following the Initial 2024 Notes ATM, the aggregate principal amount of the 2024 Notes issued was $199,281 for net proceeds of $193,253, after commissions and offering costs. On July 2, 2018, we entered into a second ATM program with B. Riley FBR, Inc. and BB&T Capital Markets, and on August 31, 2018 with Comerica Securities, Inc., through which we could sell, by means of ATM offerings, up to $100,000 in aggregate principal amount of the 2024 Notes (“Second 2024 Notes ATM”). Prior to the February 2021 full redemption discussed below, the 2024 Notes were listed on the New York Stock Exchange (“NYSE”) and traded thereon under the ticker “PBB”.

During the year ended June 30, 2019, we issued an additional $35,162 aggregate principal amount under the Second 2024 Notes ATM, for net proceeds of $34,855, after commissions and offering costs. On March 20, 2020, we commenced a tender offer to purchase for cash any and all of the $234,443 aggregate principal amount of the 2024 Notes (“2024 Notes March Tender Offer”). On March 31, 2020, $655 aggregate principal amount of the 2024 Notes, representing 0.3% of the previously outstanding 2024 Notes, were validly tendered and accepted. The 2024 Notes March Tender Offer resulted in our recognizing a gain of $203 during the three months ended March 31, 2020.

On February 16, 2021, we redeemed $233,788 of the aggregate principal amount of the 2024 Notes. The transaction resulted in our recognizing a loss of $3,391 during the three months ended March 31, 2021. Following the redemption, none of the 2024 Notes remained outstanding.

On June 7, 2018, we issued $55,000 aggregate principal amount of unsecured notes that mature on June 15, 2028 (the “2028 Notes”). The 2028 Notes bear interest at a rate of 6.25% per year, payable quarterly on March 15, June 15, September 15, and December 15 of each year, beginning September 15, 2018. Total proceeds from the issuance of the 2028 Notes, net of underwriting discounts and offering costs were $53,119. On July 2, 2018, we entered into an ATM program with B. Riley FBR, Inc. and BB&T Capital Markets, and on August 31, 2018 with Comerica Securities, Inc., through which we could sell, by means of ATM offerings, up to $100,000 in aggregate principal amount of our existing 2028 Notes (“2028 Notes ATM” or “2028 Notes Follow-on Program”). The 2028 Notes are listed on the NYSE and trade thereon under the ticker “PBY.” During the year ended June 30, 2019, we issued an additional $15,761 aggregate principal amount under the 2028 Notes ATM, for net proceeds of $15,530, after commissions and offering costs.

On June 15, 2021, we redeemed $70,761 of the aggregate principal amount of the 2028 Notes. The transaction resulted in our recognizing a loss of $1,934 during the three months ended June 30, 2021. Following the redemption, none of the 2028 Notes remained outstanding.

On October 1, 2018, we issued $100,000 aggregate principal amount of unsecured notes that mature on January 15, 2024 (the “6.375% 2024 Notes”). The 6.375% 2024 Notes bear interest at a rate of 6.375% per year, payable semi-annually on January 15 and July 15 of each year, beginning January 15, 2019. Total proceeds from the issuance of the 6.375% 2024 Notes, net of underwriting discounts and offering costs, were $98,985.

On November 17, 2020, we commenced a tender offer to purchase for cash up to $10,000 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $108.00, plus accrued and unpaid interest (“6.375% 2024 Notes November Tender Offer”). On December 15, 2020, $11,848 aggregate principal amount of the 6.375% 2024 Notes were tendered, of which, $10,000 aggregate principal amount, representing 10% of the previously outstanding 6.375% 2024 Notes, were validly accepted pursuant to the applicable 6.375% 2024 Notes Tender Offer (applying a proration factor of approximately 84.56%). The 6.375% 2024 Notes November Tender Offer resulted in our recognizing a loss of $866 during the three months ended December 31, 2020.

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On March 2, 2021, we commenced a tender offer to purchase for cash any and all of the $90,000 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $109.00, plus accrued and unpaid interest (“6.375% 2024 Notes March 2, 2021 Tender Offer”). On March 8, 2021, $7,738 aggregate principal amount of the 6.375% 2024 Notes, representing 8.60% of the previously outstanding 6.375% 2024 Notes, were validly tendered and accepted. On March 16, 2021, we commenced a tender offer to purchase for cash any and all of the $82,262 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $108.75, plus accrued and unpaid interest (“6.375% 2024 Notes March 16, 2021 Tender Offer”). On March 22, 2021, $647 aggregate principal amount of the 6.375% 2024 Notes, representing 0.79% of the previously outstanding 6.375% 2024 Notes, were validly tendered and accepted. The 6.375% 2024 Notes March 2, 2021 Tender Offer and the 6.375% 2024 Notes March 16, 2021 Tender Offer resulted in our recognizing a loss of $806 during the three months ended March 31, 2021.

On April 7, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 6.375% 2024 Notes at the purchase price of $107.50, plus accrued and unpaid interest (“6.375% 2024 Notes April 2021 Tender Offer”). On May 4, 2021, $226 aggregate principal amount of the 6.375% 2024 notes, representing 0.28% of the previously outstanding 6.375% 2024 Notes, were validly tendered and accepted. The 6.375% 2024 Notes April 2021 Tender Offer resulted in our recognizing a loss of $18 during the three months ended June 30, 2021. As of September 30, 2021, the outstanding aggregate principal amount of the 6.375% 2024 Notes is $81,389.

On December 5, 2018, we issued $50,000 aggregate principal amount of unsecured notes that mature on June 15, 2029 (the “2029 Notes”). The 2029 Notes bear interest at a rate of 6.875% per year, payable quarterly on March 15, June 15, September 15, and December 15 of each year, beginning March 15, 2019. Total proceeds from the issuance of the 2029 Notes, net of underwriting discounts and offering costs, were $48,057. On February 9, 2019, we entered into an ATM program with B. Riley FBR, Inc., BB&T Capital Markets, and Comerica Securities, Inc., through which we could sell, by means of ATM offerings, up to $100,000 in aggregate principal amount of our existing 2029 Notes (“2029 Notes ATM” or “2029 Notes Follow-on Program”). The 2029 Notes are listed on the NYSE and trade thereon under the ticker “PBC.” During the year ended June 30, 2019, we issued an additional $19,170 aggregate principal amount under the 2029 Notes ATM, for net proceeds of $18,523, after commissions and offering costs. As of September 30, 2021, the outstanding aggregate principal amount of the 2029 Notes is $69,170.

On January 22, 2021, we issued $325,000 aggregate principal amount of unsecured notes that mature on January 22, 2026 (the “Original 2026 Notes”). The Original 2026 Notes bear interest at a rate of 3.706% per year, payable semi-annually on July 22, and January 22 of each year, beginning on July 22, 2021. Total proceeds from the issuance of the 2026 Notes, net of underwriting discounts and offering costs, were $317,720. On February 19, 2021, we issued an additional $75,000 aggregate principal amount of unsecured notes that mature on January 22, 2026 (the “Additional 2026 Notes”, and together with the Original 2026 Notes, the “2026 Notes”). The Additional 2026 Notes were a further issuance of, and are fully fungible and rank equally in right of payment with, the Original 2026 Notes and bear interest at a rate of 3.706% per year, payable semi-annually on July 22 and January 22 of each year, beginning July 22, 2021. Total proceeds from the issuance of the Additional 2026 Notes, net of underwriting discounts and offering costs, were $74,061. As of September 30, 2021, the outstanding aggregate principal amount of the 2026 Notes is $400,000.

On May 27, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on November 15, 2026 (the “3.364% 2026 Notes”). The 3.364% 2026 Notes bear interest at a rate of 3.364% per year, payable semi-annually on November 15, and May 15 of each year, beginning on November 15, 2021. Total proceeds from the issuance of the 3.364% 2026 Notes, net of underwriting discounts and offering costs, were $293,283. As of September 30, 2021, the outstanding aggregate principal amount of the 3.364% 2026 Notes is $300,000.

On September 30, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on October 15, 2028 (the “3.437% 2028 Notes”). The 3.437% 2028 Notes bear interest at a rate of 3.437% per year, payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2022. Total proceeds from the issuance of the 3.437% 2028 Notes, net of underwriting discounts and offering costs, were $291,798. As of September 30, 2021, the outstanding aggregate principal amount of the 3.437% 2028 Notes is $300,000.

The 2023 Notes, the 6.375% 2024 Notes, the 2029 Notes, the 2026 Notes, the 3.364% 2026 Notes, and the 3.437% 2028 Notes (collectively, the “Public Notes”) are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding.

In connection with the issuance of the Public Notes we recorded a discount of $16,318 and debt issuance costs of $19,008, which are being amortized over the term of the notes. As of September 30, 2021, $13,486 of the original issue discount and

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$13,882 of the debt issuance costs remain to be amortized and are included as a reduction within Public Notes on the Consolidated Statement of Assets and Liabilities.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $13,932 and $12,843, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense.

Prospect Capital InterNotes®

On February 16, 2012, we entered into a selling agent agreement (the “Original Selling Agent Agreement”) with InspereX LLC (formerly known as “Incapital LLC”), as purchasing agent for our issuance and sale from time to time of up to $500,000 of Prospect Capital InterNotes®, which was increased to $1,500,000 in May 2014. On May 10, 2019, the Original Selling Agent Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “May 2019 Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $1,000,000 of Prospect Capital InterNotes®.

On September 16, 2019, the May 2019 Selling Agent Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “September 2019 Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $500,000 of Prospect Capital InterNotes®. We sold approximately $1,700,000 in aggregate principal amount of Prospect Capital InterNotes® under the Original Selling Agent Agreement, May 2019 Selling Agent Agreement, and September 2019 Selling Agent Agreement (collectively the “Previous Selling Agent Agreements”).

On February 13, 2020, the September 2019 Selling Agent Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $1,000,000 of Prospect Capital InterNotes® (collectively with the previously authorized selling agent agreements, the “InterNotes® Offerings”). Additional agents may be appointed by us from time to time in connection with the InterNotes® Offering and become parties to the Selling Agent Agreement. We have, from time to time, repurchased certain notes issued through the InterNotes® Offerings and, therefore, as of September 30, 2021, $382,164 aggregate principal amount of Prospect Capital InterNotes® were outstanding.

These notes are direct unsecured obligations and rank equally with all of our unsecured indebtedness from time to time outstanding. Each series of notes will be issued by a separate trust. These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.

During the three months ended September 30, 2021, we issued $87,657 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $85,472. These notes were issued with stated interest rates ranging from 2.25% to 4.00% with a weighted average interest rate of 3.35%. These notes mature between July 15, 2026 and September 15, 2051.

