What changed in this filing

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Item 1. Financial Statements

2022-02-08 compared with 2021-11-08 · 714 added, 714 removed, 3286 unchanged (30% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

3 unchanged sentences

(in thousands, except share and per share data)

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

(Unaudited) (Audited)

35 unchanged sentences

187,000 Series A2 shares issued and outstanding;

and 6,000,000 Series A shares issued and outstanding as of September 30, 2021) (Note 9) 365,037 —

and 6,000,000 Series A shares issued and outstanding as of December 31, 2021) at carrying value plus cumulative accrued and unpaid dividends (Note 9) 440,661 —

Net Assets as of June 30, 2021 $ — $ 3,945,517

Net Assets Applicable to Common Shares as of September 30, 2021 $ 3,943,263 $ —

Components of Net Assets Applicable to Common Shares

Net Assets Applicable to Common Shares as of December 31, 2021 $ 4,140,128 $ —

Components of Net Assets Applicable to Common Shares and Net Assets, respectively

Preferred Stock, par value $0.001 per share (141,000,000 shares authorized, with 40,000,000 shares of preferred stock authorized for each of the Series A1, Series M1, and Series M2 and 20,000,000 shares of preferred stock authorized for the Series AA1 and 1,000,000 shares of preferred stock authorized for the Series A2;

7 unchanged sentences

Paid-in capital in excess of par (Note 9 and 12) 4,056,544 4,040,748

Total distributable loss (Note 12) (92,978) (232,659)

Total distributable earnings (loss) (Note 12) 83,193 (232,659)

Net Assets as of June 30, 2021 $ — $ 3,945,517

Net Assets Applicable to Common Shares as of September 30, 2021 $ 3,943,263 $ —

Net Assets Applicable to Common Shares as of December 31, 2021 $ 4,140,128 $ —

Net Asset Value Per Common Share (Note 16)

4 unchanged sentences

(in thousands, except share and per share data)

Three Months Ended September 30,

Three Months Ended December 31, Six Months Ended December 31,

2021 2020 2021 2020

Investment Income

7 unchanged sentences

Control investments 5,687 2,261 6,937 2,261

Affiliate investments — — — —

Non-control/non-affiliate investments 17 19 34 44

13 unchanged sentences

Directors’ fees 113 113 229 226

Excise tax — — — —

Other general and administrative expenses 4,027 4,575 6,892 8,917

4 unchanged sentences

Control investments 3 — 6 2,832

Affiliate investments — 3,724 — 3,724

Non-control/non-affiliate investments (9,230) 3 (9,834) 14

9 unchanged sentences

Preferred stock dividend 7,202 46 9,609 46

Net Increase in Net Assets Resulting from Operations attributable to Common Stockholders $ 209,724 $ 167,746

Net Increase in Net Assets Resulting from Operations applicable to Common Stockholders $ 246,411 $ 305,921 $ 456,135 $ 473,667

Basic and diluted earnings per common share (Note 11)

8 unchanged sentences

(in thousands, except share data)

Three Months Ended September 30, 2020 Shares Par Paid-in capital in excess of par (1)

Distributable earnings (loss) (1)

Total Net Assets

Balance as of June 30, 2020 373,538,499 $ 374 $ 3,986,417 $ (930,930) $ 3,055,861

For the Three Months Ended December 31, 2021 Shares Par Paid-in-capital in excess of par Distributable earnings (loss) Total Net Asset Applicable to Common Shares

Balance as of September 30, 2021 389,504,713 $390 $ 4,035,851 $ (92,978) $ 3,943,263

Net Increase in Net Assets resulting from Operations:

Net investment income 85,557 85,557

Net realized gains 2,357 2,357

Net realized losses (13,078) (13,078)

Net change in unrealized gains 181,134 181,134

1 unchanged sentence

Distributions from earnings (77,442) (77,442)

Return of capital to common stockholders (12,263) (12,263)

Capital Transactions

Reclassification of preferred stock issuance costs to temporary equity(2) 11,970 11,970

Shares issued through reinvestment of dividends 1,069,426 1 8,633 8,634

Total increase for the three months ended September 30, 2020 5,238,459 5 13,013 112,148 125,166

Conversion of preferred stock to common stock 10,116 90 90

Total increase (decrease) for the three months ended December 31, 2021 1,079,542 1 20,693 176,171 196,865

Balance as of December 31, 2021 390,584,255 $ 391 $ 4,056,544 $ 83,193 $ 4,140,128

Preferred Stock Common Stock

For the Three Months Ended December 31, 2020 Liquidation Value Shares Par Paid-in capital in excess of par Distributable earnings (loss) Total Net Assets

Balance as of September 30, 2020 $ — 378,776,958 $379 $ 3,999,430 $ (818,782) $ 3,181,027

378,776,958 $ 379 $ 3,999,430 $ (818,782) $ 3,181,027

Net Increase in Net Assets resulting from Operations:

Net investment income 81,561 81,561

Net realized losses (1,367) (1,367)

Net change in unrealized gains 225,773 225,773

Distributions to Shareholders(1)

Distributions from earnings (68,870) (68,870)

Capital Transactions

Issuance of preferred stock 13,786 (2,031) 11,755

Shares issued through reinvestment of dividends 5,320,687 5 26,636 26,641

Tax reclassifications of net assets (Note 12) (57) 57 —

Total increase for the three months ended December 31, 2020 13,786 5,320,687 5 24,548 237,154 275,493

Balance as of December 31, 2020 $ 13,786 384,097,645 $ 384 $ 4,023,978 $ (581,628) $ 3,456,520

(1) We have not yet finalized return of capital estimates for the tax year ended August 31, 2021.

See Note 2 and Note 12 within the accompanying notes to consolidated financial statements for further discussion.

(2) Preferred stock issuance costs include offering costs and underwriting costs related to the issuance of preferred stock.

During the three months ended December 31, 2021, we have reclassified all preferred stock issuance costs related to preferred stock issued as temporary equity following our reclassification of preferred stock during the three months ended September 30, 2021.

Refer to Note 9 within the accompanying notes to the consolidated financial statements for further discussion.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

(in thousands, except share data)

Preferred Stock Common Stock

Three Months Ended September 30, 2021 Liquidation Value Shares Par Paid-in capital in excess of par Distributable earnings (loss) Total Net Assets Attributable to Common Shares

Six Months Ended December 31, 2021 Liquidation Value Shares Par Paid-in capital in excess of par Distributable earnings (loss) Total Net Assets Applicable to Common Shares

Balance as of June 30, 2021 $ 137,040 388,419,573 $388 $ 4,040,748 $ (232,659) $ 3,945,517

7 unchanged sentences

Issuance of preferred stock 7,866 (13,239) (5,373)

Reclassification of preferred stock issuance costs to temporary equity(3) 11,970 11,970

Shares issued through reinvestment of dividends 8 2,148,594 3 16,921 16,932

1 unchanged sentence

Reclassification of preferred stock to temporary equity(2) (144,914) (144,914)

Total increase (decrease) for the three months ended September 30, 2021 (137,040) 1,085,140 2 (4,897) 139,681 (2,254)

Balance as of September 30, 2021 $ — 389,504,713 $ 390 $ 4,035,851 $ (92,978) $ 3,943,263

Total (decrease) increase for the six months ended December 31, 2021 (137,040) 2,164,682 3 15,796 315,852 194,611

Balance as of December 31, 2021 $ — 390,584,255 $ 391 $ 4,056,544 $ 83,193 $ 4,140,128

Preferred Stock Common Stock

Six Months Ended December 31, 2020 Liquidation Value Shares Par Paid-in capital in excess of par Distributable earnings (loss) Total Net Assets

Balance as of June 30, 2020 $ — 373,538,499 $ 374 $ 3,986,417 $ (930,930) $ 3,055,861

Net Increase in Net Assets Resulting from Operations:

Net investment income 139,106 139,106

Net realized gains 990 990

Net change in unrealized gains 333,617 333,617

Distributions to Shareholders(1)

Distributions from earnings (124,468) (124,468)

Return of capital to common stockholders (12,263) (12,263)

Capital Transactions

Issuance of Preferred Stock 13,786 (2,031) 11,755

Shares issued through reinvestment of dividends 10,559,146 10 51,912 51,922

Tax reclassifications of net assets (Note 12) (57) 57 —

Total increase for the six months ended December 31, 2020 13,786 10,559,146 10 37,561 349,302 400,659

Balance as of December 31, 2020 $ 13,786 384,097,645 $ 384 $ 4,023,978 $ (581,628) $ 3,456,520

(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.

In addition, we have not yet finalized return of capital estimates for the tax year ended August 31, 2021.

See Note 2 and Note 12 within the accompanying notes to consolidated financial statements for further discussion.

1 unchanged sentence

Refer to Note 9 within the accompanying notes to the consolidated financial statements for further discussion.

(3) Preferred stock issuance costs include offering costs and underwriting costs related to the issuance of preferred stock.

During the six months ended December 31, 2021, we have reclassified all preferred stock issuance costs related to preferred stock issued as temporary equity following our reclassification of preferred stock during the three months ended September 30, 2021.

Refer to Note 9 within the accompanying notes to the consolidated financial statements for further discussion.

See notes to consolidated financial statements.

2 unchanged sentences

(in thousands, except share data)

Three Months Ended September 30,

Six Months Ended December 31,

Operating Activities

11 unchanged sentences

Proceeds from sale of investments and collection of investment principal 758,232 489,990

Decrease in due to broker (2,627) (1)

Increase (decrease) in due to Prospect Capital Management 3,338 (1,249)

(Increase) decrease in interest receivable, net (317) 701

Increase in due to broker 9,896 30

Increase in due to Prospect Capital Management 4,827 6,069

Increase in interest receivable, net (3,150) (2,031)

Decrease in interest payable (503) (1,879)

(Decrease) increase in accrued expenses (53) 2,006

Decrease (increase) in due from broker 12,551 (829)

Decrease in other liabilities (162) (1,369)

Decrease in accrued expenses (2,084) (136)

Decrease in due from broker 12,551 1,063

Increase (Decrease) in other liabilities 540 (1,124)

Increase in other receivables (279) (2,800)

7 unchanged sentences

Issuances of Public Notes, net of original issue discount (Note 6) 294,798 —

Redemptions of Public Notes (Note 6) (69,319) (42,337)

Redemptions of Convertible Notes, net (Note 5) (51,872) (96,958)

5 unchanged sentences

Dividends paid and distributions to stockholders (131,356) (84,175)

Net Cash Used in Financing Activities (11,339) (20,825)

Net Decrease in Cash (21,454) (16,258)

Net Cash Provided by (Used in) Financing Activities 283,001 (87,112)

Net (Decrease) Increase in Cash (18,584) 5,536

Cash at beginning of period 63,610 44,561

6 unchanged sentences

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

9 unchanged sentences

235,679 75,738 1.9%

Credit Central Loan Company, LLC (21) Consumer Finance Subordinated Term Loan 12/28/2012 10.00% plus 10.00% PIK — 6/26/2024 69,893 67,491 69,893 1.9% (14)(39)

Credit Central Loan Company, LLC (21) Consumer Finance First Lien Term Loan 12/28/2012 10.00% plus 10.00% PIK — 6/30/2025 71,695 69,440 71,695 1.8% (14)(39)

Class A Units (14,867,312 units) 12/28/2012 — N/A — 19,331 17,830 0.4% (14)(16)

25 unchanged sentences

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

45 unchanged sentences

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

15 unchanged sentences

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

4 unchanged sentences

31,946 32,133 0.8 %

ACE Cash Express, Inc.

Consumer Finance Senior Secured Note 12/8/2017 12.00% — 12/15/2022 39,998 37,872 38,794 1.0 % (8)(46)

ABG Intermediate Holdings 2 LLC Textiles, Apparel & Luxury Goods Second Lien Term Loan 12/20/2021 6.65% (SOFR+ 6.15%) 0.50 12/20/2029 9,000 8,933 9,000 0.2 % (8)(10)

8,933 9,000 0.2 %

19 unchanged sentences

94,538 94,815 2.3 %

BCPE Osprey Buyer, Inc.

Health Care Technology Revolving Line of Credit - $4,239 Commitment 10/18/2021 6.50% (3ML+ 5.75%) 0.75 8/21/2026 — — — — % (8)(10)(15)

Delayed Draw Term Loan - $22,609 Commitment 10/18/2021 6.50% (3ML+ 5.75%) 0.75 8/23/2028 — — — — % (8)(10)(15)

First Lien Term Loan 10/18/2021 6.50% (3ML+ 5.75%) 0.75 8/23/2028 65,000 65,000 65,000 1.6 % (8)(10)

65,000 65,000 1.6 %

Broder Bros., Co.

14 unchanged sentences

8,226 8,500 0.2 %

Carlyle C17 CLO Limited Structured Finance Subordinated Structured Note 1/24/2013 Residual Interest, current yield 14.66% — 4/30/2031 24,870 15,719 13,565 0.3 % (5)(14)

15,719 13,565 0.3 %

Carlyle Global Market Strategies CLO 2014-4-R, Ltd.

Structured Finance Subordinated Structured Note 4/7/2017 Residual Interest, current yield 14.57% — 7/15/2030 25,534 19,641 16,748 0.4 % (5)(14)

19,641 16,748 0.4 %

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

1 unchanged sentence

Non-Control/Non-Affiliate Investments (less than 5.00% voting control)

Carlyle Global Market Strategies CLO 2016-3, Ltd.

Carlyle C17 CLO Limited Structured Finance Subordinated Structured Note 1/24/2013 Residual Interest, current yield 11.59% — 4/30/2031 $ 24,870 $ 15,434 $ 13,435 0.3 % (5)(14)

15,434 13,435 0.3 %

Carlyle Global Market Strategies CLO 2014-4-R, Ltd.

