UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

ý			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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
6.25% Notes due 2028, par value $25			PBY			New York Stock Exchange
6.875% Notes due 2029, par value $25			PBC			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 May 7, 2021, there were 387,758,075 shares of the registrant’s common stock, $0.001 par value per share, outstanding.

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Table of Contents

						Page
			Forward-Looking Statements			3
PART I			FINANCIAL INFORMATION
Item 1.			Financial Statements
			Consolidated Statements of Assets and Liabilities as of March 31, 2021 (unaudited) and June 30, 2020			4
			Consolidated Statements of Operations for the three and nine months ended March 31, 2021 and March 31, 2020 (unaudited)			5
			Consolidated Statements of Changes in Net Assets for the three and nine months ended March 31, 2021 and March 31, 2020 (unaudited)			6
			Consolidated Statements of Cash Flows for the three and nine months ended March 31, 2021 and March 31, 2020 (unaudited)			8
			Consolidated Schedules of Investments as of March 31, 2021 (unaudited) and June 30, 2020			9
			Notes to Consolidated Financial Statements			48
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			111
Item 3.			Quantitative and Qualitative Disclosures About Market Risk			153
Item 4.			Controls and Procedures			155
PART II			OTHER INFORMATION
Item 1.			Legal Proceedings			156
Item 1A.			Risk Factors			156
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			160
Item 3.			Defaults Upon Senior Securities			160
Item 4.			Mine Safety Disclosures			160
Item 5.			Other Information			161
Item 6.			Exhibits			165
			Signatures

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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, 2020, 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 (“Wuhan Virus”) 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 (“LIBOR”) 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 the Investment Adviser to locate suitable investments for us and to monitor and administer our investments; and

•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, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business.

3

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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)

			March 31, 2021						June 30, 2020
			(Unaudited)						(Audited)
Assets
Investments at fair value:
Control investments (amortized cost of $2,425,409 and $2,286,725, respectively)			$	2,721,942					$	2,259,292
Affiliate investments (amortized cost of $168,350 and $163,484, respectively)			299,985						187,537
Non-control/non-affiliate investments (amortized cost of $3,321,382 and $3,332,509, respectively)			2,861,401						2,785,499
Total investments at fair value (amortized cost of $5,915,141 and $5,782,718, respectively)			5,883,328						5,232,328
Cash			100,989						44,561
Receivables for:
Interest, net			10,188						11,712
Other			285						106
Deferred financing costs on Revolving Credit Facility (Note 4)			7,510						9,145
Due from broker			2,955						1,063
Prepaid expenses			195						1,248
Due from Affiliate (Note 13)			38						—
Total Assets			6,005,488						5,300,163
Liabilities
Revolving Credit Facility (Notes 4 and 8)			343,537						237,536
Prospect Capital InterNotes® (less unamortized debt issuance costs of $12,307 and $12,802,    respectively) (Notes 7 and 8)			660,973						667,427
Public Notes (less unamortized discount and debt issuance costs of $14,259 and $11,613,   respectively) (Notes 6 and 8)			892,342						782,106
Convertible Notes (less unamortized debt issuance costs of $4,518 and $8,892, respectively) (Notes 5 and 8)			262,755						450,598
Due to broker			48,669						1
Due to Prospect Capital Management (Note 13)			47,441						42,481
Dividends payable			23,249						22,412
Interest payable			16,731						29,066
Due to Prospect Administration (Note 13)			3,745						7,000
Accrued expenses			3,431						3,648
Other liabilities			775						2,027
Total Liabilities			2,303,648						2,244,302
Commitments and Contingencies (Note 3)
Net Assets			$	3,701,840					$	3,055,861
Components of Net Assets
Convertible Preferred Stock, par value $0.001 per share (140,000,000 shares authorized, with 40,000,000 shares of preferred stock authorized for each of the Series A1, Series M1, and Series M2 shares and 20,000,000 shares of preferred stock authorized for the Series AA1 shares; 2,654,253 and 0 Series A1 shares issued and outstanding, respectively; 0 and 0 Series AA1 shares issued and outstanding, respectively; 21,760 and 0 Series M1 shares issued and outstanding, respectively; and 0 and 0 Series M2 shares issued and outstanding, respectively) (Note 9)			$	66,900					$	—
Common stock, par value $0.001 per share (1,860,000,000 common shares authorized; 387,400,554 and 373,538,499 issued and outstanding, respectively) (Note 9)			387						374
Paid-in capital in excess of par (Note 9 and 12)			4,039,776						3,986,417
Total distributable loss (Note 12)			(405,223)						(930,930)
Net Assets			$	3,701,840					$	3,055,861
Net Asset Value Per Common Share (Note 16)			$	9.38					$	8.18

See notes to consolidated financial statements.

4

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)

			Three Months Ended March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Investment Income
Interest income:
Control investments			$	52,056					$	51,833					$	151,416					$	152,301
Affiliate investments			6,145						2,623						24,333						5,325
Non-control/non-affiliate investments			52,846						57,960						156,125						179,062
Structured credit securities			28,536						26,390						84,735						88,733
Total interest income			139,583						138,806						416,609						425,421
Dividend income:
Control investments			1,384						2,267						3,645						9,335
Non-control/non-affiliate investments			18						310						62						1,005
Total dividend income			1,402						2,577						3,707						10,340
Other income:
Control investments			15,877						9,440						45,493						34,012
Affiliate investments			38						—						102						—
Non-control/non-affiliate investments			2,556						3,678						8,717						8,528
Total other income (Note 10)			18,471						13,118						54,312						42,540
Total Investment Income			159,456						154,501						474,628						478,301
Operating Expenses
Base management fee (Note 13)			29,183						26,625						83,866						82,631
Income incentive fee (Note 13)			18,251						17,119						53,354						51,855
Interest and credit facility expenses			32,773						37,646						100,549						113,603
Allocation of overhead from Prospect Administration (Note 13)			2,685						4,096						10,768						13,601
Audit, compliance and tax related fees			989						421						2,267						2,729
Directors’ fees			113						113						339						339
Other general and administrative expenses			2,060						5						10,977						6,122
Total Operating Expenses			86,054						86,025						262,120						270,880
Net Investment Income			73,402						68,476						212,508						207,421
Net Realized and Net Change in Unrealized Gains (Losses) from Investments
Net realized gains (losses)
Control investments			121						—						2,953						—
Affiliate investments			745						—						4,469						—
Non-control/non-affiliate investments			15						26						29						(263)
Net realized gains (losses)			881						26						7,451						(263)
Net change in unrealized gains (losses)
Control investments			142,379						(97,444)						323,967						(172,328)
Affiliate investments			21,876						(9,516)						107,582						20,746
Non-control/non-affiliate investments			20,705						(150,037)						87,028						(231,766)
Net change in unrealized gains (losses)			184,960						(256,997)						518,577						(383,348)
Net Realized and Net Change in Unrealized Gains (Losses) from Investments			185,841						(256,971)						526,028						(383,611)
Net realized (losses) gains on extinguishment of debt			(12,835)						2,796						(18,415)						(2,647)
Net Increase (Decrease) in Net Assets Resulting from Operations			246,408						(185,699)						720,121						(178,837)
Preferred stock dividend			400						—						446						—
Net Increase (Decrease) in Net Assets Resulting from Operations attributable to Common Stockholders			$	246,008					$	(185,699)					$	719,675					$	(178,837)
Basic and diluted earnings (loss) per common share (Note 11)
Basic			$	0.64					$	(0.51)					$	1.89					$	(0.49)
Diluted			$	0.63					$	(0.51)					$	1.88					$	(0.49)
Weighted-average shares of common stock outstanding (Note 11)
Basic			385,996,921						367,685,511						380,985,329						367,460,412
Diluted			389,420,855						367,685,511						382,259,257						367,460,412

See notes to consolidated financial statements.

5

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(in thousands, except share data)

(Unaudited)

						Common Stock
Nine Months Ended March 31, 2020						Shares						Par						Paid-in capital in excess of par						Distributable earnings (loss)						Total Net Assets
Balance as of June 30, 2019						367,131,025						$	367					$	4,039,872					$	(733,964)					$	3,306,275
Net Decrease in Net Assets resulting from Operations:
Net investment income																								207,421						207,421
Net realized losses																								(2,910)						(2,910)
Net change in unrealized losses																								(383,348)						(383,348)
Distributions to Shareholders(1)
Distributions from earnings																								(150,392)						(150,392)
Return of capital to common stockholders																		(48,063)												(48,063)
Capital Transactions
Shares issued through reinvestment of dividends						686,901						1						4,391												4,392
Tax reclassifications of net assets (Note 12)																		(78)						78						—
Total increase (decrease) for the nine months ended March 31, 2020						686,901						1						(43,750)						(329,151)						(372,900)
Balance as of March 31, 2020(1)						367,817,926						$	368					$	3,996,122					$	(1,063,115)					$	2,933,375

						Convertible Preferred Stock						Common Stock
Nine Months Ended March 31, 2021												Shares						Par						Paid-in capital in excess of par						Distributable earnings (loss)						Total Net Assets
Balance as of June 30, 2020(1)						$	—					373,538,499						$374						$	3,986,417					$	(930,930)					$	3,055,861
Net Increase in Net Assets resulting from Operations:
Net investment income																														212,508						212,508
Net realized losses																														(10,964)						(10,964)
Net change in unrealized gains																														518,577						518,577
Distributions to Shareholders(1)
Distributions from earnings																														(194,471)						(194,471)
Return of capital to common stockholders (Note 12)																								(12,263)												(12,263)
Capital Transactions
Issuance of preferred stock						66,971																		(7,610)												59,361
Shares issued through reinvestment of dividends						9						13,852,073						13						73,209												73,231
Conversion of preferred stock to common stock						(80)						9,982												80												—
Tax reclassifications of net assets (Note 12)																								(57)						57						—
Total increase for the nine months ended March 31, 2021						66,900						13,862,055						13						53,359						525,707						645,979
Balance as of March 31, 2021						$	66,900					387,400,554						$	387					$	4,039,776					$	(405,223)					$	3,701,840

(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.

See notes to consolidated financial statements.

6

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

(in thousands, except share data)

(Unaudited)

						Common Stock
Three Months Ended March 31, 2020						Shares						Par						Paid-in capital in excess of par						Distributable earnings (loss)						Total Net Assets
Balance as of December 31, 2019						367,584,244						$367						$	4,030,773					$	(847,275)					$	3,183,865
Net Decrease in Net Assets resulting from Operations:
Net investment income																								68,476						68,476
Net realized gains																								2,822						2,822
Net change in unrealized losses																								(256,997)						(256,997)
Distributions to Shareholders(1)
Distributions from earnings																								(30,141)						(30,141)
Return of capital to common stockholders																		(36,051)												(36,051)
Capital Transactions
Shares issued through reinvestment of dividends						233,682						1						1,400												1,401
Total increase (decrease) for the three months ended March 31, 2020						233,682						1						(34,651)						(215,840)						(250,490)
Balance as of March 31, 2020						367,817,926						$	368					$	3,996,122					$	(1,063,115)					$	2,933,375

						Convertible Preferred Stock						Common Stock
Three Months Ended March 31, 2021												Shares						Par						Paid-in capital in excess of par						Distributable earnings (loss)						Total Net Assets
Balance as of December 31, 2020(1)						$	13,786					384,097,645						$384						$	4,023,978					$	(581,628)					$	3,456,520
Net Increase in Net Assets resulting from Operations:
Net investment income																														73,402						73,402
Net realized losses																														(11,954)						(11,954)
Net change in unrealized gains																														184,960						184,960
Distributions to Shareholders
Distributions from earnings																														(70,003)						(70,003)
Capital Transactions
Issuance of preferred stock						53,185																		(5,579)												47,606
Shares issued through reinvestment of dividends						9						3,292,927						3						21,297												21,309
Conversion of preferred stock to common stock						(80)						9,982												80												—
Total increase for the three months ended March 31, 2021						53,114						3,302,909						3						15,798						176,405						245,320
Balance as of March 31, 2021						$	66,900					387,400,554						$	387					$	4,039,776					$	(405,223)					$	3,701,840

(1) Certain reclassifications have been made in the presentation of prior year 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.

See notes to consolidated financial statements.

7

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share data)

(Unaudited)

			Nine Months Ended March 31,
			2021						2020
Operating Activities
Net increase (decrease) in net assets resulting from operations			$	720,121					$	(178,837)
Net realized losses on extinguishment of debt			18,415						2,647
Net realized (gains) losses on investments			(7,451)						263
Net change in unrealized (gains) losses on investments			(518,577)						383,348
Amortization of (accretion of premiums) discounts, net			(17,163)						5,750
Accretion of original issue discount			903						775
Amortization of deferred financing costs			5,527						6,342
Payment-in-kind interest			(58,750)						(35,134)
Structuring fees			(20,620)						(5,562)
Change in operating assets and liabilities:
Payments for purchases of investments			(701,768)						(721,764)
Proceeds from sale of investments and collection of investment principal			673,329						882,111
Increase in due to broker			48,668						—
Increase (decrease) in due to Prospect Capital Management			4,960						(2,781)
Decrease in interest receivable, net			1,524						10,851
Decrease in interest payable			(12,335)						(14,154)
Increase in preferred dividend payable			5						—
Decrease in accrued expenses			(217)						(222)
Increase in due from broker			(1,892)						—
Decrease in other liabilities			(1,252)						(212)
(Increase) decrease in other receivables			(179)						2,603
(Increase) decrease in due from affiliate			(38)						38
Decrease in prepaid expenses			1,053						709
(Decrease) Increase in due to Prospect Administration			(3,255)						6,597
Net Cash Provided by Operating Activities			131,008						343,368
Financing Activities
Borrowings under Revolving Credit Facility (Note 4)			668,000						990,000
Principal payments under Revolving Credit Facility (Note 4)			(561,999)						(991,400)
Issuances of Public Notes, net of original issue discount (Note 6)			395,781						—
Redemptions of Public Notes (Note 6)			(290,419)						(446)
Redemptions of Convertible Notes, net (Note 5)			(199,626)						(165,159)
Issuances of Prospect Capital InterNotes® (Note 7)			109,562						224,934
Redemptions of Prospect Capital InterNotes®, net (Note 7)			(116,511)						(260,074)
Financing costs paid and deferred			(6,053)						(7,651)
Proceeds from issuance of preferred stock, net of underwriting costs			61,823						—
Offering costs from issuance of preferred stock			(2,462)						—
Dividends paid			(132,676)						(194,024)
Net Cash Used in Financing Activities			(74,580)						(403,820)
Net Increase (Decrease) in Cash			56,428						(60,452)
Cash at beginning of period			44,561						107,098
Cash at End of Period			$	100,989					$	46,646
Supplemental Disclosures
Cash paid for interest			$	106,454					$	120,640
Purchases of investments settled net of proceeds from sale of investments			$	—					$	61,086
Non-Cash Financing Activities
Value of shares issued through reinvestment of dividends			$	73,231					$	4,392
Cost basis of investments written off as worthless			$	—					$	2,420

See notes to consolidated financial statements.

8

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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			12/29/2022			$	40,203		$	40,203		$	40,203		1.1		%	(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			13,156			13,156			13,156			0.4		%	(10)
						Series A Preferred Units to Spartan Energy Holdings, Inc. (10,000 shares)			9/25/2020						—			N/A			—			26,193			8,837			0.2		%	(16)
						Series B Convertible Preferred Stock (790 shares)			10/30/2015						—			N/A			—			63,225			1,035			—		%	(16)
						Common Stock (102,924 shares)			8/2/2013						—			N/A			—			86,240			—			—		%	(16)
																								229,017			63,231			1.7		%
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			65,473			68,137			1.8		%	(14)(39)
						Class A Units (14,867,312 units)			12/28/2012						—			N/A			—			19,331			3,007			0.1		%	(14)(16)
						Net Revenues Interest (25% of Net Revenues)			1/28/2015						—			N/A			—			—			—			—		%	(14)(16)
																								84,804			71,144			1.9		%
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			1.4		%	(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			7,700			0.2		%	(16)
																								98,144			83,106			2.2		%
First Tower Finance Company LLC (23)			Consumer Finance			First Lien Term Loan			6/24/2014			10.00% plus 12.00% PIK			—			6/24/2024			272,633			272,633			272,633			7.3		%	(14)(39)
						Class A Units (95,709,910 units)			6/14/2012						—			N/A			—			81,146			306,454			8.3		%	(14)(16)
																								353,779			579,087			15.6		%
Freedom Marine Solutions, LLC (24)			Energy Equipment & Services			Membership Interest (100%)			11/9/2006						—			N/A			—			43,892			12,058			0.3		%	(16)
																								43,892			12,058			0.3		%
InterDent, Inc. (29)			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			2.1		%	(10)
						Senior Secured Term Loan B			8/3/2012			12.00% PIK			—			9/5/2022			139,838			139,838			139,838			3.8		%	(39)
						Common Stock (99,900 shares)			5/3/2019						—			N/A			—			45,118			130,070			3.5		%	(16)
																								278,447			363,399			9.8		%
Kickapoo Ranch Pet Resort			Diversified Consumer Services			Membership Interest (100%)			8/26/2019						—			N/A			—			2,378			3,000			0.1		%	(16)
																								2,378			3,000			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			29,125			29,125			29,125			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			15,311			15,311			15,311			0.4		%	(10)(39)
						Subordinated Unsecured Note to Broda Enterprises ULC			9/19/2013			10.00%			—			1/1/2028			5,860			7,200			5,295			0.1		%	(14)
						Common Stock (42,053 shares)			9/19/2013						—			N/A			—			27,349			—			—		%	(16)
																								78,985			49,731			1.3		%

See notes to consolidated financial statements.

9

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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			$	424,487		$	424,487		$	424,487		11.5		%	(10)(39)
						Senior Secured Term Loan B			12/31/2018			5.00% (3ML+ 2.00%) plus 5.50% PIK			3.00			12/31/2023			11,600			11,600			11,600			0.3		%	(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			2.4		%	(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			5.0		%	(10)(39)
						Residual Profit Interest			12/31/2018						—			N/A			—			—			29,700			0.8		%	(35)
						Common Stock (3,254,594 shares)			12/31/2013						—			N/A			—			210			344,973			9.3		%	(45)
																								709,922			1,084,385			29.3		%
Nationwide Loan Company LLC (27)			Consumer Finance			First Lien Term Loan			6/18/2014			10.00% plus 10.00% PIK			—			6/18/2021			20,260			20,260			20,260			0.6		%	(14)(39)
						Class A Units (38,550,460 units)			1/31/2013						—			N/A			—			20,846			20,300			0.5		%	(14)(16)
																								41,106			40,560			1.1		%
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			4,911			4,911			4,911			0.1		%	(3)(10)
						Common Stock (21,419 shares)			12/30/2019						—			N/A			—			12,869			37,744			1.1		%	(16)
																								17,780			42,655			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			40,953			40,953			40,953			1.1		%	(10)(39)
						Convertible Preferred Equity (282,407 shares)			6/15/2018						—			N/A			—			186,795			9,633			0.3		%	(16)
						Common Stock (6,778,414 shares)			9/29/2017						—			N/A			—			—			—			—		%	(16)
																								248,573			71,411			1.9		%
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			0.8		%	(3)(10)
						Common Stock (745,107 shares)			6/26/2007						—			N/A			—			6,866			19,741			0.5		%	(16)
																								35,488			48,363			1.3		%
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			2,865			2,865			2,865			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			23,839			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)
																								64,940			26,704			0.7		%
USES Corp. (30)			Commercial Services & Supplies			Senior Secured Term Loan A			3/31/2014			9.00% PIK			—			7/29/2024			53,882			30,651			35,401			1.0		%	(9)
						Senior Secured Term Loan B			3/31/2014			15.50% PIK			—			7/29/2024			74,525			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			37,401			1.1		%
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			0.9		%	(39)
						Consolidated Revenue Interest (2.0%)			6/22/2018						—			N/A			—			—			1,989			0.1		%	(12)
						Common Stock (50,000 shares)			12/31/2012						—			N/A			—			26,204			99,987			2.7		%
																								69,935			145,707			4.0		%
Total Control Investments (Level 3)																								$	2,425,409		$	2,721,942		73.5		%

See notes to consolidated financial statements.

10

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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			11/13/2020			6.25% (12ML+ 5.25%) plus 4.25% PIK			1.00			9/29/2023			32,179			30,433			32,179			0.8		%	(3)(10)(39)
						1.5 Lien Term Loan			5/27/2020			14.50% PIK (12ML+ 13.50%)			1.00			6/28/2024			17,522			17,522			17,522			0.5		%	(10)(39)
						Second Lien Term Loan			9/29/2014			15.75% PIK (1ML+ 14.75%)			1.00			9/29/2024			117,590			117,590			117,590			3.2		%	(10)(39)
						Common Stock (40,780,359 shares)			5/27/2020						—			N/A			—			—			106,261			2.9		%	(16)
																								165,545			273,552			7.4		%
Targus Cayman HoldCo Limited (33)			Textiles, Apparel & Luxury Goods			Common Stock (7,383,395 shares)			2/12/2016						—			N/A			—			2,805			26,433			0.7		%	(16)
																								2,805			26,433			0.7		%
Total Affiliate Investments (Level 3)																								$	168,350		$	299,985		8.1		%

See notes to consolidated financial statements.

11

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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			10/10/2018			7.86% (1ML+ 7.75%)			—			10/1/2026			$	27,133		$	26,973		$	27,133		0.7		%	(3)(8)(10)
																								26,973			27,133			0.7		%
ACE Cash Express, Inc.			Consumer Finance			Senior Secured Note			12/15/2017			12.00%			—			12/15/2022			39,998			36,985			37,865			1.0		%	(8)(46)
																								36,985			37,865			1.0		%
Ahead Data Blue, LLC			IT Services			Second Lien Term Loan			10/16/2020			9.50% (6ML+ 8.50%)			1.00			10/16/2028			57,500			57,500			57,500			1.6		%	(3)(10)
																								57,500			57,500			1.6		%
AmeriLife Holdings, LLC			Insurance			Second Lien Term Loan			4/2/2020			9.50% (6ML+ 8.50%)			1.00			3/18/2028			21,750			21,371			21,723			0.6		%	(3)(8)(10)
																								21,371			21,723			0.6		%
Apidos CLO XI			Structured Finance			Subordinated Structured Note			12/6/2012			Residual Interest, current yield 12.02%			—			10/17/2030			40,500			32,391			29,164			0.8		%	(5)(14)
																								32,391			29,164			0.8		%
Apidos CLO XII			Structured Finance			Subordinated Structured Note			3/15/2013			Residual Interest, current yield 13.83%			—			4/15/2031			52,203			38,340			29,828			0.8		%	(5)(14)
																								38,340			29,828			0.8		%
Apidos CLO XV			Structured Finance			Subordinated Structured Note			9/13/2013			Residual Interest, current yield 14.84%			—			4/21/2031			48,515			39,707			31,133			0.8		%	(5)(14)
																								39,707			31,133			0.8		%
Apidos CLO XXII			Structured Finance			Subordinated Structured Note			9/16/2015			Residual Interest, current yield 17.16%			—			4/21/2031			35,855			30,717			25,733			0.7		%	(5)(14)
																								30,717			25,733			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			70,797			70,797			70,797			1.9		%	(3)(10)
																								70,797			70,797			1.9		%
Barings CLO 2018-III			Structured Finance			Subordinated Structured Note			10/9/2014			Residual Interest, current yield 9.88%			—			7/20/2029			83,098			45,804			31,925			0.9		%	(5)(14)
																								45,804			31,925			0.9		%
Broder Bros., Co.			Textiles, Apparel & Luxury Goods			Senior Secured Note			12/4/2017			9.75% (3ML+ 8.50%)			1.25			12/2/2022			163,556			163,556			163,556			4.4		%	(3)(10)
																								163,556			163,556			4.4		%
Brookside Mill CLO Ltd.			Structured Finance			Subordinated Structured Note			4/25/2013			Residual Interest, current yield 0.00%			—			1/17/2028			36,300			15,682			10,569			0.3		%	(5)(14)(17)
																								15,682			10,569			0.3		%
California Street CLO IX Ltd.			Structured Finance			Subordinated Structured Note			4/19/2012			Residual Interest, current yield 12.31%			—			7/16/2032			58,915			42,195			29,668			0.8		%	(5)(14)
																								42,195			29,668			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			11,750			11,750			11,750			0.4		%	(3)(10)
						Senior Secured Term Loan B			1/23/2018			10.75% (3ML+ 9.50%)			1.25			1/23/2023			12,500			12,500			12,500			0.3		%	(3)(10)
																								24,250			24,250			0.7		%
Capstone Logistics Acquisition, Inc.			Commercial Services & Supplies			Second Lien Delayed Draw Term Loan - $1,500 Commitment			11/19/2020			9.75% (1ML+ 8.75%)			1.00			11/13/2028			—			—			—			—		%	(8)(10)(15)
						Second Lien Term Loan			11/19/2020			9.75% (1ML+ 8.75%)			1.00			11/13/2028			8,500			8,196			8,477			0.2		%	(3)(8)(10)
																								8,196			8,477			0.2		%
Carlyle C17 CLO Limited			Structured Finance			Subordinated Structured Note			1/24/2013			Residual Interest, current yield 18.76%			—			4/30/2031			24,870			15,809			13,575			0.4		%	(5)(14)
																								15,809			13,575			0.4		%
Carlyle Global Market Strategies CLO 2014-4-R, Ltd.			Structured Finance			Subordinated Structured Note			4/7/2017			Residual Interest, current yield 18.38%			—			7/15/2030			25,534			20,119			17,206			0.5		%	(5)(14)
																								20,119			17,206			0.5		%

See notes to consolidated financial statements.

12

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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 11.89%			—			10/22/2029			$	32,200		$	33,461		$	26,949		0.7		%	(5)(14)
																								33,461			26,949			0.7		%
CCS-CMGC Holdings, Inc.			Health Care Providers & Services			First Lien Term Loan			5/23/2019			5.61% (1ML+ 5.50%)			—			10/1/2025			9,550			9,440			9,550			0.3		%	(3)(8)(10)
						Second Lien Term Loan			10/12/2018			9.11% (1ML+ 9.00%)			—			10/1/2026			37,000			36,510			37,000			1.0		%	(3)(8)(10)
																								45,950			46,550			1.3		%
Cent CLO 21 Limited			Structured Finance			Subordinated Structured Note			5/15/2014			Residual Interest, current yield 12.21%			—			7/29/2030			49,552			39,361			30,116			0.8		%	(5)(14)
																								39,361			30,116			0.8		%
CIFC Funding 2013-III-R, Ltd.			Structured Finance			Subordinated Structured Note			8/2/2013			Residual Interest, current yield 14.21%			—			4/24/2031			44,100			29,613			20,096			0.5		%	(5)(14)
																								29,613			20,096			0.5		%
CIFC Funding 2013-IV, Ltd.			Structured Finance			Subordinated Structured Note			10/22/2013			Residual Interest, current yield 17.14%			—			4/28/2031			45,500			33,401			31,069			0.8		%	(5)(14)
																								33,401			31,069			0.8		%
CIFC Funding 2014-IV-R, Ltd.			Structured Finance			Subordinated Structured Note			8/5/2014			Residual Interest, current yield 13.29%			—			10/17/2030			44,467			31,395			22,342			0.6		%	(5)(14)
																								31,395			22,342			0.6		%
CIFC Funding 2016-I, Ltd.			Structured Finance			Subordinated Structured Note			12/9/2016			Residual Interest, current yield 11.78%			—			10/21/2031			34,000			30,353			28,585			0.8		%	(5)(14)
																								30,353			28,585			0.8		%
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			7,786			7,736			7,786			0.2		%	(10)(39)
																								7,736			7,786			0.2		%
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 7.94%			—			10/25/2028			40,275			22,978			18,456			0.5		%	(5)(14)
																								22,978			18,456			0.5		%
Coverall North America, Inc.			Commercial Services & Supplies			Senior Secured Term Loan B			11/2/2015			12.00% (3ML+ 11.00%)			1.00			5/3/2022			10,872			10,872			10,872			0.3		%	(3)(10)
																								10,872			10,872			0.3		%
CP VI Bella Midco			IT Services			Second Lien Term Loan			2/26/2018			6.86% (1ML+ 6.75%)			—			12/29/2025			15,750			15,716			15,750			0.4		%	(3)(8)(10)
																								15,716			15,750			0.4		%
Curo Group Holdings Corp.			Consumer Finance			Second Lien Term Loan			7/30/2020			8.25%			—			9/1/2025			14,621			12,399			14,621			0.4		%	(14)(47)
																								12,399			14,621			0.4		%
Digital Room, LLC			Commercial Services & Supplies			First Lien Term Loan			5/29/2019			5.20% (6ML+ 5.00%)			—			5/21/2026			9,825			9,735			9,825			0.3		%	(3)(8)(10)
						Second Lien Term Loan			5/30/2019			9.20% (6ML+ 9.00%)			—			5/21/2027			70,000			70,000			70,000			1.9		%	(3)(8)(10)
																								79,735			79,825			2.2		%
Dunn Paper, Inc.			Paper & Forest Products			First Lien Term Loan			11/27/2019			5.75% (2ML+ 4.75%)			1.00			8/26/2022			4,488			4,426			4,488			0.1		%	(3)(8)(10)
						Second Lien Term Loan			10/7/2016			9.75% (2ML+ 8.75%)			1.00			8/26/2023			11,500			11,420			11,500			0.3		%	(3)(8)(10)
																								15,846			15,988			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			3,970			3,970			3,970			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			6,890			0.2		%	(16)
																								5,971			11,641			0.3		%
Edmentum (22)			Diversified Consumer Services			Escrow Receivable			12/11/2020						—			N/A			—			—			128			—		%	(16)
																								—			128			—		%

See notes to consolidated financial statements.

13

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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)
Engine Group, Inc. (7)			Media			Senior Secured Term Loan			11/17/2020			5.75% (3ML+ 4.75%)			1.00			11/17/2023			$	12,229		$	12,229		$	10,966		0.3		%	(8)(10)
						Class B Common Units (1,039,554 units)			11/17/2020						—			N/A			—			26,991			—			—		%	(8)
																								39,220			10,966			0.3		%
EXC Holdings III Corp			Technology Hardware, Storage & Peripherals			Second Lien Term Loan			12/5/2017			8.50% (3ML+ 7.50%)			1.00			12/1/2025			12,500			12,427			12,500			0.3		%	(3)(8)(10)
																								12,427			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			47,853			47,853			47,853			1.3		%	(3)(10)
																								47,853			47,853			1.3		%
First Brands Group			Auto Components			First Lien Term Loan			3/24/2021			6.00% (3ML+ 5.00%)			1.00			3/30/2027			16,750			16,583			16,750			0.5		%	(8)(10)
						Second Lien Term Loan			3/24/2021			9.50% (3ML+ 8.50%)			1.00			3/30/2028			32,000			31,360			32,000			0.9		%	(8)(10)
																								47,943			48,750			1.4		%
Galaxy XV CLO, Ltd.			Structured Finance			Subordinated Structured Note			2/13/2013			Residual Interest, current yield 12.91%			—			10/15/2030			50,525			35,502			26,388			0.8		%	(5)(14)
																								35,502			26,388			0.8		%
Galaxy XXVII CLO, Ltd.			Structured Finance			Subordinated Structured Note			9/30/2013			Residual Interest, current yield 14.38%			—			5/16/2031			24,575			16,901			12,061			0.3		%	(5)(14)
																								16,901			12,061			0.3		%
Galaxy XXVIII CLO, Ltd.			Structured Finance			Subordinated Structured Note			5/30/2014			Residual Interest, current yield 11.16%			—			7/15/2031			39,905			29,204			16,806			0.5		%	(5)(14)
																								29,204			16,806			0.5		%
GEON Performance Solutions, LLC			Chemicals			Revolving Line of Credit - $3,621 Commitment			12/12/2019			7.88% (1ML+ 6.25%)			1.63			10/25/2024			—			—			—			—		%	(10)(15)
						First Lien Term Loan			12/12/2019			7.88% (1ML+ 6.25%)			1.63			10/25/2024			30,987			30,860			30,987			0.8		%	(3)(10)
																								30,860			30,987			0.8		%
Global Tel*Link Corporation			Diversified Telecommunication Services			First Lien Term Loan			8/20/2019			4.36% (1ML+ 4.25%)			—			11/29/2025			9,824			9,518			9,699			0.3		%	(3)(8)(10)
						Second Lien Term Loan			12/4/2018			8.36% (1ML+ 8.25%)			—			11/29/2026			40,170			39,485			40,170			1.1		%	(3)(8)(10)
																								49,003			49,869			1.4		%
GlobalTranz Enterprises, Inc.			Air Freight & Logistics			Second Lien Term Loan			5/15/2019			8.36% (1ML+ 8.25%)			—			5/15/2027			12,500			12,500			11,945			0.3		%	(3)(8)(10)
																								12,500			11,945			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			3,709			—			—		%	(5)(14)(17)
																								3,709			—			—		%
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			—			—		%
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			29,591			8,771			0.2		%	(5)(14)(17)
																								29,591			8,771			0.2		%
HarbourView CLO VII-R, Ltd.			Structured Finance			Subordinated Structured Note			6/5/2015			Residual Interest, current yield 1.98%			—			7/18/2031			19,025			12,988			4,973			0.1		%	(5)(14)
																								12,988			4,973			0.1		%

See notes to consolidated financial statements.

14

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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)
Help/Systems Holdings, Inc.			Software			First Lien Term Loan			11/29/2019			5.75% (3ML+ 4.75%)			1.00			11/19/2026			$	8,415		$	8,352		$	8,415		0.2		%	(3)(8)(10)(47)
						Second Lien Term Loan			11/22/2019			9.00% (3ML+ 8.00%)			1.00			11/19/2027			17,500			17,226			17,500			0.5		%	(3)(8)(10)
																								25,578			25,915			0.7		%
Inpatient Care Management Company, LLC			Health Care Providers & Services			Senior Secured Term Loan			6/8/2016			9.00% (3ML+ 8.00%)			1.00			6/8/2021			12,000			12,000			12,000			0.3		%	(3)(10)
																								12,000			12,000			0.3		%
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			70,148			70,148			70,148			1.9		%	(3)(10)
																								72,148			72,148			2.0		%
Jefferson Mill CLO Ltd.			Structured Finance			Subordinated Structured Note			6/26/2015			Residual Interest, current yield 9.68%			—			10/20/2031			23,594			20,098			12,690			0.3		%	(5)(14)
																								20,098			12,690			0.3		%
K&N Parent, Inc.			Auto Components			First Lien Term Loan			3/3/2020			5.75% (3ML+ 4.75%)			1.00			10/20/2023			1,888			1,697			1,888			0.1		%	(3)(8)(10)
						Second Lien Term Loan			10/28/2016			9.75% (3ML+ 8.75%)			1.00			10/21/2024			25,887			25,594			25,887			0.7		%	(3)(8)(10)
																								27,291			27,775			0.8		%
Keystone Acquisition Corp. (4)			Health Care Providers & Services			Second Lien Term Loan			5/18/2017			10.25% (3ML+ 9.25%)			1.00			5/1/2025			50,000			50,000			50,000			1.4		%	(3)(8)(10)
																								50,000			50,000			1.4		%
KM2 Solutions LLC			IT Services			First Lien Term Loan			12/17/2020			9.00% (3ML+ 8.00%)			1.00			12/17/2025			24,938			24,938			24,938			0.7		%	(3)(10)
																								24,938			24,938			0.7		%
LCM XIV Ltd.			Structured Finance			Subordinated Structured Note			6/25/2013			Residual Interest, current yield 11.86%			—			7/21/2031			49,934			28,893			20,204			0.5		%	(5)(14)
																								28,893			20,204			0.5		%
Legility, LLC			Professional Services			First Lien Term Loan			2/28/2020			7.00% (6ML+ 6.00%)			1.00			12/17/2025			19,113			18,794			19,113			0.5		%	(3)(8)(10)
						First Lien Term Loan			2/28/2020			7.00% (1ML+ 6.00%)			1.00			12/17/2025			387			381			387			—		%	(3)(8)(10)
																								19,175			19,500			0.5		%
LGC US FINCO, LLC			Machinery			First Lien Term Loan			1/24/2020			8.50% (1ML+ 7.50%)			1.00			12/20/2025			29,250			28,534			27,955			0.8		%	(3)(8)(10)
																								28,534			27,955			0.8		%
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			9.00% (3ML+ 8.00%)			1.00			4/8/2024			24,199			23,948			23,948			0.6		%	(3)(10)
																								23,948			23,948			0.6		%
Mountain View CLO 2013-I Ltd.			Structured Finance			Subordinated Structured Note			4/17/2013			Residual Interest, current yield 5.25%			—			10/15/2030			43,650			29,005			17,807			0.5		%	(5)(14)
																								29,005			17,807			0.5		%
Mountain View CLO IX Ltd.			Structured Finance			Subordinated Structured Note			5/13/2015			Residual Interest, current yield 16.34%			—			7/15/2031			47,830			29,138			26,611			0.7		%	(5)(14)
																								29,138			26,611			0.7		%
Octagon Investment Partners XV, Ltd.			Structured Finance			Subordinated Structured Note			1/24/2013			Residual Interest, current yield 12.24%			—			7/19/2030			42,064			32,628			25,403			0.8		%	(5)(14)
																								32,628			25,403			0.8		%
Octagon Investment Partners 18-R Ltd.			Structured Finance			Subordinated Structured Note			8/12/2015			Residual Interest, current yield 17.12%			—			4/16/2031			46,016			25,459			18,568			0.5		%	(5)(14)
																								25,459			18,568			0.5		%

See notes to consolidated financial statements.