The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2021:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range		Weighted Average Interest Rate		Maturity Date Range
5	$	15,681	2.25% – 2.50%		2.42	%	July 15, 2026 – September 15, 2026
7	17,016		2.75% – 3.00%		2.96	%	July 15, 2028 – September 15, 2028
10	17,027		3.15% – 3.40%		3.29	%	July 15, 2031 – September 15, 2031
12	2,422		3.70	%	3.70	%	July 15, 2033
15	12,317		3.50% – 4.00%		3.82	%	July 15, 2036 – September 15, 2036
30	23,194		4.00	%	4.00	%	July 15, 2051 – September 15, 2051
	$	87,657

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During the three months ended September 30, 2020, we issued $38,657 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $38,070. These notes were issued with stated interest rates ranging from 4.75% to 6.00% with a weighted average interest rate of 5.42%. These notes mature between July 15, 2025 and October 15, 2030 .

The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2020:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
5	$	24,906	4.75% – 5.50%	5.31	%	July 15, 2025 – October 15, 2025
7	5,884		5.00% – 5.75%	5.490	%	July 15, 2027 – October 15, 2027
10	7,867		5.25% – 6.00%	5.75	%	July 15, 2030 – October 15, 2030
	$	38,657

During the three months ended September 30, 2021, we repaid $671 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. In order to replace short maturity debt with longer-term debt, we redeemed $213,533 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.09%. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2021 was $3,719.

The following table summarizes the Prospect Capital InterNotes® outstanding as of September 30, 2021:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range		Weighted Average Interest Rate		Maturity Date Range
3	$	662	1.50	%	1.50	%	January 15, 2024
5	45,974		2.25% – 3.00%		2.80	%	January 15, 2026 – September 15, 2026
6	15,107		3.00	%	3.00	%	June 15, 2027 – July 15, 2027
7	25,339		2.75% – 4.00%		3.15	%	January 15, 2028 – September 15, 2028
8	3,511		3.40% – 3.50%		3.45	%	June 15, 2029 – July 15, 2029
10	72,600		3.15% – 6.00%		3.88	%	November 15, 2025 – September 15, 2031
12	16,854		3.70% – 6.00%		4.17	%	November 15, 2025 – July 15, 2033
15	29,118		3.50% – 6.00%		4.96	%	May 15, 2028 – September 15, 2036
18	18,467		4.50% – 6.25%		5.59	%	December 15, 2030 – August 15, 2031
20	3,777		5.75% – 6.00%		5.89	%	November 15, 2032 – October 15, 2033
25	30,209		6.25% – 6.50%		6.39	%	August 15, 2038 – May 15, 2039
30	120,546		4.00% – 6.75%		5.82	%	November 15, 2042 – September 15, 2051
	$	382,164

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During the three months ended September 30, 2020, we repaid $565 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2020 was $14.

The following table summarizes the Prospect Capital InterNotes® outstanding as of June 30, 2021:

Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
5	$	243,146	3.75% – 5.75%	4.86	%	September 15, 2023 – October 15, 2025
7	110,348		4.00% – 6.00%	5.13	%	July 15, 2024 – October 15, 2027
8	24,325		4.50% – 5.75%	4.67	%	August 15, 2025 – July 15, 2026
10	167,479		3.75% – 6.25%	5.34	%	January 15, 2024 – October 15, 2030
12	2,978		6.00%	6.00	%	November 15, 2025 – December 15, 2025
15	16,851		5.75% – 6.00%	5.79	%	May 15, 2028 – November 15, 2028
18	18,721		4.50% – 6.25%	5.58	%	December 15, 2030 – August 15, 2031
20	3,812		5.75% – 6.00%	5.89	%	November 15, 2032 – October 15, 2033
25	30,710		6.25% – 6.50%	6.39	%	August 15, 2038 – May 15, 2039
30	99,951		5.50% – 6.75%	6.25	%	November 15, 2042 – October 15, 2043
	$	718,321

In connection with the issuance of Prospect Capital InterNotes®, we incurred $26,776 of fees which are being amortized over the term of the notes, of which $8,814 remains to be amortized and is included as a reduction within Prospect Capital InterNotes® on the Consolidated Statement of Assets and Liabilities as of September 30, 2021.

During the three months ended September 30, 2021 and September 30, 2020, we recorded $5,302 and $9,708, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense.

Net Asset Value Attributable to Common Stockholders

During the three months ended September 30, 2021, our net asset value attributable to common shares increased by $134,786 $0.31 per common share. The increase was primarily attributable to an increase in net realized and net change in unrealized gains of $130,762, or $0.33 per basic weighted average common share. During the three months ended September 30, 2021, net investment income of $81,369, or $0.21 per basic weighted average common share, also exceeded distributions to common and preferred stockholders of $72,450 (including distributions classified as return of capital distributions to common stockholders), or $0.19 per basic weighted average common share, resulting in a net increase of $0.02 per basic weighted average common share. The increase was primarily offset by $0.01 of dilution per common share related to common stock issuances through our common stock and dividend reinvestment program and by $0.03 of dilution per common share related to the preferred stock issuances for the three months ended September 30, 2021. The following table shows the calculation of net asset value per common share as of September 30, 2021 and June 30, 2021.

	September 30, 2021		June 30, 2021
Net assets	$	3,943,263	$	3,945,517
Less: Preferred Stock	—		(137,040)
Net assets available to common stockholders	$	3,943,263	$	3,808,477
Shares of common stock issued and outstanding	389,504,713		388,419,573
Net asset value per common share	$	10.12	$	9.81

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Results of Operations

Operating results for the three months ended September 30, 2021 and September 30, 2020 were as follows:

	Three Months Ended September 30,
	2021		2020
Investment income	$	169,474	$	142,880
Operating expenses	(88,105)		(85,335)
Net investment income	81,369		57,545
Net realized gains (losses) from investments	(601)		2,843
Net change in unrealized gains from investments	136,720		107,844
Net realized losses on extinguishment of debt	(5,357)		(486)
Net increase in net assets resulting from operations	212,131		167,746
Preferred stock dividend	(2,407)		—
Net Increase in Net Assets Resulting from Operations attributable to Common Stockholders	$	209,724	$	167,746

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. These companies typically do not issue securities rated investment grade, and have limited resources, limited operating history, and concentrated product lines or customers. These 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. These changes, along with those discussed in Investment Valuation above, can cause significant fluctuations in our net change in unrealized gains (losses) from investments, and therefore our net increase (decrease) in net assets resulting from operations attributable to common stockholders, quarter over quarter.

Investment Income

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 fees generated from 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 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.

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The following table describes the various components of investment income and the related levels of debt investments:

	Three Months Ended September 30,
	2021			2020
Interest income	$	146,271		$	132,239
Dividend income	1,267			25
Other income	21,936			10,616
Total investment income	$	169,474		$	142,880
Average debt principal of performing interest bearing investments(1)	$	5,777,799		$	5,395,867
Weighted average interest rate earned on performing interest bearing investments(1)	9.91		%	9.59		%
Average debt principal of all interest bearing investments(2)	$	6,056,587		$	5,825,885
Weighted average interest rate earned on all interest bearing investments(2)	9.45		%	8.88		%

(1)Excludes equity investments and non-accrual loans.

(2)Excludes equity investments.

The average interest earned on interest bearing performing assets increased from 9.59% for the three months ended September 30, 2020 to 9.91% for the three months ended September 30, 2021. The increase is primarily driven by an increase in interest income from early repayments causing an increase in accelerated income and prepayment premium income, and an increase due to originations in higher yielding investments, offset by a decrease in income from our structured credit investments due to lower future expected cash flows. The average interest earned on all interest bearing performing assets increased from 8.88% for the three months ended September 30, 2020 to 9.45% for the three months ended September 30, 2021. The increase is primarily due to decreases in non-accrual loans.

Investment income is also generated from dividends and other income which is less predictable than interest income. The following table describes dividend income earned for the three and three months ended September 30, 2021 and September 30, 2020, respectively:

	Three Months Ended September 30,
	2021		2020
Dividend income
Nationwide Loan Company LLC	$	1,250	$	—
Other, net	17		25
Total dividend income	$	1,267	$	25

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Other income is comprised of structuring fees, advisory fees, amendment fees, royalty interests, settlement of net profits interests, settlement of residual profits interests, administrative agent fees and structured credit rebate income. The following table describes other income earned for the three months ended September 30, 2021 and September 30, 2020, respectively:

	Three Months Ended September 30,
	2021	2020
Structuring, advisory and amendment fees
First Tower Finance Company LLC	$7,234	$—
PGX Holdings, Inc.	3,779	—
Eze Castle Integration, Inc.	—	1,250
Other, net	810	176
Total structuring, advisory and amendment fees	$11,823	$1,426
Royalty and net revenue interests
National Property REIT Corp.	$9,625	$8,898
Other, net	181	168
Total royalty and net revenue interests	$9,806	$9,066
Administrative agent fees
Other, net	$168	$124
Total administrative agent fees	168	124
Structured Credit rebate income
Other, net	$139	$—
Total structured credit rebate income	139	—
Total other income	$21,936	$10,616

Operating Expenses

Our primary operating expenses consist of investment advisory fees (base management and income incentive fees), borrowing costs, legal and professional fees, overhead-related expenses and other operating 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 the 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.

The following table describes the various components of our operating expenses:

	Three Months Ended September 30,
	2021		2020
Base management fee	$	32,203	$	26,850
Income incentive fee	19,740		14,386
Interest and credit facility expenses	28,038		34,049
Allocation of overhead from Prospect Administration	4,526		4,657
Audit, compliance and tax related fees	617		938
Directors’ fees	116		113
Other general and administrative expenses	2,865		4,342
Total operating expenses	$	88,105	$	85,335

Total gross and net base management fee was $32,203 and $26,850 for the three months ended September 30, 2021 and September 30, 2020, respectively. The increase in total gross base management fee is directly related to an increase in average total assets.

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For the three months ended September 30, 2021 and September 30, 2020, we incurred $19,740 and $14,386 of income incentive fees, respectively. This increase was driven by a corresponding increase in pre-incentive fee net investment income from $71,931 for the three months ended September 30, 2020 to $101,109 for the three months ended September 30, 2021. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.

During the three months ended September 30, 2021 and September 30, 2020, we incurred $28,038 and $34,049 respectively, of interest and credit facility expenses related to our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Notes”). These expenses are related directly to the leveraging capacity put into place for each of those periods and the levels of indebtedness actually undertaken in those periods.

The table below describes the various expenses of our Notes and the related indicators of leveraging capacity and indebtedness during these years:

	Three Months Ended September 30,
	2021			2020
Interest on borrowings	$	24,245		$	30,058
Amortization of deferred financing costs	1,915			1,921
Accretion of discount on unsecured debt	573			269
Facility commitment fees	1,305			1,801
Total interest and credit facility expenses	$	28,038		$	34,049
Average principal debt outstanding	$	2,278,761		$	2,314,135
Annualized weighted average stated interest rate on borrowings(1)	4.26		%	5.20		%
Annualized weighted average interest rate on borrowings(2)	4.92		%	5.89		%

(1)Includes only the stated interest expense.