Structured Finance Subordinated Structured Note 4/7/2017 Residual Interest, current yield 11.63% — 7/15/2030 25,534 19,151 16,517 0.4 % (5)(14)

19,151 16,517 0.4 %

CCS-CMGC Holdings, Inc.

Health Care Providers & Services First Lien Term Loan 5/13/2019 5.58% (1ML+ 5.50%) — 10/1/2025 9,501 9,404 9,501 0.2 % (3)(8)(10)

Second Lien Term Loan 9/25/2018 9.08% (1ML+ 9.00%) — 10/1/2026 37,000 36,554 37,000 1.0 % (3)(8)(10)

Carlyle Global Market Strategies CLO 2016-3, Ltd.

Structured Finance Subordinated Structured Note 8/9/2016 Residual Interest, current yield 9.92% — 7/20/2034 32,200 32,079 27,443 0.7 % (5)(14)

32,079 27,443 0.7 %

18 unchanged sentences

28,591 28,795 0.7 %

CP IRIS Holdco I, Inc.

(49) Building Products Second Lien Term Loan 10/1/2021 7.50% (1ML+ 7.00%) 0.50 10/1/2029 35,000 35,000 35,000 0.8 % (3)(8)(10)

35,000 35,000 0.8 %

Curo Group Holdings Corp.

1 unchanged sentence

44,051 44,403 1.1 %

Digital Room, LLC Commercial Services & Supplies First Lien Term Loan 5/14/2019 5.08% (1ML+ 5.00%) — 5/21/2026 9,775 9,701 9,775 0.2 % (3)(8)(10)

DRI Holding Inc.

Commercial Services & Supplies First Lien Term Loan 12/21/2021 5.75% (1ML+ 5.25%) 0.50 12/21/2028 20,000 20,000 20,000 0.5 % (8)(10)

Second Lien Term Loan 12/21/2021 8.50% (1ML+ 8.00%) 0.50 12/21/2029 135,000 135,000 135,000 3.3 % (10)

9 unchanged sentences

5,931 9,789 0.2 %

Edmentum (22) Diversified Consumer Services Escrow Receivable 12/11/2020 — N/A — — — — % (16)

Engine Group, Inc.

(7) Media Senior Secured Term Loan 11/17/2020 5.75% (1ML+ 4.75%) 1.00 11/17/2023 8,461 8,461 8,045 0.2 % (8)(10)

Senior Secured Term Loan 11/17/2020 7.00% (PRIME+ 3.75%) 1.00 11/17/2023 690 690 646 — % (8)(10)

Class B Common Units (1,039,554 units) 11/17/2020 — N/A — 26,991 — — % (8)(16)

8 unchanged sentences

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

2 unchanged sentences

Enseo Acquisition, Inc.

IT Services Revolving Line of Credit - $5,000 Commitment 6/2/2021 9.00% (3ML+ 8.00%) 1.00 10/4/2021 $ — $ — $ — — % (10)(15)

First Lien Term Loan 6/2/2021 9.00% (3ML+ 8.00%) 1.00 6/2/2026 54,863 54,863 54,863 1.4 % (3)(10)

IT Services First Lien Term Loan 6/2/2021 9.00% (3ML+ 8.00%) 1.00 6/2/2026 $ 54,725 $ 54,725 $ 54,725 1.3 % (3)(10)

54,725 54,725 1.3 %

49 unchanged sentences

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

12 unchanged sentences

27,491 19,947 0.5 %

Legility, LLC Professional Services First Lien Term Loan 2/25/2020 7.00% (1ML+ 6.00%) 1.00 12/17/2025 18,813 18,528 18,813 0.5 % (3)(8)(10)

First Lien Term Loan 2/25/2020 7.00% (6ML+ 6.00%) 1.00 12/17/2025 387 381 387 — % (3)(8)(10)

18,909 19,200 0.5 %

LGC US FINCO, LLC Machinery First Lien Term Loan 1/17/2020 7.50% (1ML+ 6.50%) 1.00 12/20/2025 28,800 28,198 28,800 0.7 % (3)(8)(10)

28,198 28,800 0.7 %

Magnate Worldwide, LLC Air Freight & Logistics Second Lien Term Loan 12/30/2021 8.50% (3ML+ 7.75%) 0.75 12/30/2029 95,000 95,000 95,000 2.3 % (8)(10)

95,000 95,000 2.3 %

Mamba Purchaser, Inc.

1 unchanged sentence

4,976 5,000 0.1 %

Maverick Healthcare Equity, LLC Health Care Providers & Services Preferred Units (1,250,000 units) 10/31/2007 — N/A — — — — % (16)

Class A Common Units (1,250,000 units) 10/31/2007 — N/A — — — — % (16)

Medical Solutions Holdings, Inc.

(50) Health Care Providers & Services Second Lien Term Loan 11/1/2021 7.50% (3ML+ 7.00%) 0.50 11/1/2029 53,000 53,000 53,000 1.3 % (3)(8)(10)

53,000 53,000 1.3 %

Medusind Acquisition, Inc.

7 unchanged sentences

27,210 25,156 0.6 %

Nexus Buyer LLC Capital Markets Second Lien Term Loan 11/5/2021 6.75% (1ML+ 6.25%) 0.50 11/5/2029 42,500 42,500 42,500 1.0 % (8)(10)

42,500 42,500 1.0 %

Octagon Investment Partners XV, Ltd.

8 unchanged sentences

39,690 39,690 1.0 %

Pearl Intermediate Parent LLC Health Care Providers & Services Second Lien Term Loan 2/1/2018 6.33% (1ML+ 6.25%) — 2/15/2026 5,000 4,986 5,000 0.1 % (3)(8)(10)

PeopleConnect Holdings, LLC (11) Interactive Media & Services Senior Secured Term Loan 1/22/2020 10.00% (3ML+ 8.25%) 1.75 1/22/2025 249,831 249,831 249,831 6.0 % (3)(10)

249,831 249,831 6.0 %

1 unchanged sentence

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

December 31, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

1 unchanged sentence

Non-Control/Non-Affiliate Investments (less than 5.00% voting control)

PeopleConnect Holdings, LLC (11) Interactive Media & Services Revolving Line of Credit - $8,918 Commitment 1/22/2020 10.00% (1ML+ 8.25%) 1.75 1/22/2025 $ — $ — $ — — % (10)(15)

Senior Secured Term Loan 1/22/2020 10.00% (3ML+ 8.25%) 1.75 1/22/2025 174,977 174,977 174,977 4.4 % (3)(10)

PetVet Care Centers, LLC (f/k/a Pearl Intermediate Parent LLC) Health Care Providers & Services Second Lien Term Loan 2/1/2018 6.35% (1ML+ 6.25%) — 2/15/2026 $ 11,000 $ 10,987 $ 11,000 0.3 % (3)(8)(10)

10,987 11,000 0.3 %

2 unchanged sentences

5,833 5,669 0.1 %

Preventics, Inc.

(d/b/a Legere Pharmaceuticals) (46) Health Care Providers & Services First Lien Term Loan 11/12/2021 11.50% (3ML+ 10.50%) 1.00 11/12/2026 9,289 9,289 9,289 0.3 % (3)(10)

Series A Convertible Preferred Stock (320 units) 11/12/2021 — N/A — 127 127 — % (16)

Series C Convertible Preferred Stock (3,575 units) 11/12/2021 — N/A — 1,419 1,420 — % (16)

10,835 10,836 0.3 %

RC Buyer, Inc.

33 unchanged sentences

16,424 16,577 0.4 %

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

(in thousands, except share data)

December 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)

Southern Veterinary Partners Health Care Providers & Services Second Lien Term Loan 10/2/2020 8.75% (6ML+ 7.75%) 1.00 10/5/2028 $ 8,000 $ 7,932 $ 8,000 0.2 % (3)(8)(10)

5 unchanged sentences

8,759 8,579 0.2 %

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

Value(2) % of Net Assets

Non-Control/Non-Affiliate Investments (less than 5.00% voting control)

Strategic Materials Household Durables Second Lien Term Loan 10/27/2017 8.75% (3ML+ 7.75%) 1.00 11/1/2025 7,000 6,967 5,700 0.1 % (8)(10)

3 unchanged sentences

Structured Finance Subordinated Structured Note 11/14/2013 Residual Interest, current yield 0.00% — 1/19/2026 28,200 — — — % (5)(14)(17)

13,178 5,960 0.2 %

Symphony CLO XIV, Ltd.

8 unchanged sentences

Town & Country Holdings, Inc.

Distributors First Lien Term Loan 1/26/2018 10.00% (3ML+ 8.50%) 1.50 1/26/2023 159,686 159,686 159,686 4.0 % (3)(10)

Distributors First Lien Term Loan 1/26/2018 5.00% (3ML+ 3.50%) plus 8.125% PIK 1.50 1/26/2023 160,345 160,345 160,345 3.9 % (3)(10)(39)

160,345 160,345 3.9 %

1 unchanged sentence

28,463 28,463 0.7 %

Transplace Holdings, Inc.

Transportation Infrastructure Second Lien Term Loan 10/2/2017 9.75% (6ML+ 8.75%) 1.00 10/6/2025 30,900 30,415 30,900 0.8 % (3)(8)(10)

30,415 30,900 0.8 %

United Sporting Companies, Inc.

14 unchanged sentences

14,481 12,199 0.3 %

Victor Technology, LLC Commercial Services & Supplies Senior Secured Term Loan 12/3/2021 8.50% (3ML+ 7.50%) 1.00 12/3/2028 30,000 30,000 30,000 0.7 % (3)(10)

30,000 30,000 0.7 %

Vision Solutions, Inc.

1 unchanged sentence

59,474 60,000 1.4 %

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

(in thousands, except share data)

December 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 2012-4, Ltd.

10 unchanged sentences

49,446 42,735 1.0 %

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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

(in thousands, except share data)

September 30, 2021 (Unaudited)

Portfolio Company Industry Investments(1)(37) Acquisition Date(44) Coupon/Yield Floor Legal Maturity Principal Value Amortized Cost Fair

Value(2) % of Net Assets

Non-Control/Non-Affiliate Investments (less than 5.00% voting control)

VT Topco, Inc.

2 unchanged sentences

20,139 20,187 0.5 %

Wellpath Holdings, Inc.

(f/k/a CCS-CMGC Holdings, Inc.) Health Care Providers & Services First Lien Term Loan 5/13/2019 5.63% (3ML+ 5.50%) — 10/1/2025 $ 14,464 $ 14,278 $ 14,464 0.4 % (3)(8)(10)

Second Lien Term Loan 9/25/2018 9.13% (3ML+ 9.00%) — 10/1/2026 37,000 36,577 37,000 0.9 % (3)(8)(10)

50,855 51,464 1.3 %

Total Non-Control/Non-Affiliate Investments (Level 3) $ 3,938,560 $ 3,514,969 84.8 %

479 unchanged sentences

(in thousands, except share data)

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

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

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

6 unchanged sentences

(3) Security, or a portion thereof, is held by Prospect Capital Funding LLC (“PCF”), our wholly owned subsidiary and a bankruptcy remote special purpose entity, and is pledged as collateral for the Revolving Credit Facility and such security is not available as collateral to our general creditors (see Note 4).

The fair values of the investments held by PCF at September 30, 2021 and June 30, 2021 were $1,860,102 and $1,797,733, respectively, representing 28.9% and 29.0% of our total investments, respectively.

The fair values of the investments held by PCF at December 31, 2021 and June 30, 2021 were $2,056,413 and $1,797,733, respectively, representing 29.4% and 29.0% of our total investments, respectively.

(4) Keystone Acquisition Corp.

17 unchanged sentences

(10) Certain variable rate securities in our portfolio bear interest at a rate determined by a publicly disclosed base rate plus a basis point spread.

The 1-Month LIBOR, or “1ML”, was 0.08% as of September 30, 2021 and 0.10% as of June 30, 2021.

The 2-Month LIBOR, or “2ML”, was 0.11% as of September 30, 2021 and 0.13% as of June 30, 2021.

The 3-Month LIBOR, or “3ML”, was 0.13% as of September 30, 2021 and 0.15 % as of June 30, 2021.

The 6-Month LIBOR, or “6ML”, was 0.16% as of September 30, 2021 and 0.16% as of June 30, 2021.

The 12-Month LIBOR, or “12ML”, was 0.24% as of September 30, 2021 and 0.25% as of June 30, 2021.

The 1-Month LIBOR, or “1ML”, was 0.10% as of December 31, 2021 and 0.10% as of June 30, 2021.

The 2-Month LIBOR, or “2ML”, was 0.15% as of December 31, 2021 and 0.13% as of June 30, 2021.

The 3-Month LIBOR, or “3ML”, was 0.21% as of December 31, 2021 and 0.15 % as of June 30, 2021.

The 6-Month LIBOR, or “6ML”, was 0.34% as of December 31, 2021 and 0.16% as of June 30, 2021.

The 12-Month LIBOR, or “12ML”, was 0.58% as of December 31, 2021 and 0.25% as of June 30, 2021.

The Secured Overnight Financing Rate or “SOFR”, was 0.05% as of December 31, 2021 and 0.05% as of June 30, 2021.

(11) PeopleConnect Holdings, Inc.

7 unchanged sentences

(in thousands, except share data)

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

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

(14) Investment has been designated as an investment not “qualifying” under Section 55(a) of the Investment Company Act of 1940 (the “1940 Act”).

Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets.

As of September 30, 2021 and June 30, 2021, our qualifying assets, as a percentage of total assets, stood at 76.34% and 76.31%, respectively.

As of December 31, 2021 and June 30, 2021, our qualifying assets, as a percentage of total assets, stood at 77.96% and 76.31%, respectively.

We monitor the status of these assets on an ongoing basis.