15

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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)
OneTouchPoint Corp			Professional Services			Senior Secured Term Loan			2/19/2021			9.00% (3ML+ 8.00%)			1.00			2/19/2026			$	40,500		$	40,500		$	40,500		1.1		%	(3)(10)
																								40,500			40,500			1.1		%
Orva Buyer, LLC			Specialty Retail			Senior Secured Term Loan			12/23/2020			9.50% (1ML+ 7.50%)			2.00			12/23/2025			40,298			40,298			40,298			1.1		%	(3)(10)
																								40,298			40,298			1.1		%
Pearl Intermediate Parent LLC			Health Care Providers & Services			Second Lien Term Loan			2/28/2018			6.36% (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			185,277			185,277			185,277			5.0		%	(3)(10)
																								185,277			185,277			5.0		%
PlayPower, Inc.			Leisure Products			First Lien Term Loan			5/16/2019			5.70% (3ML+ 5.50%)			—			5/10/2026			6,197			6,150			6,197			0.2		%	(3)(8)(10)
																								6,150			6,197			0.2		%
Research Now Group, Inc. & Survey Sampling International LLC			Professional Services			First Lien Term Loan			1/5/2018			6.50% (6ML+ 5.50%)			1.00			12/20/2024			9,675			9,390			9,675			0.3		%	(3)(8)(10)
						Second Lien Term Loan			1/5/2018			10.50% (6ML+ 9.50%)			1.00			12/20/2025			50,000			47,947			50,000			1.4		%	(3)(8)(10)
																								57,337			59,675			1.7		%
RGIS Services, LLC			Commercial Services & Supplies			Senior Secured Term Loan			6/25/2020			8.50% (1ML+ 7.50%)			1.00			6/25/2025			8,974			8,974			8,974			0.3		%	(8)(10)(39)
						Membership Interest (4.34%)			6/25/2020						—			N/A			—			10,303			8,952			0.2		%	(16)
																								19,277			17,926			0.5		%
RME Group Holding Company			Media			Senior Secured Term Loan A			5/4/2017			7.00% (3ML+ 6.00%)			1.00			5/4/2022			27,083			27,083			27,083			0.7		%	(3)(10)
						Senior Secured Term Loan B			5/4/2017			12.00% (3ML+ 11.00%)			1.00			5/4/2022			22,161			22,161			21,328			0.6		%	(3)(10)
																								49,244			48,411			1.3		%
Romark WM-R Ltd.			Structured Finance			Subordinated Structured Note			4/11/2014			Residual Interest, current yield 9.84%			—			4/21/2031			27,725			23,260			14,961			0.4		%	(5)(14)
																								23,260			14,961			0.4		%
Rosa Mexicano			Hotels, Restaurants & Leisure			Revolving Line of Credit - $500 Commitment			3/29/2018			4.25% (3ML+ 3.00%) plus 4.50% PIK			1.25			3/29/2023			518			518			493			—		%	(10)(15)(39)
						Senior Secured Term Loan			3/29/2018			4.25% (3ML+ 3.00%) plus 4.50% PIK			1.25			3/29/2023			23,707			23,707			22,551			0.6		%	(10)(39)
																								24,225			23,044			0.6		%
Securus Technologies Holdings, Inc.			Communications Equipment			First Lien Term Loan			9/3/2019			5.50% (3ML+ 4.50%)			1.00			11/1/2024			9,822			9,140			9,468			0.3		%	(8)(10)
						Second Lien Term Loan			11/3/2017			9.25% (6ML+ 8.25%)			1.00			11/1/2025			50,662			50,551			48,357			1.3		%	(3)(8)(10)
																								59,691			57,825			1.6		%
SEOTownCenter, Inc.			IT Services			Senior Secured Term Loan A			4/10/2018			9.50% (3ML+ 7.50%)			2.00			4/7/2023			24,223			24,223			24,223			0.7		%	(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)
																								43,250			43,250			1.2		%
Shearer’s Foods, LLC			Food Products			Second Lien Term Loan			9/28/2020			8.75% (1ML+ 7.75%)			1.00			9/23/2028			5,000			4,906			5,000			0.1		%	(3)(8)(10)
																								4,906			5,000			0.1		%
Shutterfly, Inc.			Internet & Direct Marketing Retail			First Lien Term Loan			12/9/2019			7.00% (3ML+ 6.00%)			1.00			9/25/2026			16,019			14,513			16,019			0.4		%	(3)(8)(10)(47)
																								14,513			16,019			0.4		%
Sorenson Communications, LLC			Diversified Telecommunication Services			First Lien Term Loan			3/26/2021			6.25% (3ML+ 5.50%)			0.75			3/17/2026			18,000			17,820			18,000			0.5		%	(8)(10)
																								17,820			18,000			0.5		%
Southern Veterinary Partners			Health Care Providers & Services			Second Lien Term Loan			10/21/2020			8.75% (6ML+ 7.75%)			1.00			10/5/2028			$	8,000		$	7,924		$	8,000		0.2		%	(3)(8)(10)

See notes to consolidated financial statements.

16

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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)
																								7,924			8,000			0.2		%
Spectrum Holdings III Corp			Health Care Equipment & Supplies			Second Lien Term Loan			2/13/2018			8.00% (6ML+ 7.00%)			1.00			1/31/2026			7,500			7,477			6,542			0.2		%	(3)(8)(10)
																								7,477			6,542			0.2		%
Staples, Inc.			Distributors			First Lien Term Loan			12/3/2019			5.21% (3ML+ 5.00%)			—			4/16/2026			8,887			8,816			8,723			0.2		%	(3)(8)(10)(47)
																								8,816			8,723			0.2		%
Strategic Materials			Household Durables			Second Lien Term Loan			11/1/2017			8.75% (3ML+ 7.75%)			1.00			11/1/2025			7,000			6,960			5,558			0.2		%	(3)(8)(10)
																								6,960			5,558			0.2		%
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			4,544			0.1		%	(5)(14)(17)
																								13,875			4,544			0.1		%
Symphony CLO XIV, Ltd.			Structured Finance			Subordinated Structured Note			5/6/2014			Residual Interest, current yield 0.00%			—			7/14/2026			49,250			27,201			11,984			0.3		%	(5)(14)(17)
																								27,201			11,984			0.3		%
Symphony CLO XV, Ltd.			Structured Finance			Subordinated Structured Note			10/17/2014			Residual Interest, current yield 12.86%			—			1/19/2032			63,830			44,937			27,762			0.7		%	(5)(14)
																								44,937			27,762			0.7		%
TGP HOLDINGS III LLC			Household Durables			Second Lien Term Loan			10/3/2017			9.50% (3ML+ 8.50%)			1.00			9/25/2025			3,000			2,975			3,000			0.1		%	(8)(10)
																								2,975			3,000			0.1		%
The Octave Music Group, Inc.			Entertainment			First Lien Term Loan			3/6/2020			6.25% (1ML+ 5.25%) plus 0.75% PIK			1.00			5/29/2025			37,897			37,585			37,897			1.0		%	(3)(8)(10)(39)
																								37,585			37,897			1.0		%
TPS, LLC			Machinery			First Lien Term Loan			11/30/2020			10.00% (3ML+ 9.00%) plus 1.50% PIK			1.00			11/30/2025			29,001			29,001			29,001			0.8		%	(3)(10)(39)
																								29,001			29,001			0.8		%
Town & Country Holdings, Inc.			Distributors			First Lien Term Loan			1/26/2018			10.00% (3ML+ 8.50%)			1.50			1/26/2023			160,604			160,604			160,604			4.3		%	(3)(10)
																								160,604			160,604			4.3		%
Transplace Holdings, Inc.			Transportation Infrastructure			Second Lien Term Loan			10/16/2017			9.75% (6ML+ 8.75%)			1.00			10/6/2025			30,900			30,354			30,900			0.8		%	(3)(8)(10)
																								30,354			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			146,393			105,431			9,111			0.2		%	(9)(10)
																								105,431			9,111			0.2		%
Universal Fiber Systems, LLC			Textiles, Apparel & Luxury Goods			Second Lien Term Loan			10/16/2015			10.50% (1ML+ 9.50%)			1.00			10/2/2022			37,000			36,842			34,716			0.9		%	(3)(8)(10)
																								36,842			34,716			0.9		%
Upstream Newco, Inc.			Health Care Providers & Services			First Lien Term Loan			12/2/2019			4.61% (1ML+ 4.50%)			—			11/20/2026			8,168			8,134			8,168			0.2		%	(3)(8)(10)
						Second Lien Term Loan			12/2/2019			8.61% (1ML+ 8.50%)			—			11/20/2027			22,000			21,829			22,000			0.6		%	(3)(8)(10)
																								29,963			30,168			0.8		%
USG Intermediate, LLC			Leisure Products			Revolving Line of Credit - $3,000 Commitment			4/15/2015			10.25% (1ML+ 9.25%)			1.00			8/24/2021			1,000			1,000			1,000			—		%	(10)(15)
						Senior Secured Term Loan B			4/15/2015			12.75% (1ML+ 11.75%)			1.00			8/24/2022			15,304			15,304			15,304			0.4		%	(3)(10)
						Equity			4/15/2015						—			N/A			—			1			—			—		%	(16)
																								16,305			16,304			0.4		%
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			15,333			15,333			15,333			0.4		%	(10)(39)(48)
																								15,333			15,333			0.4		%
Voya CLO 2012-4, Ltd.			Structured Finance			Subordinated Structured Note			11/5/2012			Residual Interest, current yield 8.35%			—			10/15/2030			40,613			30,738			25,091			0.7		%	(5)(14)
																								30,738			25,091			0.7		%
Voya CLO 2014-1, Ltd.			Structured Finance			Subordinated Structured Note			2/5/2014			Residual Interest, current yield 7.01%			—			4/18/2031			$	40,772		$	31,222		$	17,923		0.5		%	(5)(14)
																								31,222			17,923			0.5		%

See notes to consolidated financial statements.

17

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF MARCH 31, 2021 (Unaudited)

(in thousands, except share data)

																					March 31, 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)
Voya CLO 2016-3, Ltd.			Structured Finance			Subordinated Structured Note			9/30/2016			Residual Interest, current yield 10.50%			—			10/20/2031			28,100			25,634			19,835			0.5		%	(5)(14)
																								25,634			19,835			0.5		%
Voya CLO 2017-3, Ltd.			Structured Finance			Subordinated Structured Note			6/13/2017			Residual Interest, current yield 12.24%			—			7/22/2030			44,884			49,489			41,803			1.1		%	(5)(14)
																								49,489			41,803			1.1		%
VT Topco, Inc.			Commercial Services & Supplies			Second Lien Term Loan			8/23/2018			7.11% (1ML+ 7.00%)			—			8/17/2026			7,000			6,977			6,847			0.2		%	(3)(8)(10)
																								6,977			6,847			0.2		%
Total Non-Control/Non-Affiliate Investments (Level 3)																								$	3,321,382		$	2,861,401		77.3		%
Total Portfolio Investments (Level 3)																								$	5,915,141		$	5,883,328		158.9		%

See notes to consolidated financial statements.

18

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)(42)
CP Energy Services Inc. (20)			Energy Equipment & Services			Senior Secured Term Loan			10/1/2017			12.00% (3ML+ 11.00%)			1.00			12/29/2022			$	36,744		$	36,744		$	36,744		1.2%			(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			13,156			13,156			13,156			0.4%			(10)
						Senior Secured Term Loan B to Spartan Energy Services, LLC			10/20/2014			15.00% PIK (1ML+ 14.00%)			1.00			12/31/2022			25,234			23,360			5,555			0.1%			(9)(10)
						Series B Convertible Preferred Stock (790 shares)			10/30/2015						—			N/A			—			63,225			14,430			0.5%			(16)
						Common Stock (102,924 shares)			8/2/2013						—			N/A			—			86,241			—			—%			(16)
																								222,726			69,885			2.2%
Credit Central Loan Company, LLC (21)			Consumer Finance			Subordinated Term Loan			12/28/2012			10.00% plus 10.00% PIK			—			6/26/2024			62,859			59,870			62,859			2.1%			(14)(39)
						Class A Units (14,867,312 units)			12/28/2012						—			N/A			—			19,331			12,826			0.4%			(14)(16)
						Net Revenues Interest (25% of Net Revenues)			1/28/2015						—			N/A			—			—			—			—%			(14)(16)
																								79,201			75,685			2.5%
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			45,072			45,072			45,072			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			20,399			20,399			20,399			0.7%			(10)(39)
						Membership Interest (100%)			3/31/2014						—			N/A			—			22,737			20,156			0.7%			(16)
																								88,208			85,627			2.8%
First Tower Finance Company LLC (23)			Consumer Finance			Subordinated Term Loan to First Tower, LLC			6/24/2014			10.00% plus 10.50% PIK			—			6/24/2024			277,069			277,069			277,069			9.0%			(14)(39)
						Class A Units (95,709,910 units)			6/14/2012						—			N/A			—			81,146			231,396			7.6%			(14)(16)
																								358,215			508,465			16.6%
Freedom Marine Solutions, LLC (24)			Energy Equipment & Services			Membership Interest (100%)			11/9/2006						—			N/A			—			43,892			12,351			0.4%			(16)
																								43,892			12,351			0.4%
InterDent, Inc. (29)			Health Care Providers & Services			Senior Secured Term Loan A/B			8/1/2018			7.05% (1ML+ 5.05%)			2.00			9/5/2020			14,249			14,249			14,249			0.5%			(10)(39)
						Senior Secured Term Loan A			8/3/2012			6.25% (1ML+ 5.50%)			0.75			9/5/2020			79,242			79,242			79,242			2.6%			(10)(39)
						Senior Secured Term Loan B			8/3/2012			10.00% PIK			—			9/5/2020			128,443			128,443			128,443			4.2%			(39)
						Senior Secured Term Loan C			3/22/2018			18.00% PIK			—			9/5/2020			48,929			35,767			8,823			0.3%			(9)
						Senior Secured Term Loan D			9/19/2018			1.00% PIK			—			9/5/2020			9,458			9,351			—			—%			(9)
						Common Stock (99,900 shares)			5/3/2019						—			N/A			—			1			—			—%			(16)
																								267,053			230,757			7.6%
Kickapoo Ranch Pet Resort			Diversified Consumer Services			Membership Interest (100%)			8/26/2019						—			N/A			—			2,378			3,286			0.1%			(16)
																								2,378			3,286			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			26,250			26,250			26,250			0.9%			(10)
						Senior Secured Note B			6/23/2014			10.00% (3ML+ 7.00%) plus 10.00% PIK			3.00			4/30/2025			33,008			33,008			25,655			0.8%			(10)(39)
						Subordinated Unsecured Note to Broda Enterprises ULC			9/19/2013			10.00%			—			1/1/2028			7,200			6,350			—			—%			(14)
						Common Stock (42,053 shares)			9/19/2013						—			N/A			—			6,849			—			—%			(16)
																								72,457			51,905			1.7%

See notes to consolidated financial statements.

19

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)(42)
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			$	302,633		$	302,633		$	302,633		9.9%			(10)(39)
						Senior Secured Term Loan B			12/31/2018			5.00% (3ML+ 2.00%) plus 5.50% PIK			3.00			12/31/2023			45,950			45,950			45,950			1.5%			(10)(39)
						Senior Secured Term Loan C			10/31/2019			11.00% (3ML+ 10.00%) plus 2.25% PIK			1.00			12/31/2023			79,200			79,200			79,200			2.6%			(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			6.0%			(10)(39)
						Residual Profit Interest			12/31/2018						—			N/A			—			—			21,461			0.7%			(35)
						Common Stock (3,254,594 shares)			12/31/2013						—			N/A			—			210			246,064			8.1%			(45)
																								611,418			878,733			28.8%
Nationwide Loan Company LLC (27)			Consumer Finance			Senior Subordinated Term Loan to Nationwide Acceptance LLC			6/18/2014			10.00% plus 10.00% PIK			—			6/18/2021			20,087			20,087			20,087			0.6%			(14)(39)
						Class A Units (38,550,460 units)			1/31/2013						—			N/A			—			20,462			17,151			0.6%			(14)(16)
																								40,549			37,238			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			5,025			5,025			5,025			0.2%			(3)(10)
						Common Stock (21,419 shares)			12/30/2019						—			N/A			—			12,869			28,643			0.9%
																								17,894			33,668			1.1%
Pacific World Corporation (36)			Personal Products			Revolving Line of Credit - $26,000 Commitment			9/26/2014			8.25% (1ML+ 7.25%)			1.00			9/26/2020			20,825			20,825			20,825			0.7%			(10)(15)
						Senior Secured Term Loan A			12/31/2014			6.25% PIK (1ML+ 5.25%)			1.00			9/26/2020			39,082			39,082			39,082			1.3%			(10)(39)
						Convertible Preferred Equity (247,330 shares)			6/15/2018						—			N/A			—			186,795			—			—%			(16)
						Common Stock (6,778,414 shares)			9/29/2017						—			N/A			—			—			—			—%			(16)
																								246,702			59,907			2.0%
R-V Industries, Inc.			Machinery			Senior Subordinated Note			6/12/2013			10.00% (3ML+ 9.00%)			1.00			3/31/2022			28,622			28,622			28,622			0.9%			(3)(10)
						Common Stock (745,107 shares)			6/26/2007						—			N/A			—			6,867			9,943			0.3%			(16)
																								35,489			38,565			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			7/22/2021			2,887			2,887			2,887			0.1%			(10)(15)
						Senior Secured Term Loan A			7/22/2016			6.75% (3ML+ 5.75%)			1.00			7/22/2021			30,063			30,063			23,712			0.8%			(10)
						Senior Secured Term Loan B			7/22/2016			12.75% PIK (3ML+ 11.75%)			1.00			7/22/2021			42,941			32,500			—			—%			(9)(10)
						Common Stock (10,000 units)			12/10/2018						—			N/A			—			—			—			—%			(16)
																								65,450			26,599			0.9%
USES Corp. (30)			Commercial Services & Supplies			Senior Secured Term Loan A			3/31/2014			9.00% PIK			—			7/29/2022			50,327			30,651			17,325			0.6%			(9)
						Senior Secured Term Loan B			3/31/2014			15.50% PIK			—			7/29/2022			66,283			35,568			—			—%			(9)
						Common Stock (268,962 shares)			6/15/2016						—			N/A			—			—			—			—%			(16)
																								66,219			17,325			0.6%

See notes to consolidated financial statements.

20

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)(42)
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			1.1%			(39)
						Consolidated Revenue Interest (2.0%)			6/22/2018						—			N/A			—			—			2,448			0.1%			(12)
						Common Stock (50,000 shares)			12/31/2012						—			N/A			—			25,143			83,117			2.7%
																								68,874			129,296			4.2%
Total Control Investments (Level 3)																								$	2,286,725		$	2,259,292		73.9%

See notes to consolidated financial statements.

21

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)(43)
Edmentum Ultimate Holdings, LLC (22)			Diversified Consumer Services			Second Lien Revolving Credit Facility to Edmentum, Inc. - $7,834 Commitment			6/9/2015			5.00% PIK			—			12/9/2021			$	8,539		$	9,986		$	8,539		0.2%			(15)(39)
						Unsecured Senior PIK Note			6/9/2015			8.50% PIK			—			12/9/2021			8,920			8,920			8,920			0.3%			(39)
						Unsecured Junior PIK Note			6/9/2015			10.00% PIK			—			12/9/2021			43,048			28,665			42,159			1.4%			(39)
						Class A Units (370,964 units)			6/9/2015						—			N/A			—			6,577			—			—%			(16)
																								54,148			59,618			1.9%
Nixon, Inc. (32)			Textiles, Apparel & Luxury Goods			Common Stock (857 units)			5/12/2017						—			N/A			—			—			—			—%			(16)
																								—			—			—%
PGX Holdings, Inc. (6)			Diversified Consumer Services			1.5 Lien Term Loan			5/27/2020			11.50% PIK (3ML+ 10.50%)			1.00			3/29/2024			1,981			1,981			1,981			0.1%			(10)(39)
						Second Lien Term Loan			9/29/2014			15.75% PIK (1ML+ 14.75%)			1.00			9/29/2024			104,550			104,550			98,873			3.2%			(10)(39)
						Common Stock (28,961,715 shares)			5/27/2020						—			N/A			—			—			5,857			0.2%			(16)
																								106,531			106,711			3.5%
Targus Cayman HoldCo Limited (33)			Textiles, Apparel & Luxury Goods			Common Stock (7,383,395 shares)			2/12/2016						—			N/A			—			2,805			21,208			0.7%			(16)
																								2,805			21,208			0.7%
Total Affiliate Investments (Level 3)																								$	163,484		$	187,537		6.1%

See notes to consolidated financial statements.

22

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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			10/10/2018			7.93% (1ML+ 7.75%)			—			10/1/2026			$	25,000		$	24,853		$	25,000		0.8		%	(3)(8)(10)
																								24,853			25,000			0.8		%
ACE Cash Express, Inc.			Consumer Finance			Senior Secured Note			12/15/2017			12.00%			—			12/15/2022			30,000			28,806			24,338			0.8		%	(8)(14)
																								28,806			24,338			0.8		%
Ahead Data Blue, LLC			IT Services			Second Lien Term Loan			12/13/2019			10.00% (3ML+ 8.50%)			1.50			11/8/2025			70,000			70,000			70,000			2.3		%	(3)(10)
																								70,000			70,000			2.3		%
AmeriLife Holdings, LLC			Insurance			Second Lien Term Loan			4/2/2020			9.50% (3ML+ 8.50%)			1.00			3/18/2028			10,000			9,806			9,806			0.3		%	(8)(10)
																								9,806			9,806			0.3		%
Apidos CLO XI			Structured Finance			Subordinated Structured Note			12/6/2012			Residual Interest, current yield 8.74%			—			10/17/2030			40,500			32,650			25,211			0.8		%	(5)(14)
																								32,650			25,211			0.8		%
Apidos CLO XII			Structured Finance			Subordinated Structured Note			3/15/2013			Residual Interest, current yield 14.25%			—			4/15/2031			52,202			38,099			29,275			1.0		%	(5)(14)
																								38,099			29,275			1.0		%
Apidos CLO XV			Structured Finance			Subordinated Structured Note			9/13/2013			Residual Interest, current yield 12.38%			—			4/21/2031			48,515			39,270			27,793			0.9		%	(5)(14)
																								39,270			27,793			0.9		%
Apidos CLO XXII			Structured Finance			Subordinated Structured Note			9/16/2015			Residual Interest, current yield 15.58%			—			4/21/2031			35,855			30,035			24,192			0.8		%	(5)(14)
																								30,035			24,192			0.8		%
Ark-La-Tex Wireline Services, LLC			Energy Equipment & Services			Escrow Receivable			4/8/2014						—			N/A			—			—			—			—		%
																								—			—			—		%
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			4/30/2021			—			—			—			—		%	(10)(15)
						Senior Secured Term Loan			2/21/2013			10.75% (3ML+ 8.75%)			2.00			4/30/2021			71,409			71,409			71,409			2.3		%	(3)(10)
																								71,409			71,409			2.3		%
Barings CLO 2018-III			Structured Finance			Subordinated Structured Note			10/9/2014			Residual Interest, current yield 3.93%			—			7/20/2029			83,098			48,464			30,106			1.0		%	(5)(14)
																								48,464			30,106			1.0		%
Broder Bros., Co.			Textiles, Apparel & Luxury Goods			Senior Secured Note			12/4/2017			9.75% (3ML+ 8.50%)			1.25			12/2/2022			166,307			166,307			164,656			5.4		%	(3)(10)
																								166,307			164,656			5.4		%
Brookside Mill CLO Ltd.			Structured Finance			Subordinated Structured Note			4/25/2013			Residual Interest, current yield 0.00%			—			1/17/2028			36,300			17,033			11,920			0.4		%	(5)(14)(17)
																								17,033			11,920			0.4		%
California Street CLO IX Ltd.			Structured Finance			Subordinated Structured Note			4/19/2012			Residual Interest, current yield 6.69%			—			7/16/2032			58,915			40,994			27,579			0.9		%	(5)(14)
																								40,994			27,579			0.9		%
Candle-Lite Company, LLC			Household Products			Senior Secured Term Loan A			1/23/2018			6.75% (3ML+ 5.50%)			1.25			1/23/2023			11,937			11,937			11,937			0.4		%	(3)(10)
						Senior Secured Term Loan B			1/23/2018			10.75% (3ML+ 9.50%)			1.25			1/23/2023			12,500			12,500			12,425			0.4		%	(3)(10)
																								24,437			24,362			0.8		%
Capstone Logistics Acquisition, Inc.			Commercial Services & Supplies			Second Lien Term Loan			10/7/2014			9.32% (6ML+ 8.25%)			1.00			10/7/2022			98,982			98,790			98,982			3.2		%	(3)(8)(10)
																								98,790			98,982			3.2		%
Carlyle C17 CLO Limited			Structured Finance			Subordinated Structured Note			1/24/2013			Residual Interest, current yield 20.31%			—			4/30/2031			24,870			15,391			13,009			0.4		%	(5)(14)
																								15,391			13,009			0.4		%

See notes to consolidated financial statements.

23

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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 17.05%			—			7/15/2030			$	25,534		$	18,656		$	15,534		0.5		%	(5)(14)
																								18,656			15,534			0.5		%
Carlyle Global Market Strategies CLO 2016-3, Ltd.			Structured Finance			Subordinated Structured Note			8/9/2016			Residual Interest, current yield 12.42%			—			10/22/2029			32,200			33,536			25,358			0.8		%	(5)(14)
																								33,536			25,358			0.8		%
CCS-CMGC Holdings, Inc.			Health Care Providers & Services			First Lien Term Loan			5/23/2019			6.57% (6ML+ 5.50%)			—			10/1/2025			6,010			5,929			5,929			0.2		%	(3)(8)(10)
						First Lien Term Loan			5/23/2019			6.26% (3ML+ 5.50%)			—			10/1/2025			3,615			3,566			3,566			0.1		%	(3)(8)(10)
						Second Lien Term Loan			10/12/2018			9.76% (3ML+ 9.00%)			—			10/1/2026			37,000			36,443			36,443			1.2		%	(3)(8)(10)
																								45,938			45,938			1.5		%
Cent CLO 21 Limited			Structured Finance			Subordinated Structured Note			5/15/2014			Residual Interest, current yield 7.80%			—			7/29/2030			49,552			38,806			26,006			0.9		%	(5)(14)
																								38,806			26,006			0.9		%
CIFC Funding 2013-III-R, Ltd.			Structured Finance			Subordinated Structured Note			8/2/2013			Residual Interest, current yield 10.23%			—			4/24/2031			44,100			29,717			21,373			0.7		%	(5)(14)
																								29,717			21,373			0.7		%
CIFC Funding 2013-IV, Ltd.			Structured Finance			Subordinated Structured Note			10/22/2013			Residual Interest, current yield 13.44%			—			4/28/2031			45,500			33,090			27,518			0.9		%	(5)(14)
																								33,090			27,518			0.9		%
CIFC Funding 2014-IV-R, Ltd.			Structured Finance			Subordinated Structured Note			8/5/2014			Residual Interest, current yield 9.49%			—			10/17/2030			44,467			31,238			22,711			0.7		%	(5)(14)
																								31,238			22,711			0.7		%
CIFC Funding 2016-I, Ltd.			Structured Finance			Subordinated Structured Note			12/9/2016			Residual Interest, current yield 9.57%			—			10/21/2031			34,000			30,096			26,209			0.9		%	(5)(14)
																								30,096			26,209			0.9		%
Cinedigm DC Holdings, LLC			Entertainment			Senior Secured Term Loan			2/28/2013			11.00% (3ML+ 9.00%) plus 2.50% PIK			2.00			3/31/2021			12,107			12,057			12,107			0.4		%	(10)(39)
																								12,057			12,107			0.4		%
Class Valuation, LLC			Real Estate Management & Development			Senior Secured Term Loan			3/12/2018			9.75% (3ML+ 8.25%)			1.50			3/10/2023			31,747			31,747			31,747			1.0		%	(3)(10)
																								31,747			31,747			1.0		%
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			1.0		%	(3)(10)
																								30,165			30,165			1.0		%
Columbia Cent CLO 27 Limited			Structured Finance			Subordinated Structured Note			12/18/2013			Residual Interest, current yield 7.78%			—			10/25/2028			40,275			23,099			18,356			0.6		%	(5)(14)
																								23,099			18,356			0.6		%
Coverall North America, Inc.			Commercial Services & Supplies			Senior Secured Term Loan A			11/2/2015			7.00% (3ML+ 6.00%)			1.00			5/3/2021			2,622			2,622			2,622			0.1		%	(3)(10)
						Senior Secured Term Loan B			11/2/2015			12.00% (3ML+ 11.00%)			1.00			5/3/2021			22,750			22,750			22,750			0.7		%	(3)(10)
																								25,372			25,372			0.8		%
CP VI Bella Midco			IT Services			Second Lien Term Loan			2/26/2018			6.93% (1ML+ 6.75%)			—			12/29/2025			15,750			15,711			15,750			0.5		%	(3)(8)(10)
																								15,711			15,750			0.5		%
Digital Room, LLC			Commercial Services & Supplies			First Lien Term Loan			5/29/2019			6.07% (6ML+ 5.00%)			—			5/21/2026			9,900			9,785			9,359			0.3		%	(3)(8)(10)
						Second Lien Term Loan			5/30/2019			10.07% (6ML+ 9.00%)			—			5/21/2027			70,000			70,000			66,761			2.2		%	(3)(8)(10)
																								79,785			76,120			2.5		%
Dunn Paper, Inc.			Paper & Forest Products			First Lien Term Loan			11/27/2019			5.75% (1ML+ 4.75%)			1.00			8/26/2022			4,488			4,393			4,393			0.1		%	(3)(8)(10)
						Second Lien Term Loan			10/7/2016			9.75% (1ML+ 8.75%)			1.00			8/26/2023			11,500			11,395			11,395			0.4		%	(3)(8)(10)
																								15,788			15,788			0.5		%

See notes to consolidated financial statements.

24

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)
Easy Gardener Products, Inc.			Household Durables			Third Lien Term Loan			6/11/2020			10.31% (3ML+ 10.00%)			0.25			9/30/2024			$	3,990		$	3,990		$	3,990		0.2		%	(10)
						Class A Units of EZG Holdings, Inc. (200 units)			6/11/2020						—			N/A			—			313			781			—		%	(16)
						Class B Units of EZG Holdings, Inc. (12,525 units)			6/11/2020						—			N/A			—			1,688			3,072			0.1		%	(16)
																								5,991			7,843			0.3		%
EDSCO Holding Company LLC			Machinery			Senior Secured Term Loan			1/10/2020			7.50% (1ML+ 6.00%)			1.50			1/10/2025			19,875			19,875			19,875			0.7		%	(3)(10)
																								19,875			19,875			0.7		%
Engine Group, Inc. (7)			Media			Senior Secured Term Loan			9/25/2017			6.00% (1ML+ 5.00%)			1.00			9/15/2022			4,220			4,220			3,760			0.1		%	(8)(9)(10)
						Second Lien Term Loan			9/25/2017			10.00% (1ML+ 9.00%)			1.00			9/15/2023			35,000			35,000			2,754			0.1		%	(8)(9)(10)
																								39,220			6,514			0.2		%
EXC Holdings III Corp			Technology Hardware, Storage & Peripherals			Second Lien Term Loan			12/5/2017			8.94% (3ML+ 7.50%)			1.00			12/1/2025			12,500			12,415			12,318			0.4		%	(3)(8)(10)
																								12,415			12,318			0.4		%
Galaxy XV CLO, Ltd.			Structured Finance			Subordinated Structured Note			2/13/2013			Residual Interest, current yield 11.47%			—			10/15/2030			50,525			35,451			24,637			0.8		%	(5)(14)
																								35,451			24,637			0.8		%
Galaxy XXVII CLO, Ltd.			Structured Finance			Subordinated Structured Note			9/30/2013			Residual Interest, current yield 10.18%			—			5/16/2031			24,575			16,647			11,093			0.4		%	(5)(14)
																								16,647			11,093			0.4		%
Galaxy XXVIII CLO, Ltd.			Structured Finance			Subordinated Structured Note			5/30/2014			Residual Interest, current yield 9.89%			—			7/15/2031			39,905			28,584			16,973			0.6		%	(5)(14)
																								28,584			16,973			0.6		%
GEON Performance Solutions, LLC			Chemicals			Revolving Line of Credit - $3,621 Commitment			12/12/2019			7.88% (1ML+ 6.25%)			1.63			10/25/2024			769			769			767			—		%	(10)(15)
						First Lien Term Loan			12/12/2019			7.88% (1ML+ 6.25%)			1.63			10/25/2024			31,223			31,068			31,124			1.0		%	(3)(10)
																								31,837			31,891			1.0		%
Global Tel*Link Corporation			Diversified Telecommunication Services			First Lien Term Loan			8/20/2019			4.43% (1ML+ 4.25%)			—			11/29/2025			9,893			9,538			9,237			0.3		%	(3)(8)(10)
						Second Lien Term Loan			12/4/2018			8.43% (1ML+ 8.25%)			—			11/29/2026			40,170			39,394			37,908			1.2		%	(3)(8)(10)
																								48,932			47,145			1.5		%
GlobalTranz Enterprises, Inc.			Air Freight & Logistics			Second Lien Term Loan			5/15/2019			8.43% (1ML+ 8.25%)			—			5/15/2027			12,500			12,500			10,755			0.4		%	(3)(8)(10)
																								12,500			10,755			0.4		%
H.I.G. ECI Merger Sub, Inc.			IT Services			Senior Secured Term Loan A			5/31/2018			7.00% (3ML+ 5.50%)			1.50			5/31/2023			43,792			43,792			44,230			1.4		%	(3)(10)
						Senior Secured Term Loan B			5/31/2018			12.00% (3ML+ 10.50%)			1.50			5/31/2023			29,900			29,900			30,199			1.0		%	(3)(10)
																								73,692			74,429			2.4		%
Halcyon Loan Advisors Funding 2012-1 Ltd.			Structured Finance			Subordinated Structured Note			8/7/2012			Residual Interest, current yield 0.00%			—			8/15/2023			23,187			3,736			—			—		%	(5)(14)(17)
																								3,736			—			—		%
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			—			—		%
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			39,597			29,716			16,694			0.5		%	(5)(14)(17)
																								29,716			16,694			0.5		%

See notes to consolidated financial statements.