(2)Includes the stated interest expense, amortization of deferred financing costs, accretion of discount on Public Notes and commitment fees on the undrawn portion of our Revolving Credit Facility.

Interest expense decreased from $34,049 for the three months ended September 30, 2020 to $28,038 for the three months ended September 30, 2021. The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.20% for the three months ended September 30, 2020 to 4.26% for the three months ended September 30, 2021, primarily due to redemptions of our Prospect Capital InterNotes®, as well as repurchases of our Convertible Notes, June 2024 Baby Bond and June 2028 Baby Bond. In addition to Prospect Capital InterNotes®, the 2026 Notes and 3.364% 2026 Notes were issued this quarter at lower rates.

The allocation of net overhead expense from Prospect Administration was $4,526 and $4,657 for the three months ended September 30, 2021 and September 30, 2020, respectively. Prospect Administration received estimated payments of $2,298 and $66 directly from our portfolio companies, and certain funds managed by the Investment Adviser for legal services during the three months ended September 30, 2021 and September 30, 2020, respectively. We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration. Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by this amount.

Total operating expenses, excluding investment advisory fees, interest and credit facility expenses, and allocation of overhead from Prospect Administration (“Other Operating Expenses”), net of any expense reimbursements, were $3,598 and $5,393 for the three months ended September 30, 2021 and September 30, 2020, respectively. The decrease was primarily attributable to a decrease in general and administrative expenses and legal fees.

Net Realized Gains (Losses)

The following table details net realized gains (losses) from investments for the three months ended September 30, 2021 and September 30, 2020:

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	Three Months Ended September 30,
Portfolio Company	2021		2020
Spartan Energy Services, LLC - Term Loan B	—		2,832
Other, net	(601)		11
Net realized gains (losses)	$	(601)	$	2,843

Net Realized Loss from Extinguishment of Debt

During the three months ended September 30, 2021 and September 30, 2020, we recorded a net realized loss from the extinguishment of debt of $5,357 and $486, respectively. Refer to Capitalization for additional discussion.

Change in Unrealized Gains (Losses)

The following table details net change in unrealized (losses) gains for our portfolio for the three months ended September 30, 2021 and September 30, 2020, respectively:

	Three Months Ended September 30,
	2021		2020
Control investments	$	122,330	$	13,535
Affiliate investments	6,037		66,473
Non-control/non-affiliate investments	8,353		27,836
Net change in unrealized gains (losses)	$	136,720	$	107,844

The following table details reflects net change in unrealized gains (losses) on investments for the three months ended September 30, 2021:

	Net Change in Unrealized Gains (Losses)
National Property REIT Corp.	$	73,851
InterDent, Inc.	26,932
NMMB, Inc.	16,876
First Tower Finance Company LLC	15,403
Subordinated Structured Notes	10,084
Credit Central Loan Company, LLC	8,554
Targus Cayman HoldCo Limited	5,093
Other, net	(1,193)
USES Corp.	(4,381)
Valley Electric Company, Inc.	(6,776)
Echelon Transportation, LLC	(7,723)
Net change in unrealized gains	$	136,720

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The following table reflects net change in unrealized gains (losses) on investments for the three months ended September 30, 2020:

	Net Change in Unrealized Gains (Losses)
PGX Holdings, Inc.	$	57,771
Other, net	22,428
National Property REIT Corp.	11,430
Subordinated Structured Notes	9,689
First Tower Finance Company LLC	6,546
Pacific World Corporation	6,433
USES Corp.	5,137
Edmentum Ultimate Holdings, LLC	4,924
Valley Electric Company, Inc.	4,328
Engine Group, Inc.	4,076
Targus Cayman HoldCo Limited	3,778
MITY, Inc.	(3,632)
NMMB, Inc.	(5,530)
CP Energy Services Inc.	(19,534)
Net change in unrealized gains	$	107,844

Financial Condition, Liquidity and Capital Resources

On July 27, 2017, the Financial Conduct Authority (“FCA”) announced that it will no longer persuade or compel banks to submit rates for the calculation of the LIBOR rates after 2021 (the “FCA Announcement”). Furthermore, in the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board (“ARRC”) and the Federal Reserve Bank of New York. On August 24, 2017, the Federal Reserve Board requested public comment on a proposal by the Federal Reserve Bank of New York, in cooperation with the Office of Financial Research, to produce three new reference rates intended to serve as alternatives to LIBOR. These alternative rates are based on overnight repurchase agreement transactions secured by U.S. Treasury Securities. On December 12, 2017, following consideration of public comments, the Federal Reserve Board concluded that the public would benefit if the Federal Reserve Bank of New York published the three proposed reference rates as alternatives to LIBOR (the “Federal Reserve Board Notice”). In April 2018, the Federal Reserve System, in conjunction with the ARRC, announced the replacement of LIBOR with a new index, calculated by short term repurchase agreements collateralized by U.S. Treasury securities, called the Secured Overnight Financing Rate (“SOFR”). On June 12, 2019, the Staff from the SEC’s Division of Corporate Finance, Division of Investment Management, Division of Trading and Markets, and Office of the Chief Accountant issued a statement about the potentially significant effects on financial markets and market participants when LIBOR is discontinued in 2021 and no longer available as a reference benchmark rate. The Staff encouraged all market participants to identify contracts that reference LIBOR and begin transitions to alternative rates. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, at this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere or, whether the COVID-19 will have further effect on LIBOR transition plans. The elimination of LIBOR or any other changes or reforms to the determination or supervision of LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, and other financial obligations or extensions of credit held by or due to us or on our overall financial condition or results of operations.

At this time, it is not possible to predict the effect of the FCA Announcement or other regulatory changes or announcements, any establishment of any alternative reference rates, including SOFR and its market acceptance, or any other reforms to LIBOR that may be enacted in the United Kingdom, the United States or elsewhere. As such, the potential effect of any such event on our net investment income cannot yet be determined. The CLOs in which the Company is invested generally contemplate a scenario where LIBOR is no longer available by requiring the CLO administrator to calculate a replacement rate primarily through dealer polling on the applicable measurement date. However, there is uncertainty regarding the effectiveness of the dealer polling processes, including the willingness of banks to provide such quotations, which could adversely impact our net investment income. Recently, the CLOs we are invested in have included, or have been amended to include, language permitting the CLO investment manager to implement a market replacement rate (like SOFR) upon the occurrence of certain material disruption events. However, we cannot ensure that all CLOs in which we are invested will have such provisions, nor

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can we ensure the CLO investment managers will undertake the suggested amendments when able. In addition, the effect of a phase out of LIBOR on U.S. senior secured loans, the underlying assets of the CLOs in which we invest, is currently unclear. To the extent that any replacement rate utilized for senior secured loans differs from that utilized for a CLO that holds those loans, the CLO would experience an interest rate mismatch between its assets and liabilities which could have an adverse impact on the Company’s net investment income and portfolio returns.

For the three months ended September 30, 2021 and September 30, 2020, our operating activities used $10,115 and provided $4,567 of cash, respectively. The change is primarily driven by net originations for the current quarter, which out-paced the cash components of net investment income. There were no investing activities for the three months ended September 30, 2021 and September 30, 2020. Financing activities used $11,339 and $20,825 of cash during the three months ended September 30, 2021 and September 30, 2020, respectively, which included dividend payments of $64,034 and $42,265, respectively.

Our primary uses of funds have been to continue to invest in portfolio companies, through both debt and equity investments, repay outstanding borrowings and to make cash distributions to our stockholders.

Our primary sources of funds have historically been issuances of debt and equity. More recently, we have and may continue to fund a portion of our cash needs through repayments and opportunistic sales of our existing investment portfolio. We may also securitize a portion of our investments in unsecured 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 three months ended September 30, 2021, we borrowed $417,618 and we made repayments totaling $690,018 under the Revolving Credit Facility. As of September 30, 2021, our outstanding balance on the Revolving Credit Facility was $84,537. As of September 30, 2021, we had, net of unamortized discount and debt issuance costs, $213,253 outstanding on the Convertible Notes, $1,407,410 outstanding on the Public Notes and $373,350 outstanding on the Prospect Capital InterNotes® (See “Capitalization” above).

Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%. As of September 30, 2021 and June 30, 2021, we had $41,564 and $67,385, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies. The fair value of our undrawn committed revolvers and delayed draw term loans was zero as of September 30, 2021 and June 30, 2021.

We have guaranteed $2,737 in standby letters of credit issued through a financial intermediary and $2,152 of equipment lease obligations on behalf of InterDent, Inc. (“InterDent”) as of September 30, 2021. Under these arrangements, we would be required to make payments to the financial intermediary or equipment lease provider, respectively, if InterDent was to default on their related payment obligations. As of September 30, 2021, we have not recorded a liability on the statement of assets and liabilities for these guarantees as the likelihood of default on the standby letters of credit or equipment lease is deemed to be remote.

On February 13, 2020, we filed a registration statement on Form N-2 (File No. 333-236415) that was effective upon filing pursuant to Rule 462(e) under the Securities Act as permitted under the Small Business Credit Availability Act. The registration statement permits us to issue, through one or more transactions, an indeterminate amount of securities, consisting of common stock, preferred stock, debt securities, subscription rights to purchase our securities, warrants representing rights to purchase our securities or separately tradeable units combining two or more of our securities.

Preferred Stock

On August 3, 2020, we entered into a Dealer Manager Agreement with Preferred Capital Securities, LLC (“PCS”), pursuant to which PCS has agreed to serve as the Company’s agent, principal distributor and dealer manager for the Company’s offering of up to 40,000,000 shares, par value $0.001 per share, of preferred stock, with a liquidation preference of $25.00 per share. Such preferred stock will initially be issued in multiple series, including the 5.50% Series A1 Preferred Stock (“Series A1 Preferred Stock”), the 5.50% Series M1 Preferred Stock (“Series M1 Preferred Stock”), and the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”, and together with the Series M1 Preferred Stock, the “Series M Preferred Stock”). In connection with such offering, on August 3, 2020, we filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland (“SDAT”), reclassifying and designating 120,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as “Convertible Preferred Stock.” On October 30, 2020, we entered into a Dealer Manager Agreement with InspereX LLC, pursuant to which InspereX LLC has agreed to serve as the Company’s agent and dealer manager for the Company’s offering of up to 10,000,000 shares, par value $0.001 per share, of 5.50% Series AA1 Preferred Stock, with a liquidation preference of $25.00 per share (the “Series AA1 Preferred Stock”). In connection with such offering, on October 30, 2020, we filed Articles Supplementary with the SDAT, reclassifying and designating an additional 20,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as Convertible Preferred Stock. On May 19, 2021, we entered into an Underwriting Agreement with UBS Securities LLC, relating to the offer and sale of 187,000 shares, par value $0.001 per share, of 5.50% Series A2 Preferred Stock, with a liquidation preference of $25.00 per share (the “Series A2 Preferred Stock”, and together with the Series A1 Preferred Stock,

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Series M1 Preferred Stock, Series M2 Preferred Stock and Series AA1 Preferred Stock, the “5.50% Preferred Stock”). The issuance of the Series A2 Preferred Stock settled on May 26, 2021. In connection with such offering, on May 19, 2021, we filed Articles Supplementary with the SDAT, reclassifying and designating an additional 1,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as Convertible Preferred Stock.