(15) Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%.

As of September 30, 2021 and June 30, 2021, we had $41,564 and $67,385, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.

As of December 31, 2021 and June 30, 2021, we had $48,672 and $67,385, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.

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

12 unchanged sentences

(20) CP Holdings of Delaware LLC (“CP Holdings”), a consolidated entity in which we own 100% of the membership interests, owns 99.8% of CP Energy Services Inc.

(“CP Energy”) as of September 30, 2021 and June 30, 2021.

(“CP Energy”) as of December 31, 2021 and June 30, 2021.

CP Energy owns directly or indirectly 100% of each of CP Well Testing, LLC;

5 unchanged sentences

In June 2019, CP Energy purchased a controlling interest in the common equity of Spartan Energy Holdings, Inc.

(“Spartan Holdings”), which owns 100% of Spartan Energy Services, LLC (“Spartan”), a portfolio company of Prospect with $15,656 in senior secured term loans (the “Spartan Term Loans”) due to us as of September 30, 2021.

(“Spartan Holdings”), which owns 100% of Spartan Energy Services, LLC (“Spartan”), a portfolio company of Prospect with $16,019 in senior secured term loans (the “Spartan Term Loans”) due to us as of December 31, 2021.

As a result of CP Energy’s purchase, and given Prospect’s controlling interest in CP Energy, our Spartan Term Loans are presented as control investments under CP Energy beginning June 30, 2019.

3 unchanged sentences

We recorded a realized gain of $2,832 in our Consolidated Statement of Operations for the quarter ended September 30, 2020 as a result of this transaction.

(21) Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a consolidated entity in which we own 100% of the membership interests, owns 99.01% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC (“Credit Central”)) as of September 30, 2021 and June 30, 2021.

(21) Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a consolidated entity in which we own 100% of the membership interests, owns 98.90% and 99.01% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC (“Credit Central”)) as of December 31, 2021 and June 30, 2021, respectively.

Credit Central owns 100% of each of Credit Central, LLC;

3 unchanged sentences

We report Credit Central as a separate controlled company.

Effective December 10, 2021, Credit Central’s term loan lenders were granted a first priority security interest on certain assets of Credit Central and our investment became classified as a First Lien Term Loan.

(22) Redstone Holdco 2 LP is the parent borrower on the second lien term loan.

Redstone Buyer, LLC, Redstone Intermediate (Archer) HoldCo LLC, Redstone Intermediate (FRI) HoldCo LLC, Redstone Intermediate (NetWitness) HoldCo, LLC, and Redstone Intermediate (SecurID) HoldCo, LLC are joint borrowers on the Second Lien Term Loan.

(23) First Tower Holdings of Delaware LLC (“First Tower Delaware”), a consolidated entity in which we own 100% of the membership interests, owns 80.1% of First Tower Finance Company LLC (“First Tower Finance”), which owns 100% of First Tower, LLC, the operating company as of September 30, 2021 and June 30, 2021.

We report First Tower Finance as a separate controlled company.

5 unchanged sentences

(in thousands, except share data)

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

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

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

9 unchanged sentences

Our subordinated unsecured note issued and outstanding to Broda Canada is denominated in Canadian Dollars (“CAD”).

As of September 30, 2021 and June 30, 2021, the principal balance of this note was CAD 7,371.

As of December 31, 2021 and June 30, 2021, the principal balance of this note was CAD 7,371.

In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), this note was remeasured into our functional currency, US Dollars (USD), and is presented on our Consolidated Schedule of Investments in USD.

7 unchanged sentences

See Note 3 for further discussion of the investments held by NPRC.

(27) Nationwide Acceptance Holdings LLC (“Nationwide Holdings”), a consolidated entity in which we own 100% of the membership interests, owns 94.48% of Nationwide Loan Company LLC, the operating company, as of September 30, 2021 and June 30, 2021.

We report Nationwide Loan Company LLC as a separate controlled company.

2 unchanged sentences

(“NMMB Holdings”), a consolidated entity in which we own 100% of the equity, owns 95.17% and 94.82% of the fully diluted equity of NMMB, Inc.

(“NMMB”) as of September 30, 2021 and June 30, 2021, respectively.

(“NMMB”) as of December 31, 2021 and June 30, 2021, respectively.

NMMB owns 100% of Refuel Agency, Inc., which owns 100% of Armed Forces Communications, Inc.

3 unchanged sentences

(30) Prospect owns 99.96% of the equity of USES Corp.

as of September 30, 2021 and June 30, 2021.

as of December 31, 2021 and June 30, 2021.

(31) Valley Electric Holdings I, Inc., a consolidated entity in which we own 100% of the common stock, owns 100% of Valley Electric Holdings II, Inc.

4 unchanged sentences

We report Valley Electric as a separate controlled company.

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

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

(32) As of December 31, 2021 and June 30, 2021, Prospect owns 8.57% of the equity in Encinitas Watches Holdco, LLC (f/k/a Nixon Holdco, LLC), the parent company of Nixon, Inc.

(33) Prospect owns 9.19% of the equity in Targus Cayman HoldCo Limited (“Targus”), the parent company of Targus International LLC (“Targus International”), as of December 31, 2021 and June 30, 2021.

(34) On December 10, 2018, UTP Holdings Group, Inc.

1 unchanged sentence

At the time UTP Holdings acquired UTP, UTP Holdings (f/k/a Harbortouch Holdings of Delaware) was a wholly-owned holding company controlled by Prospect and therefore Prospect’s investment in UTP became classified as a control investment during the year ended June 30, 2019.

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

(36) Prospect owns 100% of the preferred equity of Pacific World Corporation (“Pacific World”), which represents a 99.97% ownership interest of Pacific World as of September 30, 2021 and June 30, 2021, respectively.

(35) As of December 31, 2021 and June 30, 2021, the residual profit interest includes both (i) 8.33% of New TLA and TLD residual profit and (ii) 100% of TLC residual profits, with both calculated quarterly in arrears.

(36) Prospect owns 100% of the preferred equity of Pacific World Corporation (“Pacific World”), which represents a 99.97% ownership interest of Pacific World as of December 31, 2021 and June 30, 2021.

As a result, Prospect’s investment in Pacific World is classified as a control investment.

3 unchanged sentences

(in thousands, except share data)

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

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

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

(37) The following shows the composition of our investment portfolio at cost by control designation, investment type and by industry as of December 31, 2021:

Industry 1st Lien

23 unchanged sentences

Non-Control/Non-Affiliate Investments

Air Freight & Logistics $ — $ 95,000 — $ — $ — $ — $ 95,000

Auto Components 18,239 77,043 — — — — 95,282

Building Products — 35,000 — — — — 35,000

Capital Markets — 42,500 — — — — 42,500

Commercial Services & Supplies 50,000 163,365 — — — — 213,365

9 unchanged sentences

Health Care Providers & Services 187,110 185,321 — — — 1,546 373,977

Health Care Technology 65,000 — — — — — 65,000

Hotels, Restaurants & Leisure 24,045 — — — — — 24,045

9 unchanged sentences

Paper & Forest Products 4,440 11,445 — — — — 15,885

Professional Services 82,824 48,166 — — — — 130,990

Software — 22,253 — — — — 22,253

Technology Hardware, Storage & Peripherals — 12,435 — — — — 12,435

Textiles, Apparel & Luxury Goods 186,585 36,894 — — — — 223,479

See notes to consolidated financial statements.

2 unchanged sentences

(in thousands, except share data)

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

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

Industry 1st Lien

1 unchanged sentence

Term Loan 3rd Lien Term Loan Subordinated Structured Notes Subordinated Unsecured Debt Equity (B)

Transportation Infrastructure — 30,415 — — — — 30,415

Professional Services 63,743 48,276 — — — — 112,019

Software — 52,267 — — — — 52,267

Technology Hardware, Storage & Peripherals — 12,439 — — — — 12,439

Textiles, Apparel & Luxury Goods 185,527 45,854 — — — — 231,381

Structured Finance (A) — — — 1,050,779 — — 1,050,779

1 unchanged sentence

Total Portfolio Investment Cost $ 3,320,317 $ 1,455,265 $ 3,930 $ 1,050,779 $ 7,200 $ 703,847 $ 6,541,338

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

The following table shows the composition of our investment portfolio at fair value by control designation, investment type and by industry as of December 31, 2021:

Industry 1st Lien

1 unchanged sentence

Term Loan 3rd Lien Term Loan Subordinated Structured Notes Subordinated Unsecured Debt Equity (B)

Fair Value Total Fair Value % of Net Assets Attributable to Common Stock

Fair Value Total Fair Value % of Net Assets Applicable to Common Stock

Control Investments

19 unchanged sentences

(in thousands, except share data)

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

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

Industry 1st Lien

1 unchanged sentence

Term Loan 3rd Lien Term Loan Subordinated Structured Notes Subordinated Unsecured Debt Equity (B)

Fair Value Total Fair Value % of Net Assets Attributable to Common Stock

Fair Value Total Fair Value % of Net Assets Applicable to Common Stock

Affiliate Investments

5 unchanged sentences

Non-Control/Non-Affiliate Investments

Air Freight & Logistics $ — $ 95,000 $ — $ — $ — $ — $ 95,000 2.3 %

Auto Components 18,497 77,887 — — — — 96,384 2.3 %

Building Products — 35,000 — — — — 35,000 0.8 %

Capital Markets — 42,500 — — — — 42,500 1.0 %

Commercial Services & Supplies 50,000 163,687 — — — — 213,687 5.2 %

9 unchanged sentences

Health Care Providers & Services 187,484 186,000 — — — 1,547 375,031 9.1 %

Health Care Technology 65,000 — — — — — 65,000 1.6 %

Hotels, Restaurants & Leisure 23,652 — — — — — 23,652 0.6 %

13 unchanged sentences

Textiles, Apparel & Luxury Goods 185,527 45,253 — — — — 230,780 5.6 %

Transportation Infrastructure — 30,900 — — — — 30,900 0.8 %

Structured Finance (A) — — — 744,458 — — 744,458 17.9 %

68 unchanged sentences

(in thousands, except share data)

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

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

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

49 unchanged sentences

(in thousands, except share data)

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

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

Industry 1st Lien

25 unchanged sentences

(in thousands, except share data)

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

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

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

The interest rate in the schedule represents the current interest rate in effect for these investments.

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

Security Name PIK Rate -

4 unchanged sentences

- 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)

CP Energy Services Inc.

- Senior Secured Term Loan A to Spartan Energy Services, LLC 9.00 % — % 9.00 % (B)

Credit Central Loan Company, LLC - Subordinated Term Loan 10.00 % — % 10.00 % (C)

Echelon Transportation, LLC - Senior Secured Term Loan — % — % 2.25 % (D)

Echelon Transportation, LLC - Senior Secured Term Loan — % — % 1.00 % (E)

First Tower Finance Company LLC - Senior Secured Term Loan 4.15 % 7.85 % 12.00 %

1 unchanged sentence

- Senior Secured Term Loan B 12.00 % — % 12.00 %

- Senior Secured Note A 10.00 % — % — % (E)

- Senior Secured Note B 20.00 % — % 10.00 % (E)

- Senior Secured Note A 10.00 % — % — % (F)

- Senior Secured Note B 20.00 % — % 10.00 % (F)

National Property REIT Corp.

7 unchanged sentences

Nationwide Loan Company LLC - Senior Subordinated Term Loan — % 10.00 % 10.00 %

Pacific World Corporation - Revolving Line of Credit 8.25 % — % 8.25 % (G)

Pacific World Corporation - Senior Secured Term Loan A 6.25 % — % 6.25 %

1 unchanged sentence

(fka Touchtunes) - First Lien Term Loan — % 0.75 % 0.75 %

Town & Country Holdings, Inc.

- First Lien Term Loan 8.125 % — % 8.125 % (H)

TPS, LLC - First Lien Term Loan 1.50 % — % 1.50 %

4 unchanged sentences

Venio LLC - First Lien Term Loan 1.00 % — % 1.00 %

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

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

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

(A) On September 30, 2021, the CP Energy Thirteenth Amendment to Loan Agreement was amended to allow 100% of the September 30, 2021 and December 31, 2021 interest accruing in cash to be payable in kind resulting in a current PIK rate capitalized of 12.00%.

(B) On October 28, 2021, the Spartan Energy Services, LLC Twenty-Second Amendment to Amended and Restated Senior Secured Loan Agreemen t was amended to allow interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 9.00%.

(C) 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%.

(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 14.00%.

(E) On March 23, 2021, the Mity Amendment No.

(E) 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%.

(F) 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%.

(G) Effective as of December 29, 2021, the Pacific World Corporation Amendment No.

8 was amended to allow the Revolving Line of Credit interest accruing in cash to be payable in kind resulting in a maximum current rate of 8.25%.

(H) On December 31, 2021, the Town & Country Holdings, Inc.

Seventh Amendment to Loan Agreement was amended to allow the First Lien Term loan interest accruing in cash to be payable in kind resulting in a maximum current PIK rate of 8.125%.

See notes to consolidated financial statements.

2 unchanged sentences

(in thousands, except share data)

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

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

52 unchanged sentences

(in thousands, except share data)

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

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

(40) As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities.

Transactions during the three months ended September 30, 2021 with these controlled investments were as follows:

Portfolio Company Fair Value at June 30, 2021 Gross Additions (Cost)(A) Gross Reductions (Cost)(B) Net unrealized

gains (losses) Fair Value at September 30, 2021 Interest

Transactions during the six months ended December 31, 2021 with these controlled investments were as follows:

Controlled Companies Fair Value at June 30, 2021 Gross Additions (Cost)(A) Gross Reductions (Cost)(B) Net unrealized

gains (losses) Fair Value at December 31, 2021 Interest

income Dividend

27 unchanged sentences

(41) As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities.