25

---

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)
Halyard MD OpCo, LLC			Media			First Lien Term Loan			8/6/2018			10.00% (3ML+ 8.00%)			2.00			8/6/2023			$	10,415		$	10,415		$	10,415		0.3		%	(3)(10)
																								10,415			10,415			0.3		%
HarbourView CLO VII-R, Ltd.			Structured Finance			Subordinated Structured Note			6/5/2015			Residual Interest, current yield 0.00%			—			7/18/2031			19,025			12,817			5,814			0.2		%	(5)(14)(17)
																								12,817			5,814			0.2		%
Help/Systems Holdings, Inc.			Software			First Lien Term Loan			11/29/2019			5.75% (1ML+ 4.75%)			1.00			11/19/2026			8,500			8,425			8,425			0.3		%	(3)(8)(10)
						Second Lien Term Loan			11/22/2019			9.00% (1ML+ 8.00%)			1.00			11/19/2027			17,500			17,184			17,184			0.6		%	(3)(8)(10)
																								25,609			25,609			0.9		%
Inpatient Care Management Company, LLC			Health Care Providers & Services			Senior Secured Term Loan			6/8/2016			9.00% (3ML+ 8.00%)			1.00			6/8/2021			14,930			14,930			14,746			0.5		%	(3)(10)
																								14,930			14,746			0.5		%
Jefferson Mill CLO Ltd.			Structured Finance			Subordinated Structured Note			6/26/2015			Residual Interest, current yield 9.08%			—			10/20/2031			23,594			19,252			11,962			0.4		%	(5)(14)
																								19,252			11,962			0.4		%
K&N Parent, Inc.			Auto Components			First Lien Term Loan			3/3/2020			5.82% (6ML+ 4.75%)			1.00			10/20/2023			1,434			1,244			1,373			—		%	(3)(8)(10)
						Second Lien Term Loan			10/28/2016			9.82% (6ML+ 8.75%)			1.00			10/21/2024			25,887			25,532			23,494			0.8		%	(3)(8)(10)
																								26,776			24,867			0.8		%
Keystone Acquisition Corp. (4)			Health Care Providers & Services			Second Lien Term Loan			5/18/2017			10.25% (3ML+ 9.25%)			1.00			5/1/2025			50,000			50,000			49,435			1.6		%	(3)(8)(10)
																								50,000			49,435			1.6		%
LCM XIV Ltd.			Structured Finance			Subordinated Structured Note			6/25/2013			Residual Interest, current yield 10.41%			—			7/21/2031			49,934			28,237			18,634			0.6		%	(5)(14)
																								28,237			18,634			0.6		%
Legility, LLC			Professional Services			First Lien Term Loan			2/28/2020			7.00% (3ML+ 6.00%)			1.00			12/17/2025			774			759			764			—		%	(3)(8)(10)
						First Lien Term Loan			2/28/2020			7.00% (6ML+ 6.00%)			1.00			12/17/2025			19,101			18,739			18,860			0.6		%	(3)(8)(10)
																								19,498			19,624			0.6		%
LGC US FINCO, LLC			Machinery			First Lien Term Loan			1/24/2020			7.50% (1ML+ 6.50%)			1.00			12/20/2025			29,700			28,870			28,780			0.9		%	(3)(8)(10)
																								28,870			28,780			0.9		%
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			9.00% (3ML+ 8.00%)			1.00			4/8/2024			24,387			24,074			23,800			0.8		%	(3)(10)(39)
																								24,074			23,800			0.8		%
Mountain View CLO 2013-I Ltd.			Structured Finance			Subordinated Structured Note			4/17/2013			Residual Interest, current yield 2.19%			—			10/15/2030			43,650			28,479			14,794			0.5		%	(5)(14)
																								28,479			14,794			0.5		%
Mountain View CLO IX Ltd.			Structured Finance			Subordinated Structured Note			5/13/2015			Residual Interest, current yield 14.53%			—			7/15/2031			47,830			29,046			25,909			0.8		%	(5)(14)
																								29,046			25,909			0.8		%
Octagon Investment Partners XV, Ltd.			Structured Finance			Subordinated Structured Note			1/24/2013			Residual Interest, current yield 9.72%			—			7/19/2030			42,064			32,798			23,572			0.8		%	(5)(14)
																								32,798			23,572			0.8		%
Octagon Investment Partners 18-R Ltd.			Structured Finance			Subordinated Structured Note			8/12/2015			Residual Interest, current yield 13.38%			—			4/16/2031			46,016			25,700			19,111			0.6		%	(5)(14)
																								25,700			19,111			0.6		%
Pearl Intermediate Parent LLC			Health Care Providers & Services			Second Lien Term Loan			2/28/2018			6.43% (1ML+ 6.25%)			—			2/15/2026			5,000			4,982			4,943			0.2		%	(3)(8)(10)
																								4,982			4,943			0.2		%

See notes to consolidated financial statements.

26

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)
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)
						Delayed Draw Term Loan - $5,000 Commitment			1/22/2020			10.00% (3ML+ 8.25%)			1.75			1/22/2021			—			—			—			—		%	(10)(15)
						Senior Secured Term Loan			1/22/2020			10.00% (3ML+ 8.25%)			1.75			1/22/2025			200,728			200,728			200,728			6.6		%	(3)(10)
																								200,728			200,728			6.6		%
PG Dental Holdings New Jersey, LLC			Health Care Providers & Services			Delayed Draw Term Loan - $5,000 Commitment			5/31/2019			10.00% (3ML+ 7.25%)			2.75			5/31/2024			2,500			2,500			2,477			0.1		%	(3)(10)(15)
						Senior Secured Term Loan			5/31/2019			10.00% (3ML+ 7.25%)			2.75			5/31/2024			22,300			22,300			22,095			0.7		%	(3)(10)
																								24,800			24,572			0.8		%
PlayPower, Inc.			Leisure Products			First Lien Term Loan			5/16/2019			5.81% (3ML+ 5.50%)			—			5/10/2026			6,341			6,286			6,087			0.2		%	(3)(8)(10)
																								6,286			6,087			0.2		%
Research Now Group, Inc. & Survey Sampling International LLC			Professional Services			First Lien Term Loan			1/5/2018			6.50% (3ML+ 5.50%)			1.00			12/20/2024			9,750			9,412			9,651			0.4		%	(3)(8)(10)
						Second Lien Term Loan			1/5/2018			10.50% (3ML+ 9.50%)			1.00			12/20/2025			50,000			47,617			50,000			1.6		%	(3)(8)(10)
																								57,029			59,651			2.0		%
RGIS Services, LLC			Commercial Services & Supplies			Senior Secured Term Loan			6/25/2020			8.50% (3ML+ 7.50%)			1.00			6/25/2025			8,678			8,678			8,678			0.3		%	(8)(10)
						Membership Interest (4.34%)			6/25/2020						—			N/A			—			10,303			9,233			0.3		%	(16)
																								18,981			17,911			0.6		%
RME Group Holding Company			Media			Senior Secured Term Loan A			5/4/2017			7.00% (3ML+ 6.00%)			1.00			5/4/2022			27,646			27,646			27,646			0.9		%	(3)(10)
						Senior Secured Term Loan B			5/4/2017			12.00% (3ML+ 11.00%)			1.00			5/4/2022			22,349			22,349			22,349			0.7		%	(3)(10)
																								49,995			49,995			1.6		%
Rocket Software, Inc.			Software			Second Lien Term Loan			12/7/2018			9.01% (3ML+ 8.25%)			—			11/27/2026			50,000			49,599			48,136			1.6		%	(3)(8)(10)
																								49,599			48,136			1.6		%
Romark WM-R Ltd.			Structured Finance			Subordinated Structured Note			4/11/2014			Residual Interest, current yield 8.32%			—			4/21/2031			27,725			22,967			14,374			0.5		%	(5)(14)
																								22,967			14,374			0.5		%
Rosa Mexicano			Hotels, Restaurants & Leisure			Revolving Line of Credit - $500 Commitment			3/29/2018			2.75% (3ML+ 1.50%) plus 6.00% PIK			1.25			3/29/2023			502			502			449			—		%	(10)(15)(39)
						Senior Secured Term Loan			3/29/2018			2.75% (3ML+ 1.50%) plus 6.00% PIK			1.25			3/29/2023			22,999			22,999			20,559			0.7		%	(10)(39)
																								23,501			21,008			0.7		%
Securus Technologies Holdings, Inc.			Communications Equipment			First Lien Term Loan			9/3/2019			5.50% (1ML+ 4.50%)			1.00			11/1/2024			9,898			9,105			8,671			0.3		%	(8)(10)
						Second Lien Term Loan			11/3/2017			9.25% (3ML+ 8.25%)			1.00			11/1/2025			50,662			50,533			42,166			1.4		%	(3)(8)(10)
																								59,638			50,837			1.7		%
SEOTownCenter, Inc.			IT Services			Senior Secured Term Loan A			4/10/2018			9.50% (3ML+ 7.50%)			2.00			4/7/2023			24,763			24,763			24,763			0.8		%	(3)(10)(39)
						Senior Secured Term Loan B			4/10/2018			14.50% (3ML+ 12.50%)			2.00			4/7/2023			19,119			19,119			19,119			0.6		%	(3)(10)(39)
																								43,882			43,882			1.4		%
Shutterfly, Inc.			Internet & Direct Marketing Retail			First Lien Term Loan			12/9/2019			7.00% (3ML+ 6.00%)			1.00			9/25/2026			17,419			15,706			16,440			0.5		%	(3)(8)(10)
																								15,706			16,440			0.5		%
Sorenson Communications, LLC			Diversified Telecommunication Services			First Lien Term Loan			5/8/2019			6.81% (3ML+ 6.50%)			—			4/29/2024			8,227			8,166			8,166			0.3		%	(3)(8)(10)
																								8,166			8,166			0.3		%
Spectrum Holdings III Corp			Health Care Equipment & Supplies			Second Lien Term Loan			2/13/2018			8.07% (6ML+ 7.00%)			1.00			1/31/2026			7,500			7,474			5,606			0.2		%	(3)(8)(10)
																								7,474			5,606			0.2		%
Staples, Inc.			Distributors			First Lien Term Loan			12/3/2019			5.69% (3ML+ 5.00%)			—			4/16/2026			8,955			8,873			8,135			0.3		%	(3)(8)(10)
																								8,873			8,135			0.3		%
Strategic Materials			Household Durables			Second Lien Term Loan			11/1/2017			8.75% (3ML+ 7.75%)			1.00			11/1/2025			7,000			6,953			5,223			0.2		%	(3)(8)(10)
																								6,953			5,223			0.2		%

See notes to consolidated financial statements.

27

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)
Stryker Energy, LLC			Energy Equipment & Services			Overriding Royalty Interests			12/4/2006						—			N/A			$	—		$	—		$	—		—		%	(13)
																								—			—			—		%
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			2,632			0.1		%	(5)(14)(17)
																								13,875			2,632			0.1		%
Symphony CLO XIV, Ltd.			Structured Finance			Subordinated Structured Note			5/6/2014			Residual Interest, current yield 0.00%			—			7/14/2026			49,250			29,171			13,608			0.4		%	(5)(14)(17)
																								29,171			13,608			0.4		%
Symphony CLO XV, Ltd.			Structured Finance			Subordinated Structured Note			10/17/2014			Residual Interest, current yield 3.91%			—			1/19/2032			63,831			43,104			20,287			0.7		%	(5)(14)
																								43,104			20,287			0.7		%
TGP HOLDINGS III LLC			Household Durables			Second Lien Term Loan			10/3/2017			9.50% (3ML+ 8.50%)			1.00			9/25/2025			3,000			2,971			3,000			0.1		%	(8)(10)
																								2,971			3,000			0.1		%
The Octave Music Group, Inc. (f/k/a Touchtunes Interactive Networks, Inc.)			Entertainment			First Lien Term Loan			3/6/2020			6.25% (3ML+ 5.25%) plus 0.75% PIK			1.00			5/29/2025			38,912			38,544			36,910			1.2		%	(8)(10)(39)
																								38,544			36,910			1.2		%
Town & Country Holdings, Inc.			Distributors			First Lien Term Loan			1/26/2018			8.81% (3ML+ 8.50%)			—			1/26/2023			163,980			163,980			160,830			5.3		%	(3)(10)(39)
																								163,980			160,830			5.3		%
Transplace Holdings, Inc.			Transportation Infrastructure			Second Lien Term Loan			10/16/2017			9.82% (6ML+ 8.75%)			1.00			10/6/2025			28,104			27,662			27,662			0.9		%	(3)(8)(10)
																								27,662			27,662			0.9		%
United Sporting Companies, Inc. (18)			Distributors			Second Lien Term Loan			9/28/2012			12.75% (1ML+ 11.00%) plus 2.00% PIK			1.75			11/16/2019			147,470			105,478			6,966			0.2		%	(9)(10)
																								105,478			6,966			0.2		%
Universal Fiber Systems, LLC			Textiles, Apparel & Luxury Goods			Second Lien Term Loan			10/16/2015			10.50% (1ML+ 9.50%)			1.00			10/2/2022			37,000			36,762			35,363			1.2		%	(3)(8)(10)
																								36,762			35,363			1.2		%
Upstream Newco, Inc.			Health Care Providers & Services			First Lien Term Loan			12/2/2019			4.68% (1ML+ 4.50%)			—			11/20/2026			8,229			8,192			7,802			0.3		%	(3)(8)(10)
						Second Lien Term Loan			12/2/2019			9.57% (6ML+ 8.50%)			—			11/20/2027			22,000			21,810			22,000			0.7		%	(3)(8)(10)
																								30,002			29,802			1.0		%
USG Intermediate, LLC			Leisure Products			Revolving Line of Credit - $1,000 Commitment			4/15/2015			10.25% (1ML+ 9.25%)			1.00			8/24/2020			1,000			1,000			1,000			—		%	(10)(15)
						Senior Secured Term Loan B			4/15/2015			12.75% (1ML+ 11.75%)			1.00			8/24/2022			17,232			17,232			17,232			0.6		%	(3)(10)
						Equity			4/15/2015						—			N/A			—			1			—			—		%	(16)
																								18,233			18,232			0.6		%
Venio LLC			Professional Services			Second Lien Term Loan			2/19/2014			4.00% plus 10.00% PIK (3ML + 7.50%)			2.50			2/19/2020			27,637			27,637			27,267			0.9		%	(10)(39)
																								27,637			27,267			0.9		%
Versant Health Holdco, Inc. (f/k/a Wink Holdco, Inc.)			Insurance			Second Lien Term Loan			12/12/2017			7.75% (3ML+ 6.75%)			1.00			12/1/2025			3,000			2,990			2,938			0.1		%	(3)(8)(10)
																								2,990			2,938			0.1		%
Voya CLO 2012-4, Ltd.			Structured Finance			Subordinated Structured Note			11/5/2012			Residual Interest, current yield 7.00%			—			10/15/2030			40,613			29,996			22,509			0.7		%	(5)(14)
																								29,996			22,509			0.7		%
Voya CLO 2014-1, Ltd.			Structured Finance			Subordinated Structured Note			2/5/2014			Residual Interest, current yield 4.39%			—			4/18/2031			40,773			30,303			17,668			0.6		%	(5)(14)
																								30,303			17,668			0.6		%
Voya CLO 2016-3, Ltd.			Structured Finance			Subordinated Structured Note			9/30/2016			Residual Interest, current yield 8.35%			—			10/20/2031			28,100			26,253			18,680			0.6		%	(5)(14)
																								26,253			18,680			0.6		%

See notes to consolidated financial statements.

28

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS AS OF JUNE 30, 2020

(in thousands, except share data)

																					June 30, 2020
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)
Voya CLO 2017-3, Ltd.			Structured Finance			Subordinated Structured Note			6/13/2017			Residual Interest, current yield 9.24%			—			7/22/2030			$	44,885		$	49,645		$	37,860		1.2		%	(5)(14)
																								49,645			37,860			1.2		%
VT Topco, Inc.			Commercial Services & Supplies			Second Lien Term Loan			8/23/2018			7.18% (1ML+ 7.00%)			—			8/17/2026			7,000			6,973			6,662			0.2		%	(3)(8)(10)
																								6,973			6,662			0.2		%
Total Non-Control/Non-Affiliate Investments (Level 3)																								$	3,332,509		$	2,785,499		91.2		%
Total Portfolio Investments (Level 3)																								$	5,782,718		$	5,232,328		171.3		%

See notes to consolidated financial statements.

29

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020

(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 March 31, 2021 and June 30, 2020 were $1,528,576 and $1,491,022, respectively, representing 26.0% and 28.5% 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.

(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 0.11% as of March 31, 2021 and 0.16% as of June 30, 2020. The 2-Month LIBOR, or “2ML”, was 0.13% as of March 31, 2021 and 0.23% as of June 30, 2020. The 3-Month LIBOR, or “3ML”, was 0.19% as of March 31, 2021 and 0.30% as of June 30, 2020. The 6-Month LIBOR, or “6ML”, was 0.21% as of March 31, 2021 and 0.37% as of June 30, 2020. The 12-Month LIBOR, or “12ML”, was 0.28% as of March 31, 2021 and 0.55% as of June 30, 2020.

(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.

(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 March 31, 2021 and June 30, 2020,

See notes to consolidated financial statements.

30

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

our qualifying assets, as a percentage of total assets, stood at 75.67% and 74.44%, 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 5.00%. As of March 31, 2021 and June 30, 2020, we had $38,999 and $41,487, 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”). Prospect previously held a 3.48% equity interest in SportCo and following an additional issuance of common stock by SportCo, Prospect’s ownership increased to 22.0% as of September 30, 2018. As a result, Prospect’s investment in USC is classified as an affiliate investment beginning the period ended September 30, 2018. In June 2019, USC filed for Chapter 11 bankruptcy and began liquidating its remaining assets. Since filing for chapter 11, USC used a portion of the proceeds from the ongoing liquidation to partially repay $21,569 of our Second Lien Term Loan and our 22.0% equity interest was canceled.

(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 March 31, 2021 and June 30, 2020. 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. 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 $13,156 in senior secured term loans (the “Spartan Term Loans”) due to us as of June 30, 2020. 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 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. (See Note 14). 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 98.63% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC (“Credit Central”)) as of March 31, 2021 and June 30, 2020. 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)As of June 30, 2020, Prospect held an 11.51% membership interest in Edmentum Ultimate Holdings, LLC (“Edmentum Holdings”), which owns 100% of the equity of Edmentum, Inc. On December 11, 2020, we sold our 11.51% Class A voting interest in Edmentum Holdings and recorded realized gains of $3,724 and $745 in our Consolidated Statements of Operations for the quarters ended December 31, 2020 and March 31, 2021, respectively. Concurrently, Edmentum

See notes to consolidated financial statements.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

Holdings fully repaid the $9,312 Unsecured Senior PIK Note and the $45,277 Unsecured Junior PIK Note, and Edmentum, Inc. fully repaid the $8,758 Second Lien Revolving Credit Facility receivable to us at par.

(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 March 31, 2021 and June 30, 2020. 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.

(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 March 31, 2021 and June 30, 2020, 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. Effective December 31, 2018, 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 A Secured Note (“New TLA”) in the aggregate principal amount of $433,553, a New Term Loan B Secured Note (“New TLB”) in the aggregate principal amount of $205,000, and our net operating income interest was revised to a residual profit interest (refer to endnote 37 for residual profit interest calculation). NPRC utilized a portion of the proceeds from the New TLA and New TLB to repay the previously outstanding Senior Secured Term Loan A and Senior Secured Term Loan E. The remaining proceeds of $140,351 were returned to us as a return of capital, reducing our equity investment in NPRC. 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 $51,428 Senior Secured Term Loan C (“TLC”) and $12,857 in equity financing. 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 (“TLD”) 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.

(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 March 31, 2021 and June 30, 2020. 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 94.82% and 93.00% of the fully diluted equity of NMMB, Inc. (“NMMB”) as of March 31, 2021 and June 30, 2020, respectively. NMMB owns 100% of Refuel Agency, Inc., which owns 100% of Armed Forces Communications, Inc. We report NMMB as a separate controlled company. 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 common equity and received a dividend distribution of $2,797.

(29)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. As a result, Prospect’s investment in InterDent is classified as a control investment.

See notes to consolidated financial statements.

32

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

(30)Prospect owns 99.96% of the equity of USES Corp. as of March 31, 2021 and June 30, 2020.

(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 March 31, 2021 and June 30, 2020, 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 9.67% of the equity in Targus Cayman HoldCo Limited (“Targus”), the parent company of Targus International LLC (“Targus International”), as of March 31, 2021 and June 30, 2020.

(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 March 31, 2021 and June 30, 2020, 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 99.96% ownership interest of Pacific World as of March 31, 2021 and June 30, 2020, respectively. As a result, Prospect’s investment in Pacific World is classified as a control investment.

See notes to consolidated financial statements.

33

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

(37)The following shows the composition of our investment portfolio at cost by control designation, investment type and by industry as of March 31, 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			112,655			—			—			—			—			7,200			27,349			147,204
Construction & Engineering			43,731			—			—			—			—			—			26,204			69,935
Consumer Finance			292,893			—			65,473			—			—			—			121,323			479,689
Diversified Consumer Services			—			—			—			—			—			—			2,378			2,378
Energy Equipment & Services			53,359			—			—			—			—			—			219,550			272,909
Equity Real Estate Investment Trusts (REITs)			607,912			—			—			—			—			—			210			608,122
Health Care Providers & Services			233,329			—			—			—			—			—			45,118			278,447
Machinery			28,622			—			—			—			—			—			6,866			35,488
Media			4,911			—			—			—			—			—			12,869			17,780
Online Lending			11,600			—			—			—			—			—			—			11,600
Personal Products			61,778			—			—			—			—			—			186,795			248,573
Trading Companies & Distributors			32,440			—			—			—			—			—			32,500			64,940
Structured Finance (A)			90,200			—			—			—			—			—			—			90,200
Total Control Investments			$	1,648,836		$	—		$	65,473		$	—		$	—		$	7,200		$	703,900		$	2,425,409
Affiliate Investments
Diversified Consumer Services			$	30,433		$	17,522		$	117,590		$	—		$	—		$	—		$	—		$	165,545
Textiles, Apparel & Luxury Goods			—			—			—			—			—			—			2,805			2,805
Total Affiliate Investments			$	30,433		$	17,522		$	117,590		$	—		$	—		$	—		$	2,805		$	168,350
Non-Control/Non-Affiliate Investments
Air Freight & Logistics			$	—		$	—		$	12,500		—			$	—		$	—		$	—		$	12,500
Auto Components			18,280			—			56,954			—			—			—			—			75,234
Chemicals			30,860			—			—			—			—			—			—			30,860
Commercial Services & Supplies			29,581			—			85,173			—			—			—			10,303			125,057
Communications Equipment			9,140			—			50,551			—			—			—			—			59,691
Consumer Finance			36,985			—			12,399			—			—			—			—			49,384
Distributors			169,420			—			105,431			—			—			—			—			274,851
Diversified Financial Services			30,165			—			—			—			—			—			—			30,165
Diversified Telecommunication Services			27,338			—			39,485			—			—			—			—			66,823
Entertainment			45,321			—			—			—			—			—			—			45,321
Food Products			—			—			31,879			—			—			—			—			31,879
Health Care Equipment & Supplies			—			—			7,477			—			—			—			—			7,477
Health Care Providers & Services			196,467			—			121,248			—			—			—			—			317,715
Hotels, Restaurants & Leisure			24,225			—			—			—			—			—			—			24,225
Household Durables			—			—			9,935			3,970			—			—			2,001			15,906
Household Products			24,250			—			—			—			—			—			—			24,250
Insurance			—			—			21,371			—			—			—			—			21,371
Interactive Media & Services			185,277			—			—			—			—			—			—			185,277
Internet & Direct Marketing Retail			54,811			—			—			—			—			—			—			54,811
IT Services			116,041			—			73,216			—			—			—			—			189,257
Leisure Products			22,454			—			—			—			—			—			1			22,455
Machinery			57,535			—			—			—			—			—			—			57,535
Media			61,473			—			—			—			—			—			26,991			88,464

See notes to consolidated financial statements.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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)			Cost Total
Paper & Forest Products			4,426			—			11,420			—			—			—			—			15,846
Professional Services			84,398			—			47,947			—			—			—			—			132,345
Software			8,352			—			17,226			—			—			—			—			25,578
Technology Hardware, Storage & Peripherals			—			—			12,427			—			—			—			—			12,427
Textiles, Apparel & Luxury Goods			163,556			—			36,842			—			—			—			—			200,398
Transportation Infrastructure			—			—			30,354			—			—			—			—			30,354
Structured Finance (A)			—			—			—			—			1,093,926			—			—			1,093,926
Total Non-Control/Non-Affiliate			$	1,400,355		$	—		$	783,835		$	3,970		$	1,093,926		$	—		$	39,296		$	3,321,382
Total Portfolio Investment Cost			$	3,079,624		$	17,522		$	966,898		$	3,970		$	1,093,926		$	7,200		$	746,001		$	5,915,141

The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of March 31, 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		$	—		$	—		$	—		$	—		$	—		$	7,700		$	83,106		2.2		%
Commercial Services & Supplies			81,837			—			—			—			—			5,295			—			87,132			2.4		%
Construction & Engineering			43,731			—			—			—			—			—			101,976			145,707			3.9		%
Consumer Finance			292,893			—			68,137			—			—			—			329,761			690,791			18.7		%
Diversified Consumer Services			—			—			—			—			—			—			3,000			3,000			0.1		%
Energy Equipment & Services			53,359			—			—			—			—			—			21,930			75,289			2.0		%
Equity Real Estate Investment Trusts (REITs)			607,912			—			—			—			—			—			374,673			982,585			26.5		%
Health Care Providers & Services			233,329			—			—			—			—			—			130,070			363,399			9.9		%
Machinery			28,622			—			—			—			—			—			19,741			48,363			1.3		%
Media			4,911			—			—			—			—			—			37,744			42,655			1.2		%
Online Lending			11,600			—			—			—			—			—			—			11,600			0.3		%
Personal Products			61,778			—			—			—			—			—			9,633			71,411			1.9		%
Trading Companies & Distributors			26,704			—			—			—			—			—			—			26,704			0.7		%
Structured Finance (A)			90,200			—			—			—			—			—			—			90,200			2.4		%
Total Control Investments			$	1,612,282		$	—		$	68,137		$	—		$	—		$	5,295		$	1,036,228		$	2,721,942		73.5		%
Fair Value % of Net Assets			43.6		%	—		%	1.8		%	—		%	—		%	0.1		%	28.0		%	73.5		%

See notes to consolidated financial statements.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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
Affiliate Investments
Diversified Consumer Services			32,179			17,522			117,590			—			—			—			106,261			273,552			7.4		%
Textiles, Apparel & Luxury Goods			—			—			—			—			—			—			26,433			26,433			0.7		%
Total Affiliate Investments			$	32,179		$	17,522		$	117,590		$	—		$	—		$	—		$	132,694		$	299,985		8.1		%
Fair Value % of Net Assets			0.9		%	0.5		%	3.2		%	—		%	—		%	—		%	3.5		%	8.1		%
Non-Control/Non-Affiliate Investments
Air Freight & Logistics			$	—		$	—		$	11,945		$	—		$	—		$	—		$	—		$	11,945		0.3		%
Auto Components			18,638			—			57,887			—			—			—			—			76,525			2.1		%
Chemicals			30,987			—			—			—			—			—			—			30,987			0.8		%
Commercial Services & Supplies			29,671			—			85,324			—			—			—			8,952			123,947			3.3		%
Communications Equipment			9,468			—			48,357			—			—			—			—			57,825			1.6		%
Consumer Finance			37,865			—			14,621			—			—			—			—			52,486			1.4		%
Distributors			169,327			—			9,111			—			—			—			—			178,438			4.8		%
Diversified Consumer Services			—			—			—			—			—			—			128			128			—		%
Diversified Financial Services			30,165			—			—			—			—			—			—			30,165			0.8		%
Diversified Telecommunication Services			27,699			—			40,170			—			—			—			—			67,869			1.8		%
Entertainment			45,683			—			—			—			—			—			—			45,683			1.2		%
Food Products			—			—			32,133			—			—			—			—			32,133			0.9		%
Health Care Equipment & Supplies			—			—			6,542			—			—			—			—			6,542			0.2		%
Health Care Providers & Services			196,611			—			122,000			—			—			—			—			318,611			8.6		%
Hotels, Restaurants & Leisure			23,044			—			—			—			—			—			—			23,044			0.6		%
Household Durables			—			—			8,558			3,970			—			—			7,671			20,199			0.5		%
Household Products			24,250			—			—			—			—			—			—			24,250			0.7		%
Insurance			—			—			21,723			—			—			—			—			21,723			0.6		%
Interactive Media & Services			185,277			—			—			—			—			—			—			185,277			5.0		%
Internet & Direct Marketing Retail			56,317			—			—			—			—			—			—			56,317			1.5		%
IT Services			116,041			—			73,250			—			—			—			—			189,291			5.2		%
Leisure Products			22,501			—			—			—			—			—			—			22,501			0.6		%
Machinery			56,956			—			—			—			—			—			—			56,956			1.5		%
Media			59,377			—			—			—			—			—			—			59,377			1.6		%
Paper & Forest Products			4,488			—			11,500			—			—			—			—			15,988			0.4		%
Professional Services			85,008			—			50,000			—			—			—			—			135,008			3.7		%
Software			8,415			—			17,500			—			—			—			—			25,915			0.7		%
Technology Hardware, Storage & Peripherals			—			—			12,500			—			—			—			—			12,500			0.3		%
Textiles, Apparel & Luxury Goods			163,556			—			34,716			—			—			—			—			198,272			5.5		%
Transportation Infrastructure			—			—			30,900			—			—			—			—			30,900			0.8		%
Structured Finance (A)			—			—			—			—			750,599			—			—			750,599			20.3		%
Total Non-Control/Non-Affiliate			$	1,401,344		$	—		$	688,737		$	3,970		$	750,599		$	—		$	16,751		$	2,861,401		77.3		%
Fair Value % of Net Assets			37.9		%	—		%	18.6		%	0.1		%	20.3		%	—		%	0.4		%	77.3		%
Total Portfolio			$	3,045,805		$	17,522		$	874,464		$	3,970		$	750,599		$	5,295		$	1,185,673		$	5,883,328		158.9		%
Fair Value % of Net Assets			82.4		%	0.5		%	23.6		%	0.1		%	20.3		%	0.1		%	31.9		%	158.9		%

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

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 March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

(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, 2020:

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			$	65,471		$	—		$	—		$	—		$	—		$	—		$	22,737		$	88,208
Commercial Services & Supplies			125,477			—			—			—			—			6,350			6,849			138,676
Construction & Engineering			43,731			—			—			—			—			—			25,143			68,874
Consumer Finance			—			—			357,026			—			—			—			120,939			477,965
Diversified Consumer Finance			—			—			—			—			—			—			2,378			2,378
Energy Equipment & Services			73,260			—			—			—			—			—			193,358			266,618
Equity Real Estate Investment Trusts (REITs)			486,058			—			—			—			—			—			210			486,268
Health Care Providers & Services			267,052			—			—			—			—			—			1			267,053
Machinery			—			—			28,622			—			—			—			6,867			35,489
Media			5,025			—			—			—			—			—			12,869			17,894
Online Lending			45,950			—			—			—			—			—			—			45,950
Personal Products			59,907			—			—			—			—			—			186,795			246,702
Trading Companies & Distributors			65,450			—			—			—			—			—			—			65,450
Structured Finance (A)			79,200			—			—			—			—			—			—			79,200
Total Control Investments			$	1,316,581		$	—		$	385,648		$	—		$	—		$	6,350		$	578,146		$	2,286,725
Affiliate Investments
Diversified Consumer Services			$	—		$	1,981		$	114,536		$	—		$	—		$	37,585		$	6,577		$	160,679
Textiles, Apparel & Luxury Goods			—			—			—			—			—			—			2,805			2,805
Total Affiliate Investments			$	—		$	1,981		$	114,536		$	—		$	—		$	37,585		$	9,382		$	163,484
Non-Control/Non-Affiliate Investments
Air Freight & Logistics			$	—		$	—		$	12,500		$	—		$	—		$	—		$	—		$	12,500
Auto Components			1,244			—			25,532			—			—			—			—			26,776
Chemicals			31,837			—			—			—			—			—			—			31,837
Commercial Services & Supplies			43,835			—			175,763			—			—			—			10,303			229,901
Communications Equipment			9,105			—			50,533			—			—			—			—			59,638
Consumer Finance			28,806			—			—			—			—			—			—			28,806
Distributors			172,853			—			105,478			—			—			—			—			278,331
Diversified Financial Services			30,165			—			—			—			—			—			—			30,165
Diversified Telecommunication Services			17,704			—			39,394			—			—			—			—			57,098
Entertainment			50,601			—			—			—			—			—			—			50,601
Food Products			—			—			24,853			—			—			—			—			24,853
Health Care Equipment & Supplies			—			—			7,474			—			—			—			—			7,474
Health Care Providers & Services			152,900			—			113,235			—			—			—			—			266,135
Hotels, Restaurants & Leisure			23,501			—			—			—			—			—			—			23,501
Household Durables			—			—			9,924			3,990			—			—			2,001			15,915
Household Products			24,437			—			—			—			—			—			—			24,437
Insurance			—			—			12,796			—			—			—			—			12,796
Interactive Media & Services			200,728			—			—			—			—			—			—			200,728
Internet & Direct Marketing Retail			15,706			—			—			—			—			—			—			15,706
IT Services			117,574			—			85,711			—			—			—			—			203,285
Leisure Products			24,518			—			—			—			—			—			1			24,519

See notes to consolidated financial statements.

37

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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)			Cost Total
Machinery			48,745			—			—			—			—			—			—			48,745
Media			64,630			—			35,000			—			—			—			—			99,630
Paper & Forest Products			4,393			—			11,395			—			—			—			—			15,788
Professional Services			28,910			—			75,254			—			—			—			—			104,164
Real Estate Management & Development			31,747			—			—			—			—			—			—			31,747
Software			8,425			—			66,783			—			—			—			—			75,208
Technology Hardware, Storage & Peripherals			—			—			12,415			—			—			—			—			12,415
Textiles, Apparel & Luxury Goods			166,307			—			36,762			—			—			—			—			203,069
Transportation Infrastructure			—			—			27,662			—			—			—			—			27,662
Structured Finance (A)			—			—			—			—			1,089,079			—			—			1,089,079
Total Non-Control/Non-Affiliate			$	1,298,671		$	—		$	928,464		$	3,990		$	1,089,079		$	—		$	12,305		$	3,332,509
Total Portfolio Investment Cost			$	2,615,252		$	1,981		$	1,428,648		$	3,990		$	1,089,079		$	43,935		$	599,833		$	5,782,718

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, 2020:

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			$	65,471		$	—		$	—		$	—		$	—		$	—		$	20,156		$	85,627		2.8		%
Commercial Services & Supplies			69,230			—			—			—			—			—			—			69,230			2.3		%
Construction & Engineering			43,731			—			—			—			—			—			85,565			129,296			4.2		%
Consumer Finance			—			—			360,015			—			—			—			261,373			621,388			20.3		%
Diversified Consumer Services			—			—			—			—			—			—			3,286			3,286			0.1		%
Energy Equipment & Services			55,455			—			—			—			—			—			26,781			82,236			2.7		%
Equity Real Estate Investment Trusts (REITs)			486,058			—			—			—			—			—			267,525			753,583			24.7		%
Health Care Providers & Services			230,757			—			—			—			—			—			—			230,757			7.6		%
Machinery			—			—			28,622			—			—			—			9,943			38,565			1.3		%
Media			5,025			—			—			—			—			—			28,643			33,668			1.1		%
Online Lending			45,950			—			—			—			—			—			—			45,950			1.5		%
Personal Products			59,907			—			—			—			—			—			—			59,907			2.0		%
Trading Companies & Distributors			26,599			—			—			—			—			—			—			26,599			0.9		%

See notes to consolidated financial statements.

38

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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
Structured Finance (A)			79,200			—			—			—			—			—			—			79,200			2.6		%
Total Control Investments			$	1,167,383		$	—		$	388,637		$	—		$	—		$	—		$	703,272		$	2,259,292		73.9		%
Fair Value % of Net Assets			38.2		%	—		%	12.7		%	—		%	—		%	—		%	23.0		%	73.9		%
Affiliate Investments
Distributors			$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		—		%
Diversified Consumer Services			$	—		$	1,981		$	107,412		$	—		$	—		$	51,079		$	5,857		$	166,329		5.4		%
Textiles, Apparel & Luxury Goods			—			—			—			—			—			—			21,208			21,208			0.7		%
Total Affiliate Investments			$	—		$	1,981		$	107,412		$	—		$	—		$	51,079		$	27,065		$	187,537		6.1		%
Fair Value % of Net Assets			—		%	0.1		%	3.5		%	—		%	—		%	1.7		%	0.9		%	6.1		%
Non-Control/Non-Affiliate Investments
Air Freight & Logistics			$	—		$	—		$	10,755		$	—		$	—		$	—		$	—		$	10,755		0.4		%
Auto Components			1,373			—			23,494			—			—			—			—			24,867			0.8		%
Building Products			—			—			—			—			—			—			—			—			—		%
Capital Markets			—			—			—			—			—			—			—			—			—		%
Chemicals			31,891			—			—			—			—			—			—			31,891			1.0		%
Commercial Services & Supplies			43,409			—			172,405			—			—			—			9,233			225,047			7.4		%
Communications Equipment			8,671			—			42,166			—			—			—			—			50,837			1.7		%
Consumer Finance			24,338			—			—			—			—			—			—			24,338			0.8		%
Distributors			168,965			—			6,966			—			—			—			—			175,931			5.8		%
Diversified Financial Services			30,165			—			—			—			—			—			—			30,165			1.0		%
Diversified Telecommunication Services			17,403			—			37,908			—			—			—			—			55,311			1.8		%
Electronic Equipment, Instruments & Components			—			—			—			—			—			—			—			—			—		%
Entertainment			49,017			—			—			—			—			—			—			49,017			1.6		%
Food Products			—			—			25,000			—			—			—			—			25,000			0.8		%
Health Care Equipment & Supplies			—			—			5,606			—			—			—			—			5,606			0.2		%
Health Care Providers & Services			151,824			—			112,821			—			—			—			—			264,645			8.7		%
Hotels, Restaurants & Leisure			21,008			—			—			—			—			—			—			21,008			0.7		%
Household Durables			—			—			8,223			3,990			—			—			3,853			16,066			0.5		%
Household Products			24,362			—			—			—			—			—			—			24,362			0.8		%
Insurance			—			—			12,744			—			—			—			—			12,744			0.4		%
Interactive Media & Services			200,728			—			—			—			—			—			—			200,728			6.6		%
Internet & Direct Marketing Retail			16,440			—			—			—			—			—			—			16,440			0.5		%
IT Services			118,311			—			85,750			—			—			—			—			204,061			6.7		%
Leisure Products			24,319			—			—			—			—			—			—			24,319			0.8		%
Machinery			48,655			—			—			—			—			—			—			48,655			1.6		%
Media			64,170			—			2,754			—			—			—			—			66,924			2.2		%
Paper & Forest Products			4,393			—			11,395			—			—			—			—			15,788			0.5		%
Professional Services			29,275			—			77,267			—			—			—			—			106,542			3.5		%
Real Estate Management & Development			31,747			—			—			—			—			—			—			31,747			1.0		%
Software			8,425			—			65,320			—			—			—			—			73,745			2.4		%
Technology Hardware, Storage & Peripherals			—			—			12,318			—			—			—			—			12,318			0.4		%
Textiles, Apparel & Luxury Goods			164,656			—			35,363			—			—			—			—			200,019			6.5		%
Transportation Infrastructure			—			—			27,662			—			—			—			—			27,662			0.9		%
Structured Finance (A)			—			—			—			—			708,961			—			—			708,961			23.2		%

See notes to consolidated financial statements.