In connection with the offerings of the 5.50% Preferred Stock, we adopted and amended, respectively, a preferred stock dividend reinvestment plan (the “Preferred Stock Plan” or the “Preferred Stock DRIP”), pursuant to which holders of the 5.50% Preferred Stock will have dividends on their 5.50% Preferred Stock automatically reinvested in additional shares of such 5.50% Preferred Stock at a price per share of $25.00, if they elect.

Each series of 5.50% Preferred Stock ranks (with respect to the payment of dividends and rights upon liquidation, dissolution or winding up) (a) senior to our common stock, (b) on parity with each other series of our preferred stock, and (c) junior to our existing and future secured and unsecured indebtedness. See Note 8, Fair Value and Maturity of Debt Outstanding for further discussion on our senior securities.

At any time prior to the listing of the 5.50% Preferred Stock on a national securities exchange, shares of the 5.50% Preferred Stock are convertible, at the option of the holder of the 5.50% Preferred Stock (the “Holder Optional Conversion”). We will settle any Holder Optional Conversion by paying or delivering, as the case may be, (A) any portion of the Settlement Amount (as defined below) that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the Settlement Amount, minus (b) any portion of the Settlement Amount that we elect to pay in cash, divided by (2) the arithmetic average of the daily volume weighted average price of shares of our common stock over each of the five consecutive trading days ending on the Holder Conversion Exercise Date (such arithmetic average, the “5-day VWAP”). For the Series A1 Preferred Stock, the Series AA1 Preferred Stock, and the Series A2 Preferred Stock, “Settlement Amount” means (A) $25.00 per share (the “Stated Value”), plus (B) unpaid dividends accrued to, but not including, the Holder Conversion Exercise Date, minus (C) the applicable 5.50% Holder Optional Conversion Fee for the respective Holder Conversion Deadline. For the Series M Preferred Stock, “Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the Holder Conversion Exercise Date, minus (C) the applicable Series M Clawback, if any. “Series M Clawback”, if applicable, means an amount equal to the aggregate amount of all dividends, whether paid or accrued, on such share of Series M Stock in the three full months prior to the Holder Conversion Exercise Date. Subject to certain limited exceptions, we will not pay any portion of the Settlement Amount in cash (other than cash in lieu of fractional shares of our common stock) until the five year anniversary of the date on which a share of 5.50% Preferred Stock has been issued. Beginning on the five year anniversary of the date on which a share of 5.50% Preferred Stock is issued, we may elect to settle all or a portion of any Holder Optional Conversion in cash without limitation or restriction. The right of holders to convert a share of 5.50% Preferred Stock will terminate upon the listing of such share on a national securities exchange.

Subject to certain limited exceptions allowing earlier redemption, beginning on the earlier of the five year anniversary of the date on which a share of 5.50% Preferred Stock has been issued, or, for listed shares of 5.50% Preferred Stock, five years from the earliest date on which any series that has been listed was first issued (the earlier of such dates, the “Redemption Eligibility Date”), such share of 5.50% Preferred Stock may be redeemed at any time or from time to time at our option (the “Issuer Optional Redemption”), at a redemption price of 100% of the Stated Value of the shares of 5.50% Preferred Stock to be redeemed plus unpaid dividends accrued to, but not including, the date fixed for redemption.

Subject to certain limitations, each share of 5.50% Preferred Stock may be converted at our option (the “Issuer Optional Conversion”). We will settle any Issuer Optional Conversion by paying or delivering, as the case may be, (A) any portion of the IOC Settlement Amount (as defined below) that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the IOC Settlement Amount, minus (b) any portion of the IOC Settlement Amount that we elect to pay in cash, divided by (2) the 5-day VWAP, subject to our ability to obtain or maintain any stockholder approval that may be required under the 1940 Act to permit us to sell our common stock below net asset value if the 5-day VWAP represents a discount to our net asset value per share of common stock. For the 5.50% Preferred Stock, “IOC Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the date fixed for conversion. In connection with an Issuer Optional Conversion, we will use commercially reasonable efforts to obtain or maintain any stockholder approval that may be required under the 1940 Act to permit us to sell our common stock below net asset value. If we do not have or obtain any required stockholder approval under the 1940 Act to sell our common stock below net asset value and the 5-day VWAP is at a discount to our net asset value per share of common stock, we will settle any conversions in connection with an Issuer Optional Conversion by paying or delivering, as the case may be, (A) any portion of the IOC Settlement Amount that we elect to pay in cash and (B) a number of shares of our common stock at a conversion rate equal to (1) (a) the IOC Settlement Amount, minus (b) any portion of the IOC Settlement Amount that we elect to pay in cash, divided by (2) the NAV per share of common stock at the close of business on the business day immediately preceding the date of conversion. We will not pay any portion of the IOC Settlement Amount from an Issuer Optional Conversion in cash (other than cash in lieu of fractional shares of our common stock) until the Redemption Eligibility Date. Beginning on the Redemption Eligibility Date, we may elect to settle any Issuer Optional Conversion in cash without limitation or restriction. In the event that we exercise an Issuer Optional

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Conversion with respect to any shares of 5.50% Preferred Stock, the holder of such 5.50% Preferred Stock may instead elect a Holder Optional Conversion with respect to such 5.50% Preferred Stock provided that the date of conversion for such Holder Optional Conversion would occur prior to the date of conversion for an Issuer Optional Conversion.

On July 12, 2021, we entered into an underwriting agreement by and among us, Prospect Capital Management L.P., Prospect Administration LLC, and Morgan Stanley & Co. LLC, RBC Capital Markets, LLC and UBS Securities LLC, as representatives of the underwriters, relating to the offer and sale of 6,000,000 shares, or $150,000 in aggregate liquidation preference, of our 5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock” or “5.35% Preferred Stock”), at a public offering price of $25.00 per share. Pursuant to the Underwriting Agreement, we also granted the underwriters a 30-day option to purchase up to an additional 900,000 shares of Series A Preferred Stock solely to cover over-allotments. The offer settled on July 19, 2021, and no additional shares of Series A Preferred Stock were issued pursuant to the option. In connection with such offering, on July 15, 2021, we filed Articles Supplementary with SDAT, reclassifying and designating 6,900,000 shares of the Company’s authorized and unissued shares of Common Stock into shares of Series A Preferred Stock.

The Series A Preferred Stock ranks (with respect to the payment of dividends and rights upon liquidation, dissolution or winding up) (a) senior to our common stock, (b) on parity with each other series of our preferred stock, and (c) junior to our existing and future secured and unsecured indebtedness. See Note 8, Fair Value and Maturity of Debt Outstanding for further discussion on our senior securities.

Subject to certain limited exceptions allowing earlier redemption, at any time after the close of business on July 19, 2026 (any such date, an “Optional Redemption Date”), at our sole option, we may redeem the Series A Preferred Stock in whole or, from time to time, in part, out of funds legally available for such redemption, at a price per share equal to the liquidation preference of $25.00 per share, plus an amount equal to all unpaid dividends on such shares (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the date fixed for redemption. We may also redeem the Series A Preferred Stock at any time, in whole or, from time to time, in part, including prior to the Optional Redemption Date, pro rata, based on liquidation preference, with all other series of our then outstanding preferred stock, in the event that our Board determines to redeem any series of our preferred stock, in whole or, from time to time, in part, because such redemption is deemed necessary by the Board to comply with the asset coverage requirements of the 1940 Act or for us to maintain RIC status.

In the event of a Change of Control Triggering Event (as defined below), we may, at our option, exercise our special optional redemption right to redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control Triggering Event has occurred by paying the liquidation preference, plus an amount equal to all unpaid dividends on such shares (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the date fixed for such redemption. To the extent that we exercise our optional redemption right or our special optional redemption right relating to the Series A Preferred Stock, the holders of Series A Preferred Stock will not be permitted to exercise the conversion right described below in respect of their shares called for redemption.

Except to the extent that we have elected to exercise our optional redemption right or our special optional redemption right by providing notice of redemption prior to the Change of Control Conversion Date (as defined below), upon the occurrence of a Change of Control Triggering Event, each holder of Series A Preferred Stock will have the right to convert some or all of the Series A Preferred Stock held by such holder on the Change of Control Conversion Date into a number of our shares of common stock per Series A Preferred Stock to be converted equal to the lesser of:

•the quotient obtained by dividing (i) the sum of the Liquidation Preference per share plus an amount equal to all unpaid dividends thereon (whether or not earned or declared, but excluding interest thereon) accumulated up to, but excluding, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a Record Date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividends will be included in this sum) by (ii) the Common Stock Price (as defined below); and

•6.03865, subject to certain adjustments,

subject, in each case, to provisions for the receipt of alternative consideration upon conversion as described in the applicable prospectus supplement.

If we have provided or provide a redemption notice with respect to some or all of the Series A Preferred Stock, holders of any Series A Preferred Stock that we have called for redemption will not be permitted to exercise their Change of Control Conversion Right in respect of any of their Series A Preferred Stock that have been called for redemption, and any Series A Preferred Stock subsequently called for redemption that have been tendered for conversion will be redeemed on the applicable date of redemption instead of converted on the Change of Control Conversion Date.

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For purposes of the foregoing discussion of a redemption upon the occurrence of a Change of Control Triggering Event, the following definitions are applicable:

“Change of Control Triggering Event” means the occurrence of any of the following:

•the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation and other than an Excluded Transaction) in one or a series of related transactions, of all or substantially all of the assets of the Company and its Controlled Subsidiaries taken as a whole to any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than to any Permitted Holders); provided that, for the avoidance of doubt, a pledge of assets pursuant to any of our secured debt instruments or the secured debt instruments of our Controlled Subsidiaries shall not be deemed to be any such sale, lease, transfer, conveyance or disposition; or

•the consummation of any transaction (including, without limitation, any merger or consolidation and other than an Excluded Transaction) the result of which is that any “person” or “group” (as those terms are used in Section 13(d)(3) of the Exchange Act) (other than any Permitted Holders) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more than 50% of our outstanding Voting Stock, measured by voting power rather than number of shares.

Notwithstanding the foregoing, the consummation of any of the transactions referred to in the bullet points above will not be deemed a Change of Control Triggering Event if we or the acquiring or surviving consolidated entity has or continues to have a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE American or NASDAQ, or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or NASDAQ, or is otherwise listed or quoted on a national securities exchange.