Transactions during the three months ended September 30, 2021 with these affiliated investments were as follows:

Portfolio Company Fair Value at June 30, 2021 Gross Additions (Cost)(A) Gross Reductions (Cost)(B) Net unrealized

gains (losses) Fair Value at September 30, 2021 Interest

Transactions during the six months ended December 31, 2021 with these affiliated investments were as follows:

Affiliated Companies Fair Value at June 30, 2021 Gross Additions (Cost)(A) Gross Reductions (Cost)(B) Net unrealized

gains (losses) Fair Value at December 31, 2021 Interest

income Dividend

13 unchanged sentences

(in thousands, except share data)

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

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

(42) As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities.

50 unchanged sentences

(in thousands, except share data)

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

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

(44) Acquisition date represents the date of PSEC's initial investment.

16 unchanged sentences

Barings CLO 2018-III Subordinated Structured Note 5/18/2018 9,255

BCPE North Star US Holdco 2, Inc.

Second Lien Term Loan 12/30/2021 65,000

Broder Bros., Co.

4 unchanged sentences

Subordinated Structured Note 9/6/2016, 10/17/2016 6,842

CCS-CMGC Holdings, Inc.

First Lien Term Loan 10/8/2019 4,692

CCS-CMGC Holdings, Inc.

Second Lien Term Loan 8/20/2019 1,993

Cent CLO 21 Limited Subordinated Structured Note 7/12/2018 1,024

1 unchanged sentence

Subordinated Structured Note 10/12/2018, 12/20/2021 2,860

Columbia Cent CLO 27 Limited Subordinated Structured Note 12/2/2021 7,815

CP Energy Services Inc.

5 unchanged sentences

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

Senior Secured Note 8/31/2021, 11/18/2021 14,051

Curo Group Holdings Corp.

First Lien Term Loan 8/31/2021 5,006

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

22 unchanged sentences

Subordinated Structured Note 9/25/2015, 5/18/2018 9,422

Common Stock 6/23/2014 7,200

See notes to consolidated financial statements.

2 unchanged sentences

(in thousands, except share data)

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

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

Portfolio Company Investment Follow-On Acquisition Dates Follow-On Acquisitions

(Excluding initial investment cost)

Common Stock 6/23/2014 7,200

Senior Secured Note A 1/17/2017, 3/23/2021 10,650

5 unchanged sentences

National Property REIT Corp.

Senior Secured Term Loan B 12/8/20221, 12/17/2021 6,400

National Property REIT Corp.

Senior Secured Term Loan C 10/23/2019, 1/23/2020, 3/31/2020, 4/8/2020, 8/4/2020, 12/7/2021 119,600

7 unchanged sentences

PeopleConnect Holdings, LLC Revolving Line of Credit 1/31/2020 1,115

PeopleConnect Holdings, LLC Senior Secured Term Loan 10/21/2021 82,005

PetVet Care Centers, LLC Second Lien Term Loan 11/22/2021 6,000

PGX Holdings, Inc.

First Lien Term Loan (restructured) 11/16/2021 20,000

PGX Holdings, Inc.

First Lien Term Loan 12/1/2020,12/14/2020,12/23/2020, 12/26/2020, 3/5/2021, 4/23/2021, 4/27/2021, 5/4/2021, 6/28/2021 34,589

36 unchanged sentences

Subordinated Structured Note 3/29/2018 3,943

Wellpath Holdings, Inc.

First Lien Term Loan 10/8/2019, 10/8/2021 9,592

Wellpath Holdings, Inc.

Second Lien Term Loan 8/20/2019 1,993

See notes to consolidated financial statements.

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(in thousands, except share data)

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

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

(45) Since Prospect's initial common equity investment in NPRC on December 31, 2013, we have made numerous additional follow-on investments that have been used to invest in new and existing properties as well as online consumer loans and rated secured structured notes.

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(NPRC Common Stock, excluding cost of initial investment)

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

(47) This investment represents a Level 2 security in the ASC 820 table as of September 30, 2021.

(46) Prospect owns 38.95% of the preferred stock of Legere Pharmaceutical Holdings, Inc.

(“Legere”), which represents 4.98% voting interest in Legere.

Legere is the parent company of the borrower, Preventics, Inc.

(d/b/a Legere Pharmaceuticals).

(47) This investment represents a Level 2 security in the ASC 820 table as of December 31, 2021.

See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.

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In December 2020, Venio, LLC completed the sale of a majority of its assets and we received $3,693 in proceeds, which was applied to the outstanding principal balance of our first lien term loan.

As of September 30, 2021, $14,444 in aggregate principal remained outstanding.

As of December 31, 2021, $14,481 in aggregate principal remained outstanding.

We expect to receive additional distributions from remaining assets and legal claims against a third party.

(49) CP Iris Holdco I, Inc.

and CP Iris Holdco II, Inc.

are joint borrowers on the Second Lien Term Loan.

(50) Medical Solutions Holdings, Inc.

and Medical Solutions, LLC are joint borrowers on the Second Lien Term Loan.

See notes to consolidated financial statements.

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(in thousands, except share data)

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

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

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.

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Reclassifications

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

See notes to consolidated financial statements.

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As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions).

As of September 30, 2021 and June 30, 2021, our qualifying assets as a percentage of total assets, stood at 76.34% and 76.31%, respectively.

As of December 31, 2021 and June 30, 2021, our qualifying assets as a percentage of total assets, stood at 77.96% and 76.31%, respectively.

Investment Transactions

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Interest received and applied against cost while a loan is on non-accrual, and PIK interest capitalized but not recognized while on non-accrual, is recognized prospectively on the effective yield basis through maturity of the loan when placed back on accrual status, to the extent deemed collectible by management.

As of September 30, 2021, approximately 0.5% of our total assets at fair value are in non-accrual status.

As of December 31, 2021, approximately 0.4% 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.

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To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income.

As of September 30, 2021, we do not expect to have any excise tax due for the 2021 calendar year.

As of December 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.

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Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year.

As of September 30, 2021, we did not record any unrecognized tax benefits or liabilities.

As of December 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.

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(in thousands, except share and per share data)

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

As of December 31, 2021 and June 30, 2021, there are no prepaid expenses related to registration expenses and all amounts incurred have been expensed.

Guarantees and Indemnification Agreements

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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.

Basic earnings per common share is calculated by dividing the net increase (decrease) in net assets resulting from operations applicable 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.

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Management is currently evaluating the impact of the optional guidance on the Company’s consolidated financial statements and disclosures.

The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the three months ended September 30, 2021.

The Company did not utilize the optional expedients and exceptions provided by ASU 2020-04 during the three months ended December 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):

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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.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021.

We are currently evaluating the impact, if any, of adopting this ASU on our consolidated financial statements and disclosures.

Portfolio Investments

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

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

The original cost basis of debt placement and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $424,668 and $177,141 during the three months ended September 30, 2021 and September 30, 2020, respectively.

Debt repayments and considerations from sales of equity securities of approximately $324,000 and $145,410 were received during the three months ended September 30, 2021 and September 30, 2020, respectively.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

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

September 30, 2021 June 30, 2021

Portfolio Investments

At December 31, 2021, we had investments in 127 long-term portfolio investments and CLOs, which had an amortized cost of $6,541,338 and a fair value of $7,002,846.

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

The original cost basis of debt placement and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $1,280,041 and $522,719 during the six months ended December 31, 2021 and December 31, 2020, respectively.

Debt repayments and considerations from sales of equity securities of approximately $768,060 and $483,420 were received during the six months ended December 31, 2021 and December 31, 2020, respectively.

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

December 31, 2021 June 30, 2021

Cost Fair Value Cost Fair Value

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

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

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of December 31, 2021:

Level 1 Level 2 Level 3 Total

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$ — $ 39,894 $ 6,161,884 $ 6,201,778

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

The following tables show the aggregate changes in the fair value of our Level 3 investments during the six months ended December 31, 2021:

Fair Value Measurements Using Unobservable Inputs (Level 3)

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Fair value as of June 30, 2021 $ 2,919,717 $ 356,734 $ 2,885,433 $ 6,161,884

Net realized gains on investments 3 — — 3

Net realized gains (losses) on investments 6 — (9,406) (9,400)

Net change in unrealized gains 256,396 37,626 27,547 321,569

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Repayments and sales of portfolio investments (281,385) (189,390) (257,199) (727,974)

Fair value as of September 30, 2021 $ 3,046,090 $ 379,057 $ 2,941,113 $ 6,366,260

Transfers into Level 3(2) — — 20,505 20,505

Fair value as of December 31, 2021 $ 3,057,923 $ 429,954 $ 3,461,987 $ 6,949,864

Revolving Line of Credit Senior Secured

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Fair value as of June 30, 2021 $ 27,503 $ 3,104,139 $ 966,237 $ 3,715 $ 756,109 $ 1,304,181 $ 6,161,884

Net realized gains on investments — — — 3 — — 3

Net realized gains (losses) on investments — — — 6 (9,406) — (9,400)

Net change in unrealized gains (losses) 11 (14,253) (326) 2,109 27,745 306,283 321,569

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Repayments and sales of portfolio investments (84) (474,029) (253,855) (6) — — (727,974)

Fair value as of September 30, 2021 $ 31,479 $ 3,080,848 $ 1,061,102 $ 4,114 $ 750,769 $ 1,437,948 $ 6,366,260

Transfers within Level 3(1) — 69,893 (69,893) — — — —

Transfers into Level 3(2) 20,505 20,505

Fair value as of December 31, 2021 $ 37,252 $ 3,179,155 $ 1,365,465 $ 5,824 $ 744,458 $ 1,617,710 $ 6,949,864

(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, 2021 one of our senior secured notes transferred out of Level 2 to Level 3 because inputs to the valuation became unobservable.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

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

The following tables show the aggregate changes in the fair value of our Level 3 investments during the six months ended December 31, 2020:

Fair Value Measurements Using Unobservable Inputs (Level 3)

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Repayments and sales of portfolio investments (69,490) (67,231) (353,232) (489,953)

Fair Value as of September 30, 2020 $ 2,307,572 $ 262,175 $ 2,816,638 $ 5,386,385

Transfers out of Level 3(2) — — (11,308) (11,308)

Fair Value as of December 31, 2020 $ 2,548,723 $ 263,935 $ 2,790,070 $ 5,602,728

Revolving Line of Credit Senior Secured

9 unchanged sentences

Transfers within Level 3(1) — 34,791 (54,204) — — 19,413 —

Fair Value as of September 30, 2020 $ 38,318 $ 2,435,715 $ 1,292,160 $ 53,262 $ 730,514 $ 836,416 $ 5,386,385

Transfers out of Level 3(2) — (8,438) (2,870) — — — (11,308)

Fair Value as of December 31, 2020 $ 25,178 $ 2,626,794 $ 1,181,641 $ — $ 745,390 $ 1,023,725 $ 5,602,728

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

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

(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.

For the six months ended December 31, 2021 and December 31, 2020, the net change in unrealized gains (losses) on the investments that use Level 3 inputs was $325,417 and $250,623 for investments still held as of December 31, 2021 and December 31, 2020, respectively.

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

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economy, and has resulted in a global economic recession.

The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, or the reintroduction of business shutdowns, cancellations of and restrictions on events and travel, significant reductions in demand for certain goods and services, reductions in and restrictions on business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States.

COVID-19 has been declared a pandemic by the World Health Organization and, in response to the outbreak, the U.S.

Health and Human Services Secretary declared a public health emergency in the United States.

COVID-19 had a devastating impact on the global economy, including the U.S.

economy, and resulted in a global economic recession.

Many states issued orders requiring the closure of non-essential businesses and/or requiring residents to stay at home.

The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States.

Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

While several countries, as well as certain states, counties and cities in the United States, have begun to lift the public health restrictions with a view to reopening their economies, recurring COVID-19 outbreaks due to the delta variant have led to the re-introduction of such restrictions in certain states in the United States and globally and could continue to lead to the re-introduction of such restrictions elsewhere.

Additionally, any delays or pauses in vaccine distributions, or inability to achieve “herd immunity”, could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time.

Further, the extent and strength of any economic recovery after the COVID-19 pandemic abates, including following any "second wave", “third wave” or other intensifying of the pandemic, is uncertain and subject to various factors and conditions.

Even after the COVID-19 pandemic subsides, the U.S.

economy and most other major global economies may continue to experience a recession.

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

The COVID-19 pandemic continues to have a

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, continue to experience, from time to time, surges in the reported number of cases and hospitalizations related to the COVID-19 pandemic.

Increases in cases can and 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, the

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

particularly adverse impact on industries in which certain of our portfolio companies operate, including energy, hospitality, travel, retail and restaurants.

vaccine produced by Johnson & Johnson is currently authorized for emergency use, and the U.S.

Food and Drug Administration (“FDA”) has granted full approval to the vaccines produced by Pfizer-BioNTech and Moderna, which will now be marketed as Comirnaty and Spikevax, respectively.

However, it remains unclear how quickly the vaccines will be distributed nationwide and globally or when “herd immunity” will be achieved and the restrictions that were imposed to slow the spread of the virus will be lifted entirely.

Various factors 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 COVID-19 pandemic subsides, the U.S.

economy and most other major global economies may continue to experience a substantial economic downturn or 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 economic downturn or recession in the United States and other major markets.

The COVID-19 pandemic continues to have 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 COVID-19 pandemic is continuing as of the filing date of this Quarterly Report, and its extended duration may have further adverse impacts on our portfolio companies and SSN investments after September 30, 2021, including for the reasons described herein.

The COVID-19 pandemic is continuing as of the filing date of this Quarterly Report, and its extended duration may have further adverse impacts on our portfolio companies and SSN investments after December 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.

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If any of these occur, it could materially and adversely affect our operating results and cash flows.