39

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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
Total Non-Control/Non-Affiliate			$	1,283,545		$	—		$	775,917		$	3,990		$	708,961		$	—		$	13,086		$	2,785,499		91.2		%
Fair Value % of Net Assets			42.0		%	—		%	25.4		%	0.1		%	23.2		%	—		%	0.4		%	91.2		%
Total Portfolio			$	2,450,928		$	1,981		$	1,271,966		$	3,990		$	708,961		$	51,079		$	743,423		$	5,232,328		171.2		%
Fair Value % of Net Assets			80.2		%	0.1		%	41.6		%	0.1		%	23.2		%	1.7		%	24.3		%	171.2		%

(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.

40

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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 March 31, 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			6.61		%	3.39		%	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			0.87		%	11.13		%	12.00		%
InterDent, Inc. - Senior Secured Term Loan B			12.00		%	—		%	12.00		%
MITY, Inc. - Senior Secured Note A			10.00		%	—		%	10.00		%	(E)
MITY, Inc. - Senior Secured Note B			20.00		%	—		%	10.00		%	(E)
National Property REIT Corp. - Senior Secured Term Loan A-2			—		%	3.53		%	3.53		%
National Property REIT Corp. - Senior Secured Term Loan B-2			—		%	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		%
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 March 24, 2021, the CP Energy Ninth Amendment to Loan Agreement was amended to allow 100% of the March 31, 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.

See notes to consolidated financial statements.

41

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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, 2020:    

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)
Edmentum Ultimate Holdings, LLC - Second Lien Revolving Credit Facility			5.00%			—%			5.00%
Edmentum Ultimate Holdings, LLC - Unsecured Senior PIK Note			8.50%			—%			8.50%
Edmentum Ultimate Holdings, LLC - Unsecured Junior PIK Note			10.00%			—%			10.00%
First Tower Finance Company LLC - Subordinated Term Loan			4.40%			6.10%			10.50%
InterDent, Inc. - Senior Secured Term Loan A			6.25%			—%			6.25%			(E)
InterDent, Inc. - Senior Secured Term Loan A/B			7.05%			—%			7.05%			(F)
InterDent, Inc. - Senior Secured Term Loan B			10.00%			—%			10.00%
Medusind Acquisition, Inc - First Lien Term Loan			5.49%			3.51%			9.00%			(G)
MITY, Inc. - Senior Secured Note B			10.00%			—%			10.00%
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%			(H)
PGX Holdings, Inc. - 1.5 Lien			11.50%			—%			11.50%			(I)
PGX Holdings, Inc. - Second Lien Term Loan			15.75%			—%			15.75%			(J)
Rosa Mexicano - Revolver			6.00%			—%			6.00%			(K)
Rosa Mexicano - Senior Secured Term Loan			6.00%			—%			6.00%			(L)
SEOTOWNCENTER, INC. - Senior Secured Term Loan A			—%			4.00%			4.00%			(M)
SEOTOWNCENTER, INC. - Senior Secured Term Loan B			—%			9.00%			9.00%			(N)
The Octave Music Group, Inc. (fka Touchtunes) - First Lien Term Loan			—%			0.75%			0.75%
Town & Country Holdings, Inc. - First Lien Term Loan			—%			5.00%			5.00%			(O)
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 - Second Lien Term Loan			10.00%			—%			10.00%

(A) On March 30, 2020, the CP Energy Fourth Amendment to Loan Agreement was amended to allow 100% of the June 30, 2020 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 14.50%.

(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 12.50%.

(E) On April 6, 2020, the Interdent Sixteenth Amendment was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 6.25%.

(F) On April 6, 2020, the Interdent Sixteenth Amendment was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 7.05%.

(G) On April 13, 2020, the Medusind Fourth Amendment to Credit and Guaranty Agreement was amended to allow $409 of the June 30, 2020 interest accruing in cash to be payable in kind resulting in a current PIK rate capitalized of 5.49%.

(H) Pacific World Term Loan A was placed on accrual status effective June 29, 2020. The next Term Loan A PIK interest payment/capitalization date is July 29, 2020.

(I) On May 27, 2020, the PGX 1.5 Lien Credit Agreement was entered to allow interest accrue and be payable in kind resulting in a maximum current PIK rate of 11.50%. The 1.5 Lien PIK interest will not capitalize until September 30, 2020.

(J) On May 27, 2020, the PGX Third Amendment to the Second Lien Credit Agreement was amended to allow interest accrue and be payable in kind resulting in a maximum current PIK rate of 15.75%.

(K) On April 29, 2020, the Rosa Mexicano Fifth Amendment and Waiver to Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 6.00%.

See notes to consolidated financial statements.

42

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

(L) On April 29, 2020, the Rosa Mexicano Fifth Amendment and Waiver to Loan Agreement was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 6.00%.

(M) On May 20, 2020, the SEOTownCenter Limited Waiver and Fourth Amendment to Loan Agreement was amended to allow a Maximum Term Loan A PIK Rate of 4.00% for the interest accruing in cash to be payable in kind, at the borrowers election.

(N) On May 20, 2020, the SEOTownCenter Limited Waiver and Fourth Amendment to Loan Agreement was amended to allow a Maximum Term Loan B PIK Rate of 9.00% for the interest accruing in cash to be payable in kind, at the borrowers election.

(O) On March 31, 2020, the Town & Country Fourth Amendment to Loan Agreement was amended to allow a Maximum Term Loan PIK Rate of 5.00% for the interest accruing in cash to be payable in kind, at the borrowers election.

(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 nine months ended March 31, 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 March 31, 2021			Interest income			Dividend income			Other income			Net realized gains (losses)
CP Energy Services Inc.			$	51,174		$	3,459		$	(1)		$	(13,393)		$	41,239		$	3,460		$	—		$	—		$	—
CP Energy - Spartan Energy Services, Inc.			18,711			26,193			(23,361)			450			21,993			901			—			13			2,832
Credit Central Loan Company, LLC			75,685			9,369			(3,765)			(10,145)			71,144			10,569			—			—			—
Echelon Transportation, LLC			85,627			9,935			—			(12,456)			83,106			7,212			—			—			—
First Tower Finance Company LLC			508,465			463			(4,899)			75,057			579,086			45,752			—			15,443			—
Freedom Marine Solutions, LLC			12,351			—			—			(293)			12,058			—			—			—			—
InterDent, Inc.			230,757			11,395			—			121,247			363,399			16,507			—			—			—
Kickapoo Ranch Pet Resort			3,286			—			—			(286)			3,000			—			—			—			—
MITY, Inc.			51,905			5,678			850			(8,702)			49,731			8,392			—			66			—
National Property REIT Corp.			878,733			167,853			(69,350)			107,149			1,084,385			42,627			—			29,471			—
Nationwide Loan Company LLC			37,238			173			384			2,765			40,560			3,081			1,384			—			—
NMMB, Inc.			33,668			—			(114)			9,101			42,655			399			—			—			—
Pacific World Corporation			59,907			1,870			—			9,634			71,411			3,228			—			—			—
R-V Industries, Inc.			38,565			—			—			9,798			48,363			2,147			—			—			—
Universal Turbine Parts, LLC			26,599			—			(510)			615			26,704			1,761			—			—			121
USES Corp.			17,325			2,000			—			18,076			37,401			51			—			—			—
Valley Electric Company, Inc.			129,296			—			1,061			15,350			145,707			5,329			2,261			500			—
Total			$	2,259,292		$	238,388		$	(99,705)		$	323,967		$	2,721,942		$	151,416		$	3,645		$	45,493		$	2,953

(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 nine months ended March 31, 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 March 31, 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			60,227			(1,214)			107,828			273,552			15,378			—			69			—
Targus Cayman HoldCo Limited			21,208			—			—			5,225			26,433			—			—			—			—
Total			$	187,537		$	69,505		$	(64,639)		$	107,582		$	299,985		$	24,333		$	—		$	102		$	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.

43

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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, 2020 with these controlled investments were as follows:

Portfolio Company			Fair Value at June 30, 2019			Gross Additions (Cost)(A)			Gross Reductions (Cost)(B)			Net unrealized gains (losses)			Fair Value at June 30, 2020			Interest income			Dividend income			Other income			Net realized gains (losses)
CP Energy Services Inc.			$	104,533		$	6,735		$	—		$	(60,094)		$	51,174		$	4,636		$	—		$	—		$	—
CP Energy - Spartan Energy Services, LLC			34,398			2,119			—			(17,806)			18,711			3,115			—			13			—
Credit Central Loan Company, LLC			71,417			12,891			—			(8,623)			75,685			12,145			—			112			—
Echelon Transportation LLC			89,701			10,630			—			(14,704)			85,627			8,349			—			—			—
First Tower Finance Company LLC			494,036			6,178			(6,518)			14,769			508,465			57,802			—			—			—
Freedom Marine Solutions, LLC			14,920			—			—			(2,569)			12,351			—			—			—			—
InterDent, Inc.			224,876			18,180			—			(12,299)			230,757			18,823			—			—			—
Kickapoo Ranch Pet Resort			—			2,378			—			908			3,286			—			—			36			—
MITY, Inc.			46,902			3,421			(566)			2,148			51,905			9,027			—			587			—
National Property REIT Corp.			1,004,465			118,309			(276,279)			32,238			878,733			67,303			—			45,345			—
Nationwide Loan Company LLC			32,975			1,470			(1,500)			4,293			37,238			3,917			—			—			—
NMMB, Inc.			24,183			15,100			(13,190)			7,575			33,668			653			2,797			453			—
Pacific World Corporation			112,427			12,100			(3,366)			(61,254)			59,907			2,457			—			—			—
R-V Industries, Inc.			33,624			—			—			4,941			38,565			3,087			—			—			—
Universal Turbine Parts, LLC			28,043			2,900			(664)			(3,680)			26,599			2,528			—			100			—
USES Corp.			15,725			1,500			(5,950)			6,050			17,325			—			—			—			—
Valley Electric Company, Inc.			143,685			—			(1,062)			(13,327)			129,296			7,106			7,538			665			—
Wolf Energy, LLC			14			(3,914)			18			3,882			—			—			—			—			—
Total			$	2,475,924		$	209,997		$	(309,077)		$	(117,552)		$	2,259,292		$	200,948		$	10,335		$	47,311		$	—

(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, 2020 with these affiliated investments were as follows:

Portfolio Company			Fair Value at June 30, 2019			Gross Additions (Cost)(A)			Gross Reductions (Cost)(B)			Net unrealized gains (losses)			Fair Value at June 30, 2020			Interest income			Dividend income			Other income			Net realized gains (losses)
Edmentum Ultimate Holdings, LLC			$	41,217		$	10,528		$	(3,133)		$	11,006		$	59,618		$	8,150		$	—		$	—		$	—
Nixon, Inc.			—			—			—			—			—			—			—			—			—
PGX Holdings, Inc. (C)			—			63,679			—			43,032			106,711			4,499			—			38			—
Targus Cayman HoldCo Limited			16,599			—			(967)			5,576			21,208			—			—			—			—
United Sporting Companies, Inc. (D)			18,866			(4,716)			(21,613)			7,463			—			—			—			—			—
Total			$	76,682		$	69,491		$	(25,713)		$	67,077		$	187,537		$	12,649		$	—		$	38		$	—

(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.

(C)    Investment was transferred from non-controlled/non-affiliate investments at $57,239, the fair market value at the beginning of the three month period ended June 30, 2020.

(D)    Investment was transferred to non-controlled/non-affiliate investments at $4,716, the fair market value at the beginning of the three month period ended June 30, 2020. Refer to endnote 18.

See notes to consolidated financial statements.

44

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (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

$

2,101

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

11,534

Apidos CLO XI

Subordinated Structured Note

11/2/2016

2,160

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

450

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

Capstone Logistics Acquisition, Inc.

Second Lien Term Loan

6/12/2015

37,500

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

Coverall North America, Inc.

Senior Secured Term Loan A

7/2/2018

13

Coverall North America, Inc.

Senior Secured Term Loan B

7/2/2018

2

CP Energy Services Inc.

Common Stock

10/11/2013, 12/26/2013, 4/6/2018, 12/31/2019

69,586

CP VI Bella Midco

Second Lien Term Loan

8/10/2018, 10/15/2018, 5/23/2019, 6/4/2019

13,711

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

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

Edmentum Ultimate Holdings, LLC

Second Lien Revolving Credit Facility to Edmentum, Inc.

2/19/2016, 3/17/2016, 4/20/2016, 5/19/2016, 6/22/2016, 1/31/2017, 2/14/2017, 3/1/2017, 3/14/2017, 3/28/2017, 4/11/2017, 4/25/2017, 5/10/2017, 10/30/2017, 11/8/2017, 11/21/2017, 12/20/2017, 1/3/2018, 1/17/2018, 1/30/2018, 12/12/2018, 12/21/2018, 1/15/2019, 2/1/2019, 2/26/2019, 2/28/2019, 3/18/2019, 4/9/2019,11/22/2019,12/17/2019, 1/21/2020

33,080

First Brands Group

First Lien Term Loan

8/19/2020, 10/19/2020, 12/2/2020, 12/3/2020, 12/4/2020

19,525

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

39,868

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

14,686

HELP/SYSTEMS HOLDINGS, INC.

First Lien Term Loan

11/29/2019

8,415

Help/Systems Holdings, Inc.

Second Lien Term Loan

5/10/2018, 3/11/2019, 11/22/2019

19,649

See notes to consolidated financial statements.

45

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

Portfolio Company

Investment

Follow-On Acquisition Dates

Follow-On Acquisitions (Excluding initial investment cost)

Inpatient Care Management Company, LLC

Senior Secured Term Loan

12/22/2016, 6/29/2018

10,003

Interdent, Inc.

Senior Secured Term Loan A

2/11/2014, 4/21/2014, 11/25/2014, 12/23/2014

76,125

Interdent, Inc.

Senior Secured Term Loan B

2/11/2014, 4/21/2014, 11/25/2014, 12/23/2014

76,125

Interdent, Inc.

Senior Secured Term Loan C

8/1/2018

31,558

Interdent, Inc.

Senior Secured Term Loan D

2/3/2020, 4/6/2020

4,350

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

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

165,162

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

36,825

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

PG Dental Holdings New Jersey, LLC

Delayed Draw Term Loan

8/26/2019, 4/3/2020

2,500

PG Dental Holdings New Jersey, LLC

Senior Secured Term Loan

5/31/2019

20

PGX Holdings, Inc.

First Lien Term Loan

12/1/2020,12/14/2020,12/23/2020, 12/26/2020, 3/5/2021

19,715

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

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

Sorenson Communications, LLC

First Lien Term Loan

5/14/2019

8,000

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

2,900

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

7,200

USG Intermediate, LLC

Senior Secured Term Loan B

8/24/2017

2,975

Valley Electric Company, Inc.

Common Stock

12/31/2012, 6/24/2014

18,502

See notes to consolidated financial statements.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2021 (Unaudited) and June 30, 2020 (Continued)

Portfolio Company

Investment

Follow-On Acquisition Dates

Follow-On Acquisitions (Excluding initial investment cost)

Valley Electric Company, Inc.

Senior Secured Note

6/30/2014, 8/31/2018

5,129

Voya CLO 2014-1, Ltd.

Subordinated Structured Note

3/29/2018

3,943

(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 March 31, 2021. See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.

(48)During the nine months ended March 31, 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 March 31, 2021, $15,333 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.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands, except share and per share data)

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 nine months ended March 31, 2021.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(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 March 31, 2021 and June 30, 2020, our qualifying assets as a percentage of total assets, stood at 75.67% and 74.44%, 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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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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. 

Online Small-and-Medium-Sized Business Lending Risk

With respect to our online small-and-medium-sized business (“SME”) lending initiative, we invest primarily in marketplace loans through marketplace lending platforms (e.g. OnDeck). We do not conduct loan origination activities ourselves. Therefore, our ability to purchase SME loans, and our ability to grow our portfolio of SME loans, is directly influenced by the business performance and competitiveness of the marketplace loan origination business of the marketplace lending platforms from which we purchase SME loans. In addition, our ability to analyze the risk-return profile of 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.

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

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.

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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 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.

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.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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.

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.

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. Loan origination fees, original issue discount, 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 March 31, 2021, approximately 0.7% 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.

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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.

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 March 31, 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 March 31, 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, 2017 and thereafter remain subject to examination by the Internal Revenue Service.

Dividends and Distributions

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

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PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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 completed. As of March 31, 2021 and June 30, 2020, 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 June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the financial instruments impairment guidance so that an entity is required to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses. ASU 2016-13 also amends the guidance in FASB ASC Subtopic No. 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets, related to the subsequent measurement of accretable yield recognized as interest income over the life of a beneficial interest in securitized financial assets under the effective yield method. ASU 2016-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of ASU 2016-13 did not have a material effect on our consolidated financial statements and disclosures as our investments are carried at fair value, with changes in fair value recognized in earnings.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The standard will modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. ASU No. 2018-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. The adoption of ASU 2018-13 did not have a material effect on our consolidated financial statements and disclosures.

In May 2020, the SEC adopted rule amendments that will impact the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or certain acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules adopt a new definition of “significant subsidiary” applicable only to investment companies that (i) modifies the investment test and the income test, and (ii) eliminates the asset test currently in the definition of “significant subsidiary” in Rule 1-02(w) of Regulation S-X. The new Rule 1-02(w)(2) of Regulation S-X is

54

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

intended to more accurately capture these portfolio companies that are more likely to materially impact the financial condition of an investment company. The Final Rules became effective on January 1, 2021, but voluntary compliance was permitted in advance of the effective date. We evaluated the impact of adopting the Final Rules on our consolidated financial statements and because the new definition of “significant subsidiary” contained therein is specific to investment companies, we elected to early adopt the Final Rules beginning with our fiscal year ended June 30, 2020. Refer to Note 3. Portfolio Investments - Unconsolidated Significant Subsidiaries for disclosure.

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 March 31, 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.

Note 3. Portfolio Investments

At March 31, 2021, we had investments in 123 long-term portfolio investments and CLOs, which had an amortized cost of $5,915,141 and a fair value of $5,883,328. At June 30, 2020, we had investments in 121 long-term portfolio investments and CLOs, which had an amortized cost of $5,782,718 and a fair value of $5,232,328.

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 $781,138 and $823,546 during the nine months ended March 31, 2021 and March 31, 2020, respectively. Debt repayments and considerations from sales of equity securities of approximately $673,329 and $943,197 were received during the nine months ended March 31, 2021 and March 31, 2020, respectively.

The following table shows the composition of our investment portfolio as of March 31, 2021 and June 30, 2020:

			March 31, 2021												June 30, 2020
			Cost						Fair Value						Cost						Fair Value
Revolving Line of Credit			$	27,208					$	27,183					$	38,469					$	36,944
Senior Secured Debt			3,052,416						3,018,622						2,586,769						2,422,523
Subordinated Secured Debt			988,390						895,956						1,424,633						1,269,398
Subordinated Unsecured Debt			7,200						5,295						43,935						51,079
Subordinated Structured Notes			1,093,926						750,599						1,089,079						708,961
Equity			746,001						1,185,673						599,833						743,423
Total Investments			$	5,915,141					$	5,883,328					$	5,782,718					$	5,232,328

55

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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.

•Small Business Loans includes our investments in SME whole loans purchased from OnDeck.

•Rated Secured Structured Notes includes our investments in the “debt” class of security of CLO funds.

•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 March 31, 2021:

			Level 1						Level 2						Level 3						Total
Revolving Line of Credit			$	—					$	—					$	27,183					$	27,183
Senior Secured Debt			—						33,157						2,985,465						3,018,622
Subordinated Secured Debt			—						14,621						881,335						895,956
Subordinated Unsecured Debt			—						—						5,295						5,295
Subordinated Structured Notes			—						—						750,599						750,599
Equity			—						—						1,185,673						1,185,673
Total Investments			$	—					$	47,778					$	5,835,550					$	5,883,328

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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, 2020:

			Level 1						Level 2						Level 3						Total
Revolving Line of Credit			$	—					$	—					$	36,944					$	36,944
Senior Secured Debt			—						—						2,422,523						2,422,523
Subordinated Secured Debt			—						—						1,269,398						1,269,398
Subordinated Unsecured Debt			—						—						51,079						51,079
Subordinated Structured Notes			—						—						708,961						708,961
Equity			—						—						743,423						743,423
Total Investments			$	—					$	—					$	5,232,328					$	5,232,328

The following tables show the aggregate changes in the fair value of our Level 3 investments during the nine months ended March 31, 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, 2020			$	2,259,292					$	187,537					$	2,785,499					$	5,232,328
Net realized gains on investments			$	2,953					$	4,469					$	3					$	7,425
Net change in unrealized gains(1)			323,967						107,582						84,571						516,120
Net realized and unrealized gains			326,920						112,051						84,574						523,545
Purchases of portfolio investments			199,562						45,081						468,335						712,978
Payment-in-kind interest			38,502						17,742						2,506						58,750
Accretion of discounts and premiums, net			324						6,682						9,845						16,851
Repayments and sales of portfolio investments			(102,658)						(69,108)						(501,471)						(673,237)
Transfers out of Level 3(2)			—						—						(35,665)						(35,665)
Fair value as of March 31, 2021			$	2,721,942					$	299,985					$	2,813,623					$	5,835,550

			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						—						—						—						4,593						7,425
Net change in unrealized gains (losses)(1)			54						130,107						60,691						(7,602)						36,794						296,076						516,120
Net realized and unrealized gains (losses)			54						132,939						60,691						(7,602)						36,794						300,669						523,545
Purchases of portfolio investments			4,000						473,976						115,592						—						—						119,410						712,978
Payment-in-kind interest			234						31,951						23,945						2,620						—						—						58,750
Accretion of discounts and premiums, net			—						3,690						1,878						6,439						4,844						—						16,851
Repayments and sales of portfolio investments			(14,049)						(361,562)						(240,665)						(47,241)						—						(9,720)						(673,237)
Transfers within Level 3(1)			—						314,743						(346,634)						—						—						31,891						—
Transfers out of Level 3(2)(3)			—						(32,795)						(2,870)						—						—						—						(35,665)
Fair value as of March 31, 2021			$	27,183					$	2,985,465					$	881,335					$	5,295					$	750,599					$	1,185,673					$	5,835,550

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

(2)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the three months ended December 31, 2020 one of our senior secured notes and one of our subordinated secured notes transferred out of Level 3 to Level 2 because the inputs to the valuation became observable.

(3)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the three months ended March 31, 2021 two of our senior secured notes transferred out of Level 3 to Level 2 because the inputs to the valuation became observable.

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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 nine months ended March 31, 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, 2019			$	2,475,924					$	76,682					$	3,100,947					$	5,653,553
Net realized losses on investments			—						—						(1,138)						(1,138)
Net change in unrealized (losses) gains(1)			(172,328)						20,746						(230,459)						(382,041)
Net realized and unrealized (losses) gains			(172,328)						20,746						(231,597)						(383,179)
Purchases of portfolio investments			142,899						3,134						627,374						773,407
Payment-in-kind interest			29,796						2,199						3,139						35,134
Accretion (amortization) of discounts and premiums, net			242						2,407						(8,534)						(5,885)
Repayments and sales of portfolio investments			(268,061)						(25,713)						(648,547)						(942,321)
Transfers in (out) of Level 3(1)			—						—						13,833						13,833
Fair value as of March 31, 2020			$	2,208,472					$	79,455					$	2,856,615					$	5,144,542

			Revolving Line of Credit						Senior Secured Debt						Subordinated Secured Debt						Subordinated Unsecured Debt						Rated Secured Structured Notes						Subordinated Structured Notes						Equity						Total
Fair value as of June 30, 2019			$	34,239					$	2,449,357					$	1,329,799					$	33,058					$	46,851					$	850,694					$	909,555					$	5,653,553
Net realized (losses) gains on investments			(22)						(619)						14						—						1,885						(2,396)						—						(1,138)
Net change in unrealized (losses) gains(1)			(351)						(115,131)						(73,504)						11,301						(2,078)						(132,626)						(69,652)						(382,041)
Net realized and unrealized (losses) gains			(373)						(115,750)						(73,490)						11,301						(193)						(135,022)						(69,652)						(383,179)
Purchases of portfolio investments			13,341						587,923						123,907						—						5,534						1,912						40,790						773,407
Payment-in-kind interest			274						22,654						10,281						1,925						—						—						—						35,134
Accretion (amortization) of discounts and premiums, net			—						722						4,213						2,407						(70)						(13,157)						—						(5,885)
Repayments and sales of portfolio investments			(9,183)						(696,205)						(180,850)						(428)						(52,122)						(24)						(3,509)						(942,321)
Transfers in (out) of Level 3 (1)(2)			—						13,833						—						—						—						—						—						13,833
Fair value as of March 31, 2020			$	38,298					$	2,262,534					$	1,213,860					$	48,263					$	—					$	704,403					$	877,184					$	5,144,542

(1)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the three months ended September 30, 2019 one of our senior secured notes transferred from Level 3 to Level 2 because the inputs to the valuation became observable.

(2)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the three months ended March 31, 2020 two of our senior secured notes transferred from Level 2 to Level 3 because the inputs to the valuation became unobservable.

For the nine months ended March 31, 2021 and March 31, 2020, the net change in unrealized gains (losses) on the investments that use Level 3 inputs was $400,225 and ($370,612) for investments still held as of March 31, 2021 and March 31, 2020, respectively.

Impact of the novel coronavirus (“Wuhan Virus”) pandemic

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

The Wuhan Virus 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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 Wuhan Virus outbreaks 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 prepandemic levels for a prolonged period of time. Further, the extent and strength of any economic recovery after the Wuhan Virus 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 Wuhan Virus pandemic subsides, the U.S. economy and most other major global economies may continue to experience a recession.

The Wuhan Virus 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 Wuhan Virus pandemic is having a 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 Wuhan Virus 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 March 31, 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 Wuhan Virus 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 impact of the Wuhan Virus 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 Wuhan Virus pandemic. As a result, our valuations at March 31, 2021 may not show the complete or continuing impact of the Wuhan Virus pandemic and the resulting measures taken in response thereto. In addition, write downs in the value 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 continue to incur additional net unrealized losses or may incur realized losses after March 31, 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 March 31, 2021 were as follows:

Unobservable Input

Asset Category

Fair Value

Primary Valuation Approach or Technique

Input

Range

Weighted Average

Senior Secured Debt

$

1,385,033

Discounted cash flow (Yield analysis)

Market yield

5.2% to 20.9%

9.7%

Senior Secured Debt

432,633

Enterprise value waterfall (Market approach)

EBITDA multiple

5.5x to 10.5x

9.0x

Senior Secured Debt

101,638

Enterprise value waterfall (Market approach)

Revenue multiple

0.7x to 1.6x

1.2x

Senior Secured Debt

75,406

Enterprise value waterfall (Discounted cash flow)

Discount rate

8.2% to 10.2%

9.2%

Senior Secured Debt

15,333

Asset recovery analysis

n/a

n/a

n/a

Senior Secured Debt (1)

11,600

Enterprise value waterfall

Loss-adjusted discount rate

5.0% to 15.6%

9.7%

Senior Secured Debt (2)

90,200

Enterprise value waterfall

Discount rate (3)

7.3% to 13.6%

9.7%

Senior Secured Debt (4)

292,893

Enterprise value waterfall (Market approach)

Tangible book value multiple

1.0x to 3.0x

2.8x

Senior Secured Debt

607,912

Enterprise value waterfall (NAV analysis)

Capitalization Rate

4.0% to 8.1%

6.1%

Subordinated Secured Debt

800,117

Discounted cash flow (Yield analysis)

Market yield

5.4% to 21.5%

10.6%

Subordinated Secured Debt

3,970

Enterprise value waterfall (Market approach)

Revenue multiple

0.5x to 0.6x

0.5x

Subordinated Secured Debt (5)

68,137

Enterprise value waterfall (Market approach)

Tangible book value multiple

2.2x to 2.6x

2.4x

Subordinated Secured Debt

9,111

Asset recovery analysis

n/a

n/a

n/a

Subordinated Unsecured Debt

5,295

Enterprise value waterfall (Market approach)

EBITDA multiple

7.0x to 8.0x

7.5x

Subordinated Structured Notes

750,599

Discounted cash flow

Discount rate (3)

0.1% to 31.5%

22.8%

Preferred Equity

18,470

Enterprise value waterfall (Market approach)

Revenue multiple

0.7x to 1.6x

1.0x

Preferred Equity

1,036

Enterprise value waterfall (Market approach)

EBITDA multiple

6.5x to 8.5x

7.5x

Common Equity/Interests/Warrants

429,188

Enterprise value waterfall (Market approach)

EBITDA multiple

5.5x to 10.5x

8.6x

Common Equity/Interests/Warrants

7,671

Enterprise value waterfall (Market approach)

Revenue multiple

0.5x to 0.6x

0.5x

Common Equity/Interests/Warrants (1)

3,535

Enterprise value waterfall

Loss-adjusted discount rate

5.0% to 15.6%

9.7%

Common Equity/Interests/Warrants (2)

14,736

Enterprise value waterfall

Discount rate (3)

7.3% to 13.6%

9.7%

Common Equity/Interests/Warrants

326,702

Enterprise value waterfall (NAV analysis)

Capitalization Rate

4.0% to 8.1%

6.1%

Common Equity/Interests/Warrants (6)

329,760

Enterprise value waterfall (Market approach)

Tangible book value multiple

1.0x to 3.0x

2.8x

Common Equity/Interests/Warrants (7)

29,700

Enterprise value waterfall (NAV analysis)

Capitalization Rate

4.0% to 8.1%

6.1%

Common Equity/Interests/Warrants

12,689

Enterprise value waterfall (Discounted cash flow)

Discount rate

8.2% to 30.0%

13.8%

Common Equity/Interests/Warrants

12,058

Asset recovery analysis

n/a

n/a

n/a

Escrow

128

Discounted cash flow

Discount Rate

4.0% to 5.3%

4.6%

Total Level 3 Investments

$

5,835,550

60

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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. The key unobservable input to the discounted cash flow analysis is noted above. In addition, the valuation also used projected loss rates as an unobservable input ranging from 0.0%-3.3%, with a weighted average of 0.1%.

(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 investments in consumer finance subsidiaries. The enterprise value waterfall methodology utilizes book value multiples as noted above. In addition, the valuation of certain consumer finance companies utilizes the enterprise value waterfall technique whereby the significant unobservable input is the earnings multiple and the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies the earnings multiple ranges from 7.0x to 8.0x with a weighted average of 7.5x and the discount rate ranges from 13.1% to 14.1% with a weighted average of 13.6%.

(5)Represents an investments in a consumer finance subsidiary. The enterprise value waterfall methodology utilizes book value multiples as noted above. In addition, the valuation utilizes the enterprise value waterfall technique whereby the significant unobservable input is the earnings multiple, which ranges from 6.8x to 7.8x with a weighted average of 7.3x.

(6)Represents investments in consumer finance subsidiaries. The enterprise value waterfall methodology utilizes book value multiples as noted above. In addition, the valuation of certain consumer finance companies utilizes the enterprise value waterfall technique whereby the significant unobservable input is the earnings multiple and the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies the earnings multiple ranges from 6.8x to 8.0x with a weighted average of 7.5x and the discount rate ranges from 13.1% to 14.1% with a weighted average of 13.6%.

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

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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 June 30, 2020 were as follows:

Unobservable Input

Asset Category

Fair Value

Primary Valuation Approach or Technique

Input

Range

Weighted Average

Senior Secured Debt

$

1,283,545

Discounted cash flow (Yield analysis)

Market yield

5.6% to 22.6%

10.7%

Senior Secured Debt

395,412

Enterprise value waterfall (Market approach)

EBITDA multiple

4.0x to 12.5x

8.0x

Senior Secured Debt

103,831

Enterprise value waterfall (Market approach)

Revenue multiple

0.4x to 1.2x

0.9x

Senior Secured Debt

65,471

Enterprise value waterfall (Discounted cash flow)

Discount rate (3)

8.6% to 11.4%

9.8%

Senior Secured Debt (1)

45,950

Enterprise value waterfall

Loss-adjusted discount rate

5.0% to 16.5%

11.2%

Senior Secured Debt (2)

79,200

Enterprise value waterfall

Discount rate (3)

7.3% to 12.8%

9.6%

Senior Secured Debt

486,058

Enterprise value waterfall (NAV analysis)

Capitalization Rate

4.0% to 8.1%

6.1%

Subordinated Secured Debt

839,784

Discounted cash flow  (Yield analysis)

Market yield

7.0% to 20.8%

11.9%

Subordinated Secured Debt

58,643

Enterprise value waterfall (Market approach)

EBITDA multiple

7.0x to 10.5x

8.2x

Subordinated Secured Debt

3,990

Enterprise value waterfall (Market approach)

Revenue multiple

0.4x to 0.5x

0.4x

Subordinated Secured Debt (4)

360,015

Enterprise value waterfall (Market approach)

Tangible book value multiple

0.9x to 2.9x

2.6x

Subordinated Secured Debt

6,966

Asset recovery analysis

n/a

n/a

n/a

Subordinated Unsecured Debt

51,079

Enterprise value waterfall (Market approach)

EBITDA multiple

5.0x to 12.5x

12.0x

Subordinated Structured Notes

708,961

Discounted cash flow

Discount rate (3)

4.1% to 26.9%

20.6%

Preferred Equity

14,430

Enterprise value waterfall (Market approach)

EBITDA multiple

5.4x to 6.4x

5.9x

Common Equity/Interests/Warrants

158,001

Enterprise value waterfall (Market approach)

EBITDA multiple

4.0x to 12.5x

5.4x

Common Equity/Interests/Warrants

3,853

Enterprise value waterfall (Market approach)

Revenue multiple

0.4x to 0.5x

0.4x

Common Equity/Interests/Warrants (2)

9,987

Enterprise value waterfall

Discount rate (3)

7.3% to 12.8%

9.6%

Common Equity/Interests/Warrants

236,077

Enterprise value waterfall (NAV analysis)

Capitalization Rate

4.0% to 8.1%

6.1%

Common Equity/Interests/Warrants (4)

261,373

Enterprise value waterfall (Market approach)

Tangible book value multiple

0.9x to 2.9x

2.6x

Common Equity/Interests/Warrants (5)

21,461

Enterprise value waterfall (NAV analysis)

Capitalization Rate

4.0% to 8.1%

6.1%

Common Equity/Interests/Warrants

25,890

Enterprise value waterfall (Discounted cash flow)

Discount rate (3)

8.9% to 30.0%

12.2%

Common Equity/Interests/Warrants

12,351

Asset recovery analysis

n/a

n/a

n/a

Total Level 3 Investments

$

5,232,328

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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. The key unobservable input to the discounted cash flow analysis is noted above. In addition, the valuation also used projected loss rates as an unobservable input ranging from 0.0%-4.8%, with a weighted average of 0.3%.

(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 investments in consumer finance subsidiaries. The enterprise value waterfall methodology utilizes book value multiples as noted above. In addition, the valuation of certain consumer finance companies utilizes the enterprise value waterfall technique whereby the significant unobservable input is the earnings multiple and the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies the earnings multiple ranges from 7.3x to 8.4x with a weighted average of 7.9x and the discount rate ranges from 13.1% to 14.1% with a weighted average of 13.6%.