The “Change of Control Conversion Date” is the date the shares of Series A Preferred Stock are to be converted, which will be a business day selected by us that is no fewer than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Series A Preferred Stock.

The “Common Stock Price” will be (i) if the consideration to be received in the Change of Control Triggering Event by the holders of our common stock is solely cash, the amount of cash consideration per share of our common stock or (ii) if the consideration to be received in the Change of Control Triggering Event by holders of our common stock is other than solely cash (x) the average of the closing sale prices per share of our common stock (or, if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control Triggering Event as reported on the principal U.S. securities exchange on which our common stock is then traded, or (y) the average of the last quoted bid prices for our common stock in the over-the-counter market as reported by OTC Markets Group Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control Triggering Event, if our common stock is not then listed for trading on a U.S. securities exchange.

“Controlled Subsidiary” means any of our subsidiaries, 50% or more of the outstanding equity interests of which are owned by us and our direct or indirect subsidiaries and of which we possess, directly or indirectly, the power to direct or cause the direction of the management or policies, whether through the ownership of voting equity interests, by agreement or otherwise.

“Excluded Transaction” means (i) any transaction that does not result in any reclassification, conversion, exchange or cancellation of all or substantially all of the outstanding shares of our Voting Stock; (ii) any changes resulting from a subdivision or combination or a change solely in par value; (iii) any transaction where the shares of our Voting Stock outstanding immediately prior to such transaction constitute, or are converted into or exchanged for, a majority of the Voting Stock of the surviving “person” (as that term is used in Section 13(d)(3) of the Exchange Act) or any direct or indirect parent company of the surviving “person” (as that term is used in Section 13(d)(3) of the Exchange Act) immediately after giving effect to such transaction; (iv) any transaction if (A) we become a direct or indirect wholly-owned subsidiary of a holding company and (B)(1) the direct or indirect holders of the Voting Stock of such holding company immediately following that transaction are substantially the same as the holders of our Voting Stock immediately prior to that transaction or (2) immediately following that transaction no “person” (as that term is used in Section 13(d)(3) of the Exchange Act) is the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of such holding company; or (v) any transaction primarily for the purpose of changing our jurisdiction of incorporation or form of organization.

“Permitted Holders” means (i) us, (ii) one or more of our Controlled Subsidiaries and (iii) Prospect Capital Management or any affiliate of Prospect Capital Management that is organized under the laws of a jurisdiction located in the United States of America and in the business of managing or advising clients.

“Voting Stock” as applied to stock of any person, means shares, interests, participations or other equivalents in the equity interest (however designated) in such person having ordinary voting power for the election of the directors (or the equivalent) of such person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.

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Except as provided above in connection with a Change of Control Triggering Event, the Series A Preferred Stock is not convertible into or exchangeable for any other securities or property.

For so long as the Series A Preferred Stock is outstanding, we will not exercise any option we have to convert any other series of our outstanding preferred stock to common stock, including the Issuer Optional Conversion, or any other security ranking junior to such preferred stock. As a result, and in accordance with ASC 480, we have presented both our 5.50% Preferred Stock and Series A Preferred Stock within temporary equity on our Consolidated Statement of Assets and Liabilities as of September 30, 2021.

We determined the estimated value as of September 30, 2021 of our Preferred Stock, with a $25.00 stated value per share. We engaged a third-party valuation service to assist in our determination based on the calculation resulting from the total equity on our Consolidated Statements of Assets and Liabilities in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (the “Form 10-Q”), which was prepared in accordance with U.S. generally accepted accounting principles in the United States of America, adjusted for the fair value of our investments (i.e. from our Consolidated Schedule of Investments) and total liabilities, divided by the number of shares of our Preferred Stock outstanding. Based on this methodology and because the result from the calculation above is greater than the $25.00 per share stated value of our Preferred Stock, the estimated value of our Preferred Stock as of September 30, 2021 is $25.00 per share.

Common Stock

Our common stockholders’ equity accounts as of September 30, 2021 and June 30, 2021 reflect cumulative shares issued, net of shares repurchased, as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our dividend reinvestment plan and in connection with the acquisition of certain controlled portfolio companies. 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.

We did not repurchase any shares of our common stock for the three months ended September 30, 2021 or September 30, 2020.

Off-Balance Sheet Arrangements

As of September 30, 2021, 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.

Recent Developments

On October 8, 2021, we commenced a tender offer to purchase for cash any and all of the $81,389 aggregate principal amount of our outstanding 6.375% 2024 Notes at a purchase price of $107.750, plus accrued and unpaid interest (the “6.375% 2024 Notes October Tender Offer”). The 6.375% 2024 Notes October Tender Offer expired at 5:00 p.m., New York City time, on October 15, 2021. As of the settlement date, $149 aggregate principal amount of the 6.375% 2024 Notes were validly tendered and accepted. Following settlement of the 6.375% 2024 Notes October Tender Offer on October 20, 2021, approximately $81,240 aggregate principal amount of the 6.375% 2024 Notes remains outstanding.

On October 18, 2021, we provided a new $65,000 First Lien Term Loan investment, a new $22,609 Delayed Draw Term Loan commitment, and a new $4,239 Revolving Line of Credit commitment to BCPE Osprey Buyer, Inc., a provider of marketplace and software solutions to hospitals and health systems. The Delayed Draw Term Loan and Revolving Line of Credit were unfunded at close.

On October 21, 2021, we amended our investment in PeopleConnect Intermediate, LLC whereby we provided an incremental $60,775 Senior Secured Term Loan investment, purchased an additional $21,230 Senior Secured Term Loan investment from a third party, and eliminated our $8,918 unfunded revolving line of credit commitment.

During the period from October 21, 2021 through October 27, 2021, we received partial repayments of $83,581 of our Senior Secured Term Loan A outstanding with NPRC and its wholly-owned subsidiaries.

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On November 8, 2021, we announced the declaration of monthly dividends for our 5.50% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.50% of the Stated Value of $25 per share as set forth in the Articles Supplementary for the Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date (the first business day of the month, with no additional dividend accruing in January as a result), as follows:

Monthly Cash 5.50% Preferred Shareholder Distribution	Record Date	Payment Date	Monthly Amount ($ per share), before pro ration for partial periods
December 2021	12/15/2021	1/3/2022	$0.114583
January 2022	1/19/2022	2/1/2022	$0.114583
February 2022	2/16/2022	3/1/2022	$0.114583

On November 8, 2021, we announced the declaration of quarterly dividends for our 5.35% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.35% of the Stated Value of $25.00 per share as set forth in the Articles Supplementary for the 5.35% Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date, as follows:

Quarterly Cash 5.35% Preferred Shareholder Distribution	Record Date	Payment Date	Amount ($ per share)
November 2021 - January 2022	1/19/2022	2/1/2022	$0.334375

On November 8, 2021, we announced the declaration of monthly dividends on our common stock as follows:

Monthly Cash Common Shareholder Distribution	Record Date	Payment Date	Amount ($ per share)
November 2021	11/26/2021	12/23/2021	$0.0600
December 2021	12/29/2021	1/20/2022	$0.0600
January 2022	1/27/2022	2/17/2022	$0.0600

Critical Accounting Policies and Estimates

For discussion of critical accounting policies and estimates, refer to our Annual Report on Form 10-K for the year ended June 30, 2021.

Recent Accounting Pronouncements

For discussion of recent accounting pronouncements, refer to Note 2 within the accompanying notes to the consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in interest rates and equity price risk. Uncertainty with respect to the economic effects of the COVID-19 outbreak has introduced significant volatility in the financial markets, and the effects of this volatility could materially impact our market risks, including those listed below. For additional information concerning the COVID-19 pandemic and its potential impact on our business and our operating results, see Part I, Item 1A. Risk Factors, “Risks Relating to Our Business - Events outside of our control, including public health crises, may have a negative impact on our portfolio companies and our business and operations” in our Annual Report on Form 10-K.

Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates impacting some of the loans in our portfolio which have floating interest rates. Additionally, because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. See Part I, Item 1A. Risk Factors, “Risks Relating to Our Business - Changes in interest rates may affect our cost of capital and net investment income” in our Annual Report on Form 10-K.

Our debt investments may be based on floating rates or fixed rates. For our floating rate loans the rates are determined from the LIBOR, EURO Interbank Offer Rate, the Federal Funds Rate or the Prime Rate. The floating interest rate loans may be subject to a LIBOR floor. Our loans typically have durations of one, two, three, six or twelve months after which they reset to current

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market interest rates. As of September 30, 2021, 85.62% of the interest earning investments in our portfolio, at fair value, bore interest at floating rates.

We also have a revolving credit facility that is based on floating LIBOR rates. Interest on borrowings under the revolving credit facility is one-month LIBOR plus 205 basis points with no minimum LIBOR floor and an outstanding balance of $84,537 as of September 30, 2021. The Convertible Notes, Public Notes and Prospect Capital InterNotes® bear interest at fixed rates.

On March 5, 2021, the FCA announced that (i) 24 LIBOR settings would cease to exist immediately after December 31, 2021 (all seven euro LIBOR settings; all seven Swiss franc LIBOR settings; the Spot Next, 1-week, 2-month, and 12-month Japanese yen LIBOR settings; the overnight, 1-week, 2-month, and 12-month sterling LIBOR settings; and the 1-week and 2-month US dollar LIBOR settings); (ii) the overnight and 12-month US LIBOR settings would cease to exist after June 30, 2023; and (iii) the FCA would consult on whether the remaining nine LIBOR settings should continue to be published on a synthetic basis for a certain period using the FCA’s proposed new powers that the UK government is legislating to grant to them.

The following table shows the approximate annual impact on net investment income of base rate changes in interest rates (considering interest rate flows for floating rate instruments, excluding our investments in Subordinated Structured Notes) to our loan portfolio and outstanding debt as of September 30, 2021, assuming no changes in our investment and borrowing structure:

(in thousands) Basis Point Change	Interest Income		Interest Expense		Net Investment Income		Net Investment Income(1)
Up 300 basis points	$	57,206	$	2,536	$	54,670	$	43,736
Up 200 basis points	$	28,105	$	1,691	$	26,414	$	21,131
Up 100 basis points	$	5,297	$	845	$	4,452	$	3,562
Down 100 basis points	$	(225)	$	(71)	$	(154)	$	(123)

(1)Includes the impact of income incentive fees. See Note 13 in the accompanying Consolidated Financial Statements for more information on income incentive fees.

As of September 30, 2021, one, two, three, and six month LIBOR were 0.08%, 0.11%, 0.13% and0.16% respectively.