The COVID-19 pandemic has adversely impacted the fair value of some of our investments as of September 30, 2021, and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments.

The COVID-19 pandemic has adversely impacted the fair value of some of our investments as of December 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 COVID-19 pandemic may not yet be fully reflected in the valuation of our investments as our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that is often from a time period earlier, generally two to three months, than the quarter for which we are reporting.

Additionally, we may not have yet received information or certifications from our portfolio companies that indicate any or the full extent of declining performance or non-compliance with debt covenants, as applicable, as a result of the COVID-19 pandemic.

As a result, our valuations at September 30, 2021 may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto.

As a result, our valuations at December 31, 2021 may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto.

In addition, write downs in the value of some of our investments have reduced, and any additional write downs may further reduce, our net asset value (and, as a result, our asset coverage calculation).

Accordingly, we may incur net unrealized losses or may incur realized losses after September 30, 2021, which could have a material adverse effect on our business, financial condition and results of operations.

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

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

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

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of December 31, 2021 were as follows:

Unobservable Input

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Senior Secured Debt 12,199 Asset recovery analysis Recoverable amount n/a n/a

Senior Secured Debt (1) 2,700 Enterprise value waterfall Loss-adjusted discount rate

Senior Secured Debt (1) 6,600 Enterprise value waterfall Loss-adjusted discount rate 4.9% to 8.3% 7.5%

Projected loss rates 0.0% to 2.0% 0.03%

0.0% to 2.3% 7.6%

Senior Secured Debt (2) 108,600 Enterprise value waterfall Discount rate (3) 6.9% to 12.5% 9.3%

Senior Secured Debt 328,177 Enterprise value waterfall (Market approach) Tangible book value multiple

Earnings multiple

Discount rate 3.0x to 3.5x

12.7% to 13.7% 3.3x

Senior Secured Debt 330,799 Enterprise value waterfall (Market approach) Tangible book value multiple 3.3x to 3.8x 3.5x

Earnings multiple 6.0x to 7.0x 6.5x

Discount rate 12.8% to 13.8% 13.3%

Senior Secured Debt 71,695 Enterprise value waterfall (Market approach) Tangible book value multiple 2.4x to 2.8x 2.6x

Earnings multiple 5.0x to 6.0x 5.5x

Senior Secured Debt 20,260 Enterprise value waterfall (Market approach) Tangible book value multiple 1.3x to 1.5x 1.4x

Senior Secured Debt 470,575 Enterprise value waterfall (NAV analysis) Capitalization Rate 3.1% to 7.7% 4.6%

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Subordinated Secured Debt 3,930 Enterprise value waterfall (Market approach) Revenue multiple 0.5x to 0.6x 0.6x

Subordinated Secured Debt 69,893 Enterprise value waterfall (Market approach) Tangible book value multiple

Earnings multiple 2.3x to 2.7x

5.5x to 6.5x 2.5x

Tangible book value multiple n/a n/a

Earnings multiple 5.0x to 6.0x 5.5x

Subordinated Secured Debt 6,284 Asset recovery analysis Recoverable amount n/a n/a

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Preferred Equity 16,332 Enterprise value waterfall (Market approach) Revenue multiple 0.5x to 1.4x 1.0x

Preferred Equity 1,547 Enterprise value waterfall (Market approach) EBITDA multiple 4.0x to 5.0x 4.5x

Common Equity/Interests/Warrants 581,350 Enterprise value waterfall (Market approach) EBITDA multiple 5.5x to 10.5x 8.9x

Common Equity/Interests/Warrants 21,115 Enterprise value waterfall (Market approach) Revenue multiple 0.5x to 1.1x 0.9x

Common Equity/Interests/Warrants (1) 4,695 Enterprise value waterfall Loss-adjusted discount rate

Common Equity/Interests/Warrants (1) 6,531 Enterprise value waterfall Loss-adjusted discount rate 4.9% to 8.3% 7.5%

Projected loss rates 0.0% to 2.0% 0.03%

0.0% to 2.3% 7.6%

Common Equity/Interests/Warrants (2) 23,101 Enterprise value waterfall Discount rate (3) 6.9% to 12.5% 9.3%

Common Equity/Interests/Warrants (4) 50,700 Enterprise value waterfall (NAV analysis) Capitalization Rate 3.1% to 7.7% 4.6%

Common Equity/Interests/Warrants 283,051 Enterprise value waterfall (Market approach) Tangible book value multiple

Earnings multiple

Discount rate 3.0x to 3.5x

12.7% to 13.7% 3.3x

Common Equity/Interests/Warrants 18,576 Enterprise value waterfall (Market approach) Tangible book value multiple

Earnings multiple 2.3x to 2.7x

5.5x to 6.5x 2.5x

Common Equity/Interests/Warrants 294,298 Enterprise value waterfall (Market approach) Tangible book value multiple 3.3x to 3.8x 3.5x

Earnings multiple 6.0x to 7.0x 6.5x

Discount rate 12.8% to 13.8% 13.3%

Common Equity/Interests/Warrants 17,830 Enterprise value waterfall (Market approach) Tangible book value multiple 2.4x to 2.8x 2.6x

Earnings multiple 5.0x to 6.0x 5.5x

Common Equity/Interests/Warrants 29,963 Enterprise value waterfall (Market approach) Tangible book value multiple 1.3x to 1.5x 1.4x

Common Equity/Interests/Warrants 557,691 Enterprise value waterfall (NAV analysis) Capitalization Rate 3.1% to 7.7% 4.6%

Common Equity/Interests/Warrants 5,385 Enterprise value waterfall (Discounted cash flow) Discount rate 15.0% to 30.0% 22.2%

Common Equity/Interests/Warrants 11,717 Asset recovery analysis Recoverable amount 21% to 26% 26%

Total Level 3 Investments $ 6,366,260

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

Unobservable Input

Asset Category Fair Value Primary Valuation Approach or Technique Input Range Weighted

Common Equity/Interests/Warrants 11,867 Asset recovery analysis Recoverable amount 21.6% to 26.7% 24.1%

Total Level 3 Investments $ 6,949,864

(1) Represents an investment in a Real Estate Investment Trust subsidiary.

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Common Equity/Interests/Warrants (4) 34,507 Enterprise value waterfall (NAV analysis) Capitalization Rate 3.8% to 8.1% 5.9%

Common Equity/Interests/Warrants 14,524 Enterprise value waterfall (Discounted cash flow) Discount rate 7.7% to 30.0% 13.8%

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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Asset Category Fair Value Primary Valuation Approach or Technique Input Range Weighted

Common Equity/Interests/Warrants 14,524 Enterprise value waterfall (Discounted cash flow) Discount rate 7.7% to 30.0% 13.8%

Common Equity/Interests/Warrants 11,717 Asset recovery analysis Recoverable amount n/a n/a

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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 inv estments to be different than the unrealized gains or losses reflected in the currently assigned valuations.

During the three months ended September 30, 2021, the valuation methodology for Global Tel*Link Corporation (“Global Tel”) for the First Lien Term Loan changed to incorporate Markit quotes.

As a result of a decrease in the quoted price of the First Lien Term Loan, the fair value of our investment in Global Tel First Lien Term Loan decreased to $9,728 as of September 30, 2021, a premium of $273 from its amortized cost, compared to the $289 unrealized appreciation recorded at June 30, 2021.

During the three months ended September 30, 2021, the valuation methodology for Transplace Holdings, Inc.

(“Transplace”) changed to incorporate the take-out technique.

As a result of tightened market spreads and the stability of the market, the fair value of our investment in Transplace remained at $30,900 as of September 30, 2021, a premium of $485 from its amortized cost, compared to the $516 unrealized appreciation recorded at June 30, 2021.

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

During the six months ended December 31, 2021, the valuation methodology for SEOTownCenter, Inc (“Boostability”) changed to incorporate the expected repayment of our investment, which occurred on January 31, 2022.

As a result, the fair value of our investment in Boostability decreased to $42,894 as of December 31, 2021, which is equal to its amortized cost, compared to a fair value of $43,131 as of June 30, 2021, also equal to its amortized cost.

During the six months ended December 31, 2021, the valuation methodology for Sorenson Communications, LLC (“Sorenson”) changed to remove market quotes, which were less active in the current period.

As a result of widening market spreads, the fair value of our investment in Sorenson decreased to $16,577 as of December 31, 2021, a premium of $153 from its amortized cost, compared to the $171 unrealized appreciation recorded at June 30, 2021.

During the six months ended December 31, 2021, the valuation methodology for Town & Country Holdings, Inc (“Town & Country”) changed to incorporate a combined yield method due to near term maturity.

As a result of the economics from a recent amendment, the fair value of our investment in Town & Country increased to $160,345 as of December 31, 2021, which is equal to its amortized cost, compared to a fair value of $160,145 as of June 30, 2021, also equal to its amortized cost.

During the six months ended December 31, 2021, the valuation methodology for First Brands Group (“First Brands”) for the First Lien Term Loan changed to remove market quotes, which were less active in the current period.

As a result of a reduction in call protection, the fair value of our investment in First Brands First Lien Term Loan decreased to $16,624 as of December 31, 2021, a premium of $124 from its amortized cost, compared to the $153 unrealized appreciation recorded at June 30, 2021.

During the six months ended December 31, 2021, we received partial repayments of $279,882 of our loans previously outstanding with NPRC and provided $112,156 of debt financing and $3,200 of equity financing to NPRC for the acqusition of real estate properties, to fund capital expenditures for existing real estate properties, to provide working capital, to fund purchases of rated secured structured notes, and to support the purchase of high yield corporate debt.

The online consumer loan investments held by certain of NPRC’s wholly owned subsidiaries are unsecured obligations of individual borrowers that are issued in amounts ranging from $1 to $50, with fixed terms ranging from 36 to 84 months.

As of September 30, 2021, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 1,140 individual loans and residual interest in two securitizations, and had an aggregate fair value of $6,701.

The average outstanding individual loan balance is approximately $4 and the loans mature on dates ranging from October 1, 2021 to April 19, 2025 with a weighted-average outstanding term of 16 months as of September 30, 2021.

Fixed interest rates range from 6.0% to 36.0% with a weighted-average current interest rate of 20.3%.

As of September 30, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $2,700.

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

As of December 31, 2021, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 841 individual loans, residual interest in two securitizations, and one high yield corporate bond, and had an

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

aggregate fair value of $13,272.

The average outstanding individual loan balance is approximately $4 and the loans mature on dates ranging from January 1, 2022 to April 19, 2025 with a weighted-average outstanding term of 15 months as of December 31, 2021.

Fixed interest rates range from 6.0% to 36.0% with a weighted-average current interest rate of 20.0%.

As of December 31, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $6,600.

As of December 31, 2021, based on outstanding principal balance, 22.5% of the portfolio was invested in super prime loans (borrowers with a Fair Isaac Corporation (“FICO”) score, of 720 or greater), 40.1% of the portfolio in prime loans (borrowers with a FICO score of 660 to 719) and 37.4% 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*

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The rated secured structured note investments held by certain of NPRC’s wholly owned subsidiaries are subordinated debt interests in broadly syndicated loans managed by established collateral management teams with many years of experience in the industry.

As of September 30, 2021, the outstanding investment in rated secured structured notes by certain of NPRC’s wholly owned subsidiaries was comprised of 37 investments with a fair value of $212,520 and face value of $221,942.

The average outstanding note is approximately $5,998 with an expected maturity date ranging from April 2026 to April 2029 and weighted-average expected maturity of 6 years as of September 30, 2021.

As of December 31, 2021, the outstanding investment in rated secured structured notes by certain of NPRC’s wholly owned subsidiaries was comprised of 43 investments with a fair value of $237,125 and face value of $246,307.

The average outstanding note is approximately $5,728 with an expected maturity date ranging from April 2026 to January 2032 and weighted-average expected maturity of 6 years as of December 31, 2021.

Coupons range from three-month LIBOR (“3ML”) plus 5.45% to 9.45% with a weighted-average coupon of 3ML + 7.2%.

As of September 30, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to rated secured structured notes had a fair value of $90,200.

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

As of September 30, 2021, our investment in NPRC and its wholly owned subsidiaries had an amortized cost of $729,701 and a fair value of $1,239,596, including our investment in online consumer lending and rated secured structured notes as discussed above.

The fair value of $1,146,696 related to NPRC’s real estate portfolio was comprised of fifty-one multi-family properties, eight student housing properties and three commercial properties.

The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of September 30, 2021.

As of December 31, 2021, our investment in NPRC and its wholly-owned subsidiaries relating to rated secured structured notes had a fair value of $108,600.

As of December 31, 2021, based on outstanding notional balance, 19.6% of the portfolio was invested in Single - B rated tranches and 80.4% of the portfolio in BB rated tranches.

As of December 31, 2021, our investment in NPRC and its wholly owned subsidiaries had an amortized cost of $589,185 and a fair value of $1,223,798, including our investment in online consumer lending and rated secured structured notes as discussed above.

The fair value of $1,108,598 related to NPRC’s real estate portfolio was comprised of forty-three multi-family properties, eight student housing properties and three commercial properties.

The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of December 31, 2021.