(5)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.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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 enacted in 2010 imposes a withholding tax of 30% on payments of U.S. source interest and dividends paid after December 31, 2013, or gross proceeds from the disposition of an instrument that produces U.S. source interest or dividends paid after December 31, 2016, 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 nine months ended March 31, 2021, the valuation methodology for ACE Cash Express, Inc. (“ACE Cash”) changed to incorporate the price observed in a completed tender offer for the Senior Secured Notes. As a result of the price observed in the completed tender offer and a decline in market yields, the fair value of our investment in ACE Cash increased to $37,865 as of March 31, 2021, a premium of $880 from its amortized cost, compared to the $4,468 unrealized depreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for CP VI Bella Midco changed to incorporate the take-out technique. As a result of a recent public credit rating downgrade, partially offset by observed market spread tightening, the fair value of our investment in CP VI Bella Midco decreased to $15,750 as of March 31, 2021, a premium of $34 from its amortized cost, compared to the $39 unrealized appreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for EXC Holdings III Corp (“EXC”) changed to incorporate market quotes. As a result of the company’s performance and tightened market spreads, the fair value of our investment in EXC increased to $12,500 as of March 31, 2021, a premium of $73 from its amortized cost, compared to the $97 unrealized depreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for Global Tel*Link Corporation (“Global Tel”) for the First Lien Term Loan changed to incorporate market quotes. As a result of tightened market spreads, the fair value of our investment in Global Tel First Lien Term Loan increased to $9,699 as of March 31, 2021, a premium of $181 from its amortized cost, compared to the $301 unrealized depreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for Help/Systems Holdings, Inc. (“HelpSystems”) for the First Lien Term Loan changed to incorporate market quotes. As a result of the company’s performance, the fair value of our investment in HelpSystems First Lien Term Loan increased to $8,415 as of March 31, 2021, a premium of $63 from its amortized cost, compared to the $0 unrealized depreciation/amortization recorded at June 30, 2020.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

During the nine months ended March 31, 2021, the valuation methodology for Research Now Group, Inc. & Survey Sampling International LLC (“Research Now”) for the First Lien Term Loan changed to incorporate market quotes. As a result of the company’s performance, the fair value of our investment in Research Now First Lien Term Loan increased to $9,675 as of March 31, 2021, a premium of $285 from its amortized cost, compared to the $239 unrealized appreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for Shutterfly, Inc. (“Shutterfly”) changed to incorporate market quotes. As a result of the company’s performance, the fair value of our investment in Shutterfly increased to $16,019 as of March 31, 2021, a premium of $1,506 from its amortized cost, compared to the $734 unrealized appreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for Staples North American Delivery ("Staples") changed to remove the yield method. As a result of an increase in the quoted price of the First Lien Term Loan, the fair value of our investment in Staples increased to $8,723 as of March 31, 2021, a discount of $93 from its amortized cost, compared to the $738 unrealized depreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for Upstream Newco, Inc. (“Upstream”) for the First Lien Term Loan changed to incorporate market quotes. As a result of the company’s performance, the fair value of our investment in Upstream First Lien Term Loan increased to $8,168 as of March 31, 2021, a premium of $34 from its amortized cost, compared to the $390 unrealized depreciation recorded at June 30, 2020.

During the nine months ended March 31, 2021, the valuation methodology for Venio LLC (“Venio”) changed to remove the yield method. As a result of the company’s sale of a business unit, the fair value of our investment in Venio decreased to $15,333 as of March 31, 2021.

During the nine months ended March 31, 2020, we recorded a realized loss of $2,420 related to four of our Subordinated Structured Notes. During the nine months ended March 31, 2021, we did not record any such loss.

During the nine months ended March 31, 2021, we received partial repayments of $69,350 of our loans previously outstanding with NPRC, and provided $167,854 of debt financing to NPRC for the acquisition of real estate properties, to fund capital expenditures for existing real estate properties, to provide working capital, and to fund purchases of rated secured structured notes.

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 March 31, 2021, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 2,414 individual loans and residual interest in four securitizations, and had an aggregate fair value of $13,956. The average outstanding individual loan balance is approximately $4 and the loans mature on dates ranging from April 1, 2021 to April 19, 2025 with a weighted-average outstanding term of 19 months as of March 31, 2021. Fixed interest rates range from 6.0% to 36.0% with a weighted-average current interest rate of 20.9%. As of March 31, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $11,600.

As of March 31, 2021, based on outstanding principal balance, 17.4% 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 42.4% of the portfolio in near prime loans (borrowers with a FICO score of 580 to 659, a portion of which are considered sub-prime).

Loan Type						Outstanding Principal Balance						Fair Value						Interest Rate Range						Weighted Average Interest Rate*
Super Prime						$	1,687					$	1,654					7.0% - 20.5%						12.4%
Prime						3,889						3,706						6.0% - 32.0%						18.1%
Near Prime						4,105						4,022						6.0% - 36.0%						27.0%

*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 March 31, 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 $206,524 and face value of $220,942. The average

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

outstanding note is approximately $5,971 with an expected maturity date ranging from April 2026 to April 2029 and weighted-average expected maturity of 7 years as of March 31, 2021. Coupons range from three-month LIBOR (“3ML”) plus 5.45% to 9.45% with a weighted-average coupon of 3ML + 7.15%. As of March 31, 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 March 31, 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 March 31, 2021, our investment in NPRC and its wholly owned subsidiaries had an amortized cost of $709,922 and a fair value of $1,084,385, including our investment in online consumer lending and rated secured structured notes as discussed above. The fair value of $982,585 related to NPRC’s real estate portfolio was comprised of forty-seven multi-families 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 March 31, 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						13,494
3						Cordova Regency, LLC						Pensacola, FL						11/15/2013						13,750						10,971
4						Crestview at Oakleigh, LLC						Pensacola, FL						11/15/2013						17,500						13,353
5						Inverness Lakes, LLC						Mobile, AL						11/15/2013						29,600						23,823
6						Kings Mill Pensacola, LLC						Pensacola, FL						11/15/2013						20,750						16,927
7						Plantations at Pine Lake, LLC						Tallahassee, FL						11/15/2013						18,000						13,591
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						84,398
13						Abbie Lakes OH Partners, LLC						Canal Winchester, OH						9/30/2014						12,600						15,400
14						Kengary Way OH Partners, LLC						Reynoldsburg, OH						9/30/2014						11,500						15,567
15						Lakeview Trail OH Partners, LLC						Canal Winchester, OH						9/30/2014						26,500						29,699
16						Lakepoint OH Partners, LLC						Pickerington, OH						9/30/2014						11,000						16,898
17						Sunbury OH Partners, LLC						Columbus, OH						9/30/2014						13,000						17,133
18						Heatherbridge OH Partners, LLC						Blacklick, OH						9/30/2014						18,416						24,511
19						Jefferson Chase OH Partners, LLC						Blacklick, OH						9/30/2014						13,551						19,058
20						Goldenstrand OH Partners, LLC						Hilliard, OH						10/29/2014						7,810						11,624
21						SSIL I, LLC						Aurora, IL						11/5/2015						34,500						25,927
22						Vesper Tuscaloosa, LLC						Tuscaloosa, AL						9/28/2016						54,500						43,057
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						51,111
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						54,764
34						23741 Pond Road Owner, LLC						Southfield, MI						11/8/2017						16,500						19,011
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

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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
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
																								$	2,162,181					$	1,818,964

On July 16, 2019, we sold $16,000, or 8.39%, of the outstanding principal balance of the senior secured note investment in Broder Bros., Co. We recorded a realized loss of $120 as a result of these transactions.

On August 6, 2019, Medmark repaid the $7,000 subordinated secured loan receivable to us. We recorded a realized gain of $13 as a result of these transactions.

On November 1, 2019, we sold six of our rated secured structured notes to NPRC’s wholly-owned subsidiary National General Lending Limited (“NGL”) at fair value. We recorded a realized gain of $1,885 as a result of these transactions.

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.

On December 11, 2020, we sold our 11.51% Class A voting interest in Edmentum Holdings. We recorded a realized gain of $3,724 as a result of this transaction. During the three months ended March 31, 2021, we received additional proceeds, realizing an additional gain of $745.

As of March 31, 2021, $3,319,705 of our loans to portfolio companies, at fair value, bear interest at floating rates and have LIBOR floors ranging from 0.0% - 3.0%. As of March 31, 2021, $627,351 of our loans to portfolio companies, at fair value, bear interest at fixed rates ranging from 8.25% - 22.0%. As of June 30, 2020, $3,148,081 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, 2020, $631,863 of our loans to portfolio companies, at fair value, bore interest at fixed rates ranging from 1.0% to 20.5%.

As of March 31, 2021 and June 30, 2020, the cost basis of our loans on non-accrual status amounted to $171,650 and $311,895, respectively, with fair value of $44,512 and $45,183, respectively. The fair values of these investments represent approximately 0.7% and 0.9% of our total assets at fair value as of March 31, 2021 and June 30, 2020, respectively.

Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 5.00%. As of March 31, 2021 and June 30, 2020, we had $38,999 and $41,487, 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 March 31, 2021 and June 30, 2020.

We have guaranteed $2,737 in standby letters of credit issued through a financial intermediary and $3,494 of equipment lease obligations on behalf of InterDent, Inc. (“InterDent”) as of March 31, 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

related payment obligations. As of March 31, 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. In evaluating these investments, we have voluntarily adopted the SEC’s new definition of “significant subsidiary” as set forth in Rule 1-02(w)(2) for BDC’s and closed end investment companies. Refer to Note 2. Significant Accounting policies - Recent Accounting Pronouncements for our assessment of the Final Rules and early adoption. 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 nine months ended March 31, 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 March 31,												Nine Months Ended March 31,
Summary Statement of Operations			2021						2020						2021						2020
Total revenue			$	95,906					$	118,326					$	242,930					$	407,921
Operating expenses			42,568						33,719						113,511						113,020
Operating income			53,338						84,607						129,419						294,901
Interest expense			(45,090)						(55,103)						(129,991)						(160,432)
Depreciation and amortization			(30,524)						(24,718)						(73,841)						(73,764)
Fair value adjustment			1,449						(11,562)						6,657						(16,519)
Net loss			$	(20,827)					$	(6,776)					$	(67,756)					$	44,186

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” and collectively with the 2014 Facility and the 2018 Facility, the “Revolving Credit Facility”). The lenders had extended commitments of $1,077,500 as of March 31, 2021. The Revolving Credit 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 September 9, 2024. It includes a revolving period that extends through September 9, 2023, 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

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(in thousands, except share and per share data)

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 March 31, 2021, we were in compliance with the applicable covenants.

Interest on borrowings under the 2019 Facility is one-month LIBOR plus 220 basis points. Additionally, the lenders charge a fee on the unused portion of the credit facility equal to either 50 basis points if more than 60% of the credit facility is drawn, or 100 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 2019 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.

For the nine months ended March 31, 2021 and March 31, 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 March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Average stated interest rate			2.32%						3.54%						2.35%						3.84%
Average outstanding balance			$373,734						$262,084						$376,646						$161,373

As of March 31, 2021 and June 30, 2020, we had $424,167 and $545,496, respectively, available to us for borrowing under the Revolving Credit Facility, net of $343,537 and $237,536 outstanding borrowings as of the respective balance sheet dates. As of March 31, 2021, the investments, including cash and cash equivalents, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,594,834, which represents 26.7% 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 $1,077,500. 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 $10,904 of new fees and $7,787 were carried over for continuing participants from the previous facilities, all of which are being amortized over the term of the facility in accordance with ASC 470-50. As of March 31, 2021, $7,510 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.

During the three months ended March 31, 2021 and March 31, 2020, we recorded $4,509 and $5,867, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $13,772 and $16,841, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.

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(in thousands, except share and per share data)

Note 5. Convertible Notes

2020 Notes

On April 11, 2014, we issued $400,000 aggregate principal amount of convertible notes that mature on April 15, 2020 (the “2020 Notes”), unless previously converted or repurchased in accordance with their terms. The 2020 Notes bear interest at a rate of 4.75% per year, payable semi-annually on April 15 and October 15 each year, beginning October 15, 2014. Total proceeds from the issuance of the 2020 Notes, net of underwriting discounts and offering costs, were $387,500. On January 30, 2015, we repurchased $8,000 aggregate principal amount of the 2020 Notes at a price of 93.0, including commissions. As a result of this transaction, we recorded a gain of $332, in the amount of the difference between the reacquisition price and the net carrying amount of the 2020 Notes, net of the proportionate amount of unamortized debt issuance cost. During the three months ended December 31, 2018, we repurchased an additional $13,500 aggregate principal amount of the 2020 Notes at a price of 99.5, including commissions. As a result of this transaction, we recorded a loss of $41, in the amount of the difference between the reacquisition price and the net carrying amount of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs. During the three months ended March 31, 2019, we repurchased an additional $129,798 aggregate principal amount of the 2020 Notes at a weighted average price of 101.4, including commission. As a result of these transactions, we recorded a net loss of $2,787 during the three months ended March 31, 2019, in the amount of the difference between the reacquisition price and the net carrying amounts of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs. During the three months ended June 30, 2019, we repurchased an additional $24,588 aggregate principal amount of the 2020 Notes at a weighted average price of $101.10, including commissions. As a result of these transactions, we recorded a net loss of $414 during the three months ended June 30, 2019, in the amount of the difference of the reacquisition price and the net carrying amounts of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs.

On June 28, 2019, we commenced a tender offer to purchase for cash any and all of the $224,114 then outstanding aggregate principal amount of the 2020 Notes (“June Tender Offer”). On July 27, 2019, $32,948 aggregate principal amount of the 2020 Notes, representing 14.7% of the previously outstanding 2020 Notes, were validly tendered and accepted. On August 12, 2019, we commenced a tender offer to purchase for cash up to $60,000 aggregate principal amount of the 2020 Notes (“August Tender Offer”). On September 10, 2019, $13,597 aggregate principal amount of the 2020 Notes, representing 7.1% of the previously outstanding 2020 Notes, were validly tendered and accepted. The June Tender Offer and August Tender Offer, resulted in our recognizing a loss of $668 during the three months ended September 30, 2019.

On September 24, 2019, we commenced a tender offer to purchase for cash up to $40,000 outstanding aggregate principal amount of the 2020 Notes (“2020 Notes September Tender Offer”). On October 23, 2019, $2,140 aggregate principal amount of the 2020 Notes, representing 1.2% of the previously outstanding 2020 Notes, were validly tendered and accepted. On November 7, 2019, we commenced a tender offer to purchase for cash up to $10,000 aggregate principal amount of the 2020 Notes (“2020 Notes November Tender Offer”). On December 7, 2019, $392 aggregate principal amount of the 2020 Notes, representing 0.2% of the previously outstanding 2020 Notes, were validly tendered and accepted. The 2020 Notes September Tender Offer and 2020 Notes November Tender Offer resulted in our recognizing a loss of $31 during the three months ended December 31, 2019.

On December 23, 2019, we commenced a tender offer to purchase for cash up to $10,000 aggregate principal amount of the 2020 Notes (“2020 Notes December Tender Offer”). On January 22, 2020, $2,215 aggregate principal amount of the 2020 Notes, representing 1.3% of the previously outstanding 2020 Notes, were validly tendered and accepted. The 2020 Notes December Tender Offer resulted in our recognizing a loss of $14 during the three months ended March 31, 2020. During the three months ended March 31, 2020, we repurchased an additional $45,111 aggregate principal amount of the 2020 Notes at a weighted average price of 100.5 including commissions. As a result of this transaction, we recorded a loss of $220, in the amount of the difference between the reacquisition price and the net carrying amount of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs.

On April 15, 2020, we repaid the outstanding principal amount of $127,711 of the 2020 Notes, plus interest. No gain or loss was realized on the transaction.

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(in thousands, except share and per share data)

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.

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”).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The 2022 Notes March 2021 Tender Offer expired at 12:00 midnight, New York City time, on April 14, 2021 (one minute after 11:59 p.m., New York City time, on April 13, 2021). As of March 31, 2021, the outstanding aggregate principal amount of the 2022 Notes is $111,105.

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, 20l9 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 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 March 31, 2021, the outstanding aggregate principal amount of the 2025 Notes is $156,168.

Certain key terms related to the convertible features for the 2020 Notes, 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 March 31, 2021(1)(2)												100.2305						110.7420
Conversion price at March 31, 2021(2)(3)												$	9.98					$	9.03
Last conversion price calculation date												4/11/2020						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.

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 for. 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

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(in thousands, except share and per share data)

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 $9,356 which are being amortized over the terms of the Convertible Notes. As of March 31, 2021, $2,162 of the original issue discount and $2,356 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 March 31, 2021 and March 31, 2020, we recorded $4,870 and $9,728, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $17,905 and $30,089, 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.

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 (“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. As of March 31, 2021, the outstanding aggregate principal amount of the 2023 Notes is $285,055.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

5.00% 2019 Notes

On April 7, 2014, we issued $300,000 aggregate principal amount of unsecured notes that mature on July 15, 2019 (the “5.00% 2019 Notes”). Included in the issuance is $45,000 of Prospect Capital InterNotes® that were exchanged for the 5.00% 2019 Notes. The 5.00% 2019 Notes bear interest at a rate of 5.00% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2014. Total proceeds from the issuance of the 5.00% 2019 Notes, net of underwriting discounts and offering costs, were $295,998. On June 7, 2018, we commenced a tender offer to purchase for cash any and all of the $300,000 aggregate principal amount outstanding of the 5.00% 2019 Notes. On June 20, 2018, $146,464 aggregate principal amount of the 5.00% 2019 Notes, representing 48.8% of the previously outstanding 5.00% 2019 Notes, were validly tendered and accepted. The transaction resulted in our recognizing a $3,705 loss during the three months ended June 30, 2018. On September 26, 2018, we repurchased the remaining $153,536 aggregate principal amount of the 5.00% 2019 Notes at a price of $101.645, including commissions. The transaction resulted in our recognizing a loss of $2,874 during the year ended June 30, 2019.

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.

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. As of March 31, 2021, the outstanding aggregate principal amount of the 2028 Notes is $70,761.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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. As of March 31, 2021, the outstanding aggregate principal amount of the 6.375% 2024 Notes is $81,615.

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 March 31, 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 March 31, 2021, the outstanding aggregate principal amount of the 2026 Notes is $400,000.

The 2023 Notes, the 2028 Notes, the 6.375% 2024 Notes, the 2029 Notes, and the 2026 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 $7,568 and debt issuance costs of $13,606, which are being amortized over the term of the notes. As of March 31, 2021, $5,372 of the original issue discount and $8,887 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 March 31, 2021 and March 31, 2020, we recorded $12,879 and $12,834, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $38,441 and $38,481, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Note 7. Prospect Capital InterNotes® 

On February 16, 2012, we entered into a selling agent agreement (the “Original Selling Agent Agreement”) with 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 Incapital 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 Incapital 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 Incapital 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 March 31, 2021, $673,280 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 nine months ended March 31, 2021, we issued $109,562 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $107,830. These notes were issued with stated interest rates ranging from 1.50% to 6.00% with a weighted average interest rate of 4.70%. These notes mature between January 15, 2024 and April 15, 2031. The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 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						62,567						3.00% – 5.50%						4.60%						July 15, 2025 – April 15, 2026
7						16,921						3.25% – 5.75%						4.84%						July 15, 2027 – April 15, 2028
10						29,412						3.50% – 6.00%						4.90%						July 15, 2030 – April 15, 2031
						$	109,562

During the nine months ended March 31, 2020, we issued $224,934 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $221,194. These notes were issued with stated interest rates ranging from 3.75% to 5.50% with a weighted average interest rate of 4.29%. These notes mature between July 15, 2024 and March 15, 2030 . The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2020:

Tenor at Origination (in years)						Principal Amount						Interest Rate Range						Weighted Average Interest Rate						Maturity Date Range
5						$	105,379					3.75% – 5.00%						4.12%						July 15, 2024 - March 15, 2025
7						44,184						4.00% – 5.25%						4.26%						July 15, 2026 - March 15, 2027
10						75,371						3.75% – 5.50%						4.56%						July 15, 2029 - March 15, 2030
						$	224,934

During the nine months ended March 31, 2021, we repaid $4,022 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 $112,489 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.45%. As a result of these transactions, we recorded a loss in the amount of the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the nine months ended March 31, 2021 was $1,100.

The following table summarizes the Prospect Capital InterNotes® outstanding as of March 31, 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						168,210						3.00% – 5.50%						4.31%						July 15, 2024 – April 15, 2026
7						121,045						3.25% – 6.00%						5.07%						July 15, 2024 – April 15, 2028
8						24,180						4.50% – 5.75%						4.67%						August 15, 2025 – July 15, 2026
10						188,050						3.50% – 6.25%						5.26%						January 15, 2024 – April 15, 2031
12						2,978						6.00%						6.00%						November 15, 2025 – December 15, 2025
15						16,826						5.75% – 6.00%						5.79%						May 15, 2028 – November 15, 2028
18						18,552						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						30,528						6.25% – 6.50%						6.39%						August 15, 2038 – May 15, 2039
30						98,472						5.50% – 6.75%						6.25%						November 15, 2042 – October 15, 2043
						$	673,280

During the nine months ended March 31, 2020, we redeemed, prior to maturity $255,822 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.06% in order to replace shorter maturity debt with longer-term debt. During the nine months ended March 31, 2020, we repaid $4,252 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 nine months ended March 31, 2020 was $2,435.

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

Tenor at Origination (in years)						Principal Amount						Interest Rate Range						Weighted Average Interest Rate						Maturity Date Range
5						$	218,240					3.75% – 5.75%						4.81		%				September 15, 2023 -July 15, 2025
7						104,529						4.00% – 6.00%						5.11		%				July 15, 2024 - July 15, 2027
8						24,325						4.50% – 5.75%						4.67		%				August 15, 2025 - July 15, 2026
10						159,802						3.75% – 6.25%						5.32		%				January 15, 2024 - July 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						18,741						4.50% – 6.25%						5.58		%				December 15, 2030 - August 15, 2031
20						3,847						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						100,206						5.50% – 6.75%						6.25		%				November 15, 2042 - October 15, 2043
						$	680,229

In connection with the issuance of Prospect Capital InterNotes®, we incurred $29,754 of fees which are being amortized over the term of the notes, of which $12,307 remains to be amortized and is included as a reduction within Prospect Capital InterNotes® on the Consolidated Statement of Assets and Liabilities as of March 31, 2021.

During the three months ended March 31, 2021 and March 31, 2020, we recorded $10,515 and $9,217, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $30,431 and $28,192, 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 March 31, 2021, our asset coverage ratio stood at 269.0% based on our outstanding senior securities representing indebtedness of $2,190,691 and our asset coverage ratio on our senior securities that are stock was 261.0%. As of June 30, 2020, our asset coverage ratio stood at 239.2% based on our outstanding senior securities of $2,170,974. Refer to Note 9, Equity Offerings, 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 March 31, 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 2021 (as of March 31, 2021)						$	343,537					$	17,152					—						—
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						—						—
Fiscal 2011 (as of June 30, 2011)						84,200						18,065						—						—
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						—						—
Fiscal 2011 (as of June 30, 2011)						150,000						3,740						—						—
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						—						—
Fiscal 2011 (as of June 30, 2011)						172,500						3,740						—						—
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 2021 (as of March 31, 2021)						$	111,105					$	2,690					—						—
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 2021 (as of March 31, 2021)						$	285,055					$	2,690					—						—
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
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 2021 (as of March 31, 2021)						$	81,615					$	2,690					—						—
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 2021 (as of March 31, 2021)						$	156,168					$	2,690					—						—
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 2021 (as of March 31, 2021)						$	400,000					$	2,690					—						—
2028 Notes
Fiscal 2021 (as of March 31, 2021)						$	70,761					$	2,690					—						$	1,016
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 2021 (as of March 31, 2021)						$	69,170					$	2,690					—						$	1,026
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 2021 (as of March 31, 2021)						$	673,280					$	2,690					—						—
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 2021 (as of March 31, 2021)						$	66,900					$	2,610					—						—
All Senior Securities(12)(13)
Fiscal 2021 (as of March 31, 2021)						$	2,257,591					$	2,610					—						—
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						—						—
Fiscal 2011 (as of June 30, 2011)						406,700						3,740						—						—

(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).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

(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 30th, 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 $38,999 as of March 31, 2021 as Senior Securities for purposes of Section 18 of the 1940 Act, our asset coverage per unit would be $2,566.

(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.

The following table shows our outstanding debt as of March 31, 2021.

			Principal Outstanding						Unamortized Discount & Debt Issuance Costs						Net Carrying Value						Fair Value(1)						Effective Interest Rate
Revolving Credit Facility(2)			$	343,537					$	7,510					$	343,537		(3)			$	343,537					1ML+2.20%			(6)
2022 Notes			111,105						1,017						110,088						114,260			(4)			5.69%			(7)
2025 Notes			156,168						3,501						152,667						168,260			(4)			6.63%			(7)
Convertible Notes			267,273												262,755						282,520
6.375% 2024 Notes			81,615						510						81,105						89,470			(4)			6.49%			(7)
2023 Notes			285,055						1,597						283,458						302,298			(4)			6.07%			(7)
2026 Notes			400,000						7,966						392,034						395,880			(4)			3.92%			(7)
2028 Notes			70,761						1,986						68,775						72,488			(4)			6.77%			(7)
2029 Notes			69,170						2,200						66,970						71,217			(4)			7.38%			(7)
Public Notes			906,601												892,342						931,353
Prospect Capital InterNotes®			673,280						12,307						660,973						759,983			(5)			6.00%			(8)
Total			$	2,190,691											$	2,159,607					$	2,317,393

(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 March 31, 2021.

(2)The maximum draw amount of the Revolving Credit facility as of March 31, 2021 is $1,077,500.

(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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

(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 2028 Notes and 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 our outstanding debt as of June 30, 2020:

			Principal Outstanding						Unamortized Discount & Debt Issuance Costs						Net Carrying Value						Fair Value (1)						Effective Interest Rate
Revolving Credit Facility(2)			$	237,536					$	9,145					$	237,536		(3)			$	237,536					1ML+2.20%			(6)
2022 Notes			258,240						3,615						254,625						247,133			(4)			5.65%			(7)
2025 Notes			201,250						5,277						195,973						194,279			(4)			6.63%			(7)
Convertible Notes			459,490												450,598						441,412
6.375% 2024 Notes			100,000						762						99,238						100,771			(4)			6.64%			(7)
2023 Notes			320,000						2,426						317,574						325,395			(4)			6.09%			(7)
2024 Notes			233,788						3,939						229,849						229,580			(4)			6.76%			(7)
2028 Notes			70,761						2,142						68,619						66,842			(4)			6.77%			(7)
2029 Notes			69,170						2,344						66,826						67,233			(4)			7.38%			(7)
Public Notes			793,719												782,106						789,821
Prospect Capital InterNotes®			680,229						12,802						667,427						658,292			(5)			6.06%			(8)
Total			$	2,170,974											$	2,137,667					$	2,127,061

(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, 2020.

(2)The maximum draw amount of the Revolving Credit facility as of June 30, 2020 is $1,077,500.

(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 2024 Notes, the 2028 Notes, and 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.

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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 March 31, 2021:

			Payments Due by Period
			Total						Less than 1 Year						1 – 3 Years						3 – 5 Years						After 5 Years
Revolving Credit Facility			$	343,537					—						$	—					$	343,537					$	—
Convertible Notes			267,273						—						111,105						156,168						—
Public Notes			906,601						—						366,670						400,000						139,931
Prospect Capital InterNotes®			673,280						—						11,744						238,660						422,876
Total Contractual Obligations			$	2,190,691					$	—					$	489,519					$	1,138,365					$	562,807

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of June 30, 2020:

			Payments Due by Period
			Total						Less than 1 Year						1 – 3 Years						3 – 5 Years						After 5 Years
Revolving Credit Facility			$	237,536					$	—					$	—					$	237,536					$	—
Convertible Notes			459,490						—						258,240						201,250						—
Public Notes			793,719						—						320,000						333,788						139,931
Prospect Capital InterNotes®			680,229						—						—						243,062						437,167
Total Contractual Obligations			$	2,170,974					$	—					$	578,240					$	1,015,636					$	577,098

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, 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 Incapital LLC, pursuant to which Incapital 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”, and together with the Series A1 Preferred Stock, Series M1 Preferred Stock and Series M2 Preferred Stock, the “Preferred Stock”). In connection with such offering, on October 30, 2020, we filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland, reclassifying and designating 20,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of Preferred Stock as Convertible Preferred Stock.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

In connection with the Preferred Stock Offering, effective August 3, 2020 and as amended on October 30, 2020, we adopted and amended, respectively, a Preferred Stock Dividend Reinvestment Plan (the “Preferred Stock DRIP”), pursuant to which holders of the Preferred Stock will have dividends on their Preferred Stock automatically reinvested in additional shares of such Preferred Stock at a price per share of $25.00, if they elect.

Each series of 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 Preferred Stock on a national securities exchange, shares of the Preferred Stock are convertible, at the option of the holder of the 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 (as defined in the applicable prospectus supplement)(such arithmetic average, the “5-day VWAP”). For the Series A1 Preferred Stock and the Series AA1 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 A Share Holder Optional Conversion Fee (as described in the prospectus supplement relating to the Series A1 Preferred Stock or the Series AA1 Preferred Stock, as applicable) applicable on the respective Holder Conversion Deadline (as defined in the applicable prospectus supplement). 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, but if a holder of Series M Preferred Stock exercises a Holder Optional Conversion within the first twelve months of issuance of such Series M Preferred Stock, the Settlement Amount payable to such holder will be reduced by the aggregate amount of all dividends, whether paid or accrued, on such Series M Preferred 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 Preferred Stock has been issued. Beginning on the five year anniversary of the date on which a share of 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 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 Preferred Stock has been issued, or, for listed shares of 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 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 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 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 both the Series A1 Preferred Stock and the Series M Preferred Stock, “IOC Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the date fixed for conversion. Subject to certain limited exceptions, we will not exercise an Issuer Optional Conversion with respect to a share of Preferred Stock until after the date set forth in the applicable prospectus supplement with respect to the Preferred Stock. 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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 Preferred Stock, the holder of such Preferred Stock may instead elect a Holder Optional Conversion with respect to such 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.

During the nine months ended March 31, 2021, we issued 2,657,101 shares of our 5.50% Series A1 Preferred Stock for net proceeds of $61,428 and 21,760 shares of our 5.50% Series M1 Preferred Stock for net proceeds of $544, each excluding offering costs and preferred stock dividend reinvestments.

Shares of the 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 Preferred Stock through the Preferred Stock DRIP.

During the nine months ended March 31, 2021, we distributed approximately $446 to our preferred stockholders, as summarized in the following table:

Declaration Date						Record Date						Payment Date						Monthly Amount ($ per share), before pro ration for partial periods						Amount Distributed
11/6/2020						11/18/2020						12/1/2020						$	0.114583					$	13
12/4/2020						12/21/2020						1/4/2021						0.114583						33
12/4/2020						1/20/2021						2/1/2021						0.114583						75
12/4/2020						2/17/2021						3/1/2021						0.114583						97
2/9/2021						3/17/2021						4/1/2021						0.114583						228
																								$	446

The above table includes dividends paid during the nine months ended March 31, 2021. It does not include distributions previously declared to preferred stockholders 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 March 31, 2021:

•$0.114583 per share (before pro ration for partial period holders of record) for holders of record on April 21, 2021 with a payment date of May 3, 2021

•$0.114583 per share (before pro ration for partial period holders of record) for holders of record on May 19, 2021 with a payment date of June 1, 2021

During the nine months ended March 31, 2021, we issued 364 shares of our 5.50% Series A1 Preferred Stock, in connection with the preferred stock dividend reinvestment plan.

During the nine months ended March 31, 2021, 3,212 shares of our 5.50% Series A1 Preferred Stock were converted to 9,982 shares of our common stock, in connection with Holder Optional Conversions.

Common Stock

Our common stockholders’ equity accounts as of March 31, 2021 and March 31, 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 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.

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 nine months ended March 31, 2021 and March 31, 2020. As of March 31, 2021, the approximate dollar value of shares that may yet be purchased under the Repurchase Program is $65,860.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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”). In connection with the Common Stock ATM, we have made the following issuances:

Issuances of Common Stock						Number of Shares Issued						Gross Proceeds						Underwriting Fees						Offering Expenses						Average Offering Price
During the year ended June 30, 2020:
June 15, 2020 – June 30, 2020						1,158,222						$	6,208					$	62					$	—					$	5.36

Excluding common stock dividend reinvestments, during the nine months ended March 31, 2021 and March 31, 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 common 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 March 15, 2021, we filed a notice of meeting and the definitive proxy statement in connection with a special meeting of our stockholders that is scheduled to be held on June 11, 2021 for the purpose of asking our stockholders to vote on a proposal to authorize us, with approval of our Board of Directors, to sell shares of our common stock at a price or prices below our then current net asset value per share in one or more offerings during the next 12 months following such approval, subject to certain conditions.

During the nine months ended March 31, 2021 and March 31, 2020, we distributed approximately $206,288 and $198,455, respectively, to our common stockholders. The following table summarizes our distributions declared and payable for the nine months ended March 31, 2020 and March 31, 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)
5/7/2019						7/31/2019						8/22/2019						$	0.06					$	22,032
5/7/2019						8/30/2019						9/19/2019						0.06						22,037
8/22/2019						9/30/2019						10/24/2019						0.06						22,042
8/22/2019						10/31/2019						11/20/2019						0.06						22,046
11/6/2019						11/29/2019						12/19/2019						0.06						22,051
11/6/2019						1/2/2020						1/23/2020						0.06						22,055
11/6/2019						1/31/2020						2/20/2020						0.06						22,059
2/7/2020						2/28/2020						3/19/2020						0.06						22,064
2/7/2020						3/31/2020						4/23/2020						0.06						22,069
Total declared and payable for the nine months ended March 31, 2020																								$	198,455
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
8/25/2020						10/30/2020						11/19/2020						0.06						22,836
11/6/2020						11/30/2020						12/24/2020						0.06						22,942
11/6/2020						12/31/2020						1/21/2021						0.06						23,046
11/6/2020						1/29/2020						2/18/2021						0.06						23,140
2/9/2021						2/26/2021						3/18/2021						0.06						23,219
2/9/2021						3/31/2021						4/22/2021						0.06						23,244
Total declared and payable for the nine months ended March 31, 2021																								$	206,288

Dividends and distributions to common stockholders are recorded on the ex-dividend date. As such, the table above includes distributions with record dates during nine months ended March 31, 2021 and March 31, 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 March 31, 2021:

•$0.06 per common share for April 2021 holders of record on April 30, 2021 with a payment date of May 20, 2021

During the nine months ended March 31, 2021 and March 31, 2020, we issued 13,852,073 and 686,901 shares of our common stock, respectively, in connection with the common stock dividend reinvestment plan.

During the nine months ended March 31, 2021, Prospect officers and directors purchased 7,057,543 shares of our common stock, or 1.82% of total outstanding shares as of March 31, 2021, both through the open market transactions and shares issued in connection with our common stock dividend reinvestment plan.

As of March 31, 2021, we have reserved 28,430,466 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 Preferred Stock.

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(in thousands, except share and per share data)

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 and nine months ended March 31, 2021 and March 31, 2020.

			Three Months Ended March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Structuring, advisory, and amendment fees			$	8,875					$	3,545					$	26,293					$	19,904
Royalty and net revenue interests			9,464						9,435						27,638						22,267
Administrative agent fees			132						138						381						369
Total other income			$	18,471					$	13,118					$	54,312					$	42,540

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 nine months ended March 31, 2021 and March 31, 2020, we did not have potential common shares that would be antidilutive.

The following information sets forth the computation of basic and diluted earnings per common share for the three and nine months ended March 31, 2021 and March 31, 2020:

			For the Three Months ended March 31, 2021												For the Nine Months Ended March 31, 2021
			Basic						Diluted						Basic						Diluted
Net increase in net assets resulting from operations attributable to Common Stockholders			$	246,008					$	246,408					$	719,675					$	720,121
Weighted average common shares outstanding			385,996,921						389,420,855						380,985,329						382,259,257
Earnings per share			$	0.64					$	0.63					$	1.89					$	1.88

			For the Three Months ended March 31, 2020												For the Nine Months Ended March 31, 2020
			Basic						Diluted						Basic						Diluted
Net (decrease) increase in net assets resulting from operations attributable to Common Stockholders			$	(185,699)					$	(185,699)					$	(178,837)					$	(178,837)
Weighted average common shares outstanding			367,685,511						367,685,511						367,460,412						367,460,412
Earnings (loss) per share			$	(0.51)					$	(0.51)					$	(0.49)					$	(0.49)

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, 2020, 2019, and 2018 were as follows:

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(in thousands, except share and per share data)

						Tax Year Ended August 31,
						2020						2019						2018
Ordinary income						$	169,041					$	263,773					$	269,095
Capital gain						—						—						—
Return of capital						96,720						—						—
Total dividends paid to stockholders						$	265,761					$	263,773					$	269,095

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 results in an increase to distributable earnings of $12,263 for the fiscal year ended June 30, 2021.