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 higher interest rates with respect to our portfolio of investments. During the year ended September 30, 2021, we did not engage in hedging activities.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2021, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures. We are continually monitoring and assessing the COVID-19 pandemic to determine any potential impact on the design and operating effectiveness of our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1. Legal Proceedings

(All figures in this item are in thousands except share, per share and other data.)

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 such matters as may 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 material legal proceedings as of September 30, 2021.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed below and the risk factors in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2021, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. (All figures in this item are in thousands except share, per share and other data.)

Risks Relating to Business

We are subject to risks related to corporate social responsibility.

Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities. We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business.

Risks Relating to Our Securities

Senior securities, including debt and preferred equity, expose us to additional risks, including the typical risks associated with leverage and could adversely affect our business, financial condition and results of operations.

We use our revolving credit facility to leverage our portfolio and we expect in the future to borrow from and issue senior debt securities to banks and other lenders and may securitize certain of our portfolio investments. We also have the Unsecured Notes outstanding and have launched a convertible preferred share offering program, which are forms of leverage and are senior in payment rights to our common stock.

Business development companies are generally able to issue senior securities such that their asset coverage, as defined in the 1940 Act, equals at least 200% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities. In March 2018, the Small Business Credit Availability Act added Section 61(a)(2) to the 1940 Act, a successor provision to Section 61(a)(1) referenced therein, which reduces the asset coverage requirement applicable to business development companies from 200% to 150% so long as the business development company meets certain disclosure requirements and obtains certain approvals. On May 5, 2020, the Company's stockholders voted to approve the application of the reduced asset coverage requirements in Section 61(a) (2) to the Company effective as of May 6, 2020. As a result of the stockholder approval, effective May 6, 2020, the asset coverage ratio under the 1940 Act applicable to the Company decreased to 150% from 200%. In other words, under the 1940 Act, the Company is now able to borrow $2 for investment purposes for every $1 of investor equity, as opposed to borrowing $1 for investment purposes for every $1 of investor equity. As a result, the Company will be able to incur additional indebtedness in the future and investors in the Company may face increased investment risk. In addition, the Company’s management fee payable to the Investment Adviser is based on the Company's average adjusted gross assets, which includes leverage and, as a result, if the Company incurs additional leverage, management fees paid to the Investment Adviser would increase.

With certain limited exceptions, as a BDC, we are only allowed to borrow amounts or otherwise issue senior securities such that our asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing or other issuance. The amount of leverage that we employ will depend on the Investment Adviser’s and our Board of Directors’ assessment of market conditions and other

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factors at the time of any proposed borrowing. There is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations for stockholders, any of which could adversely affect our business, financial condition and results of operations, including the following:

•A likelihood of greater volatility in the net asset value and market price of our common stock;

•Diminished operating flexibility as a result of asset coverage or investment portfolio composition requirements required by lenders or investors that are more stringent than those imposed by the 1940 Act;

•The possibility that investments will have to be liquidated at less than full value or at inopportune times to comply with debt covenants or to pay interest or dividends on the leverage;

•Increased operating expenses due to the cost of leverage, including issuance and servicing costs;

•Convertible or exchangeable securities, such as the Convertible Notes outstanding or those issued in the future (including the Preferred Stock (as defined herein)) may have rights, preferences and privileges more favorable than those of our common stock including, the case of the Preferred Stock, the statutory right under the 1940 Act to vote, as a separate class, on the election of two of our directors and approval of certain fundamental transactions in certain circumstances;

•Subordination to lenders’ superior claims on our assets as a result of which lenders will be able to receive proceeds available in the case of our liquidation before any proceeds will be distributed to our stockholders;

•Difficulty meeting our payment and other obligations under the Unsecured Notes and our other outstanding debt or preferred equity;

•The occurrence of an event of default if we fail to comply with the financial and/or other restrictive covenants contained in our debt agreements, including the credit agreement and each indenture governing the Unsecured Notes, which event of default could result in all or some of our debt becoming immediately due and payable;

•Reduced availability of our cash flow to fund investments, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes;

•The risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under our amended senior credit facility; and

•Reduced flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy.

For example, the amount we may borrow under our revolving credit facility is determined, in part, by the fair value of our investments. If the fair value of our investments declines, we may be forced to sell investments at a loss to maintain compliance with our borrowing limits. Other debt facilities we may enter into in the future may contain similar provisions. Any such forced sales would reduce our net asset value and also make it difficult for the net asset value to recover. The Investment Adviser and our Board of Directors in their best judgment nevertheless may determine to use leverage if they expect that the benefits to our stockholders of maintaining the leveraged position will outweigh the risks.

•In addition, our ability to meet our payment and other obligations of the Preferred Stock, the Unsecured Notes and our credit facility depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot provide assurance that our business will generate cash flow from operations, or that future borrowings will be available to us under our existing credit facility or otherwise, in an amount sufficient to enable us to meet our payment obligations under the Preferred Stock, the Unsecured Notes and our other debt and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt and preferred equity obligations, we may need to refinance or restructure our debt or preferred equity, including the Unsecured Notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the Preferred Stock, the Unsecured Notes and our other debt.

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Illustration.    The following tables illustrate the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of interest expense. The calculations in the tables below are hypothetical and actual returns may be higher or lower than those appearing below.

The below calculation assumes (i) $7.4 billion in total assets, (ii) an average cost of funds of 4.91% (including preferred dividend payments), (iii) $2.1 billion in debt outstanding, (iv) $1.3 billion in liquidation preference of 5.50% Preferred Stock outstanding, (v) $0.2 billion in 5.35% Preferred Stock outstanding, and (vi) $3.8 billion of common stockholders’ equity.

Assumed Return on Our Portfolio (net of expenses)	(10)%	(5)%	0%	5%	10%
Corresponding Return to Common Stockholder(1)	(24.1)%	(14.4)%	(4.7)%	5.1%	14.8%

The below calculation assumes (i) $7.4 billion in total assets, (ii) an average cost of funds of 4.58%, (iii) $2.3 billion in debt outstanding, (iv) $0.2 billion in 5.35% Preferred Stock outstanding, and (v) $5.1 billion of common stockholders’ equity.

Assumed Return on Our Portfolio (net of expenses)	(10)%	(5)%	0%	5%	10%
Corresponding Return to Common Stockholder(2)	(16.6)%	(9.3)%	(2.1%)	5.2%	12.4%

(1) Assumes no conversion of 5.50% Preferred Stock to common stock.

(2) Assumes the conversion of $1.25 billion in 5.50% Preferred Stock at a conversion rate based on the 5-day VWAP of our common stock on September 30, 2021, which was $7.88, and a Holder Optional Conversion Fee (as defined in the prospectus supplement relating to the applicable offering) of 9.00% and 9.50% on Series A1 Preferred Stock and Series AA Preferred Stock, respectively, of the maximum public offering price disclosed within the applicable prospectus supplements. The actual 5-day VWAP of our common stock on a Holder Conversion Exercise Date may be more or less than $7.88, which may result in more or less shares of common stock issued.

The assumed portfolio return is required by regulation of the SEC and is not a prediction of, and does not represent, our projected or actual performance. Actual returns may be greater or less than those appearing in the table.

Pursuant to SEC regulations, this table is calculated as of September 30, 2021. As a result, it has not been updated to take into account any changes in assets or leverage since September 30, 2021.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

Our common stock is traded on the NASDAQ Global Select Market under the symbol “PSEC.”

The following table sets forth, for the quarterly reporting periods indicated, the net asset value per common share of our common stock and the high and low sales prices for our common stock, as reported on the NASDAQ Global Select Market. Our common stock historically has traded at prices both above and below its net asset value. There can be no assurance, however, that such premium or discount, as applicable, to net asset value will be maintained. See also “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended June 30, 2021 for additional information about the risks and uncertainties we face.

			Stock Price				Premium (Discount) of High to NAV		Premium (Discount) of Low to NAV
	NAV(1)		High(2)		Low(2)
Year Ended June 30, 2020
First quarter	$	8.87	$	6.73	$	6.30	(24.1)	%	(29.0)	%
Second quarter		8.66		6.70		6.37	(22.6)	%	(26.4)	%
Third quarter		7.98		6.61		4.04	(17.2)	%	(49.4)	%
Fourth quarter		8.18		5.74		3.78	(29.8)	%	(53.8)	%
Year Ended June 30, 2021
First quarter	$	8.40	$	5.17	$	4.69	(38.5)	%	(44.2)	%
Second quarter		8.96		5.60		4.95	(37.5)	%	(44.8)	%
Third quarter		9.38		7.98		5.51	(14.9)	%	(41.3)	%
Fourth quarter		9.81		9.22		7.62	(6.0)	%	(22.3)	%
Twelve Months Ending June 30, 2022
First quarter	$	10.12	$	8.46	$	7.69	(16.4)	%	(24.0)	%

(1) Net asset value per common share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per common share on the date of the high or low sales price. The NAVs shown are based on outstanding shares of our common stock at the end of each period.

(2) The High/Low Stock Price is calculated as of the closing price on a given day in the applicable quarter.

Recent Sales of Common Stock Below Net Asset Value

At our 2009, 2010, 2011, 2012 and 2013 annual meeting of stockholders, and at special meetings of stockholders held on June 12, 2020 and June 11, 2021, our stockholders approved our ability to sell shares of our common stock at a price or prices below our NAV per common share at the time of sale in one or more offerings. The current approval to sell shares of our common stock below our NAV per common share is valid until June 11, 2022 and subject to certain conditions as set forth in the proxy statement relating to the special meeting (including that the number of shares sold on any given date does not exceed 25% of our outstanding common stock immediately prior to such sale). Accordingly, we may make offerings of our common stock without any limitation on the total amount of dilution to stockholders. Our prospectus supplement and accompanying prospectus relating to this offering contains additional information about these offerings. Pursuant to the authority granted by our stockholders and the approval of our Board of Directors, we have made the following offerings:

Date of Offering	Price Per Share to Investors	Shares Issued	Estimated Net Asset Value per Common Share(1)	Percentage Dilution
June 15, 2020 to June 22, 2020(2)	$5.29 - $5.40	1,158,222	$7.93 - 7.94	0.10%

(1) The data for sales of common shares below NAV pursuant to our equity distribution agreements are estimates based on our last reported NAV prior to the respective period adjusted for capital events occurring during the period since the last calculated NAV. All amounts presented are approximations based on the best available data at the time of issuance.

(2) At the market offering. Dates of offering represent the sales dates of the stock. The settlement dates are two business days later than the sale dates.