Property Name City Acquisition Date Purchase Price Mortgage Outstanding

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2 Arlington Park Marietta, LLC Marietta, GA 5/8/2013 14,850 13,495

3 Cordova Regency, LLC Pensacola, FL 11/15/2013 13,750 10,878

4 Crestview at Oakleigh, LLC Pensacola, FL 11/15/2013 17,500 13,240

5 Inverness Lakes, LLC Mobile, AL 11/15/2013 29,600 23,620

6 Kings Mill Pensacola, LLC Pensacola, FL 11/15/2013 20,750 16,783

7 Plantations at Pine Lake, LLC Tallahassee, FL 11/15/2013 18,000 13,476

3 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

4 Taco Bell, OK Yukon, OK 6/4/2014 1,719 —

5 Taco Bell, MO Marshall, MO 6/4/2014 1,405 —

12 Canterbury Green Apartments Holdings LLC Fort Wayne, IN 9/29/2014 85,500 83,694

6 Abbie Lakes OH Partners, LLC Canal Winchester, OH 9/30/2014 12,600 15,212

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18 Vesper Campus Quarters, LLC Corpus Christi, TX 9/28/2016 18,350 14,137

26 Vesper College Station, LLC College Station, TX 9/28/2016 41,500 32,058

27 Vesper Kennesaw, LLC Kennesaw, GA 9/28/2016 57,900 51,063

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

2 unchanged sentences

Property Name City Acquisition Date Purchase Price Mortgage Outstanding

19 Vesper College Station, LLC College Station, TX 9/28/2016 41,500 31,972

20 Vesper Kennesaw, LLC Kennesaw, GA 9/28/2016 57,900 50,919

21 Vesper Statesboro, LLC Statesboro, GA 9/28/2016 7,500 7,480

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28 150 Steeplechase Way Owner, LLC Largo, MD 1/10/2018 44,500 36,668

36 Laurel Pointe Holdings, LLC Forest Park, GA 5/9/2018 33,005 26,302

37 Bradford Ridge Holdings, LLC Forest Park, GA 5/9/2018 12,500 9,963

29 Olentangy Commons Owner LLC Columbus, OH 6/1/2018 113,000 92,876

2 unchanged sentences

32 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

33 Lorring Owner LLC Forestville, MD 10/30/2018 58,521 47,680

18 unchanged sentences

52 Jackson Crosswinds LLC Pearl, MS 6/28/2021 41,400 33,825

53 Elliot Apartments Norcross, LLC Norcross, GA 11/30/2021 128,000 98,800

54 Orlando 442 Owner, LLC (West Vue Apartments) Orlando, FL 12/30/2021 97,500 73,000

2,298,976 1,923,162

1 unchanged sentence

We recorded a realized gain of $2,832 as a result of this transaction.

As of September 30, 2021, $3,523,871 of our loans to portfolio companies, at fair value, bear interest at floating rates and have LIBOR floors ranging from 0.0% - 3.25%.

As of September 30, 2021, $718,119 of our loans to portfolio companies, at fair value, bear interest at fixed rates ranging from 1.0% - 22.0%.

As of June 30, 2021, $3,462,243 of our loans to portfolio companies, at fair value, bore interest at floating rates and have LIBOR floors ranging from 0.0% to 3.0%.

As of June 30, 2021, $679,245 of our loans to portfolio companies, at fair value, bore interest at fixed rates ranging from 8.25% to 22.0%.

As of September 30, 2021 and June 30, 2021, the cost basis of our loans on non-accrual status amounted to $169,949 and $169,949, respectively, with fair value of $34,346 and $38,751, respectively.

The fair values of these investments represent approximately 0.5% and 0.6% of our total assets at fair value as of September 30, 2021 and June 30, 2021, respectively.

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.

On December 15, 2021, we received $176 of escrow proceeds related to Edmentum Holdings, realizing a gain of the same amount.

On October 18, 2021, we received proceeds for our investment in Sudbury Mill CLO Ltd.

We recorded a realized loss of $9,406 as a result of this transaction as we do not expect any further proceeds.

As of December 31, 2021, $3,945,438 of our loans to portfolio companies, at fair value, bear interest at floating rates and have LIBOR or SOFR floors ranging from 0.0% - 3.0%.

As of December 31, 2021, $695,240 of our loans to portfolio companies, at fair value, bear interest at fixed rates ranging from 1.0% - 22.0%.

As of June 30, 2021, $3,462,243 of our loans to portfolio

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

companies, at fair value, bore interest at floating rates and have LIBOR floors ranging from 0.0% to 3.0%.

As of June 30, 2021, $679,245 of our loans to portfolio companies, at fair value, bore interest at fixed rates ranging from 8.25% to 22.0%.

As of December 31, 2021 and June 30, 2021, the cost basis of our loans on non-accrual status amounted to $169,949 and $169,949, respectively, with fair value of $29,991 and $38,751, respectively.

The fair values of these investments represent approximately 0.4% and 0.6% of our total assets at fair value as of December 31, 2021 and June 30, 2021, respectively.

Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%.

As of September 30, 2021 and June 30, 2021, we had $41,564 and $67,385, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.

The fair value of our undrawn committed revolvers and delayed draw term loans was zero as of September 30, 2021 and June 30, 2021.

As of December 31, 2021 and June 30, 2021, we had $48,672 and $67,385, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.

The fair value of our undrawn committed revolvers and delayed draw term loans was zero as of December 31, 2021 and June 30, 2021.

We have guaranteed $2,737 in standby letters of credit issued through a financial intermediary and $2,152 of equipment lease obligations on behalf of InterDent, Inc.

(“InterDent”) as of September 30, 2021.

(“InterDent”) as of December 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 September 30, 2021, we have not recorded a liability on the statement of assets and liabilities for these guarantees as the likelihood of default on the standby letters of credit or equipment lease is deemed to be remote .

As of December 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

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

During the three months ended September 30, 2021, NPRC was deemed to be a significant subsidiary.

During the three months ended December 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 September 30,

Three Months Ended December 31, Six Months Ended December 31,

Summary Statement of Operations 2021 2020 2021 2020

Total revenue $ 94,370 $ 70,474

Total income $ 432,368 $ 76,550 $ 526,738 $ 147,024

Operating expenses 45,548 36,389 91,701 70,943

3 unchanged sentences

Fair value adjustment 1,102 4,702 3,234 5,208

Net loss $ (30,548) $ (21,518)

Net income (loss) $ 298,341 $ (25,411) $ 267,793 $ (46,929)

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Revolving Credit Facility

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The 2019 Facility included an accordion feature which allowed commitments to be increased up to $1,500,000 in the aggregate.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

On April 28, 2021, we amended the 2019 Facility and closed an expanded five year revolving credit facility (the “2021 Facility” and collectively with the 2014 Facility, the 2018 Facility, and the 2019 Facility, the “Revolving Credit Facility”).

The lenders had extended commitments of $1,277,500 as of September 30, 2021.

The lenders had extended commitments of $1,297,500 as of December 31, 2021.

The 2021 Facility includes an accordion feature which allows commitments to be increased up to $1,500,000 in the aggregate.

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The Revolving Credit Facility also requires the maintenance of a minimum liquidity requirement.

As of September 30, 2021, we were in compliance with the applicable covenants.

As of December 31, 2021, we were in compliance with the applicable covenants.

Interest on borrowings under the 2021 Facility is one-month LIBOR plus 205 basis points.

1 unchanged sentence

The 2021 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.

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

Three Months Ended September 30,

For the six months ended December 31, 2021 and December 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 December 31, Six Months Ended December 31,

2021 2020 2021 2020

Average stated interest rate 2.14% 2.35% 2.13% 2.36%

Average outstanding balance $468,063 $379,027 $452,422 $378,070

As of September 30, 2021 and June 30, 2021, we had $1,021,769 and $640,853, respectively, available to us for borrowing under the Revolving Credit Facility, net of $84,537 and $356,937 outstanding borrowings as of the respective balance sheet dates.

As of September 30, 2021, the investments, including cash and cash equivalents, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,871,007, which represents 28.9% of our total investments, including cash and cash equivalents.

As of December 31, 2021 and June 30, 2021, we had $726,309 and $640,853, respectively, available to us for borrowing under the Revolving Credit Facility, net of $472,608 and $356,937 outstanding borrowings as of the respective balance sheet dates.

As of December 31, 2021, the investments, including cash and cash equivalents, used as collateral for the Revolving Credit Facility had an aggregate fair value of $2,068,703, which represents 29.4% 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.

1 unchanged sentence

The release of any assets from PCF requires the approval of the facility agent.

In connection with the origination and amendments of the Revolving Credit Facility, we incurred $15,978 of new fees and $7,509 were carried over from the previous facilities, all of which are being amortized over the term of the facility in accordance with ASC 470-50.

As of September 30, 2021, $10,945 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.

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

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

In connection with the origination and amendments of the Revolving Credit Facility, we incurred $16,019 of new fees and $7,509 were carried over from the previous facilities, all of which are being amortized over the term of the facility in accordance with ASC 470-50.

As of December 31, 2021, $9,869 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities.

During the three months ended December 31, 2021 and December 31, 2020, we recorded $5,133 and $4,630, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.

During the six months ended December 31, 2021 and December 31, 2020, we recorded $9,702 and $9,263, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.

Convertible Notes

23 unchanged sentences

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.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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”).

3 unchanged sentences

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.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

On March 16, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $102.00, plus accrued and unpaid interest (“2022 Notes March 2021 Tender Offer”).

4 unchanged sentences

The 2022 Notes August 2021 Tender Offer resulted in our recognizing a loss of $1,584.

As of September 30, 2021, the outstanding aggregate principal amount of the 2022 Notes is $60,501.

As of December 31, 2021, the outstanding aggregate principal amount of the 2022 Notes is $60,501.

On March 1, 2019, we issued $175,000 aggregate principal amount of senior convertible notes that mature on March 1, 2025 (the “2025 Notes”), unless previously converted or repurchased in accordance with their terms.

8 unchanged sentences

As a result of this transaction, we recorded a loss of $2,466, in the amount of the difference between the reacquisition price and the net carrying amount of the 2025 Notes, net of the proportionate amount of unamortized debt issuance costs.

As of September 30, 2021, the outstanding aggregate principal amount of the 2025 Notes is $156,168.

As of December 31, 2021, the outstanding aggregate principal amount of the 2025 Notes is $156,168.

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

2 unchanged sentences

Initial conversion price $ 9.98 $ 9.03

Conversion rate at September 30, 2021(1)(2) 100.2305 110.7420

Conversion price at September 30, 2021(2)(3) $ 9.98 $ 9.03

Conversion rate at December 31, 2021(1)(2) 100.2305 110.7420

Conversion price at December 31, 2021(2)(3) $ 9.98 $ 9.03

Last conversion price calculation date 4/11/2021 3/1/2021

2 unchanged sentences

(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.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

(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.

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In connection with the issuance of the Convertible Notes, we recorded a discount of $3,369 and debt issuance costs of $9,035 which are being amortized over the terms of the Convertible Notes.

As of September 30, 2021, $1,905 of the original issue discount and $1,511 of the debt issuance costs remain to be amortized and is included as a reduction within Convertible Notes on the Consolidated Statement of Assets and Liabilities.

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

As of December 31, 2021, $1,775 of the original issue discount and $1,331 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 December 31, 2021 and December 31, 2020, we recorded $3,547 and $6,170, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.

During the six months ended December 31, 2021 and December 31, 2020, we recorded $7,782 and $13,035, respectively, of interest costs and amortization of financing costs on the Covertible Notes as interest expense.

On March 15, 2013, we issued $250,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “Original 2023 Notes”).

4 unchanged sentences

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.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

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”).

6 unchanged sentences

The 2023 Notes April 2021 Tender Offer resulted in our recognizing a loss of $43 during the three months ended June 30, 2021.

As of September 30, 2021, the outstanding aggregate principal amount of the 2023 Notes is $284,219.

As of December 31, 2021, the outstanding aggregate principal amount of the 2023 Notes is $284,219.

On December 10, 2015, we issued $160,000 aggregate principal amount of unsecured notes that mature on June 15, 2024 (the “2024 Notes”).

42 unchanged sentences

The 6.375% 2024 Notes April 2021 Tender Offer resulted in our recognizing a loss of $18 during the three months ended June 30, 2021.

As of September 30, 2021, the outstanding aggregate principal amount of the 6.375% 2024 Notes is $81,389.

On October 8, 2021, we commenced a tender offer to purchase for cash any and all of the $81,389 aggregate principal amount of the 6.375% 2024 Notes at a purchase price of $107.75, plus accrued and unpaid interest (“6.375% 2024 Notes October 2021 Tender Offer”).

On October 15, 2021, $149 aggregate principal amount of the 6.375% 2024 Notes, representing 0.18% of the previously outstanding 6.375% 2024 Notes, were validly tendered and accepted.

The 6.375% 2024 Notes October 2021 Tender Offer resulted in our recognizing a loss of $12.

As of December 31, 2021, the outstanding aggregate principal amount of the 6.375% 2024 Notes is $81,240.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

7 unchanged sentences

The 2029 Notes are listed on the NYSE and trade thereon under the ticker “PBC.” During the year ended June 30, 2019, we issued an additional $19,170 aggregate principal amount under the 2029 Notes ATM, for net proceeds of $18,523, after commissions and offering costs.

As of September 30, 2021, the outstanding aggregate principal amount of the 2029 Notes is $69,170.

On December 30, 2021, we redeemed $69,170 of the aggregate principal amount of the 2029 Notes.

The transaction resulted in our recognizing a loss of $2,044 during the three months ended December 31, 2021.

Following the redemption, none of the 2029 Notes remained outstanding.

On January 22, 2021, we issued $325,000 aggregate principal amount of unsecured notes that mature on January 22, 2026 (the “Original 2026 Notes”).

4 unchanged sentences

Total proceeds from the issuance of the Additional 2026 Notes, net of underwriting discounts and offering costs, were $74,061.

As of September 30, 2021, the outstanding aggregate principal amount of the 2026 Notes is $400,000.

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

3.364% 2026 Notes

2 unchanged sentences

Total proceeds from the issuance of the 3.364% 2026 Notes, net of underwriting discounts and offering costs, were $293,283.

As of September 30, 2021, the outstanding aggregate principal amount of the 3.364% 2026 Notes is $300,000.