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, 43.97% of our distributions as of March 31, 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 March 31, 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 ending 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, 2020, 2019, and 2018:

						Tax Year Ended August 31,
						2020						2019						2018
Net increase (decrease) in net assets resulting from operations						$	(78,949)					$	93,093					$	389,732
Net realized (gains) losses on investments						10,139						(5,923)						26,762
Net unrealized (gains) losses on investments						328,997						217,159						(105,599)
Other temporary book-to-tax differences						(91,368)						(87,511)						(42,583)
Permanent differences						57						78						31
Taxable income before deductions for distributions						$	168,876					$	216,896					$	268,343

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, 2020, we had capital loss carryforwards of approximately $105,359 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, 2020, we had no cumulative taxable income in excess of cumulative distributions.

As of March 31, 2021, the cost basis of investments for tax purposes was $5,907,321 resulting in an estimated net unrealized loss of $23,993. As of March 31, 2021, the gross unrealized gains and losses were $1,059,691 and $1,083,684, respectively. As of June 30, 2020, the cost basis of investments for tax purposes was $5,778,417 resulting in an estimated net unrealized loss of $546,089. As of June 30, 2020, the gross unrealized gains and losses were $654,709 and $1,200,798, respectively. Due to the

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(in thousands, except share and per share data)

difference between our fiscal year end and tax year end, the cost basis of our investments for tax purposes as of March 31, 2021 and June 30, 2020 was calculated based on the book cost of investments as of March 31, 2021 and June 30, 2020, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2020 and 2019, 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, 2020, we decreased overdistributed net investment income by $57 and decreased capital in excess of par value by $57. During the tax year ended August 31, 2019, we decreased overdistributed net investment income by $78 and decreased capital in excess of par value by $78. Due to the difference between our fiscal and tax year end, the reclassifications for the taxable year ended August 31, 2019 is being recorded in the fiscal year ending June 30, 2020 and the reclassifications for the taxable year ended August 31, 2018 were recorded in the fiscal year ended June 30, 2019.

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 $29,183 and $26,625 during the three months ended March 31, 2021 and March 31, 2020, respectively. The total gross base management fee incurred to the favor of the Investment Advisor was $83,866 and $82,631 during the nine months ended March 31, 2021 and March 31, 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 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

•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.

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 $18,251 and $17,119 during the three months ended March 31, 2021 and March 31, 2020, respectively. The fees incurred for the nine months ended March 31, 2021 and March 31, 2020 were $53,354 and $51,855, respectively. No capital gains incentive fee was incurred during the three or nine months ended March 31, 2021 and March 31, 2020. Income incentive fee for the nine months ended March 31, 2021 includes a $264 adjustment for fees earned in prior periods that were neither expensed nor paid to the Investment Adviser.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The allocation of net overhead expense from Prospect Administration was $2,685 and $4,096 for the three months ended March 31, 2021 and March 31, 2020, respectively.

The allocation of net overhead expense from Prospect Administration was $10,768 and $13,601 for the nine months ended March 31, 2021 and March 31, 2020, respectively. Prospect Administration received estimated payments of $1,038 and $1,225 directly from our portfolio companies, and certain funds managed by the Investment Adviser for legal services during the nine months ended March 31, 2021 and March 31, 2020, respectively. In addition, we were given a credit in the amount of $3,522 for legal expenses incurred on behalf of our portfolio companies that were remitted to Prospect Administration during the three months ended March 31, 2021. 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.

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 March 31, 2021 and March 31, 2020, we received payments of $1,835 and $2,010, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration. During the nine months ended March 31, 2021 and March 31, 2020, we received payments of $5,655 and $3,310, 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 suspended 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

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(in thousands, except share and per share data)

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 March 31, 2021 and March 31, 2020, we recognized expenses that were reimbursed for valuation services of $32 and $36, respectively. During the nine months ended March 31, 2021 and March 31, 2020, we recognized expenses that were reimbursed for valuation services of $95 and $123, 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. As of March 31, 2021 and June 30, 2020, we accrued a receivable from Priority Income Fund, Inc. and Prospect Flexible Income Fund, Inc. (f/k/a TP Flexible Income Fund, Inc.) for software fees of $0 and $36, respectively, which will be reimbursed to us.

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.

Arctic Energy Services, LLC

Prospect owned 100% of the equity of Arctic Oilfield Equipment USA, Inc. (“Arctic Equipment”), a Consolidated Holding Company. Arctic Equipment owns 70% of the equity of Arctic Energy Services, LLC (“Arctic Energy”), with Ailport Holdings, LLC (“Ailport”) (100% owned and controlled by Arctic Energy management) owning the remaining 30% of the equity of Arctic Energy. Arctic Energy provides oilfield service personnel, well testing flowback equipment, frac support systems and other services to exploration and development companies in the Rocky Mountains. As of June 30, 2017, we reported Arctic Energy as a separate controlled company. On April 6, 2018, Arctic Equipment merged with CP Energy Services, Inc. (“CP Energy”) and our equity interest was exchanged for newly issued common shares of CP Energy. Refer to discussion on CP Energy ownership below.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income
Interest Income from CP Energy			$	1,171					$	1,147					$	3,460					$	3,514
Interest Income from Spartan			296						313						901						2,816
Total Interest Income			$	1,467					$	1,460					$	4,361					$	6,330
Other Income
Administrative Agent			$	—					$	6					$	13					$	6
Total Other Income			$	—					$	6					$	13					$	6
Managerial Assistance (1)			$	—					$	—					$	—					$	150
Realized Gain			—						—						2,832						—

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

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions			$	—					$	—					$	26,193					$	5,039
Interest Income Capitalized as PIK			1,171						574						3,459						2,693
Repayment of Loan Receivable			—						—						23,361						—
Return of Capital			—						—						1						—

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (2)			$	115					$	15
Other Receivables (3)			89						16

(2) Interest income recognized but not yet paid.

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

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 98.63% 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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	3,650					$	3,011					$	10,569					$	8,978
Other Income
Structuring Fee			$	—					$	—					$	—					$	112
Total Other Income			$	—					$	—					$	—					$	112
Managerial Assistance (1)			$	175					$	175					$	525					$	175
Reimbursement of Legal, Tax, etc.(2)			—						—						—						7

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

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(in thousands, except share and per share data)

(2) Paid from Credit Central to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to Credit Central (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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions (3)			$	—					$	—					$	—					$	5,600
Accreted Original Issue Discount			115						86						325						239
Interest Income Capitalized as PIK			2,338						2,923						9,044						3,886
Repayment of loan receivable			3,765						—						3,765						—

(3) During the nine months ended March 31, 2020, Prospect provided $5,600 of equity financing to support growth in Credit Central’s loan portfolio.

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (4)			$	38					$	35
Other Receivables (5)			—						2

(4) Interest income recognized but not yet paid.

(5) 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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	2,470					$	2,094					$	7,212					$	6,168
Managerial Assistance (1)			63						63						125						—

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

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions (2)			$	340					$	—					$	865					$	500
Interest Income Capitalized as PIK			4,745						3,856						9,070						7,630

(2) During the nine months ended March 31, 2020, Prospect made a follow-on $500 first lien senior secured debt. During the nine months ended March 31, 2021, Prospect made a follow-on $865 first lien senior secured debt.

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (2)			$	1,737					$	3,606
Other Receivables - Due to PA (3)			—						—
Other Receivables (4)			—						7

(2) Interest income recognized but not yet paid.

(3) Managerial assistance recognized but not yet paid by Echelon and is included by Prospect within Other Receivable and Due to PA.

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

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	14,970					$	14,278					$	45,752					$	43,485
Other Income
Structuring Fee			$	5,443					$	—					$	15,443					$	—
Total Other Income			$	5,443					$	—					$	15,443					$	—
Managerial Assistance (1)			$	600					$	600					$	1,800					$	1,800
Reimbursement of Legal, Tax, etc. (2)			—						—						—						1

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

(2) Paid from First Tower to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to First Tower (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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income Capitalized as PIK			$	463					$	—					$	463					$	2,849
Repayment of loan receivable			—						3,635						4,899						5,908

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (3)			$	167					$	158
Other Receivables (4)			—						10

(3) Interest income recognized but not yet paid.

(4) 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.

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	5,784					$	4,743					$	16,507					$	14,159

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions			$	—					$	3,750					$	—					$	3,750
Interest Income Capitalized as PIK			$	4,073					$	3,089					$	11,395					$	9,166

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (1)			$	66					$	52
Other Receivables (2)			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.

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Other Income
Royalty/Net Interest			$	—					$	36					$	—					$	36
Total Other Income			$	—					$	36					$	—					$	36

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions (1)			$	—					$	—					$	—					$	2,378

(1) During the nine months ended March 31, 2020, we provided $2,378 of equity financing to Kickapoo.

			As of
			March 31, 2021						June 30, 2020
Other Receivables (2)			$	7					$	—

(2) 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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.

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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income
Interest Income from MITY-Lite			$	3,603					$	2,264					$	8,392					$	6,722
Interest Income from Broda Canada			—						—						—						—
Total Interest Income			$	3,603					$	2,264					$	8,392					$	6,722
Other Income
Structuring Fee			$	66					$	—					$	66					$	—
Advisory Fee			—						—						—						293
Total Other Income			$	66					$	—					$	66					$	293
Managerial Assistance (1)			$	—					$	75					$	150					$	75

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

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions			$	2,650					$	—					$	2,650					$	—
Interest Income Capitalized as PIK			1,304						800						3,028						2,601
Repayment of loan receivable			(1,142)						139						(850)						428

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (2)			$	17					$	26
Other Receivables (3)			—						1

(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”).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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 out 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.

During the nine months ended March 31, 2021, we received partial repayments of $69,350 of our loans previously outstanding with NPRC, and provided $167,853 of debt financing to NPRC for the acquisition of real estate properties, to fund capital expenditures for existing real estate properties, to provide working capital, and to fund purchases of rated secured structured notes.

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	14,784					$	19,432					$	42,627					$	52,901
Other Income
Structuring Fee			$	904					$	—					$	2,337					$	3,190
Advisory Fee									—						—						7,595
Royalty/Net Interest			9,297						9,231						27,134						21,727
Total Other Income			$	10,201					$	9,231					$	29,471					$	32,512
Managerial Assistance (1)			$	525					$	525					$	1,575					$	525
Reimbursement of Legal, Tax, etc.(2)			487						124						1,181						571

(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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions			$	46,083					$	33,664					$	167,853					$	97,949
Repayment of loan receivable			30,600						142,019						69,350						235,019

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (3)			$	239					$	212
Other Receivables (4)			1						2

(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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	1,013					$	988					$	3,081					$	2,918
Dividend Income			1,384						—						1,384						—
Managerial Assistance (1)			100						100						300						200

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

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income Capitalized as PIK			$	—					$	167					$	173					$	971
Repayment of loan receivable			(384)						—						(384)						—

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (2)			$	11					$	11
Other Receivables (3)			—						2

(2) Interest income recognized but not yet paid.

(3) 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 94.82% and 93.00% of the fully-diluted equity of NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) (“NMMB”) as of March 31, 2021 and June 30, 2020, 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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income
Interest Income from NMMB			$	130					$	380					$	399					$	518
Total Interest Income			$	130					$	380					$	399					$	518
Dividend Income			$	—					$	—					$	—					$	2,797
Other Income
Structuring Fee			$	—					$	—					$	—					$	453
Total Other Income			$	—					$	—					$	—					$	453
Managerial Assistance (1)			$	100					$	100					$	300					$	100

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions			$	—					$	—					$	—					$	15,100
Repayment of loan receivable
Repayment from Armed Forces			$	—					$	—					$	—					$	3,114
Repayment from NMMB			38						10,038						114						10,038
Total Repayment of loan receivable (2)			$	38					$	10,038					$	114					$	13,152

(2) During the nine months ended March 31, 2021, Prospect received partial repayments totaling $114 for our Senior Secured Notes outstanding with NMMB, Inc.

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (3)			$	1					$	1
Other Receivables (4)			—						2

(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% ownership interest of Pacific World as of March 31, 2021 and June 30, 2020, respectively. As a result, Prospect’s investment in Pacific World is classified as a control investment.

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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	1,071					$	—					$	3,228					$	527
Reimbursement of Legal, Tax, etc. (3)			2,377						—						2,377						—

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions (1)			$	—					$	3,000					$	—					$	12,456
Interest Income Capitalized as PIK			605						4,923						1,870						4,923

(1) During the nine months ended March 31, 2020, Prospect provided $12,456 of equity financing to Pacific World to fund working capital needs.

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (2)			$	72					$	10
Other Receivables (3)			29						19

(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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	716					$	770					$	2,147					$	2,360
Managerial Assistance (1)			45						45						135						45
Reimbursement of Legal, Tax, etc.(2)			—						—						—						12

(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
			March 31, 2021						June 30, 2020
Interest Receivable (3)			$	8					$	8
Other Receivables (4)			1						—

(3) Interest income recognized but not yet paid.

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

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	576					$	637					$	1,761					$	1,903
Other Income
Structuring Fee			$	—					—						$	—					$	100
Total Other Income			$	—					$	—					$	—					$	100
Managerial Assistance (1)			$	3					$	3					$	8					$	6
Realized Gain			$	121					$	—					$	121					$	—

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

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions			$	—					$	1,900					$	—					$	2,900
Repayment of loan receivable			170						167						510						494

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (2)			$	7					$	6
Other Receivables (3)			1						1

(2) Interest income recognized by 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. (“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 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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income			$	50					$	—					$	51					$	—

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Additions (1)			$	—					$	—					$	2,000					$	1,500
Repayment of loan receivable (2)			—						(2,267)						—						5,950

(1) During the nine months ended March 31, 2020, Prospect provided $1,500 of equity financing to USES to fund capital expenditures and repayment of accounts payable. During the nine months ended March 31, 2021, Prospect provided $2,000 of new Senior Acquisition Term Loan financing to USES to fund company’s equity investment.

(2) During the nine months ended March 31, 2020, Prospect received $5,950 of Senior Secured Term Loan A repayment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (3)			$	1					$	—
Other Receivables (4)			53						—

(3) Interest income recognized by not yet paid.

(4) 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												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Interest Income
Interest Income from Valley			$	274					$	278					$	834					$	838
Interest Income from Valley Electric			1,498						1,498						4,495						4,494
Total Interest Income			$	1,772					$	1,776					$	5,329					$	5,332
Dividend Income (1)			$	—					$	2,267					$	2,261					$	6,538
Other Income
Residual Profit Interest			$	167					$	167					$	500					$	500
Total Other Income			$	167					$	167					$	500					$	500
Managerial Assistance (2)			$	150					$	150					$	450					$	150
Reimbursement of Legal, Tax, etc. (4)			$	—					$	—					$	—					$	29

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

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

			Three Months Ended												Nine Months Ended
			March 31, 2021						March 31, 2020						March 31, 2021						March 31, 2020
Repayment of loan receivable			$	—					$	(2,267)					$	(1,061)					$	1,062

			As of
			March 31, 2021						June 30, 2020
Interest Receivable (3)			$	20					$	15
Other Receivables (4)			2						2

(3) Interest income recognized but not yet paid.

(4) 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.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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 March 31, 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 and nine months ended March 31, 2021 and March 31, 2020:

			Three Months Ended March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Per Share Data
Net asset value per common share at beginning of period			$	8.96					$	8.66					$	8.18					$	9.01
Net investment income(1)			0.19						0.19						0.56						0.56
Net realized and change in unrealized gains (losses)(1)			0.45						(0.70)						1.33						(1.05)
Net increase (decrease) from operations			0.64						(0.51)						1.89						(0.49)
Distributions of net investment income to preferred stockholders			—			(4)			—			(6)			—			(4)			—			(6)
Distributions of net investment income to common stockholders			(0.18)			(7)			(0.08)			(7)			(0.51)			(7)			(0.41)			(7)
Return of Capital to common stockholders			—			(6)			(0.10)			(7)			(0.03)			(6)(7)			(0.13)			(7)
Common stock transactions(2)			(0.02)						—			(4)			(0.11)						(0.01)
Offering costs from issuance of preferred stock			(0.01)						—			(6)			(0.02)						—			(6)
Net asset value per common share at end of period			$	9.38		(5)			$	7.98		(5)			$	9.38		(5)			$	7.98		(5)
Per common share market value at end of period			$	7.67					$	4.25					$	7.67					$	4.25
Total return based on market value(3)			45.64		%				(31.99		%)				65.84		%				(29.18		%)
Total return based on net asset value(3)			7.54		%				(5.04		%)				26.70		%				(3.63		%)
Shares of common stock outstanding at end of period			387,400,554						367,817,926						387,400,554						367,817,926
Weighted average shares of common stock outstanding			385,996,921						367,685,511						380,985,329						367,460,412
Ratios/Supplemental Data
Net assets at end of period			$	3,701,840					$	2,933,375					$	3,701,840					$	2,933,375
Portfolio turnover rate			3.19		%				5.12		%				12.17		%				15.31		%
Annualized ratio of operating expenses to average net assets(8)			9.62		%				11.25		%				10.44		%				11.39		%
Annualized ratio of net investment income to average net assets(8)			8.20		%				8.96		%				8.46		%				8.72		%

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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, 2020:

			Year Ended June 30,
			2020						2019						2018						2017						2016
Per Share Data
Net asset value per common share at beginning of year			$	9.01					$	9.35					$	9.32					$	9.62					$	10.31
Net investment income(1)			0.72						0.85						0.79						0.85						1.04
Net realized and change in unrealized (losses) gains(1)			(0.76)						(0.46)						0.04						(0.15)						(0.75)
Net (decrease) increase from operations			(0.04)						0.39						0.83						0.70						0.29
Distributions of net investment income to common stockholders			(0.49)			(7)			(0.72)						(0.77)						(1.00)						(1.00)
Distributions of net investment income preferred stockholders			—						—						—						—						—
Return of Capital to common stockholders			(0.23)			(7)			—						—												—
Common stock transactions(2)			(0.07)						(0.01)						(0.03)						—			(4)			0.02
Net asset value per common share at end of year			$	8.18					$	9.01					$	9.35					$	9.32					$	9.62
Per common share market value at end of year			$	5.11					$	6.53					$	6.71					$	8.12					$	7.82
Total return based on market value(3)			(11.35		%)				8.23		%				(7.42		%)				16.80		%				21.84		%
Total return based on net asset value(3)			2.84		%				7.17		%				12.39		%				8.98		%				7.15		%
Shares of common stock outstanding at end of year			373,538,499						367,131,025						364,409,938						360,076,933						357,107,231
Weighted average shares of common stock outstanding			368,094,299						365,984,541						361,456,075						358,841,714						356,134,297
Ratios/Supplemental Data
Net assets at end of year			$	3,055,861					$	3,306,275					$	3,407,047					$	3,354,952					$	3,435,917
Portfolio turnover rate			16.46		%				10.86		%				30.70		%				23.65		%				15.98		%
Ratio of operating expenses to average net assets			11.37		%				11.65		%				11.08		%				11.57		%				11.95		%
Ratio of net investment income to average net assets			8.44		%				9.32		%				8.57		%				8.96		%				10.54		%

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

(7)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.

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

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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 ending June 30, 2021:

						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, 2018						$	180,422					$	0.49					$	85,159					$	0.23					$	(1,364)					$	—		(2)			$	83,795					$	0.23
December 31, 2018						187,883						0.51						80,811						0.22						(148,200)						(0.40)						(67,389)						(0.18)
March 31, 2019						171,109						0.47						77,262						0.21						11,933						0.03						89,195						0.24
June 30, 2019						164,353						0.45						69,627						0.19						(30,741)						(0.08)						38,886						0.11
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

(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). As such, 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

During the period from April 8, 2021 through May 6, 2021, we issued $20,692 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $20,341.

On March 15, 2021, we filed a notice of meeting and definitive proxy statement in connection with a special meeting of the our stockholders that is scheduled to be held on June 11, 2021 for the purpose of asking the our stockholders to vote on a proposal to authorize us, with approval of our Board of Directors, to sell shares of our common stock (during the next 12 months) at a price or prices below the our then current net asset value per share in one or more offerings subject to certain conditions.

On March 24, 2021, we made a new $16,750 First Lien Term Loan investment and a new $32,000 Second Lien Term Loan investment in First Brands Group, LLC, an after-market automotive repair parts supplier. The new investments settled on April 5, 2021.

On March 16, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 4.95% Senior Convertible Notes due 2022 at the purchase price of $102.00, plus accrued and unpaid interest (“2022 Notes March Tender Offer”). The 2022 Notes March Tender Offer expired at 12:00 midnight, New York City time, on April 14, 2021 (one minute after 11:59 p.m., New York City time, on April 13, 2021). As of the expiration date, $50 aggregate principal amount of the 2022 Notes were validly tendered and accepted. Following settlement of the 2022 Notes March Tender Offer on April 16, 2021, approximately $111,055 aggregate principal amount of the 2022 Notes remain outstanding.

On April 7, 2021, we commenced two separate tender offers to purchase for cash (i) 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 Tender Offer”), and (ii) 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 Tender Offer”, and together with the 2023 Notes April Tender Offer, the “April Tender Offers”). The April Tender Offers expired at 5:00 p.m., New York City time, on May 5, 2021 (one minute after 11:59 p.m., New York City time, on May 4, 2021). As of the expiration date, $836 aggregate principal amount of the 2023 Notes and $226

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

aggregate principal amount of the 6.375% 2024 Notes were validly tendered and accepted. Following settlement of the April Tender Offers on May 7, 2021, approximately $284,219 aggregate principal amount of the 2023 Notes and $81,389 aggregate principal amount of the 6.375% 2024 Notes remain outstanding.

On April 8, 2021 and April 22, 2021, we issued a total of 483,282 shares of our 5.50% Series A1 Preferred Stock and 63,626 shares of our 5.50% Series M1 Preferred Stock, excluding shares issued via the Preferred Stock Dividend Reinvestment Plan, for net proceeds of $12,539.

On April 16, 2021, we entered a new $31,778 Second Lien Term Loan investment and a new $18,222 Delayed Draw Term Loan commitment with Redstone Buyer, LLC, a provider of cybersecurity and risk management services. Our new investments settled on April 30, 2021, with the Delayed Draw Term Loan unfunded at close.

On April 28, 2021, we completed an extension of the Revolving Credit Facility (the “New Facility”) for PCF, extending the term 5.7 years from such date and reducing the interest rate on drawn amounts to one-month LIBOR plus 2.05%. The New Facility, for which $1,082,500 of commitments have been closed to date, includes an accordion feature that allows the New Facility, at Prospect's discretion, to accept up to a total of $1,500,000 of commitments. The New 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. Pricing for amounts drawn under the Facility is one-month LIBOR plus 2.05%, which achieves a 15 basis point reduction in the interest rate from the previous facility rate of LIBOR plus 2.20%. 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.

On April 30, 2021, Ahead Data Blue, LLC fully repaid the $57,500 Second Lien Term Loan receivable to us at par.

We have provided notice to call certain of our Prospect Capital InterNotes® at par with the following terms:

Notice Date

Settlement Date

Maturity Date Range

Interest Rate Range

Principal

3/12/2021

4/15/2021

April 15, 2024

5.75%

$

4,794

4/15/2021

5/17/2021

May 15, 2024

5.75%

$

5,255

5/4/2021

5/11/2021

July 15, 2024 - March 15, 2025

4.00% - 4.75%

$

85,449

On May 10, 2021, we announced the declaration of monthly dividends for our 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, as follows:

Monthly Cash Preferred Shareholder Distribution			Record Date			Payment Date			Monthly Amount ($ per share), before pro ration for partial periods
June 2021			6/16/2021			7/1/2021			$0.114583
July 2021			7/21/2021			8/2/2021			$0.114583
August 2021			8/18/2021			9/1/2021			$0.114583

On May 10, 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)
May 2021			5/27/2021			6/17/2021			$0.0600
June 2021			6/28/2021			7/22/2021			$0.0600
July 2021			7/28/2021			08/19/2021			$0.0600
August 2021			08/27/2021			09/23/2021			$0.0600

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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, student housing, and self-storage. 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 March 31, 2021, as shown in our Consolidated Schedule of Investments, the cost basis and fair value of our investments in controlled companies was $2,425,409 and $2,721,942, 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 March 15, 2021, we filed a notice of meeting and the definitive proxy statement in connection with a special meeting of our stockholders that is scheduled to be held on June 11, 2021 for the purpose of asking our stockholders to vote on a proposal to authorize us, with approval of our Board of Directors, to sell shares of our common stock at a price or prices below our then

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current net asset value per share in one or more offerings during the next 12 months following such approval, subject to certain conditions.

Third Quarter Highlights

Investment Transactions

We seek to be a long-term investor with our portfolio companies. During the three months ended March 31, 2021, we acquired $176,762 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $58,731, funded $2,000 of revolver advances, and recorded PIK interest of $20,926, resulting in gross investment originations of $258,419. During the three months ended March 31, 2021, we received full repayments totaling $128,699, received $7 of revolver paydowns, and received several partial prepayments, scheduled principal amortization payments, and return of capital distributions, resulting in net repayments of $182,458.

Debt Issuances and Redemptions

During the three months ended March 31, 2021, we repaid $1,333 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 $112,489 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.45%. 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 March 31, 2021 was $1,031.

During the three months ended March 31, 2021, we issued $28,095 aggregate principal amount of Prospect Capital InterNotes® with a weighted average stated interest rate of 3.48%, to extend our borrowing base. The newly issued notes mature between January 15, 2024 and April 15, 2031 and generated net proceeds of $27,627.

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.

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 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.

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.

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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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 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 (“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 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”). The 2022 Notes March 2021 Tender Offer expired at 12:00 midnight, New York City time, on April 14, 2021 (one minute after 11:59 p.m., New York City time, on April 13, 2021).

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.

Equity Issuances

On January 21, 2021, February 18, 2021, and March 18, 2021, we issued 1,563,270, 1,324,683, and 404,974 shares of our common stock in connection with the common stock dividend reinvestment plan, respectively.

During the three months ended March 31, 2021, we issued 2,105,677 shares of our 5.50% Series A1 Preferred Stock for net proceeds of $48,888 and 21,760 shares of our 5.50% Series M1 Preferred Stock for net proceeds of $544, each excluding offering costs and preferred stock dividend reinvestments.

During the three months ended March 31, 2021, we issued 364 shares of our 5.50% Series A1 Preferred Stock, in connection with the preferred stock dividend reinvestment plan.

During the three months ended March 31, 2021, 3,212 shares of our 5.50% Series A1 Preferred Stock were converted in to 9,982 shares of our common stock, in connection with Holder Optional Conversions.

Investment Holdings

At March 31, 2021, we have $5,883,328, or 158.9%, of our net assets invested in 123 long-term portfolio investments and CLOs.

Our annualized current yield was 11.8% and 11.4% as of March 31, 2021 and June 30, 2020, respectively, across all performing interest bearing investments, excluding equity investments and non-accrual loans. Our annualized current yield was 9.4% and 9.7% as of March 31, 2021 and June 30, 2020, 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.

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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 March 31, 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. (“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 $13,156 in senior secured term loans (the “Spartan Term Loan A”) due to us as of March 31, 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 March 31, 2021, we also own affiliated interests in Nixon, Inc. (“Nixon”), PGX Holdings, Inc. (“PGX”), and Targus Cayman HoldCo Limited (“Targus”).

The following shows the composition of our investment portfolio by level of control as of March 31, 2021 and June 30, 2020:

			March 31, 2021															June 30, 2020
Level of Control			Cost			% of Portfolio			Fair Value			% of Portfolio						Cost			% of Portfolio			Fair Value			% of Portfolio
Control Investments			$	2,425,409		41.0		%	$	2,721,942		46.3		%				$	2,286,725		39.5		%	$	2,259,292		43.2		%
Affiliate Investments			168,350			2.8		%	299,985			5.1		%				163,484			2.8		%	187,537			3.6		%
Non-Control/Non-Affiliate Investments			3,321,382			56.2		%	2,861,401			48.6		%				3,332,509			57.7		%	2,785,499			53.2		%
Total Investments			$	5,915,141		100.0		%	$	5,883,328		100.0		%				$	5,782,718		100.0		%	$	5,232,328		100.0		%

The following shows the composition of our investment portfolio by type of investment as of March 31, 2021 and June 30, 2020:

			March 31, 2021															June 30, 2020
Type of Investment			Cost			% of Portfolio			Fair Value			% of Portfolio						Cost			% of Portfolio			Fair Value			% of Portfolio
Revolving Line of Credit			$	27,208		0.5		%	$	27,183		0.5		%				$	38,469		0.7		%	$	36,944		0.7		%
Senior Secured Debt			3,052,416			51.6		%	3,018,622			51.3		%				2,586,769			44.8		%	2,422,523			46.3		%
Subordinated Secured Debt			988,390			16.7		%	895,956			15.2		%				1,424,633			24.6		%	1,269,398			24.3		%
Subordinated Unsecured Debt			7,200			0.1		%	5,295			0.1		%				43,935			0.8		%	51,079			1.0		%
Subordinated Structured Notes			1,093,926			18.5		%	750,599			12.8		%				1,089,079			18.8		%	708,961			13.5		%
Preferred Stock			308,713			5.2		%	19,505			0.3		%				250,020			4.3		%	14,430			0.3		%
Common Stock			207,662			3.5		%	765,209			13.0		%				140,986			2.4		%	394,832			7.5		%
Membership Interest			229,626			3.9		%	369,142			6.3		%				208,827			3.6		%	310,252			5.9		%
Participating Interest(1)			—			—		%	31,689			0.5		%				—			—		%	23,909			0.5		%
Escrow Receivable			—			—		%	128			—		%				—			—		%	—			—		%
Total Investments			$	5,915,141		100.0		%	$	5,883,328		100.0		%				$	5,782,718		100.0		%	$	5,232,328		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.

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The following shows our investments in interest bearing securities by type of investment as of March 31, 2021 and June 30, 2020:

			March 31, 2021															June 30, 2020
Type of Investment			Cost			% of Portfolio			Fair Value			% of Portfolio						Cost			% of Portfolio			Fair Value			% of Portfolio
First Lien			$	3,079,624		59.6		%	$	3,045,805		64.8		%				$	2,615,252		50.5		%	$	2,450,928		54.7		%
1.5 Lien			17,522			0.3		%	17,522			0.4		%				1,981			—		%	1,981			—		%
Second Lien(1)			966,898			18.7		%	874,464			18.6		%				1,428,648			27.6		%	1,271,966			28.3		%
Third Lien			3,970			0.1		%	3,970			0.1		%				3,990			0.1		%	3,990			0.1		%
Unsecured			7,200			0.1		%	5,295			0.1		%				43,935			0.8		%	51,079			1.1		%
Subordinated Structured Notes			1,093,926			21.2		%	750,599			16.0		%				1,089,079			21.0		%	708,961			15.8		%
Total Interest Bearing Investments			$	5,169,140		100.0		%	$	4,697,655		100.0		%				$	5,182,885		100.0		%	$	4,488,905		100.0		%

(1)As of June 30, 2020, includes the Second Lien Revolving Credit Facility to Edmentum, Inc., which is otherwise classified as Revolving Line of Credit.

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The following shows the composition of our investment portfolio by industry as of March 31, 2021 and June 30, 2020:

			March 31, 2021															June 30, 2020
Industry			Cost			% of Portfolio			Fair Value			% of Portfolio						Cost			% of Portfolio			Fair Value			% of Portfolio
Aerospace & Defense			$	98,144		1.7		%	$	83,106		1.4		%				$	88,208		1.5		%	$	85,627		1.6		%
Air Freight & Logistics			12,500			0.2		%	11,945			0.2		%				12,500			0.2		%	10,755			0.2		%
Auto Components			75,234			1.3		%	76,525			1.3		%				26,776			0.5		%	24,867			0.5		%
Chemicals			30,860			0.5		%	30,987			0.5		%				31,837			0.6		%	31,891			0.6		%
Commercial Services & Supplies			272,261			4.7		%	211,079			3.6		%				368,577			6.4		%	294,277			5.6		%
Communications Equipment			59,691			1.0		%	57,825			1.0		%				59,638			1.0		%	50,837			1.0		%
Construction & Engineering			69,935			1.2		%	145,707			2.5		%				68,874			1.2		%	129,296			2.5		%
Consumer Finance			529,073			8.9		%	743,277			12.6		%				506,771			8.8		%	645,726			12.3		%
Distributors			274,851			4.6		%	178,438			3.0		%				278,331			4.8		%	175,931			3.4		%
Diversified Consumer Services			167,923			2.8		%	276,680			4.7		%				163,057			2.8		%	169,615			3.2		%
Diversified Financial Services			30,165			0.5		%	30,165			0.5		%				30,165			0.5		%	30,165			0.6		%
Diversified Telecommunication Services			66,823			1.1		%	67,869			1.2		%				57,098			1.0		%	55,311			1.1		%
Energy Equipment & Services			272,909			4.7		%	75,289			1.3		%				266,618			4.6		%	82,236			1.6		%
Entertainment			45,321			0.8		%	45,683			0.8		%				50,601			0.9		%	49,017			0.9		%
Equity Real Estate Investment Trusts (REITs)			608,122			10.3		%	982,585			16.7		%				486,268			8.4		%	753,583			14.4		%
Food Products			31,879			0.5		%	32,133			0.5		%				24,853			0.4		%	25,000			0.5		%
Health Care Equipment & Supplies			7,477			0.1		%	6,542			0.1		%				7,474			0.1		%	5,606			0.1		%
Health Care Providers & Services			596,162			10.1		%	682,010			11.6		%				533,188			9.2		%	495,402			9.5		%
Hotels, Restaurants & Leisure			24,225			0.4		%	23,044			0.4		%				23,501			0.4		%	21,008			0.4		%
Household Durables			15,906			0.3		%	20,199			0.3		%				24,437			0.4		%	24,362			0.5		%
Household Products			24,250			0.4		%	24,250			0.4		%				15,915			0.3		%	16,066			0.3		%
Insurance			21,371			0.4		%	21,723			0.4		%				12,796			0.2		%	12,744			0.2		%
Interactive Media & Services			185,277			3.1		%	185,277			3.1		%				200,728			3.5		%	200,728			3.8		%
Internet & Direct Marketing Retail			54,811			0.9		%	56,317			1.0		%				15,706			0.3		%	16,440			0.3		%
IT Services			189,257			3.2		%	189,291			3.3		%				203,285			3.5		%	204,061			3.9		%
Leisure Products			22,455			0.4		%	22,501			0.4		%				24,519			0.4		%	24,319			0.5		%
Machinery			93,023			1.6		%	105,319			1.8		%				84,234			1.5		%	87,220			1.7		%
Media			106,244			1.8		%	102,032			1.7		%				117,524			2.0		%	100,592			1.9		%
Online Lending			11,600			0.2		%	11,600			0.2		%				45,950			0.8		%	45,950			0.9		%
Paper & Forest Products			15,846			0.3		%	15,988			0.3		%				15,788			0.3		%	15,788			0.3		%
Personal Products			248,573			4.2		%	71,411			1.2		%				246,702			4.3		%	59,907			1.1		%
Professional Services			132,345			2.2		%	135,008			2.3		%				104,164			1.8		%	106,542			2.0		%
Real Estate Management & Development			—			—		%	—			—		%				31,747			0.5		%	31,747			0.6		%
Software			25,578			0.4		%	25,915			0.4		%				75,208			1.3		%	73,745			1.4		%
Technology Hardware, Storage & Peripherals			12,427			0.2		%	12,500			0.2		%				12,415			0.2		%	12,318			0.2		%
Textiles, Apparel & Luxury Goods			203,203			3.4		%	224,705			3.8		%				205,874			3.6		%	221,227			4.2		%
Trading Companies & Distributors			64,940			1.1		%	26,704			0.5		%				65,450			1.1		%	26,599			0.5		%
Transportation Infrastructure			30,354			0.5		%	30,900			0.5		%				27,662			0.5		%	27,662			0.5		%
Subtotal			$	4,731,015		80.0		%	$	5,042,529		85.7		%				$	4,614,439		79.8		%	$	4,444,167		84.8		%
Structured Finance(1)			$	1,184,126		20.0		%	$	840,799		14.3		%				$	1,168,279		20.2		%	$	788,161		15.2		%
Total Investments			$	5,915,141		100.0		%	$	5,883,328		100.0		%				$	5,782,718		100.0		%	$	5,232,328		100.0		%

(1) Our SSN investments do not have industry concentrations and as such have been separated in the tables above. As of March 31, 2021 and June 30, 2020, Structured Finance includes $90,200 and $79,200, respectively, of senior secured debt investments held through our investment in NPRC and it’s 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 nine months ended March 31, 2021 and March 31, 2020 are presented below:

			Nine months ended March 31,
			2021						2020
Investments made in new portfolio companies			$	459,277					$	565,521
Follow-on investments made in existing portfolio companies (1)			259,111						211,551
Revolver advances			4,000						11,340
PIK interest			58,750						35,134
Total acquisitions			$	781,138					$	823,546
Acquisitions by portfolio composition
1st Lien Term Loan			$	575,545					$	635,787
Subordinated Secured Debt			176,780						137,597
Rated Secured Structured Notes			—						7,446
Subordinated Unsecured Debt			2,620						1,925
Equity			26,193						40,791
Total acquisitions by portfolio composition			$	781,138					$	823,546
Investments sold			—						$	40,994
Partial repayments (2)			148,951						352,014
Full repayments			513,636						544,259
Revolver paydowns			3,291						6,193
Total dispositions			$	665,878					$	943,460
Dispositions by portfolio composition
1st Lien Term Loan			$	364,083					$	702,896
Subordinated Secured Debt			249,421						183,969
Rated Secured Structured Notes			—						50,237
Subordinated Structured Notes			—						2,420
Subordinated Unsecured Debt			53,738						428
Equity			(1,364)						3,510
Total dispositions by portfolio composition			$	665,878					$	943,460
Weighted average interest rates for new investments by portfolio composition (3)
1st Lien Term Loan			9.32		%				8.92		%
Subordinated Secured Debt			9.41		%				9.90		%

    (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 $5,883,328.