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FEES AND EXPENSES

The following tables are intended to assist you in understanding the costs and expenses that an investor in shares of common stock will bear directly or indirectly. We caution you that some of the percentages indicated in the table below are estimates and may vary. These tables are based on our assets and common stock outstanding as of September 30, 2021, except that we assume that we have issued $1.25 billion in 5.50% Preferred Stock paying dividends of 5.50% per annum, in addition to our $0.15 billion of 5.35% Preferred Stock paying dividends of 5.35% per annum, and that we have borrowed $1.28 billion under our credit facility, which is the maximum amount available under the credit facility with the current levels of other debt, in addition to our other indebtedness of $2.0 billion. Except where the context suggests otherwise, any 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’s common stock. 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:	A1 Shares	M Shares	AA Shares
Sales Load (as a percentage of offering price)	10.00% (1)	3.00% (2)	10.00% (3)
Offering expenses borne by the Company (as a percentage of offering price)	(4)	(4)	(5)
Preferred Stock Dividend reinvestment plan expenses (6)	None	None	None
Total stockholder transaction expenses (as a percentage of offering price):	11.5%	4.5%	10.5%
Annual expenses (as a percentage of net assets attributable to common stock):
Management fees (7)	4.50%
Incentive fees payable under Investment Advisory Agreement (20% of realized capital gains and 20% of pre-incentive fee net investment income) (8)	2.06%
Total advisory fees	6.56%
Total interest expenses (9)	3.37%
Other expenses (10)	0.85%
Total annual expenses (8)(10)(11)	10.78%
Dividends on Preferred Stock(12)	2.01%
Total annual expenses after dividends on Preferred Stock (13)	12.79%

Example

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 have issued $1.25 billion in 5.50% Preferred Stock paying dividends of 5.50% per annum, in addition to our $0.15 billion of 5.35% Preferred Stock paying dividends of 5.35% per annum, we have borrowed $1.28 billion available under our line of credit, in addition to our other indebtedness of $2.0 billion, and 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.

	1 Year		3 Years		5 Years		10 Years
A Shares and AA Shares - You would pay the following expenses on a $1,000 investment in shares of our common stock, assuming a 5% annual return on our portfolio*	$	138	$	324	$	490	$	832
A Shares and AA Shares - You would pay the following expenses on a $1,000 investment in shares of our common stock, assuming a 5% annual return on our portfolio**	$	148	$	348	$	524	$	871

* Assumes that we will not realize any capital gains computed net of all realized capital losses and unrealized capital depreciation on our portfolio.

** Assumes no unrealized capital depreciation or realized capital losses and 5% annual return on our portfolio resulting entirely from net realized capital gains (and therefore subject to the capital gains incentive fee).

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While the example assumes, as required by the SEC, a 5% annual return on our portfolio, 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 on our portfolio and is not included in the example. If we achieve sufficient returns on our portfolio, 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 NAV, common stockholders that participate in our common stock 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 95% of the market price per share of our common stock at the close of trading on the valuation date for the distribution.

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.

(1)    Includes up to a 7.0% selling commission on the $25.00 per share (the “Stated Value”) paid by the Company and a dealer manager fee equal to 3.0% of the Stated Value paid by the Company. Reductions in selling commissions will be reflected in reduced public offering prices as described in the “Plan of Distribution” section of the applicable prospectus supplement and the net proceeds to us will not be impacted by such reductions; therefore, we will bear a reduction in net proceeds to us up to 7.0% of the Stated Value on all A Shares although the selling commission compensation paid by us to our dealer manager may represent less than 7.0% of the Stated Value. We may, through the Holder Optional Conversion Fee, recoup a portion of the Sales Load if stockholders exercise a Holder Optional Conversion (as defined in the prospectus supplement relating to the applicable offering) of their Preferred Stock prior to the 5-year anniversary of the original issue date. The Holder Optional Conversion Fee is 9.00% of the maximum public offering price disclosed herein prior to the first anniversary of the issuance of such Preferred Stock, 8.00% of the maximum public offering price disclosed herein on or after the first anniversary but prior to the second anniversary, 7.00% of the maximum public offering price disclosed herein on or after the second anniversary but prior to the third anniversary, 6.00% of the maximum public offering price disclosed herein on or after the third anniversary but prior to the fourth anniversary, 5.00% of the maximum public offering price disclosed herein on or after the fourth anniversary but prior to the fifth anniversary and 0.00% on or after the fifth anniversary.

(2)    Includes a dealer manager fee equal to 3.0% of the Stated Value paid by the Company.

(3)    Includes a 10% selling concession on the Stated Value paid by the Company. We may, through the Holder Optional Conversion Fee, recoup a portion of the Sales Load if stockholders exercise a Holder Optional Conversion of their Preferred Stock prior to the 5-year anniversary of the original issue date. The Holder Optional Conversion Fee is 9.50% of the maximum public offering price disclosed herein prior to the first anniversary of the issuance of such Preferred Stock, 8.50% of the maximum public offering price disclosed herein on or after the first anniversary but prior to the second anniversary, 7.50% of the maximum public offering price disclosed herein on or after the second anniversary but prior to the third anniversary, 6.50% of the maximum public offering price disclosed herein on or after the third anniversary but prior to the fifth anniversary and 0.00% on or after the fifth anniversary.

(4)    The selling commission and dealer manager fee, when combined with organization and offering expenses (including due diligence expenses and fees for establishing servicing arrangements for new stockholder accounts), are not expected to exceed 11.5% of the gross offering proceeds. Our Board of Directors may, in its discretion, authorize the Company to incur underwriting and other offering expenses in excess of 11.5% of the gross offering proceeds. In no event will the combined selling commission, dealer manager fee and offering expenses exceed FINRA’s limit on underwriting and other offering expenses.

(5)    The selling concession, when combined with organization and offering expenses (including due diligence expenses), are not expected to exceed 10.5% of the gross offering proceeds. Our Board of Directors may, in its discretion, authorize the Company to incur underwriting and other offering expenses in excess of 10.5% of the gross offering proceeds. In no event will the combined selling concession and offering expenses exceed FINRA’s limit on underwriting and other offering expenses.

(6)    The expenses of the Preferred DRIP are included in “other expenses.” See “Capitalization” in the applicable prospectus supplement.

(7)    Our base management fee is 2% of our gross assets (which include any amount borrowed, i.e., total assets without deduction for any liabilities, including any borrowed amounts for non-investment purposes, for which purpose we have not and have no intention of borrowing). Although no plans are in place to borrow the full amount under our line of credit, assuming that we borrowed $1.28 billion, the 2% management fee of gross assets equals approximately 4.50% of net assets.

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(8)    Based on our net investment income and realized capital gains, less realized and unrealized capital losses, earned on our portfolio for the year ended September 30, 2021, all of which consisted of an income incentive fee. This historical amount has been adjusted to reflect the issuance of 50,000,000 shares of Preferred Stock. The capital gain incentive fee is paid without regard to pre-incentive fee income. For a more detailed discussion of the calculation of the two-part incentive fee, see “Management Services-Investment Advisory Agreement” in the applicable prospectus.

(9)    As of September 30, 2021, we had $2.0 billion outstanding of Unsecured Notes (as defined below) in various maturities, ranging from July 15, 2022 to September 15, 2051, and interest rates, ranging from 1.50% to 6.875%, some of which are convertible into shares of the Company’s common stock at various conversion rates.

(10)    “Other expenses” are based on estimated amounts for the current fiscal year. The amount shown above represents annualized expenses during our year ended September 30, 2021 representing all of our estimated recurring operating expenses (except fees and expenses reported in other items of this table) that are deducted from our operating income and reflected as expenses in our Statement of Operations. The estimate of our overhead expenses, including payments under an administration agreement with Prospect Administration, or the Administration Agreement is based on our projected allocable portion of overhead and other expenses incurred by Prospect Administration in performing its obligations under the Administration Agreement. See “Business-Management Services-Administration Agreement” in the applicable prospectus.

(11)    If all 50,000,000 shares of Preferred Stock were converted into common stock and assuming all the Series A and Series AA Shares of Preferred Stock pay a Holder Optional Conversion Fee of 9.00% and 9.50%, respectively, of the maximum public offering price disclosed within the applicable prospectus supplement and are converted at a conversion rate based on the 5-day VWAP of our common stock on September 30, 2021, which was $7.88, then management fees would be 3.39%, incentive fees payable under our Investment Advisory Agreement would be 1.56%, total advisory fees would be 4.95%, total interest expenses would be 2.54%, other expenses would be 0.63%, and total annual expenses would be 8.12% of net assets attributable to our common stock. The actual 5-day VWAP of our common stock on a conversion date may be more or less than $7.88, which may result in fees that are higher or lower than those described herein. These figures are based on the same assumptions described in the other notes to this fee table.

(12)    Based on the 5.50% per annum dividend rate applicable to the A1 Shares, M Shares, AA Shares, and A2 Shares. Also based on the 5.35% per annum dividend rate applicable to the A Shares. Other series of preferred stock, including other series of preferred stock being sold in different offerings, may bear different annual dividend rates. No dividend will be paid on shares of Preferred Stock after they have been converted to shares of common stock.

(13)     The indirect expenses associated with the Company’s investments in collateralized loan obligations are not included in the fee table presentation, but if such expenses were included in the fee table presentation then the Company’s total annual expenses would have been 11.36%, or 13.37% after dividends on Preferred Stock.

Item 6. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC (according to the number assigned to them in Item 601 of Regulation S-K):

Exhibit No.
3.1	Articles of Amendment and Restatement(1)
3.2	Amended and Restated Bylaws(2)
3.3	Articles of Amendment(3)
3.4	Articles Supplementary to the Articles of Amendment and Restatement of Prospect Capital Corporation (4)
3.5	Articles Supplementary to the Articles of Amendment and Restatement of Prospect Capital Corporation (5)
3.6	Certificate of Correction to the Articles Supplementary of Prospect Capital Corporation(6)
3.7	Articles Supplementary to the Articles of Amendment and Restatement of Prospect Capital Corporation (23)
3.8	Articles Supplementary to the Articles of Amendment and Restatement of Prospect Capital Corporation (24)
3.9	Certificate of Correction to the Articles Supplementary of Prospect Capital Corporation(25)
4.1	Nine Hundred Eighty-Fourth Supplemental Indenture dated as of July 1, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2027(7)
4.2	Nine Hundred Eighty-Fifth Supplemental Indenture dated as of July 1, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2029(7)