As of December 31, 2021, the outstanding aggregate principal amount of the 3.364% 2026 Notes is $300,000.

3.437% 2028 Notes

2 unchanged sentences

Total proceeds from the issuance of the 3.437% 2028 Notes, net of underwriting discounts and offering costs, were $291,798.

As of September 30, 2021, the outstanding aggregate principal amount of the 3.437% 2028 Notes is $300,000.

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

As of December 31, 2021, the outstanding aggregate principal amount of the 3.437% 2028 Notes is $300,000.

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

In connection with the issuance of the Public Notes we recorded a discount of $15,802 and debt issuance costs of $17,770, which are being amortized over the term of the notes.

As of September 30, 2021, $13,486 of the original issue discount and $13,882 of the debt issuance costs remain to be amortized and are included as a reduction within Public Notes on the Consolidated Statement of Assets and Liabilities .

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

Prospect Capital InterNotes®

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

On May 10, 2019, the Original Selling Agent

As of December 31, 2021, $12,467 of the original issue discount and $12,375 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 December 31, 2021 and December 31, 2020, we recorded $16,822 and $12,719, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense.

During the six months ended December 31, 2021 and December 31, 2020, we recorded $30,754 and $25,562, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

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

Prospect Capital InterNotes®

On May 10, 2019, the Original Selling Agent Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “May 2019 Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $1,000,000 of Prospect Capital InterNotes®.

On September 16, 2019, the May 2019 Selling Agent Agreement was terminated, and we entered into a new selling agent agreement with InspereX LLC (the “September 2019 Selling Agent Agreement”), authorizing the issuance and sale from time to time of up to $500,000 of Prospect Capital InterNotes®.

2 unchanged sentences

Additional agents may be appointed by us from time to time in connection with the InterNotes® Offering and become parties to the Selling Agent Agreement.

We have, from time to time, repurchased certain notes issued through the InterNotes® Offerings and, therefore, as of September 30, 2021, $382,164 aggregate principal amount of Prospect Capital InterNotes® were outstanding.

We have, from time to time, repurchased certain notes issued through the InterNotes® Offerings and, therefore, as of December 31, 2021, $340,537 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.

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These notes bear interest at fixed interest rates and offer a variety of maturities no less than twelve months from the original date of issuance.

During the three months ended September 30, 2021, we issued $87,657 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $85,472.

During the six months ended December 31, 2021, we issued $120,322 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $117,442.

These notes were issued with stated interest rates ranging from 2.25% to 4.25% with a weighted average interest rate of 3.32%.

These notes will mature between July 15, 2026 and September 15, 2051.

The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2021:

These notes will mature between July 15, 2026 and December 15, 2051.

The following table summarizes the Prospect Capital InterNotes® issued during the six months ended December 31, 2021:

(in years) Principal

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Interest Rate Maturity Date Range

5 $ 15,681 2.25% – 2.50% 2.42% July 15, 2026 – September 15, 2026

7 17,016 2.75% – 3.00% 2.96% July 15, 2028 – September 15, 2028

10 17,027 3.15% – 3.40% 3.29% July 15, 2031 – September 15, 2031

5 $ 32,244 2.25% – 3.25% 2.63% July 15, 2026 – December 15, 2026

7 20,018 2.75% – 3.50% 2.99% July 15, 2028 – December 15, 2028

10 20,045 3.15% – 3.75% 3.30% July 15, 2031 – December 15, 2031

12 2,422 3.70% 3.70% July 15, 2033

15 12,317 3.50% – 4.00% 3.82% July 15, 2036 – September 15, 2036

30 23,194 4.00 % 4.00% July 15, 2051 – September 15, 2051

During the three months ended September 30, 2020, we issued $38,657 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $38,070.

15 14,098 3.50% – 4.00% 3.80% July 15, 2036 – December 15, 2036

30 31,495 4.00% – 4.25% 4.01% July 15, 2051 – December 15, 2051

During the six months ended December 31, 2020, we issued $81,467 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $80,203.

These notes were issued with stated interest rates ranging from 4.25% to 6.00% with a weighted average interest rate of 5.12%.

These notes mature between July 15, 2025 and October 15, 2030 .

The following table summarizes the Prospect Capital InterNotes® issued during the three months ended September 30, 2020:

These notes mature between July 15, 2025 and December 15, 2030 .

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

(in years) Principal

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Interest Rate Maturity Date Range

5 $ 24,906 4.75% – 5.50% 5.31% July 15, 2025 – October 15, 2025

7 5,884 5.00% – 5.75% 5.49% July 15, 2027 – October 15, 2027

10 7,867 5.25% – 6.00% 5.75% July 15, 2030 – October 15, 2030

During the three months ended September 30, 2021, we repaid $671 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus.

In order to replace short maturity debt with longer-term debt, we redeemed $213,533 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.10%.

As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs.

The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2021 was $3,719.

5 $ 49,426 4.25% – 5.50% 4.99% July 15, 2025 – December 15, 2025

7 13,064 4.50% – 5.75% 5.18% July 15, 2027 – December 15, 2027

10 18,977 4.75% – 6.00% 5.40% July 15, 2030 – December 15, 2030

During the six months ended December 31, 2021, we repaid $957 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

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

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

maturity debt with longer-term debt, we redeemed $287,539 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 5.34%.

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 six months ended December 31, 2021 was $5,462.

The following table summarizes the Prospect Capital InterNotes® outstanding as of December 31, 2021:

(in years) Principal

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3 $ 662 1.50% 1.50% January 15, 2024

5 45,974 2.25% – 3.00% 2.80% January 15, 2026 – September 15, 2026

5 62,537 2.25% – 3.25% 2.81% January 15, 2026 – December 15, 2026

6 15,107 3.00% 3.00% June 15, 2027 – July 15, 2027

7 25,339 2.75% – 4.00% 3.15 % January 15, 2028 – September 15, 2028

7 28,341 2.75% – 4.00% 3.15% January 15, 2028 – December 15, 2028

8 3,511 3.40% – 3.50% 3.45% June 15, 2029 – July 15, 2029

10 74,926 3.15% – 4.50% 3.84% August 15, 2029 – December 15, 2031

12 15,066 3.70% – 4.00% 3.95% June 15, 2033 – July 15, 2033

15 14,978 3.50% – 6.00% 3.93% August 15, 2028 – December 15, 2036

18 6,509 4.50% – 6.25% 5.50% January 15, 2031 – August 15, 2031

20 2,482 5.75% – 6.00% 5.84% November 15, 2032 – September 15, 2033

12 16,854 3.70% – 6.00% 4.17% November 15, 2025 – July 15, 2033

15 29,118 3.50% – 6.00% 4.96% May 15, 2028 – September 15, 2036

18 18,467 4.50% – 6.25% 5.59% December 15, 2030 – August 15, 2031

20 3,777 5.75% – 6.00% 5.89% November 15, 2032 – October 15, 2033

25 21,611 6.25% – 6.50% 6.41% August 15, 2038 – May 15, 2039

30 120,546 4.00% – 6.75% 5.82% November 15, 2042 – September 15, 2051

During the three months ended September 30, 2020, we repaid $565 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus.

30 94,807 4.00% – 6.75% 5.52% November 15, 2042 – December 15, 2051

During the six months ended December 31, 2020, we repaid $2,689 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus.

As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs.

The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended September 30, 2020 was $14.

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

The net loss on the extinguishment of Prospect Capital InterNotes® in the six months ended December 31, 2020 was $69.

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

(in years) Principal

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Interest Rate Maturity Date Range

5 $ 243,146 3.75% – 5.75% 4.86 % September 15, 2023 – October 15, 2025

7 110,348 4.00% – 6.00% 5.13 % July 15, 2024 – October 15, 2027

8 24,325 4.50% – 5.75% 4.67 % August 15, 2025 – July 15, 2026

10 167,479 3.75% – 6.25% 5.34 % January 15, 2024 – October 15, 2030

12 2,978 6.00% 6.00 % November 15, 2025 – December 15, 2025

3 $ 662 1.50% 1.50% January 15, 2024

5 46,968 3.00% – 4.25% 3.28% August 15, 2024 – May 15, 2026

6 15,107 3.00% 3.00% June 15, 2027 – July 15, 2027

7 59,729 3.25% – 5.75% 4.31% July 15, 2024 – May 15, 2028

8 3,511 3.40% – 3.50% 3.45% June 15, 2029 – July 15, 2029

10 201,285 3.50% – 6.25% 5.09% January 15, 2024 – July 15, 2031

12 14,432 4.00% – 6.00% 4.25% November 15, 2025 – July 15, 2033

15 16,801 5.75% – 6.00% 5.79% May 15, 2028 – November 15, 2028

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30 97,608 5.50% – 6.75% 6.25% November 15, 2042 – October 15, 2043

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

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

In connection with the issuance of Prospect Capital InterNotes ® , we incurred $25,785 of fees which are being amortized over the term of the notes, of which $7,667 remains to be amortized and is included as a reduction within Prospect Capital InterNotes ® on the Consolidated Statement of Assets and Liabilities as of December 31, 2021.

During the three months ended December 31, 2021 and December 31, 2020, we recorded $4,177 and $10,208, respectively, of

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense.

During the six months ended December 31, 2021 and December 31, 2020, we recorded $9,479 and $19,916, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense.

Fair Value and Maturity of Debt Outstanding

As of September 30, 2021, our asset coverage ratio stood at 302.7% based on our outstanding senior securities representing indebtedness of $2,118,148 and our asset coverage ratio on our senior securities that are stock was 258.2%.

As of December 31, 2021, our asset coverage ratio stood at 290.6% based on our outstanding senior securities representing indebtedness of $2,395,273 and our asset coverage ratio on our senior securities that are stock was 243.7%.

As of June 30, 2021, our asset coverage ratio stood at 274.0% based on our outstanding senior securities representing indebtedness of $2,267,649 and our asset coverage ratio on our senior securities that are stock was 258.4%.

Refer to Note 9, 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 September 30, 2021.

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 December 31, 2021.

(All figures in this item are in thousands except per unit data)

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Credit Facility

Fiscal 2022 (as of September 30, 2021) $ 84,537 $ 75,837 — —

Fiscal 2022 (as of December 31, 2021) $ 472,608 $ 14,731 — —

Fiscal 2021 (as of June 30, 2021) 356,937 17,408 — —

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Fiscal 2012 (as of June 30, 2012) 130,000 3,277 — —

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

2018 Notes(8)

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Fiscal 2013 (as of June 30, 2013) 200,000 2,578 — —

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

2019 Notes(10)

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Fiscal 2012 (as of June 30, 2012) 100,000 3,277 — 996

Fiscal 2022 (as of September 30, 2021) $ 60,501 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 60,501 $ 2,906 — —

Fiscal 2021 (as of June 30, 2021) 111,055 2,740 — —

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2023 Notes(12)

Fiscal 2022 (as of September 30, 2021) $ 284,219 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 284,219 $ 2,906 — —

Fiscal 2021 (as of June 30, 2021) 284,219 2,740 — —

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Fiscal 2013 (as of June 30, 2013) 247,725 2,578 — —

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

2024 Notes(15)

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Fiscal 2016 (as of June 30, 2016) 161,364 2,269 — 951

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

6.375% 2024 Notes(12)

Fiscal 2022 (as of September 30, 2021) $ 81,389 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 81,240 $ 2,906 — —

Fiscal 2021 (as of June 30, 2021) 81,389 2,740 — —

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Fiscal 2019 (as of June 30, 2019) 99,726 2,365 — —

Fiscal 2022 (as of September 30, 2021) $ 156,168 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 156,168 $ 2,906 — —

Fiscal 2021 (as of June 30, 2021) 156,168 2,740 — —

1 unchanged sentence

Fiscal 2019 (as of June 30, 2019) 201,250 2,365 — —

Fiscal 2022 (as of September 30, 2021) $ 400,000 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 400,000 $ 2,906 — —

Fiscal 2021 (as of June 30, 2021) 400,000 2,740 — —

3.364% 2026 Notes

Fiscal 2022 (as of September 30, 2021) $ 300,000 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 300,000 $ 2,906 — —

Fiscal 2021 (as of June 30, 2021) 300,000 2,740 — —

3.437% 2028 Notes

Fiscal 2022 (as of September 30, 2021) $ 300,000 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 300,000 $ 2,906 — —

2028 Notes(16)

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Fiscal 2018 (as of June 30, 2018) 55,000 2,452 — 1,004

Fiscal 2022 (as of September 30, 2021) $ 69,170 $ 3,027 — $ 1,017

2029 Notes(17)

Fiscal 2021 (as of June 30, 2021) 69,170 2,740 — 1,028

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Prospect Capital InterNotes®

Fiscal 2022 (as of September 30, 2021) $ 382,164 $ 3,027 — —

Fiscal 2022 (as of December 31, 2021) $ 340,537 $ 2,906 — —

Fiscal 2021 (as of June 30, 2021) 508,711 2,740 — —

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Preferred Stock

Fiscal 2022 (as of September 30, 2021) $ 365,037 $ 2,582 — —

Fiscal 2021 (as of June 30, 2021) 137,040 2,584 — —

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

1 unchanged sentence

(in thousands, except share and per share data)

Fiscal 2022 (as of December 31, 2021) $ 461,439 $ 2,437 — —

Fiscal 2021 (as of June 30, 2021) 137,040 2,584 — —

All Senior Securities(12)(13)

Fiscal 2022 (as of September 30, 2021) $ 2,483,185 $ 2,582 — —

Fiscal 2022 (as of December 31, 2021) $ 2,856,712 $ 2,437 — —

Fiscal 2021 (as of June 30, 2021) 2,404,689 2,584 — —

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

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

(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 $48,672 as of December 31, 2021 as Senior Securities for purposes of Section 18 of the 1940 Act, our asset coverage per unit would be $2,396.