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 “Wuhan Virus”) pandemic

As of March 31, 2021, there remains to be global uncertainty surrounding the Wuhan Virus 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 March 31, 2021, the resulting changes in net unrealized depreciation on investments were largely due to widening credit spreads as market participants expected a higher yield on similar investments given the significant market volatility generated by the Wuhan Virus pandemic. To a lesser extent, the changes in net unrealized depreciation on investments for certain of our portfolio companies also reflected other factors such as specific industry concerns, uncertainty about the duration of business shutdowns and near-term liquidity needs. For additional information concerning the Wuhan Virus pandemic and its potential impact on our business and our operating results, see Part II, Item 1A. Risk Factors, “Risk Factors - The Wuhan Virus pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impact on our portfolio companies and our business and operations.”

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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 nine months ended March 31, 2021.

CP Energy Services Inc.

Prospect owns 100% of the equity of CP Holdings, a Consolidated Holding Company. CP Holdings owns 99.8% of the equity of CP Energy, and the remaining equity is owned by CP Energy management. 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 Holdings, which owns 100% of Spartan, a portfolio company of Prospect with $13,156 in senior secured term loans due to us as of March 31, 2021. As a result of CP Energy’s purchase, and given Prospect’s controlling interest in CP Energy, our Spartan Term Loan A is 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. On December 30, 2019, Wolf Energy LLC, Wolf Energy Services LLC, and AEH LLC (collectively referred to as “Wolf Energy”), a previously controlled portfolio company, merged with and into CP Energy, with CP Energy continuing as the surviving corporation. See Note 14 in our Consolidated Financial Statements for further discussion.

The fair value of our investment in CP Energy decreased to $63,231 as of March 31, 2021, which is a discount of $165,786 from its amortized cost, compared to a fair value of $69,885 as of June 30, 2020, representing a discount of $152,841 to its amortized cost. The increase in discount to amortized cost resulted from a decline in financial performance and corresponding valuation multiples as a result of headwinds in the oil and gas industry, primarily associated with the demand imbalance stemming from the novel coronavirus.

Credit Central Loan Company, LLC

Prospect owns 100% of the equity of Credit Central Delaware, a consolidated holding company. Credit Central Delaware owns 98.63% of Credit Central, with entities owned by Credit Central management owning the remaining 1.37% of the equity. Credit Central is a branch-based provider of installment loans.

The fair value of our investment in Credit Central decreased to $71,144 as of March 31, 2021, which is a discount of $13,660 from its amortized cost, compared to a fair value of $75,685 as of June 30, 2020, representing a discount of $3,517 to its amortized cost basis. The increase in discount to amortized cost resulted from a decline in financial performance and corresponding valuation multiples, as well as an increase in Credit Central’s cost basis.

Echelon Transportation, LLC

Prospect owns 100% of the equity of Echelon, a consolidated holding company. Echelon owns 60.7% of the equity of AerLift. Echelon is an aircraft leasing company.

The fair value of our investment in Echelon decreased to $83,106 as of March 31, 2021, which is a discount of $15,038 from its amortized cost, compared to a fair value of $85,628 as of June 30, 2020, representing a discount of $2,581 to its amortized cost basis. The increase in discount to amortized cost resulted from lower aircraft residual values, as well as an increase in Echelon’s cost basis.

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 $579,087 as of March 31, 2021, representing a premium of $225,308 to its amortized cost basis compared to a fair value of $508,465 as of June 30, 2020, a premium of $150,250 to its amortized cost. The increase in premium to amortized cost was driven by strong financial performance.

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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 $363,399 as of March 31, 2021, a premium of $84,952 to its amortized cost basis compared to a fair value of $230,757 as of June 30, 2020, a discount of $36,296 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 March 31, 2021, we own 100% of the fully-diluted common equity of NPRC.

During the nine months ended March 31, 2021, we received partial repayments of $69,350 of our loans previously outstanding with NPRC, and provided $167,854 of debt financing to NPRC for the acquisition of real estate properties, to fund capital expenditures for existing real estate properties, to provide working capital, and to fund purchases of rated secured structured notes.

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 March 31, 2021, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 2,414 individual loans and residual interest in four securitizations, and had an aggregate fair value of $13,956. The average outstanding individual loan balance is approximately $4 and the loans mature on dates ranging from April 1, 2021 to April 19, 2025 with a weighted-average outstanding term of 19 months as of March 31, 2021. Fixed interest rates range from 6.0% to 36.0% with a weighted-average current interest rate of 20.9%. As of March 31, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $11,600.

As of March 31, 2021, based on outstanding principal balance, 17.4% 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 42.4% of the portfolio in near prime loans (borrowers with a FICO score of 580 to 659, a portion of which are considered sub-prime).

Loan Type						Outstanding Principal Balance						Fair Value						Interest Rate Range						Weighted Average Interest Rate*
Super Prime						$	1,687					$	1,654					7.0% - 20.5%						12.4%
Prime						3,889						3,706						6.0% - 32.0%						18.1%
Near Prime						4,105						4,022						6.0% - 36.0%						27.0%

*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 March 31, 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 $206,524 and face value of $220,942. The average outstanding note is approximately $5,971 with an expected maturity date ranging from April 2026 to April 2029 and weighted-average expected maturity of 7 years as of March 31, 2021. Coupons range from three-month LIBOR (“3ML”) plus 5.45% to 9.45% with a weighted-average coupon of 3ML + 7.15%. As of March 31, 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 March 31, 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.

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As of March 31, 2021, our investment in NPRC and its wholly owned subsidiaries had an amortized cost of $709,922 and a fair value of $1,084,385, including our investment in online consumer lending and rated secured structured notes as discussed above. The fair value of $982,585 related to NPRC’s real estate portfolio was comprised of forty-seven multi-families 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 March 31, 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						13,494
3						Cordova Regency, LLC						Pensacola, FL						11/15/2013						13,750						10,971
4						Crestview at Oakleigh, LLC						Pensacola, FL						11/15/2013						17,500						13,353
5						Inverness Lakes, LLC						Mobile, AL						11/15/2013						29,600						23,823
6						Kings Mill Pensacola, LLC						Pensacola, FL						11/15/2013						20,750						16,927
7						Plantations at Pine Lake, LLC						Tallahassee, FL						11/15/2013						18,000						13,591
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						84,398
13						Abbie Lakes OH Partners, LLC						Canal Winchester, OH						9/30/2014						12,600						15,400
14						Kengary Way OH Partners, LLC						Reynoldsburg, OH						9/30/2014						11,500						15,567
15						Lakeview Trail OH Partners, LLC						Canal Winchester, OH						9/30/2014						26,500						29,699
16						Lakepoint OH Partners, LLC						Pickerington, OH						9/30/2014						11,000						16,898
17						Sunbury OH Partners, LLC						Columbus, OH						9/30/2014						13,000						17,133
18						Heatherbridge OH Partners, LLC						Blacklick, OH						9/30/2014						18,416						24,511
19						Jefferson Chase OH Partners, LLC						Blacklick, OH						9/30/2014						13,551						19,058
20						Goldenstrand OH Partners, LLC						Hilliard, OH						10/29/2014						7,810						11,624
21						SSIL I, LLC						Aurora, IL						11/5/2015						34,500						25,927
22						Vesper Tuscaloosa, LLC						Tuscaloosa, AL						9/28/2016						54,500						43,057
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						51,111
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						54,764
34						23741 Pond Road Owner, LLC						Southfield, MI						11/8/2017						16,500						19,011
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

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No.						Property Name						City						Acquisition Date						Purchase Price						Mortgage Outstanding
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
																								$	2,162,181					$	1,818,964

The fair value of our investment in NPRC increased to $1,084,385 as of March 31, 2021, a premium of $374,463 from its amortized cost basis compared to a fair value of $878,733 as of June 30, 2020, representing a premium of $267,315. 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.

USES Corp.

Prospect owns 99.96% of the equity of USES Corp. as of March 31, 2021 and June 30, 2020.

The fair value of our investment in USES increased to $37,401 as of March 31, 2021, a discount of $30,818 from its amortized cost basis, compared to a fair value of $17,325 as of June 30, 2020, representing a discount of $48,894 to it amortized cost. The decrease in discount to amortized cost resulted from improved financial performance.

Valley Electric Company, Inc.

Prospect owns 100% of the common stock of Valley Holdings I, a Consolidated Holding Company. Valley Holdings I owns 100% of Valley Holdings II, a Consolidated Holding Company. Valley Holdings II owns 94.99% of 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 electrical contractors in the United States.

The fair value of our investment in Valley Electric increased to $145,707 as of March 31, 2021, a premium of $75,772 to its amortized cost, compared to a fair value of $129,296 as of June 30, 2020, representing a $60,422 premium to its amortized cost. The increase in premium to amortized cost was driven by strong financial performance and improving market conditions.

Our controlled investments, including those discussed above, are valued at $296,533 above their amortized cost as of March 31, 2021.

Affiliate and Non-Control Company Investments

We hold three affiliate investments at March 31, 2021 with a total fair value of $299,985, a premium of $131,635 from their combined amortized cost, compared to a fair value of $187,537 as of June 30, 2020, representing a $24,053 premium to its amortized cost. The increase in premium is primarily driven by our investment in PGX Holdings, Inc. (“Progrexion”), which is valued at a premium of $108,007 at March 31, 2021 compared to a premium of $180 as of June 30, 2020. The increase in Progrexion’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 March 31, 2021, two of our non-control/ non-affiliate investments, Engine Group, Inc. (“Engine”) and USC are valued at discounts to amortized cost of $28,254 and $96,320, respectively. As of March 31, 2021, our CLO investment portfolio is valued at a $343,327 discount to amortized cost. Excluding Engine, USC, and the CLO investment portfolio, the fair value of our non-control/non-affiliate investments at March 31, 2021 increased and are valued at $7,920 above their amortized cost, compared to a discount of

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$35,674 recorded at June 30, 2020. This increase is driven largely by tightening credit spreads as market participants expected a lower yield on similar investments given the level of volatility generated by the Wuhan Virus pandemic declined.

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 March 31, 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, June 2018 (and from time to time through our 2028 Notes Follow-on Program), October 2018, December 2018 (and from time to time through our 2029 Notes Follow-on Program), and January 2021; and Prospect Capital InterNotes® which we issue from time to time. As of March 31, 2021, our equity capital is comprised of common and preferred equity.

The following table shows our outstanding debt as of March 31, 2021.

			Principal Outstanding						Unamortized Discount & Debt Issuance Costs						Net Carrying Value						Fair Value(1)						Effective Interest Rate
Revolving Credit Facility(2)			$	343,537					$	7,510					$	343,537		(3)			$	343,537					1ML+2.20%			(6)
2022 Notes			111,105						1,017						110,088						114,260			(4)			5.69		%	(7)
2025 Notes			156,168						3,501						152,667						168,260			(4)			6.63		%	(7)
Convertible Notes			267,273												262,755						282,520
6.375% 2024 Notes			81,615						510						81,105						89,470			(4)			6.49		%	(7)
2023 Notes			285,055						1,597						283,458						302,298			(4)			6.07		%	(7)
2026 Notes			400,000						7,966						392,034						395,880			(4)			3.92		%	(7)
2028 Notes			70,761						1,986						68,775						72,488			(4)			6.77		%	(7)
2029 Notes			69,170						2,200						66,970						71,217			(4)			7.38		%	(7)
Public Notes			906,601												892,342						931,353
Prospect Capital InterNotes®			673,280						12,307						660,973						759,983			(5)			6.00		%	(8)
Total			$	2,190,691											$	2,159,607					$	2,317,393

(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 March 31, 2021.

(2)The maximum draw amount of the Revolving Credit facility as of March 31, 2021 is $1,077,500.

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

(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 2028 Notes and 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.

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The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of March 31, 2021.

			Payments Due by Period
			Total						Less than 1 Year						1 – 3 Years						3 – 5 Years						After 5 Years
Revolving Credit Facility			$	343,537					$	—					$	—					$	343,537					$	—
Convertible Notes			267,273						—						111,105						156,168						—
Public Notes			906,601						—						366,670						400,000						139,931
Prospect Capital InterNotes®			673,280						—						11,744						238,660						422,876
Total Contractual Obligations			$	2,190,691					$	—					$	489,519					$	1,138,365					$	562,807

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of June 30, 2020:

			Payments Due by Period
			Total						Less than 1 Year						1 – 3 Years						3 – 5 Years						After 5 Years
Revolving Credit Facility			$	237,536					$	—					$	—					$	237,536					$	—
Convertible Notes			459,490						—						258,240						201,250						—
Public Notes			793,719						—						320,000						333,788						139,931
Prospect Capital InterNotes®			680,229						—						—						243,062						437,167
Total Contractual Obligations			$	2,170,974					$	—					$	578,240					$	1,015,636					$	577,098

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 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.

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On September 9, 2019, we amended the 2018 Facility and closed an expanded revolving credit facility (the “2019 Facility” and collectively with the 2014 Facility and the 2018 Facility, the “Revolving Credit Facility”). The lenders had extended commitments of $1,077,500 as of March 31, 2021. The Revolving Credit 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 September 9, 2024. It includes a revolving period that extends through September 9, 2023, 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 March 31, 2021, we were in compliance with the applicable covenants.

Interest on borrowings under the 2019 Facility is one-month LIBOR plus 220 basis points. Additionally, the lenders charge a fee on the unused portion of the credit facility equal to either 50 basis points if more than 60% of the credit facility is drawn, or 100 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 2019 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.

For the nine months ended March 31, 2021 and March 31, 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 March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Average stated interest rate			2.32		%				3.54		%				2.35		%				3.84		%
Average outstanding balance			$373,734						$262,084						$376,646						$161,373

As of March 31, 2021 and June 30, 2020, we had $424,167 and $545,496, respectively, available to us for borrowing under the Revolving Credit Facility, net of $343,537 and $237,536 outstanding borrowings as of the respective balance sheet dates. As of March 31, 2021, the investments, including cash and cash equivalents, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,594,834, which represents 26.7% 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 $1,077,500. 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 $10,904 of new fees and $7,787 were carried over for continuing participants from the previous facilities, all of which are being amortized over the term of the facility in accordance with ASC 470-50. As of March 31, 2021, $7,510 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.

During the three months ended March 31, 2021 and March 31, 2020, we recorded $4,509 and $5,867, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $13,772 and $16,841, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.

Convertible Notes

On April 11, 2014, we issued $400,000 aggregate principal amount of convertible notes that mature on April 15, 2020 (the “2020 Notes”), unless previously converted or repurchased in accordance with their terms. The 2020 Notes bear interest at a rate of 4.75% per year, payable semi-annually on April 15 and October 15 each year, beginning October 15, 2014. Total proceeds from the issuance of the 2020 Notes, net of underwriting discounts and offering costs, were $387,500. On January 30, 2015, we repurchased $8,000 aggregate principal amount of the 2020 Notes at a price of 93.0, including commissions. As a result of this transaction, we recorded a gain of $332, in the amount of the difference between the reacquisition price and the net

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carrying amount of the 2020 Notes, net of the proportionate amount of unamortized debt issuance cost. During the three months ended December 31, 2018, we repurchased an additional $13,500 aggregate principal amount of the 2020 Notes at a price of 99.5, including commissions. As a result of this transaction, we recorded a loss of $41, in the amount of the difference between the reacquisition price and the net carrying amount of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs. During the three months ended March 31, 2019, we repurchased an additional $129,798 aggregate principal amount of the 2020 Notes at a weighted average price of 101.4, including commission. As a result of these transactions, we recorded a net loss of $2,787 during the three months ended March 31, 2019, in the amount of the difference between the reacquisition price and the net carrying amounts of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs. During the three months ended June 30, 2019, we repurchased an additional $24,588 aggregate principal amount of the 2020 Notes at a weighted average price of $101.10, including commissions. As a result of these transactions, we recorded a net loss of $414 during the three months ended June 30, 2019, in the amount of the difference of the reacquisition price and the net carrying amounts of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs.

On June 28, 2019, we commenced a tender offer to purchase for cash any and all of the $224,114 then outstanding aggregate principal amount of the 2020 Notes (“June Tender Offer”). On July 27, 2019, $32,948 aggregate principal amount of the 2020 Notes, representing 14.7% of the previously outstanding 2020 Notes, were validly tendered and accepted. On August 12, 2019, we commenced a tender offer to purchase for cash up to $60,000 aggregate principal amount of the 2020 Notes (“August Tender Offer”). On September 10, 2019, $13,597 aggregate principal amount of the 2020 Notes, representing 7.1% of the previously outstanding 2020 Notes, were validly tendered and accepted. The June Tender Offer and August Tender Offer, resulted in our recognizing a loss of $668 during the three months ended September 30, 2019.

On September 24, 2019, we commenced a tender offer to purchase for cash up to $40,000 outstanding aggregate principal amount of the 2020 Notes (“2020 Notes September Tender Offer”). On October 23, 2019, $2,140 aggregate principal amount of the 2020 Notes, representing 1.2% of the previously outstanding 2020 Notes, were validly tendered and accepted. On November 7, 2019, we commenced a tender offer to purchase for cash up to $10,000 aggregate principal amount of the 2020 Notes (“2020 Notes November Tender Offer”). On December 7, 2019, $392 aggregate principal amount of the 2020 Notes, representing 0.2% of the previously outstanding 2020 Notes, were validly tendered and accepted. The 2020 Notes September Tender Offer and 2020 Notes November Tender Offer resulted in our recognizing a loss of $31 during the three months ended December 31, 2019.

On December 23, 2019, we commenced a tender offer to purchase for cash up to $10,000 aggregate principal amount of the 2020 Notes (“2020 Notes December Tender Offer”). On January 22, 2020, $2,215 aggregate principal amount of the 2020 Notes, representing 1.3% of the previously outstanding 2020 Notes, were validly tendered and accepted. The 2020 Notes December Tender Offer resulted in our recognizing a loss of $14 during the three months ended March 31, 2020. During the three months ended March 31, 2020, we repurchased an additional $45,111 aggregate principal amount of the 2020 Notes at a weighted average price of 100.5 including commissions. As a result of this transaction, we recorded a loss of $220, in the amount of the difference between the reacquisition price and the net carrying amount of the 2020 Notes, net of the proportionate amount of unamortized debt issuance costs.

On April 15, 2020, we repaid the outstanding principal amount of $127,711 of the 2020 Notes, plus interest. No gain or loss was realized on the transaction.

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

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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.

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”). The 2022 Notes March 2021 Tender Offer expired at 12:00 midnight, New York City time, on April 14, 2021 (one minute after 11:59 p.m., New York City time, on April 13, 2021). As of March 31, 2021, the outstanding aggregate principal amount of the 2022 Notes is $111,105.

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, 20l9 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 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

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2025 Notes, net of the proportionate amount of unamortized debt issuance costs. As of March 31, 2021, the outstanding aggregate principal amount of the 2025 Notes is $156,168.

Certain key terms related to the convertible features for the 2020 Notes, 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 March 31, 2021(1)(2)									100.2305						110.7420
Conversion price at March 31, 2021(2)(3)									$	9.98					$	9.03
Last conversion price calculation date									4/11/2020						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.

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 for. 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 $9,356 which are being amortized over the terms of the Convertible Notes. As of March 31, 2021, $2,162 of the original issue discount and $2,356 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 March 31, 2021 and March 31, 2020, we recorded 4,870 and $9,728, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $17,905 and $30,089, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.

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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 (“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. As of March 31, 2021, the outstanding aggregate principal amount of the 2023 Notes is $285,055.

On April 7, 2014, we issued $300,000 aggregate principal amount of unsecured notes that mature on July 15, 2019 (the “5.00% 2019 Notes”). Included in the issuance is $45,000 of Prospect Capital InterNotes® that were exchanged for the 5.00% 2019 Notes. The 5.00% 2019 Notes bear interest at a rate of 5.00% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2014. Total proceeds from the issuance of the 5.00% 2019 Notes, net of underwriting discounts and offering costs, were $295,998. On June 7, 2018, we commenced a tender offer to purchase for cash any and all of the $300,000 aggregate principal amount outstanding of the 5.00% 2019 Notes. On June 20, 2018, $146,464 aggregate principal amount of the 5.00% 2019 Notes, representing 48.8% of the previously outstanding 5.00% 2019 Notes, were validly tendered and accepted. The transaction resulted in our recognizing a $3,705 loss during the three months ended June 30, 2018. On September 26, 2018, we repurchased the remaining $153,536 aggregate principal amount of the 5.00% 2019 Notes at a price of $101.645, including commissions. The transaction resulted in our recognizing a loss of $2,874 during the year ended June 30, 2019.

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”.

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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. As of March 31, 2021, the outstanding aggregate principal amount of the 2028 Notes is $70,761.

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. As of March 31, 2021, the outstanding aggregate principal amount of the 6.375% 2024 Notes is $81,615.

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 March 31, 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,

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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 March 31, 2021, the outstanding aggregate principal amount of the 2026 Notes is $400,000.

The 2023 Notes, the 2028 Notes, the 6.375% 2024 Notes, the 2029 Notes, and the 2026 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 $7,568 and debt issuance costs of $13,606, which are being amortized over the term of the notes. As of March 31, 2021, $5,372 of the original issue discount and $8,887 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 March 31, 2021 and March 31, 2020, we recorded 12,879 and $12,834, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $38,441 and $38,481, 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 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 Incapital 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 Incapital 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 Incapital 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 March 31, 2021, $673,280 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 nine months ended March 31, 2021, we issued $109,562 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $107,830. These notes were issued with stated interest rates ranging from 1.50% to 6.00% with a weighted average interest rate of 4.70%. These notes mature between January 15, 2024 and April 15, 2031.

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The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 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						62,567						3.00% – 5.50%						4.60		%				July 15, 2025 – April 15, 2026
7						16,921						3.25% – 5.75%						4.84		%				July 15, 2027 – April 15, 2028
10						29,412						3.50% – 6.00%						4.90		%				July 15, 2030 – April 15, 2031
						$	109,562

During the nine months ended March 31, 2020, we issued $224,934 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $221,194. These notes were issued with stated interest rates ranging from 3.75% to 5.50% with a weighted average interest rate of 4.29%. These notes mature between July 15, 2024 and March 15, 2030 .

The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2020:

Tenor at Origination (in years)						Principal Amount						Interest Rate Range						Weighted Average Interest Rate						Maturity Date Range
5						$	105,379					3.75% – 5.00%						4.12		%				July 15, 2024 - March 15, 2025
7						44,184						4.00% – 5.25%						4.260		%				July 15, 2026 - March 15, 2027
10						75,371						3.75% – 5.50%						4.56		%				July 15, 2029 - March 15, 2030
						$	224,934

During the nine months ended March 31, 2021, we repaid $4,022 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 nine months ended March 31, 2021 was $1,100.

The following table summarizes the Prospect Capital InterNotes® outstanding as of March 31, 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						168,210						3.00% – 5.50%						4.31		%				July 15, 2024 – April 15, 2026
7						121,045						3.25% – 6.00%						5.07		%				July 15, 2024 – April 15, 2028
8						24,180						4.50% – 5.75%						4.67		%				August 15, 2025 – July 15, 2026
10						188,050						3.50% – 6.25%						5.26		%				January 15, 2024 – April 15, 2031
12						2,978						6.00%						6.00		%				November 15, 2025 – December 15, 2025
15						16,826						5.75% – 6.00%						5.79		%				May 15, 2028 – November 15, 2028
18						18,552						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						30,528						6.25% – 6.50%						6.39		%				August 15, 2038 – May 15, 2039
30						98,472						5.50% – 6.75%						6.25		%				November 15, 2042 – October 15, 2043
						$	673,280

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During the nine months ended March 31, 2020, we redeemed, prior to maturity $255,822 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.06% in order to replace shorter maturity debt with longer-term debt. During the nine months ended March 31, 2020, we repaid $4,252 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 nine months ended March 31, 2020 was $2,435.

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

Tenor at Origination (in years)						Principal Amount						Interest Rate Range						Weighted Average Interest Rate						Maturity Date Range
5						$	218,240					3.75% – 5.75%						4.81		%				September 15, 2023 -July 15, 2025
7						104,529						4.00% – 6.00%						5.11		%				July 15, 2024 - July 15, 2027
8						24,325						4.50% – 5.75%						4.67		%				August 15, 2025 - July 15, 2026
10						159,802						3.75% – 6.25%						5.32		%				January 15, 2024 - July 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						18,741						4.50% – 6.25%						5.58		%				December 15, 2030 - August 15, 2031
20						3,847						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						100,206						5.50% – 6.75%						6.25		%				November 15, 2042 - October 15, 2043
						$	680,229

In connection with the issuance of Prospect Capital InterNotes®, we incurred $29,754 of fees which are being amortized over the term of the notes, of which $12,307 remains to be amortized and is included as a reduction within Prospect Capital InterNotes® on the Consolidated Statement of Assets and Liabilities as of March 31, 2021.

During the three months ended March 31, 2021 and March 31, 2020, we recorded 10,515 and $9,217, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense. During the nine months ended March 31, 2021 and March 31, 2020, we recorded $30,431 and $28,192, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense.

Net Asset Value

During the nine months ended March 31, 2021, our net asset value increased by $645,979. After reducing our net asset value by the stated value of our cumulative preferred stock issuances, our net asset value available to common stockholders increased by $579,079, or $1.20 per common share. The increase was primarily attributable to an increase in net realized and net change in unrealized gains of $507,613, or $1.33 per basic weighted average common share. During the nine months ended March 31, 2021, net investment income of $212,508, or $0.56 per basic weighted average common share, also exceeded distributions to common and preferred stockholders of $206,734 (including distributions classified as return of capital distributions to common stockholders), or $0.54 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 $0.11 of dilution per common share related to common and preferred stock issuances through our common stock and preferred stock dividend reinvestment programs for the nine months ended March 31, 2021, as well as $0.02 per basic weighted average common share for the preferred offering cost. The following table shows the calculation of net asset value per common share as of March 31, 2021 and June 30, 2020.

						March 31, 2021						June 30, 2020
Net assets						$	3,701,840					$	3,055,861
Preferred Stock						(66,900)						—
Net assets available to common stockholders						$	3,634,940					$	3,055,861
Shares of common stock issued and outstanding						387,400,554						373,538,499
Net asset value per common share						$	9.38					$	8.18

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Results of Operations

Operating results for the three and nine months ended March 31, 2021 and March 31, 2020 were as follows:

			Three Months Ended March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Investment income			$	159,456					$	154,501					$	474,628					$	478,301
Operating expenses			86,054						86,025						262,120						270,880
Net investment income			73,402						68,476						212,508						207,421
Net realized gains (losses) from investments			881						26						7,451						(263)
Net change in unrealized gains (losses) from investments			184,960						(256,997)						518,577						(383,348)
Net realized losses on extinguishment of debt			(12,835)						2,796						(18,415)						(2,647)
Net increase (decrease) in net assets resulting from operations			$	246,408					$	(185,699)					$	720,121					$	(178,837)
Preferred stock dividend			400						—						446						—
Net Increase (Decrease) in Net Assets Resulting from Operations attributable to Common Stockholders			$	246,008					$	(185,699)					$	719,675					$	(178,837)

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 March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Interest income			$	139,583					$	138,806					$	416,609					$	425,421
Dividend income			1,402						2,577						3,707						10,340
Other income			18,471						13,118						54,312						42,540
Total investment income			$	159,456					$	154,501					$	474,628					$	478,301
Average debt principal of performing interest bearing investments(1)			$	5,483,233					$	5,256,009					$	5,432,414					$	5,270,507
Weighted average interest rate earned on performing interest bearing investments(1)			10.18		%				10.45		%				10.08		%				10.57		%
Average debt principal of all interest bearing investments(2)			$	5,800,685					$	5,889,955					$	5,793,085					$	5,878,182
Weighted average interest rate earned on all interest bearing investments(2)			9.63		%				9.32		%				9.45		%				9.47		%

(1) Excludes equity investments and non-accrual loans.

(2) Excludes equity investments.

The average interest earned on interest bearing performing assets decreased from 10.45% for the three months ended March 31, 2020 to 10.18% for the three months ended March 31, 2021. The decrease is primarily due to decreases in interest income due to a decline in LIBOR offset by early repayments causing an increase in accelerated income.The average interest earned on all interest bearing performing assets increased from 9.32% for the three months ended March 31, 2020 to 9.63% for the three months ended March 31, 2021. The increase is primarily due to decreases in non-accrual loans.

The average interest earned on interest bearing performing assets decreased from 10.57% for the nine months ended March 31, 2020 to 10.08% for the nine months ended March 31, 2021. The average interest earned on all interest bearing performing assets decreased from 9.47% for the nine months ended March 31, 2020 to 9.45% for the nine months ended March 31, 2021. The decrease is primarily due to decreases in interest income due to reduced returns from our structured credit investments and due to a decline in LIBOR offset by early repayments causing an increase in accelerated income.

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 nine months ended March 31, 2021 and March 31, 2020, respectively:

			Three Months Ended March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Dividend income
Nationwide Loan Company LLC			$	1,384					$	—					$	1,384					$	—
Valley Electric Company, Inc.			—						2,267						2,261						6,538
NMMB, Inc.			—						—						—						2,797
Other, net			18						310						62						1,005
Total dividend income			$	1,402					$	2,577					$	3,707					$	10,340

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Other income is comprised of structuring fees, advisory fees, royalty interests, settlement of net profits interests and settlement of residual profits interests. The following table describes other income earned for the three and nine months ended March 31, 2021 and March 31, 2020, respectively:

			Three Months Ended March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Structuring, advisory and amendment fees
First Tower Finance Company LLC			$	5,443					$	—					$	15,443					$	—
Interventional Management Services, LLC			1,510						—						1,510						—
National Property REIT Corp.			904						—						2,337						10,785
OneTouchPoint Corp.			810						—						810						—
Ahead Data Blue, LLC			—						—						1,725						1,400
Orva Buyer, LLC			—						—						810						—
Thermal Product Solutions, Inc.			—						—						689						—
H.I.G. KM2 Investor, LLC			—						—						500						—
Atlantis Health Care Group (Puerto Rico), Inc.			—						—						445						—
Eze Castle Integration, Inc.			—						—						1,250						—
PeopleConnect Intermediate, LLC			—						2,760						—						5,170
Other, net			208						785						774						2,549
Total structuring, advisory and amendment fees			$	8,875					$	3,545					$	26,293					$	19,904
Royalty and net revenue interests
National Property REIT Corp.			$	9,297					$	9,231					$	27,134					$	21,727
Other, net			167						204						504						540
Total royalty and net revenue interests			$	9,464					$	9,435					$	27,638					$	22,267
Administrative agent fees
Other, net			$	132					$	138					$	381					$	369
Total administrative agent fees			132						138						381						369
Total other income			$	18,471					$	13,118					$	54,312					$	42,540

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 March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Base management fee			$	29,183					$	26,625					$	83,866					$	82,631
Income incentive fee			18,251						17,119						53,354						51,855
Interest and credit facility expenses			32,773						37,646						100,549						113,603
Allocation of overhead from Prospect Administration			2,685						4,096						10,768						13,601
Audit, compliance and tax related fees			989						421						2,267						2,729
Directors’ fees			113						113						339						339
Other general and administrative expenses			2,060						5						10,977						6,122
Total operating expenses			$	86,054					$	86,025					$	262,120					$	270,880

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Total gross and net base management fee was $29,183 and $26,625 for the three months ended March 31, 2021 and March 31, 2020, respectively. The increase in total gross base management fee is directly related to an increase in average total assets.

Total gross base management fee was $83,866 and $82,631 for the nine months ended March 31, 2021 and March 31, 2020, respectively. The increase in total gross base management fee is directly related to an increase in average total assets.

For the three months ended March 31, 2021 and March 31, 2020, we incurred $18,251 and $17,119 of income incentive fees, respectively. This increase was driven by a corresponding increase in pre-incentive fee net investment income from $85,595 for the three months ended March 31, 2020 to $91,253 for the three months ended March 31, 2021. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement. Income incentive fee for the nine months ended March 31, 2021 includes a $264 adjustment for fees earned in prior periods that were neither expensed nor paid to the Investment Adviser.

For the nine months ended March 31, 2021 and March 31, 2020, we incurred $53,354 and $51,855 of income incentive fees, respectively. This increase was driven by a corresponding increase in pre-incentive fee net investment income from $259,276 for the nine months ended March 31, 2020 to $265,416 for the nine months ended March 31, 2021. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.

During the three months ended March 31, 2021 and March 31, 2020, we incurred $32,773 and $37,646 respectively, of interest and credit facility expenses related to our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Notes”). During the nine months ended March 31, 2021 and March 31, 2020, we incurred $100,549 and $113,603, respectively, of interest expenses related to 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 March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Interest on borrowings			$	28,849					$	32,177					$	88,709					$	95,944
Amortization of deferred financing costs			1,756						2,231						5,526						6,341
Accretion of discount on unsecured debt			365						260						903						775
Facility commitment fees			1,803						2,978						5,411						10,543
Total interest and credit facility expenses			$	32,773					$	37,646					$	100,549					$	113,603
Average principal debt outstanding			$	2,395,361					$	2,371,206					$	2,334,905					$	2,306,202
Annualized weighted average stated interest rate on borrowings(1)			4.82		%				5.43		%				5.07		%				5.55		%
Annualized weighted average interest rate on borrowings(2)			5.47		%				6.35		%				5.74		%				6.57		%

(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 $32,177 for the three months ended March 31, 2020 to $28,849 for the three months ended March 31, 2021. The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.43% for the three months ended March 31, 2020 to 4.82% for the three months ended March 31, 2021. This decrease is primarily due to repurchases and early retirements of our Convertible Notes and increased utilization of our Revolving Credit Facility, which bears a lower rate than our remaining debt due to LIBOR decline.

Interest expense decreased from $95,944 for the nine months ended March 31, 2020 to $88,709 for the nine months ended March 31, 2021. The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.55% for the nine months ended March 31, 2020 to 5.07% for the nine months ended March 31, 2020. This decrease is primarily due to repurchases and early retirements of our Convertible Notes and increased utilization of our Revolving Credit Facility, which bears a lower rate than our remaining debt due to LIBOR decline.

The allocation of net overhead expense from Prospect Administration was $2,685 and $4,096 for the three months ended March 31, 2021 and March 31, 2020, respectively. In addition, we were given a credit in the amount of $3,522 for legal expenses

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incurred on behalf of our portfolio companies that were remitted to Prospect Administration during the three months ended March 31, 2021.

The allocation of net overhead expense from Prospect Administration was $10,768 and $13,601 for the nine months ended March 31, 2021 and March 31, 2020, respectively. Prospect Administration received estimated payments of $1,038 and $1,225 directly from our portfolio companies, and certain funds managed by the Investment Adviser for legal services during the nine months ended March 31, 2021 and March 31, 2020, respectively. In addition, we were given a credit in the amount of $3,522 for legal expenses incurred on behalf of our portfolio companies that were remitted to Prospect Administration during the three months ended March 31, 2021. 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 $3,162 and $539 for the three months ended March 31, 2021 and March 31, 2020, respectively. The increase was primarily attributable to an increase in audit, compliance and tax related fees, an increase in investor relations fees and subscription expenses.