148

Exhibit No.
4.3	Nine Hundred Eighty-Sixth Supplemental Indenture dated as of July 1, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2031(7)
4.4	Nine Hundred Eighty-Seventh Supplemental Indenture dated as of July 1, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2033(7)
4.5	Nine Hundred Eighty-Eighth Supplemental Indenture dated as of July 9, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(8)
4.6	Nine Hundred Eighty-Ninth Supplemental Indenture dated as of July 9, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(8)
4.7	Nine Hundred Ninetieth Supplemental Indenture dated as of July 9, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2033(8)
4.8	Nine Hundred Ninety-First Supplemental Indenture dated as of July 9, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2036(8)
4.9	Nine Hundred Ninety-Second Supplemental Indenture dated as of July 15, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2026(9)
4.10	Nine Hundred Ninety-Third Supplemental Indenture dated as of July 15, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(9)
4.11	Nine Hundred Ninety-Fourth Supplemental Indenture dated as of July 15, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(9)
4.12	Nine Hundred Ninety-Fifth Supplemental Indenture dated as of July 15, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2033(9)
4.13	Nine Hundred Ninety-Sixth Supplemental Indenture dated as of July 15, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2036(9)
4.14	Nine Hundred Ninety-Seventh Supplemental Indenture dated as of July 22, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2026(10)
4.15	Nine Hundred Ninety-Eighth Supplemental Indenture dated as of July 22, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(10)
4.16	Nine Hundred Ninety-Ninth Supplemental Indenture dated as of July 22, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(10)
4.17	One Thousandth Supplemental Indenture dated as of July 22, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2036(10)
4.18	One Thousand First Supplemental Indenture dated as of July 22, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(10)
4.19	One Thousand Second Supplemental Indenture dated as of July 29, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2026(11)
4.20	One Thousand Third Supplemental Indenture dated as of July 29, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(11)
4.21	One Thousand Fourth Supplemental Indenture dated as of July 29, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(11)
4.22	One Thousand Fifth Supplemental Indenture dated as of July 29, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2036(11)
4.23	One Thousand Sixth Supplemental Indenture dated as of July 29, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(11)
4.24	One Thousand Seventh Supplemental Indenture dated as of August 5, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2026(12)
4.25	One Thousand Eighth Supplemental Indenture dated as of August 5, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(12)
4.26	One Thousand Ninth Supplemental Indenture dated as of August 5, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(12)
4.27	One Thousand Tenth Supplemental Indenture dated as of August 5, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2036(12)
4.28	One Thousand Eleventh Supplemental Indenture dated as of August 5, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(12)
4.29	One Thousand Twelfth Supplemental Indenture dated as of August 12, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2026(13)
4.30	One Thousand Thirteenth Supplemental Indenture dated as of August 12, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(13)

149

Exhibit No.
4.31	One Thousand Fourteenth Supplemental Indenture dated as of August 12, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(13)
4.32	One Thousand Fifteenth Supplemental Indenture dated as of August 12, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2036(13)
4.33	One Thousand Sixteenth Supplemental Indenture dated as of August 12, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(13)
4.34	One Thousand Seventeenth Supplemental Indenture dated as of August 19, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2026(14)
4.35	One Thousand Eighteenth Supplemental Indenture dated as of August 19, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(14)
4.36	One Thousand Nineteenth Supplemental Indenture dated as of August 19, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(14)
4.37	One Thousand Twentieth Supplemental Indenture dated as of August 19, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2036(14)
4.38	One Thousand Twenty-First Supplemental Indenture dated as of August 19, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(14)
4.39	One Thousand Twenty-Second Supplemental Indenture dated as of August 26, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2026(15)
4.4	One Thousand Twenty-Third Supplemental Indenture dated as of August 26, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2028(15)
4.41	One Thousand Twenty-Fourth Supplemental Indenture dated as of August 26, 2021, to the U.S. Bank Indenture, and Form of 3.400% Prospect Capital InterNote® due 2031(15)
4.42	One Thousand Twenty-Fifth Supplemental Indenture dated as of August 26, 2021, to the U.S. Bank Indenture, and Form of 3.700% Prospect Capital InterNote® due 2036(15)
4.43	One Thousand Twenty-Sixth Supplemental Indenture dated as of August 26, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(15)
4.44	One Thousand Twenty-Seventh Supplemental Indenture dated as of September 10, 2021, to the U.S. Bank Indenture, and Form of 2.250% Prospect Capital InterNote® due 2026(16)
4.45	One Thousand Twenty-Eighth Supplemental Indenture dated as of September 10, 2021, to the U.S. Bank Indenture, and Form of 2.750% Prospect Capital InterNote® due 2028(16)
4.46	One Thousand Twenty-Ninth Supplemental Indenture dated as of September 10, 2021, to the U.S. Bank Indenture, and Form of 3.150% Prospect Capital InterNote® due 2031(16)
4.47	One Thousand Thirtieth Supplemental Indenture dated as of September 10, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2036(16)
4.48	One Thousand Thirty-First Supplemental Indenture dated as of September 10, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(16)
4.49	One Thousand Thirty-Second Supplemental Indenture dated as of September 16, 2021, to the U.S. Bank Indenture, and Form of 2.250% Prospect Capital InterNote® due 2026(17)
4.5	One Thousand Thirty-Third Supplemental Indenture dated as of September 16, 2021, to the U.S. Bank Indenture, and Form of 2.750% Prospect Capital InterNote® due 2028(17)
4.51	One Thousand Thirty-Fourth Supplemental Indenture dated as of September 16, 2021, to the U.S. Bank Indenture, and Form of 3.150% Prospect Capital InterNote® due 2031(17)
4.52	One Thousand Thirty-Fifth Supplemental Indenture dated as of September 16, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2036(17)
4.53	One Thousand Thirty-Sixth Supplemental Indenture dated as of September 16, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(17)
4.54	One Thousand Thirty-Seventh Supplemental Indenture dated as of September 23, 2021, to the U.S. Bank Indenture, and Form of 2.250% Prospect Capital InterNote® due 2026(18)
4.55	One Thousand Thirty-Eighth Supplemental Indenture dated as of September 23, 2021, to the U.S. Bank Indenture, and Form of 2.750% Prospect Capital InterNote® due 2028(18)
4.56	One Thousand Thirty-Ninth Supplemental Indenture dated as of September 23, 2021, to the U.S. Bank Indenture, and Form of 3.150% Prospect Capital InterNote® due 2031(18)
4.57	One Thousand Fortieth Supplemental Indenture dated as of September 23, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2036(18)
4.58	One Thousand Forty-First Supplemental Indenture dated as of September 23, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(18)

150

Exhibit No.
4.59	One Thousand Forty-Second Supplemental Indenture dated as of September 30, 2021, to the U.S. Bank Indenture, and Form of 2.250% Prospect Capital InterNote® due 2026(19)
4.60	One Thousand Forty-Third Supplemental Indenture dated as of September 30, 2021, to the U.S. Bank Indenture, and Form of 2.750% Prospect Capital InterNote® due 2028(19)
4.61	One Thousand Forty-Fourth Supplemental Indenture dated as of September 30, 2021, to the U.S. Bank Indenture, and Form of 3.150% Prospect Capital InterNote® due 2031(19)
4.62	One Thousand Forty-Fifth Supplemental Indenture dated as of September 30, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2036(19)
4.63	One Thousand Forty-Sixth Supplemental Indenture dated as of September 30, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2051(19)
10.1	Underwriting Agreement, dated September 23, 2021, by and among Prospect Capital Corporation, Prospect Capital Management L.P., Prospect Administration LLC, and RBC Capital Markets, LLC, Goldman Sachs & Co. LLC and BNP Paribas Securities Corp., as representatives of the several underwriters named in Schedule I thereto(20)
10.2	Supplemental Indenture, dated as of September 30, 2021, by and between Prospect Capital Corporation and U.S. Bank National Association, as Trustee(21)
10.3	Form of Global Note of 3.437% Notes due 2028 (22)
11	Computation of Per Share Earnings (included in the notes to the financial statements contained in this report)
12	Computation of Ratios (included in the notes to the financial statements contained in this report)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended*
32.1	Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*
32.2	Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*

________________________

*	Filed herewith.
(1)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K, filed on May 9, 2014.
(2)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K, filed on December 11, 2015.
(3)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K, filed on August 4, 2020.
(4)	Incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K, filed on August 4, 2020.
(5)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K, filed on November 4, 2020.
(6)	Incorporated by reference to Exhibit 3.2 of the Registrant’s Form 8-K, filed on November 4, 2020.
(7)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 63 to the Registration Statement on Form N-2, filed on July 1, 2021.
(8)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 64 to the Registration Statement on Form N-2, filed on July 9, 2021.
(9)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 65 to the Registration Statement on Form N-2, filed on July 15, 2021.
(10)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 66 to the Registration Statement on Form N-2, filed on July 22, 2021.
(11)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 67 to the Registration Statement on Form N-2, filed on July 29, 2021.
(12)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 68 to the Registration Statement on Form N-2, filed on August 5, 2021.
(13)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 69 to the Registration Statement on Form N-2, filed on August 12, 2021.
(14)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 70 to the Registration Statement on Form N-2, filed on August 19, 2021.
(15)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 71 to the Registration Statement on Form N-2, filed on August 26, 2021.
(16)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 72 to the Registration Statement on Form N-2, filed on September 10, 2021.
(17)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 73 to the Registration Statement on Form N-2, filed on September 16, 2021.
(18)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 74 to the Registration Statement on Form N-2, filed on September 23, 2021.

151

(19)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 75 to the Registration Statement on Form N-2, filed on September 30, 2021.
(20)	Incorporated by reference to Exhibit 1.1 of the Registrant’s Form 8-K, filed on September 24, 2021.
(21)	Incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K, filed on September 30, 2021.
(22)	Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K, filed on September 30, 2021.
(23)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 26, 2021.
(24)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 19, 2021.
(25)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 19, 2021.

152

SIGNATURES

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

		PROSPECT CAPITAL CORPORATION
November 8, 2021	By:	/s/ JOHN F. BARRY III
Date		John F. Barry III
		Chairman of the Board and Chief Executive Officer
November 8, 2021	By:	/s/ KRISTIN L. VAN DASK
Date		Kristin L. Van Dask
		Chief Financial Officer

153

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, John F. Barry III, Chairman of the Board and Chief Executive Officer of Prospect Capital Corporation, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Prospect Capital Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over the financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 8, 2021
/s/ JOHN F. BARRY III
John F. Barry III
Chairman of the Board and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a)/15d-14(a)

I, Kristin L. Van Dask, Chief Financial Officer and Treasurer of Prospect Capital Corporation, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Prospect Capital Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over the financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	November 8, 2021
/s/ KRISTIN L. VAN DASK
Kristin L. Van Dask
Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with the quarterly report on Form 10-Q for the period ended September 30, 2021 (the “Report”) of Prospect Capital Corporation (the “Registrant”), as filed with the Securities and Commission on the date hereof, I, John F. Barry III, Chairman of the Board and Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	November 8, 2021
/s/ JOHN F. BARRY III
John F. Barry III
Chairman of the Board and Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Prospect Capital Corporation and will be retained by Prospect Capital Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. ss. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

In connection with the quarterly report on Form 10-Q for the period ended September 30, 2021 (the “Report”) of Prospect Capital Corporation (the “Registrant”), as filed with the Securities and Commission on the date hereof, I, Kristin L. Van Dask, Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date:	November 8, 2021
/s/ KRISTIN L. VAN DASK
Kristin L. Van Dask
Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Prospect Capital Corporation and will be retained by Prospect Capital Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. ss. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.