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 $13,583 and $9,190 for the nine months ended March 31, 2021 and March 31, 2020, respectively. The increase was primarily attributable to an increase in legal fees and investor relations related fees offset and subscription expenses.

Net Realized Gains (Losses)

The following table details net realized gains (losses) from investments for the three months ended March 31, 2021 and March 31, 2020:

			Three Months Ended March 31,
Portfolio Company			2021						2020
Edmentum Ultimate Holdings, LLC			$	745					$	—
New Century Transportation, Inc.									449
PeopleConnect Holdings, LLC									(522)
Rated Secured Structured Note Portfolio			—						—
Other, net			136						99
Net realized gains (losses)			$	881					$	26

The following table details net realized gains (losses) from investments for the nine months ended March 31, 2021 and March 31, 2020:

			Nine Months Ended March 31,
Portfolio Company			2021						2020
Edmentum Ultimate Holdings, LLC			$	4,469					$	—
Spartan Energy Services, LLC - Term Loan B			2,832						—
Rated Secured Structured Note Portfolio			—						1,885
New Century Transportation, Inc.									449
Madison Park Funding XI, Ltd.			—						(1,949)
PeopleConnect Holdings, LLC			—						(522)
Voya CLO 2012-2 Ltd.			—						(450)
Other, net			150						324
Net realized gains (losses)			$	7,451					$	(263)

During the three months ended March 31, 2021 and March 31, 2020, we recorded a net realized gain (loss) from the extinguishment of debt of $12,835 and $2,796, respectively. During the nine months ended March 31, 2021 and March 31,

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2020, we recorded a net realized loss from the extinguishment of debt of $18,415 and $2,647, 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 and nine months ended March 31, 2021 and March 31, 2020, respectively:

			Three Months Ended March 31,												Nine Months Ended March 31,
			2021						2020						2021						2020
Control investments			$	142,379					$	(97,444)					$	323,967					$	(172,328)
Affiliate investments			21,876						(9,516)						107,582						20,746
Non-control/non-affiliate investments			20,705						(150,037)						87,028						(231,766)
Net change in unrealized gains (losses)			$	184,960					$	(256,997)					$	518,577					$	(383,348)

The following table details reflects net change in unrealized gains (losses) on investments for the three months ended March 31, 2021:

									Net Change in Unrealized Gains (Losses)
InterDent, Inc.									$	54,955
First Tower Finance Company LLC									47,983
National Property REIT Corp.									36,628
PGX Holdings, Inc.									19,457
Other, net									16,853
Subordinated Structured Notes									11,527
CP Energy Services Inc.									5,306
NMMB, Inc.									5,161
Credit Central Loan Company, LLC									(6,091)
Echelon Transportation, LLC									(6,819)
Net change in unrealized gains									$	184,960

The following table reflects net change in unrealized gains (losses) on investments for the three months ended March 31, 2020:

						Net Change in Unrealized Gains (Losses)
NMMB, Inc.						$	8,680
Pacific World Corporation						(7,463)
Credit Central Loan Company, LLC						(8,304)
Echelon Aviation LLC						(10,081)
Edmentum Ultimate Holdings, LLC						(11,243)
Engine Group, Inc.						(13,337)
National Property REIT Corp.						(18,521)
First Tower Finance Company LLC						(25,963)
PGX Holdings, Inc.						(28,093)
CP Energy Services Inc.						(29,526)
Other, net						(29,676)
Subordinated Structured Notes						(83,470)
Net change in unrealized (losses)						$	(256,997)

The following table details net change in unrealized gains (losses) on investments for the nine months ended March 31, 2021:

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									Net Change in Unrealized Gains (Losses)
InterDent, Inc.									$	121,247
PGX Holdings, Inc.									107,828
National Property REIT Corp.									107,149
First Tower Finance Company LLC									75,057
Subordinated Structured Notes									36,791
Other, net									36,303
USES Corp.									18,076
Valley Electric Company, Inc.									15,350
R-V Industries, Inc.									9,798
Pacific World Corporation									9,634
NMMB, Inc.									9,101
Securus Technologies Holdings, Inc.									6,935
ACE Cash Express, Inc.									5,348
Targus Cayman HoldCo Limited									5,225
Engine Group, Inc.									4,452
Edmentum Ultimate Holdings, LLC									(5,471)
MITY, Inc.									(8,702)
Credit Central Loan Company, LLC									(10,145)
Echelon Transportation, LLC									(12,456)
CP Energy Services Inc.									(12,943)
Net change in unrealized gains									$	518,577

The following table details net change in unrealized gains (losses) on investments for the nine months ended March 31, 2020:

						Net Change in Unrealized Gains (Losses)
National Property REIT Corp.						$	32,617
Edmentum Ultimate Holdings, LLC						10,873
NMMB, Inc.						10,429
United Sporting Companies, Inc.						7,463
MITY, Inc.						6,097
Digital Room, LLC						(5,076)
Easy Gardener Products, Inc.						(5,284)
Other, net						(9,536)
Credit Central Loan Company, LLC						(9,556)
Securus Technologies Holdings, Inc.						(9,909)
Engine Group, Inc.						(12,388)
Echelon Aviation LLC						(12,991)
First Tower Finance Company LLC						(17,791)
Valley Electric Company, Inc.						(20,633)
InterDent, Inc.						(35,440)
PGX Holdings, Inc.						(42,852)
Pacific World Corporation						(66,736)
CP Energy Services Inc.						(70,012)
Subordinated Structured Notes						(132,623)
Net change in unrealized (losses)						$	(383,348)

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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 Wuhan Virus 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 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 nine months ended March 31, 2021 and March 31, 2020, our operating activities provided $131,008 and provided $343,368 of cash, respectively. There were no investing activities for the nine months ended March 31, 2021 and March 31, 2020. Financing activities used $74,580 and $403,820 of cash during the nine months ended March 31, 2021 and March 31, 2020, respectively, which included dividend payments of $132,676 and $194,024, 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 nine months ended March 31, 2021, we borrowed $668,000 and we made repayments totaling $561,999 under the Revolving Credit Facility. As of March 31, 2021, our outstanding balance on the Revolving Credit Facility was $343,537. As of March 31, 2021, we had, net of unamortized discount and debt issuance costs, $262,755 outstanding on the Convertible Notes, $892,342 outstanding on the Public Notes and $660,973 outstanding on the Prospect Capital InterNotes® (See “Capitalization” above).

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Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 5.00%. As of March 31, 2021 and June 30, 2020, we had $38,999 and $41,487, 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 March 31, 2021 and June 30, 2020.

We have guaranteed $2,737 in standby letters of credit issued through a financial intermediary and $3,494 of equipment lease obligations on behalf of InterDent, Inc. (“InterDent”) as of March 31, 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 March 31, 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, 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 Incapital LLC, pursuant to which Incapital 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”, and together with the Series A1 Preferred Stock, Series M1 Preferred Stock and Series M2 Preferred Stock, the “Preferred Stock”). In connection with such offering, on October 30, 2020, we filed Articles Supplementary with the State Department of Assessments and Taxation of Maryland, reclassifying and designating 20,000,000 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 Preferred Stock Offering, effective August 3, 2020 and as amended on October 30, 2020, we adopted and amended, respectively, a Preferred Stock Dividend Reinvestment Plan (the “Preferred Stock DRIP”), pursuant to which holders of the Preferred Stock will have dividends on their Preferred Stock automatically reinvested in additional shares of such Preferred Stock at a price per share of $25.00, if they elect.

Each series of 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 Preferred Stock on a national securities exchange, shares of the Preferred Stock are convertible, at the option of the holder of the 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 (as defined in the applicable prospectus supplement)(such arithmetic average, the “5-day VWAP”). For the Series A1 Preferred Stock and the Series AA1 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 A Share Holder Optional Conversion Fee (as described in the prospectus supplement relating to the Series A1 Preferred Stock or the Series AA1 Preferred Stock, as applicable) applicable on the respective Holder Conversion Deadline (as defined in the applicable prospectus supplement). 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, but if a holder of Series M Preferred Stock exercises a Holder Optional Conversion within the first twelve months of issuance of such Series M

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Preferred Stock, the Settlement Amount payable to such holder will be reduced by the aggregate amount of all dividends, whether paid or accrued, on such Series M Preferred 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 Preferred Stock has been issued. Beginning on the five year anniversary of the date on which a share of 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 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 Preferred Stock has been issued, or, for listed shares of 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 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 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 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 both the Series A1 Preferred Stock and the Series M Preferred Stock, “IOC Settlement Amount” means (A) the Stated Value, plus (B) unpaid dividends accrued to, but not including, the date fixed for conversion. Subject to certain limited exceptions, we will not exercise an Issuer Optional Conversion with respect to a share of Preferred Stock until after the date set forth in the applicable prospectus supplement with respect to the Preferred Stock. 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 Preferred Stock, the holder of such Preferred Stock may instead elect a Holder Optional Conversion with respect to such 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.

We determined the estimated value as of March 31, 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 March 31, 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 March 31, 2021 is $25.00 per share.

Common Stock

Our common stockholders’ equity accounts as of March 31, 2021 and June 30, 2020 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 nine months ended March 31, 2021 or March 31, 2020.

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Off-Balance Sheet Arrangements

As of March 31, 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

During the period from April 8, 2021 through May 6, 2021, we issued $20,692 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $20,341.

On March 15, 2021, we filed a notice of meeting and definitive proxy statement in connection with a special meeting of the our stockholders that is scheduled to be held on June 11, 2021 for the purpose of asking the our stockholders to vote on a proposal to authorize us, with approval of our Board of Directors, to sell shares of our common stock (during the next 12 months) at a price or prices below the our then current net asset value per share in one or more offerings subject to certain conditions.

On March 24, 2021, we made a new $16,750 First Lien Term Loan investment and a new $32,000 Second Lien Term Loan investment in First Brands Group, LLC, an after-market automotive repair parts supplier. The new investments settled on April 5, 2021.

On March 16, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal amount of the 4.95% Senior Convertible Notes due 2022 at the purchase price of $102.00, plus accrued and unpaid interest (“2022 Notes March Tender Offer”). The 2022 Notes March Tender Offer expired at 12:00 midnight, New York City time, on April 14, 2021 (one minute after 11:59 p.m., New York City time, on April 13, 2021). As of the expiration date, $50 aggregate principal amount of the 2022 Notes were validly tendered and accepted. Following settlement of the 2022 Notes March Tender Offer on April 16, 2021, approximately $111,055 aggregate principal amount of the 2022 Notes remain outstanding.

On April 7, 2021, we commenced two separate tender offers to purchase for cash (i) 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 Tender Offer”), and (ii) 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 Tender Offer”, and together with the 2023 Notes April Tender Offer, the “April Tender Offers”). The April Tender Offers expired at 5:00 p.m., New York City time, on May 5, 2021 (one minute after 11:59 p.m., New York City time, on May 4, 2021). As of the expiration date, $836 aggregate principal amount of the 2023 Notes and $226 aggregate principal amount of the 6.375% 2024 Notes were validly tendered and accepted. Following settlement of the April Tender Offers on May 7, 2021, approximately $284,219 aggregate principal amount of the 2023 Notes and $81,389 aggregate principal amount of the 6.375% 2024 Notes remain outstanding.

On April 8, 2021 and April 22, 2021, we issued a total of 483,282 shares of our 5.50% Series A1 Preferred Stock and 63,626 shares of our 5.50% Series M1 Preferred Stock, excluding shares issued via the Preferred Stock Dividend Reinvestment Plan, for net proceeds of $12,539.

On April 16, 2021, we entered a new $31,778 Second Lien Term Loan investment and a new $18,222 Delayed Draw Term Loan commitment with Redstone Buyer, LLC, a provider of cybersecurity and risk management services. Our new investments settled on April 30, 2021, with the Delayed Draw Term Loan unfunded at close.

On April 28, 2021, we completed an extension of the Revolving Credit Facility (the “New Facility”) for PCF, extending the term 5.7 years from such date and reducing the interest rate on drawn amounts to one-month LIBOR plus 2.05%. The New Facility, for which $1,082,500 of commitments have been closed to date, includes an accordion feature that allows the New Facility, at Prospect's discretion, to accept up to a total of $1,500,000 of commitments. The New 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. Pricing for amounts drawn under the Facility is one-month LIBOR plus 2.05%, which achieves a 15 basis point reduction in the interest rate from the previous facility rate of LIBOR plus 2.20%. 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.

On April 30, 2021, Ahead Data Blue, LLC fully repaid the $57,500 Second Lien Term Loan receivable to us at par.

We have provided notice to call certain of our Prospect Capital InterNotes® at par with the following terms:

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Notice Date

Settlement Date

Maturity Date Range

Interest Rate Range

Principal

3/12/2021

4/15/2021

April 15, 2024

5.75%

$

4,794

4/15/2021

5/17/2021

May 15, 2024

5.75%

$

5,255

5/4/2021

5/11/2021

July 15, 2024 - March 15, 2025

4.00% - 4.75%

$

85,449

On May 10, 2021, we announced the declaration of monthly dividends for our 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, as follows:

Monthly Cash Preferred Shareholder Distribution			Record Date			Payment Date			Monthly Amount ($ per share), before pro ration for partial periods
June 2021			6/16/2021			7/1/2021			$0.114583
July 2021			7/21/2021			8/2/2021			$0.114583
August 2021			8/18/2021			9/1/2021			$0.114583

On May 10, 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)
May 2021			5/27/2021			6/17/2021			$0.0600
June 2021			6/28/2021			7/22/2021			$0.0600
July 2021			7/28/2021			8/19/2021			$0.0600
August 2021			8/27/2021			9/23/2021			$0.0600

Critical Accounting Policies and Estimates

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 nine months ended March 31, 2021.

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.

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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 March 31, 2021 and June 30, 2020, our qualifying assets as a percentage of total assets, stood at 75.67% and 74.44%, 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.

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.

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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. 

Online Small-and-Medium-Sized Business Lending Risk

With respect to our online small-and-medium-sized business (“SME”) lending initiative, we invest primarily in marketplace loans through marketplace lending platforms (e.g. OnDeck). We do not conduct loan origination activities ourselves. Therefore, our ability to purchase SME loans, and our ability to grow our portfolio of SME loans, is directly influenced by the business performance and competitiveness of the marketplace loan origination business of the marketplace lending platforms from which we purchase SME loans. In addition, our ability to analyze the risk-return profile of 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.

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

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.

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

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

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 in the accompanying Consolidated Financial Statements 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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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 in the accompanying Consolidated Financial Statements for further discussion.

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. Loan origination fees, original issue discount, 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 March 31, 2021, approximately 0.7% 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 in the accompanying Consolidated Financial Statements 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.

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

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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 March 31, 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 March 31, 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, 2017 and thereafter remain subject to examination by the Internal Revenue Service.

Dividends and Distributions

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 the 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 in the accompanying Consolidated Financial Statements for further discussion).

We may record registration expenses related to shelf filings as prepaid expenses. These expenses consist principally of 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 completed. As of March 31, 2021 and June 30, 2020, there are no prepaid expenses related to registration expenses and all amounts incurred have been expensed.

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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 June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the financial instruments impairment guidance so that an entity is required to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses. ASU 2016-13 also amends the guidance in FASB ASC Subtopic No. 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets, related to the subsequent measurement of accretable yield recognized as interest income over the life of a beneficial interest in securitized financial assets under the effective yield method. ASU 2016-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of ASU 2016-13 did not have a material effect on our consolidated financial statements and disclosures as our investments are carried at fair value, with changes in fair value recognized in earnings.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The standard will modify the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. ASU No. 2018-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. The adoption of ASU 2018-13 did not have a material effect on our consolidated financial statements and disclosures.

In May 2020, the SEC adopted rule amendments that will impact the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or certain acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules adopt a new definition of “significant subsidiary” applicable only to investment companies that (i) modifies the investment test and the income test, and (ii) eliminates the asset test currently in the definition of “significant subsidiary” in Rule 1-02(w) of Regulation S-X. The new Rule 1-02(w)(2) of Regulation S-X is intended to more accurately capture these portfolio companies that are more likely to materially impact the financial condition of an investment company. The Final Rules became effective on January 1, 2021, but voluntary compliance was permitted in advance of the effective date. We evaluated the impact of adopting the Final Rules on our consolidated financial statements and because the new definition of “significant subsidiary” contained therein is specific to investment companies, we elected to early adopt the Final Rules beginning with our fiscal year ended June 30, 2020. Refer to Note 3. Portfolio Investments - Unconsolidated Significant Subsidiaries for disclosure.

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 March 31, 2021.

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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.

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 Wuhan Virus 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 Wuhan Virus pandemic and its potential impact on our business and our operating results, see Part I, Item 1A. Risk Factors, “Risks Relating to Our Business - The Wuhan Virus pandemic has caused severe disruptions in the global economy, which has had, and may continue to 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 II, Item 1A. Risk Factors, “Risks Relating to Our Business - Rising interest rates may adversely affect the value of our portfolio investments which could have an adverse effect on our business, financial condition and results of operations”.

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 market interest rates. As of March 31, 2021, 86.65% 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 220 basis points with no minimum LIBOR floor and an outstanding balance of $343,537 as of March 31, 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 March 31, 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						$	55,413					$	10,306								$	45,107					$	36,086
Up 200 basis points						$	27,642					$	6,871								$	20,771					$	16,617
Up 100 basis points						$	5,670					$	3,435								$	2,235					$	1,788
Down 100 basis points						$	(404)					$	(364)								$	(40)					$	(32)

(1)Includes the impact of income incentive fees. See Note 13 in the accompanying Consolidated Financial Statements for more information on income incentive fees.

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As of March 31, 2021, one, two, three, six, and twelve month LIBOR were 0.11%, 0.13%, 0.19%, 0.21%, and 0.28% 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 March 31, 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 March 31, 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 Wuhan Virus 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 March 31, 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 March 31, 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, 2020, 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

The Wuhan Virus pandemic has caused severe disruptions in the global economy, which has had, and may continue to have, a negative impact on our portfolio companies and our business and operations.

As of the filing date of this Quarterly Report, there is an outbreak of a highly contagious form of a novel coronavirus (“Wuhan Virus”). The Wuhan Virus has been declared a pandemic by the World Health Organization and, in response to the outbreak, the U.S. Health and Human Services Secretary has declared a public health emergency in the United States. The Wuhan Virus has had a devastating impact on the global economy, including the U.S. economy, and has resulted in a global economic recession.

Many states, including those in which we and our portfolio companies operate, have issued orders requiring the closure of non-essential businesses and/or requiring or encouraging residents to stay at home. The Wuhan Virus pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, or the re-introduction 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, began to relax the early public health restrictions with a view to partially or fully reopening their economies, many cities, both globally and in the United States, have since experienced a surge in the reported number of cases and hospitalizations related to the Wuhan Virus pandemic. This increase in cases has led to the re-introduction of restrictions and business shutdowns in certain states, counties and cities in the United States and globally and could continue to lead to the re-introduction of such restrictions elsewhere. Additionally, in December 2020, the U.S. Food and Drug Administration (“FDA”) authorized vaccines produced by Pfizer-BioNTech and Moderna for emergency use, and in February 2021, the FDA authorized vaccines produced by Johnson & Johnson. However, it remains unclear how quickly the vaccines will be distributed nationwide and globally, whether vaccine distributions may be paused, or when “herd immunity” will be achieved and the restrictions that were imposed to slow the spread of the virus will be lifted entirely. A delay in distributing the vaccines could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time.

Even after the Wuhan Virus pandemic subsides, the U.S. economy and most other major global economies may continue to experience a recession, and our business and operations, as well as the business and operations of our portfolio companies, could be materially adversely affected by a prolonged recession in the United States and other major markets. Potential consequences of the current unprecedented measures taken in response to the spread of Wuhan Virus, and current market disruptions and volatility that may impact our business include, but are not limited to:

•sudden, unexpected and/or severe declines in the market price of our securities or net asset value;

•inability of the Company to accurately or reliably value its portfolio;

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•inability of the Company to comply with certain asset coverage ratios that would prevent the Company from paying dividends to our common stockholders or holders of the Preferred Stock and that could result in breaches of covenants or events of default under our credit agreement or debt indentures;

•inability of the Company to pay any dividends and distributions on common stock or Preferred Stock or service its debt;

•inability of the Company to maintain its status as a RIC under the Code;

•potentially severe, sudden and unexpected declines in the value of our investments;

•increased risk of default or bankruptcy by the companies in which we invest;

•increased risk of companies in which we invest being unable to weather an extended cessation of normal economic activity and thereby impairing their ability to continue functioning as a going concern;

•reduced economic demand resulting from changes in consumer behavior, mass employee layoffs or furloughs in response to governmental action taken to slow the spread of Wuhan Virus, which could impact the continued viability of the companies in which we invest;

•companies in which we invest being disproportionately impacted by governmental action aimed at slowing the spread of Wuhan Virus or mitigating its economic effects;

•limited availability of new investment opportunities;

•inability for us to replace our existing leverage when it becomes due or replace it on terms as favorable as our existing leverage;

•a reduction in interest rates, including interest rates based on LIBOR and similar benchmarks, which may adversely impact our ability to lend money at attractive rates; and

•general threats to the Company’s ability to continue investment operations and to operate successfully as a business development company.

The Wuhan Virus 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. The Wuhan Virus pandemic continues to have a particularly adverse impact on industries in which certain of our portfolio companies operate, including aircraft leasing, energy, hospitality, travel, retail and restaurants. Certain of our portfolio companies in other industries have also been significantly impacted. The Wuhan Virus 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 after March 31, 2021, including for the reasons described below. Although on March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which contains provisions intended to mitigate the adverse economic effects of the Wuhan Virus pandemic, it is uncertain whether, or how much, our portfolio companies will be able to benefit from the CARES Act or any other subsequent legislation intended to provide financial relief or assistance. 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.

The effects described above on our portfolio companies have, for certain of our portfolio companies to date, impacted their ability to make payments on their loans on a timely basis and in some cases have required us to amend certain terms, including payment terms. In addition, an extended duration of the Wuhan Virus pandemic may impact the ability of our portfolio companies to continue making their loan payments on a timely basis or meeting their loan covenants. The inability of portfolio companies to make timely payments or meet loan covenants may in the future require us to undertake similar amendment actions with respect to other of our investments or to restructure our investments. The amendment or restructuring of our investments may include the need for us to make additional investments in our portfolio companies (including debt or equity investments) beyond any existing commitments, exchange debt for equity, or change the payment terms of our investments to permit a portfolio company to pay a portion of its interest through payment-in-kind, which would defer the cash collection of such interest and add it to the principal balance, which would generally be due upon repayment of the outstanding principal.

The Wuhan Virus pandemic has adversely impacted the fair value of our investments as of March 31, 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 Wuhan Virus 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 period 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 Wuhan Virus pandemic. As a result, our valuations at March 31, 2021 may not show the complete or continuing impact of the Wuhan Virus pandemic and the resulting measures taken in response thereto. In addition, write downs in the value 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

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continue to incur additional net unrealized losses or may incur realized losses after March 31, 2021, which could have a material adverse effect on our business, financial condition and results of operations.

The volatility and disruption to the global economy from the Wuhan Virus pandemic has affected, and is expected to continue to affect, the pace of our investment activity, which may have a material adverse impact on our results of operations. Such volatility and disruption have also led to the increased credit spreads in the private debt capital markets.

In response to the Wuhan Virus pandemic, Prospect Capital Management L.P. (“Prospect Capital Management” or our “Investment Adviser”) instituted a work from home policy. Although certain employees are currently allowed to return to their offices in certain circumstances, subject to health and safety protocols, it is expected that most employees will continue to work remotely for the foreseeable future. Extended periods of remote working could strain our technology resources and introduce operational risks, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the Wuhan Virus pandemic.

Despite actions of the U.S. federal government and foreign governments, the uncertainty surrounding the Wuhan Virus pandemic and other factors has contributed to significant volatility and declines in the global public equity markets and global debt capital markets, including the market price of shares of our common stock and the trading prices of our issued debt securities. Shares of our common stock are trading below our net asset value as of the filing date of this Quarterly Report. Market conditions may make it difficult for us to raise equity capital because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without general approval by our stockholders, which we currently have until June 12, 2021, and approval of the specific issuance by our Board of Directors. Moreover, these market conditions may make it difficult to access or obtain new indebtedness with similar terms to our existing indebtedness or otherwise have a negative effect on our cost of capital. See “Risk Factors-Risks Relating to Our Business-Capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

It is virtually impossible to determine the ultimate impact of the Wuhan Virus at this time. Further, the extent and strength of any economic recovery after the Wuhan Virus pandemic abates, including following any “second wave,” “third wave” or other intensifying of the pandemic, is uncertain and subject to various factors and conditions.

Accordingly, an investment in the Company is subject to an elevated degree of risk as compared to other market environments.

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

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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 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

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alternatives, we may not be able to meet our payment obligations under the Preferred Stock, the Unsecured Notes and our other debt.

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) $7.1 billion in total assets, (ii) an average cost of funds of 5.02% (including preferred dividend payments of 5.50% per annum), (iii) $2.3 billion in debt outstanding, (iv) $1.3 billion in liquidation preference of Preferred Stock outstanding, and (v) $3.5 billion of common stockholders’ equity.

Assumed Return on Our Portfolio (net of expenses)			(10)%			(5)%			0%			5%			10%
Corresponding Return to Common Stockholder(1)			(25.4)%			(15.3)%			(5.2)%			5.0%			15.1%

The below calculation assumes (i) $7.1 billion in total assets, (ii) an average cost of funds of 4.74%, (iii) $2.4 billion in debt outstanding and (iv) $4.7 billion of common stockholders’ equity.

Assumed Return on Our Portfolio (net of expenses)			(10)%			(5)%			0%			5%			10%
Corresponding Return to Common Stockholder(2)			(17.5)%			(10.0)%			(2.4%)			5.1%			12.7%

(1) Assumes no conversion of Preferred Stock to common stock.

(2) Assumes conversion rate based on the 5-day VWAP of our common stock on March 31, 2021, which was $7.76, and a Holder Optional Conversion Fee (as defined in the prospectus supplement relating to the applicable offering) of 9.50% and 9.00% on Series A 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 $7.76, 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 March 31, 2021. As a result, it has not been updated to take into account any changes in assets or leverage since March 31, 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 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, 2020 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, 2019
First quarter						$			9.39									$			7.58									$			6.67									(19.3)		%				(29.0)		%
Second quarter									9.02												7.27												5.77									(19.4)		%				(36.0)		%
Third quarter									9.08												6.93												6.27									(23.7)		%				(30.9)		%
Fourth quarter									9.01												6.83												6.24									(24.2)		%				(30.7)		%
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)		%
Twelve Months Ending 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)		%

(1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per 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 a special meeting of stockholders held on June 12, 2020, our stockholders approved our ability to sell shares of our common stock at a price or prices below our NAV per 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 share is valid until June 12, 2021 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 at our June 12, 2020 special meeting of 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 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.

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(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.

On March 15, 2021, the Company filed its notice of meeting and definitive proxy statement in connection with a special

meeting of the Company's stockholders that is scheduled to be held on June 11, 2021 for the purpose of asking the

Company's stockholders to vote on a proposal to authorize the Company, with approval of its Board of Directors, to sell

shares of its common stock (during the next 12 months) at a price or prices below the Company’s then current net asset

value per share in one or more offerings subject to certain conditions.

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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 March 31, 2021, except that we assume that we have issued $1.25 billion in Preferred Stock paying dividends of 5.50% per annum and that we have borrowed $1.08 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 $1.8 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:			A 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)			4.49%
Incentive fees payable under Investment Advisory Agreement (20% of realized capital gains and 20% of pre-incentive fee net investment income) (8)			2.04%
Total advisory fees			6.53%
Total interest expenses (9)			3.68%
Other expenses (10)			0.93%
Total annual expenses (8)(10)(11)			11.14%
Dividends on Preferred Stock(12)			1.97%
Total annual expenses after dividends on Preferred Stock (13)			13.11%

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 Preferred Stock paying dividends of 5.50% per annum, we have borrowed $1.08 billion available under our line of credit, in addition to our other indebtedness of $1.8 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*						$	147					$	340					$	511					$	855
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**						$	156					$	364					$	543					$	892

* 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).

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

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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 $1.1 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 March 31, 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 March 31, 2021, we had $1.8 billion outstanding of Unsecured Notes (as defined below) in various maturities, ranging from July 15, 2022 to October 15, 2043, and interest rates, ranging from 1.50% to 6.88%, 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 March 31, 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 March 31, 2021, which was $7.76, then management fees would be 3.31%, incentive fees payable under our Investment Advisory Agreement would be 1.50%, total advisory fees would be 4.81%, total interest expenses would be 2.71%, other expenses would be 0.68%, and total annual expenses would be 8.20% 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 $7.76, 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 A Shares, M Shares, and AA 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 11.84%, or 13.81% 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)
4.1			Nine Hundred Twelfth Supplemental Indenture dated as of January 7, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2026(7)
4.2			Nine Hundred Thirteenth Supplemental Indenture dated as of January 7, 2021, to the U.S. Bank Indenture, and Form of 4.250% Prospect Capital InterNote® due 2028(7)
4.3			Nine Hundred Fourteenth Supplemental Indenture dated as of January 7, 2021, to the U.S. Bank Indenture, and Form of 4.500% Prospect Capital InterNote® due 2031(7)
4.4			Nine Hundred Fifteenth Supplemental Indenture dated as of January 14, 2021, to the U.S. Bank Indenture, and Form of 1.500% Prospect Capital InterNote® due 2024(8)
4.5			Nine Hundred Sixteenth Supplemental Indenture dated as of January 14, 2021, to the U.S. Bank Indenture, and Form of 3.750% Prospect Capital InterNote® due 2026(8)

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Exhibit No.
4.6			Nine Hundred Seventeenth Supplemental Indenture dated as of January 14, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2028(8)
4.7			Nine Hundred Eighteenth Supplemental Indenture dated as of January 14, 2021, to the U.S. Bank Indenture, and Form of 4.250% Prospect Capital InterNote® due 2031(8)
4.8			Nine Hundred Nineteenth Supplemental Indenture dated as of January 22, 2021, to the U.S. Bank Indenture, and Form of 1.500% Prospect Capital InterNote® due 2024(9)
4.9			Nine Hundred Twentieth Supplemental Indenture dated as of January 22, 2021, to the U.S. Bank Indenture, and Form of 2.000% Prospect Capital InterNote® due 2026(9)
4.10			Nine Hundred Twenty-First Supplemental Indenture dated as of January 22, 2021, to the U.S. Bank Indenture, and Form of 2.250% Prospect Capital InterNote® due 2028(9)
4.11			Nine Hundred Twenty-Second Supplemental Indenture dated as of January 22, 2021, to the U.S. Bank Indenture, and Form of 2.500% Prospect Capital InterNote® due 2031(9)
4.12			Nine Hundred Twenty-Third Supplemental Indenture dated as of January 28, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(10)
4.13			Nine Hundred Twenty-Fourth Supplemental Indenture dated as of January 28, 2021, to the U.S. Bank Indenture, and Form of 3.250% Prospect Capital InterNote® due 2028(10)
4.14			Nine Hundred Twenty-Fifth Supplemental Indenture dated as of January 28, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2031(10)
4.15			Nine Hundred Twenty-Sixth Supplemental Indenture dated as of February 4, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(11)
4.16			Nine Hundred Twenty-Seventh Supplemental Indenture dated as of February 4, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2028(11)
4.17			Nine Hundred Twenty-Eighth Supplemental Indenture dated as of February 4, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2031(11)
4.18			Nine Hundred Twenty-Ninth Supplemental Indenture dated as of February 11, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(12)
4.19			Nine Hundred Thirtieth Supplemental Indenture dated as of February 11, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2028(12)
4.20			Nine Hundred Thirty-First Supplemental Indenture dated as of February 11, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2031(12)
4.21			Nine Hundred Thirty-Second Supplemental Indenture dated as of February 25, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(13)
4.22			Nine Hundred Thirty-Third Supplemental Indenture dated as of February 25, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2028(13)
4.23			Nine Hundred Thirty-Fourth Supplemental Indenture dated as of February 25, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2031(13)
4.24			Nine Hundred Thirty-Fifth Supplemental Indenture dated as of March 4, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(14)
4.25			Nine Hundred Thirty-Sixth Supplemental Indenture dated as of March 4, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2028(14)
4.26			Nine Hundred Thirty-Seventh Supplemental Indenture dated as of March 4, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2031(14)
4.27			Nine Hundred Thirty-Eighth Supplemental Indenture dated as of March 11, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(15)
4.28			Nine Hundred Thirty-Ninth Supplemental Indenture dated as of March 11, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2028(15)
4.29			Nine Hundred Fortieth Supplemental Indenture dated as of March 11, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2031(15)
4.30			Nine Hundred Forty-First Supplemental Indenture dated as of March 18, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(16)
4.31			Nine Hundred Forty-Second Supplemental Indenture dated as of March 18, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2028(16)
4.32			Nine Hundred Forty-Third Supplemental Indenture dated as of March 18, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2031(16)
4.33			Nine Hundred Forty-Fourth Supplemental Indenture dated as of March 25, 2021, to the U.S. Bank Indenture, and Form of 3.000% Prospect Capital InterNote® due 2026(17)

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Exhibit No.
4.34			Nine Hundred Forty-Fifth Supplemental Indenture dated as of March 25, 2021, to the U.S. Bank Indenture, and Form of 3.500% Prospect Capital InterNote® due 2028(17)
4.35			Nine Hundred Forty-Sixth Supplemental Indenture dated as of March 25, 2021, to the U.S. Bank Indenture, and Form of 4.000% Prospect Capital InterNote® due 2031(17)
10.1			Underwriting Agreement, dated January 14, 2021, by and among Prospect Capital Corporation, Prospect Capital Management L.P., Prospect Administration LLC, and Barclays Capital Inc., RBC Capital Markets, LLC and Goldman Sachs & Co. LLC, as representatives of the several underwriters named in Schedule I thereto(18)
10.2			Supplemental Indenture, dated as of January 22, 2021, by and between Prospect Capital Corporation and U.S. Bank National Association, as Trustee(19)
10.3			Form of Global Note of 3.706% Notes due 2026(20)
10.4			Underwriting Agreement, dated February 12, 2021, by and among Prospect Capital Corporation, Prospect Capital Management L.P., Prospect Administration LLC, and Goldman Sachs & Co. LLC, as representative of the several underwriters named in Schedule I thereto(21)
10.5			Underwriting Agreement, dated February 17, 2021, by and among Prospect Capital Corporation, Prospect Capital Management L.P., Prospect Administration LLC, and Goldman Sachs & Co. LLC, as representative of the several underwriters named in Schedule I thereto(22)
10.6			Amended and Restated Dealer Manager Agreement, dated as of February 25, 2021, by and between Prospect Capital Corporation and Preferred Capital Securities, LLC(23)
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. 40 to the Registration Statement on Form N-2, filed on January 7, 2021.
(8)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 41 to the Registration Statement on Form N-2, filed on January 14, 2021.
(9)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 42 to the Registration Statement on Form N-2, filed on January 22, 2021.
(10)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 43 to the Registration Statement on Form N-2, filed on January 28, 2021.
(11)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 44 to the Registration Statement on Form N-2, filed on February 4, 2021.
(12)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 45 to the Registration Statement on Form N-2, filed on February 11, 2021.
(13)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 46 to the Registration Statement on Form N-2, filed on February 25, 2021.
(14)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 47 to the Registration Statement on Form N-2, filed on March 4, 2021.
(15)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 48 to the Registration Statement on Form N-2, filed on March 11, 2021.
(16)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 49 to the Registration Statement on Form N-2, filed on March 18, 2021.
(17)			Incorporated by reference from the Registrant's Post-Effective Amendment No. 50 to the Registration Statement on Form N-2, filed on March 25, 2021.
(18)			Incorporated by reference to Exhibit 1.1 of the Registrant's Form 8-K, filed on January 15, 2021.

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(19)			Incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-K, filed on January 22, 2021.
(20)			Incorporated by reference to Exhibit 4.2 of the Registrant's Form 8-K, filed on January 22, 2021.
(21)			Incorporated by reference to Exhibit 1.1 of the Registrant's Form 8-K, filed on February 16, 2021.
(22)			Incorporated by reference to Exhibit 1.1 of the Registrant's Form 8-K, filed on February 18, 2021.
(23)			Incorporated by reference to Exhibit 1.1 of the Registrant's Form 8-K, filed on February 25, 2021.

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SIGNATURES

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

									PROSPECT CAPITAL CORPORATION
May 10, 2021						By:			/s/ JOHN F. BARRY III
Date									John F. Barry III
									Chairman of the Board and Chief Executive Officer
May 10, 2021						By:			/s/ KRISTIN L. VAN DASK
Date									Kristin L. Van Dask
									Chief Financial Officer