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

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

(17) We redeemed the 2029 Notes on December 30, 2021.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

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

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

Principal Outstanding Unamortized Discount & Debt Issuance Costs Net Carrying Value Fair Value(1) Effective Interest Rate

8 unchanged sentences

3.437% 2028 Notes 300,000 8,745 291,255 288,537 (4) 3.63% (7)

2029 Notes 69,170 2,100 67,070 70,346 (4) 7.38% (7)

Public Notes 1,365,459 1,340,617 1,380,303

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(1) As permitted by ASC 825-10-25, we have not elected to value our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® at fair value.

The fair value of these debt obligations are categorized as Level 2 under ASC 820 as of September 30, 2021.

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

The fair value of these debt obligations are categorized as Level 2 under ASC 820 as of December 31, 2021.

(2) The maximum draw amount of the Revolving Credit facility as of December 31, 2021 is $1,297,500.

(3) Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility.

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(7) The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs.

For the 2029 Notes, the rate presented is a combined effective interest rate of their respective original Note issuances and Note Follow-on Programs.

(8) For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate.

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Interest expense and deferred debt issuance costs, which are amortized on a straight-line method over the stated life of the obligation which approximates level yield, are weighted against the average year-to-date principal balance.

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

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

Payments Due by Period

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For so long as the Series A Preferred Stock is outstanding, we will not exercise any option we have to convert any other series of our outstanding preferred stock to common stock, including the Issuer Optional Conversion, or any other security ranking junior to such preferred stock.

As a result, and in accordance with ASC 480, we have presented both our 5.50% Preferred Stock and Series A Preferred Stock within temporary equity on our Consolidated Statement of Assets and Liabilities as of September 30, 2021.

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

During the six months ended December 31, 2021, we issued 6,588,940 shares of our Series A1 Preferred Stock for net proceeds of $149,357, 388,441 shares of our Series M1 Preferred Stock for net proceeds of $9,446, and 6,000,000 shares of our Series A Preferred Stock for net proceeds of $145,275, each excluding offering costs and preferred stock dividend reinvestments.

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

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

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

Declaration Date Record Date Payment Date Monthly Amount ($ per share), before pro ration for partial periods Amount Distributed

During the six months ended December 31, 2021 and December 31, 2020, we distributed approximately $5,954 and $46, respectively, to our 5.50% Preferred Stock holders.

During the six months ended December 31, 2021, we distributed approximately $2,296 to our 5.35% Series A Preferred Stock holders.

Our distributions to our 5.50% Preferred Stock holders and 5.35% Series A Preferred Stock holders for the six months ended December 31, 2021 and December 31, 2020, are summarized in the following table:

Declaration Date Record Date Payment Date Amount ($ per share), before pro ration for partial periods Amount Distributed

5.50% Preferred Stock holders

11/6/2020 11/18/2020 12/1/2020 $ 0.114583 $ 13

12/4/2020 12/21/2020 1/4/2021 0.114583 33

Distributions for the six months ended December 31, 2020 $ 46

5/7/2021 7/21/2021 8/2/2021 $ 0.114583 $ 680

The above table includes dividends paid during the three months ended September 30, 2021.

It does not include distributions previously declared to the 5.50% Preferred Stock holders of record for any future dates, as those amounts are not yet determinable.

The following dividends were previously declared and will be recorded and paid subsequent to September 30, 2021:

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

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

During the three months ended September 30, 2021, we made no distributions to our Series A Preferred Stock holders.

On August 25, 2021 we declared $0.382674 per share for Series A Preferred Stock holders of record on October 20, 2021 with a payment date of November 1, 2021.

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

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

The conversion rights discussed above are accounted for as share settled redemption features and are determined to be clearly and closely related to the preferred stock host instruments.

As such, we determined that no bifurcation was necessary.

5/7/2021 8/18/2021 9/1/2021 0.114583 786

8/24/2021 9/15/2021 10/1/2021 0.114583 941

8/24/2021 10/20/2021 11/1/2021 0.114583 1,054

8/24/2021 11/17/2021 12/1/2021 0.114583 1,197

11/5/2021 12/15/2021 1/3/2022 0.114583 1,296

Distributions for the six months ended December 31, 2021 $ 5,954

5.35% Series A Preferred Stock holders

8/24/2021 10/20/2021 11/1/2021 $ 0.382674 $ 2,296

Distributions for the six months ended December 31, 2021 $ 2,296

The above table includes dividends paid during the six months ended December 31, 2021.

It does not include distributions previously declared to the 5.50% Preferred Stock holders and 5.35% Series A Preferred Stock holders of record for any future dates, as those amounts are not yet determinable.

The following dividends were previously declared and will be recorded and paid subsequent to December 31, 2021:

• $0.114583 per share (before pro ration for partial period holders of record) for 5.50% Preferred Stock holders of record on January 19, 2022 with a payment date of February 1, 2022

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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(in thousands, except share and per share data)

Our common stockholders’ equity accounts as of September 30, 2021 and September 30, 2020 reflect cumulative shares issued as of those respective dates.

• $0.114583 per share (before pro ration for partial period holders of record) for 5.50% Preferred Stock holders of record on February 16, 2022 with a payment date of March 1, 2022

• $0.334375 per share (before pro ration for partial period holders of record) for 5.35% Series A Preferred Stock holders of record on January 19, 2022 with a payment date of February 1, 2022

As of December 31, 2021, we have accrued approximately $22 and $1,338 in dividends that have not yet been declared for our 5.50% Preferred Stock holders and 5.35% Series A Preferred Stock holders, respectively.

During the six months ended December 31, 2021, we issued 4,231 shares of our Series A1 Preferred Stock and 104 shares of our Series M1 Preferred Stock, in connection with the Preferred Stock Plan.

During the six months ended December 31, 2021, 5,751 shares of our Series A1 Preferred Stock were converted to 16,088 shares of our common stock, in connection with Holder Optional Conversions.

The conversion rights discussed above are accounted for as share settled redemption features and are determined to be clearly and closely related to the preferred stock host instruments.

As such, we determined that no bifurcation was necessary.

The following table shows our outstanding Preferred Stock as of December 31, 2021.

Series Shares Outstanding Liquidation Value

Series A1 11,751,346 $ 293,784

Series M1 519,211 12,980

Series A2 187,000 4,675

Series A 6,000,000 150,000

Total 18,457,557 $ 461,439

The following table shows our outstanding Preferred Stock as of June 30, 2021.

Series Shares Outstanding Liquidation Value

Series A1 5,163,926 $ 129,098

Series M1 130,666 3,267

Series A2 187,000 4,675

Total 5,481,592 $ 137,040

Preferred Stock issued prior to the issuance of our 5.35% Series A Preferred Stock has a carrying value equal to liquidation value per share on our Consolidated Statements of Assets and Liabilities .

Subsequent issuances of our Preferred Stock classified as temporary equity are recorded net of issuance costs.

The carrying value is inclusive of cumulative accrued and unpaid dividends as of December 31, 2021.

Our common stockholders’ equity accounts as of December 31, 2021 and June 30, 2021 reflect cumulative shares issued as of those respective dates.

Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our common stock dividend reinvestment plan in connection with the acquisition of certain controlled portfolio companies and in connection with our 5.50% Preferred Stock Holder Optional Conversion.

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Prior to any repurchase, we are required to notify stockholders of our intention to purchase our common stock.

We did not repurchase any shares of our common stock under the Repurchase Program for the three months ended September 30, 2021 and September 30, 2020.

As of September 30, 2021, the approximate dollar value of shares that may yet be purchased under the Repurchase Program is $65,860.

We did not repurchase any shares of our common stock under the Repurchase Program for the six months ended December 31, 2021 and December 31, 2020.

As of December 31, 2021, the approximate dollar value of shares that may yet be purchased under the Repurchase Program is $65,860.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

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”).

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

Excluding common stock dividend reinvestments and shares issued in connection with the 5.50% Preferred Stock Holder Optional Conversion, during the six months ended December 31, 2021 and December 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.

2 unchanged sentences

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

During the three months ended September 30, 2021 and September 30, 2020, we distributed approximately $70,043 and $67,861, respectively, to our common stockholders.

The following table summarizes our distributions declared and payable for the three months ended September 30, 2020 and September 30, 2021.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

During the six months ended December 31, 2021 and December 31, 2020, we distributed approximately $140,283 and $136,685, respectively, to our common stockholders.

The following table summarizes our distributions declared and payable for the six months ended December 31, 2020 and December 31, 2020.

Declaration Date Record Date Payment Date Amount Per Share Amount Distributed (in thousands)

2 unchanged sentences

8/25/2020 9/30/2020 10/22/2020 0.06 22,727

Total declared and payable for the three months ended September 30, 2020 $ 67,861

8/25/2020 10/30/2020 11/19/2020 0.06 22,836

1 unchanged sentence

11/6/2020 12/31/2020 1/21/2021 0.06 23,046

Total declared and payable for the three months ended September 30, 2021 $ 70,043

Total declared and payable for the six months ended December 31, 2020 $ 136,685

5/7/2021 7/28/2021 8/19/2021 $ 0.06 $ 23,325

5/7/2021 8/27/2021 9/23/2021 0.06 23,348

8/24/2021 9/28/2021 10/21/2021 0.06 23,370

8/24/2021 10/27/2021 11/18/2021 0.06 23,392

11/5/2021 11/26/2021 12/23/2021 0.06 23,413

11/5/2021 12/29/2021 1/20/2022 0.06 23,435

Total declared and payable for the six months ended December 31, 2021 $ 140,283

Dividends and distributions to common stockholders are recorded on the ex-dividend date.

As such, the table above includes distributions with record dates during three months ended September 30, 2021 and September 30, 2020.

As such, the table above includes distributions with record dates during six months ended December 31, 2021 and December 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 September 30, 2021:

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

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

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

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

The following dividends were previously declared and will be recorded and payable subsequent to December 31, 2021:

• $0.06 per share for January 2022 holders of record on January 27, 2022 with a payment date of February 17, 2022

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

During the six months ended December 31, 2021 and December 31, 2020, we issued 2,148,594 and 10,559,146 shares of our common stock, respectively, in connection with the common stock dividend reinvestment plan.

During the six months ended December 31, 2021, Prospect officers and directors purchased 49,196 shares of our common stock, or 0.01% of total outstanding shares as of December 31, 2021, through shares issued in connection with our common stock dividend reinvestment plan.

As of December 31, 2021, we have reserved 23,358,402 shares of our common stock for issuance upon conversion of the Convertible Notes (see Note 5) and 1,000,000,000 shares of our common stock for issuance upon conversion of the 5.50% Preferred Stock.

Other income consists of structuring fees, overriding royalty interests, revenue receipts related to net profit interests, deal deposits, administrative agent fees, and other miscellaneous and sundry cash receipts.

The following table shows income from such sources during the three months ended September 30, 2021 and September 30, 2020.

Three Months Ended September 30,

The following table shows income from such sources during the three and six months ended December 31, 2021 and December 31, 2020.

Three Months Ended December 31, Six Months Ended December 31,

2021 2020 2021 2020

Structuring, advisory, and amendment fees $ 16,853 $ 15,992 $ 28,814 $ 17,418

2 unchanged sentences

Total other income $ 27,499 $ 25,225 $ 49,435 $ 35,841

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Net Increase (Decrease) in Net Assets per Common Share

3 unchanged sentences

Diluted earnings per share excludes all dilutive potential common shares if their effect is anti-dilutive.

During the three months ended September 30, 2021 and September 30, 2020, we did not have potential common shares that would be anti-dilutive.

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

For the Three Months Ended September 30, 2021

Basic Diluted

Net increase in net assets resulting from operations attributable to Common Stockholders $ 209,724 $ 212,131

During the six months ended December 31, 2021 and December 31, 2020, we did not have potential common shares that would be anti-dilutive.

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

For the three months ended December 31, 2021 For the Six Months Ended December 31, 2021

Basic Diluted Basic Diluted

Net increase in net assets resulting from operations applicable to Common Stockholders $ 246,411 $ 253,613 $ 456,135 $ 465,744

Weighted average common shares outstanding 389,991,324 417,952,347 389,438,733 412,840,135

Earnings per share $ 0.63 $ 0.61 $ 1.17 $ 1.13

For the Three Months Ended September 30, 2020

Basic Diluted

Net increase in net assets resulting from operations attributable to Common Stockholders $ 167,746 $ 167,746

For the Three Months Ended December 31, 2020 For the Six Months Ended December 31, 2020

Basic Diluted Basic Diluted

Net increase in net assets resulting from operations applicable to Common Stockholders $ 305,921 $ 305,967 $ 473,667 $ 473,713

Weighted average common shares outstanding 381,157,121 381,817,317 378,534,006 378,864,104

Earnings per share $ 0.80 $ 0.80 $ 1.25 $ 1.25

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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.

8 unchanged sentences

Total dividends paid to stockholders $ 279,346 (1) $ 265,761 $ 263,773

$ 279,346 (1) $ 265,761 $ 263,773

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

4 unchanged sentences

This adjustment resulted in an increase to distributable earnings of $12,263 for the three months ended September 30, 2020 .

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

We generate certain types of income that may be exempt from U.S.

4 unchanged sentences

stockholders with proper documentation.

For the 2021 calendar year, 41.36% of our distributions as of September 30, 2021 qualified as interest related dividends which are exempt from U.S.

For the 2021 calendar year, 41.98% of our taxable dividends as of December 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 August 30, 2021 is expected to be ordinary income and return of capital however due to the difference between our fiscal and tax year ends, the final determination of the tax character of dividends between ordinary income, capital gains, and return of capital will not be made until we file our tax return for the tax year ended August 31, 2021.

This percentage is based on the best estimates available at the time of this filing.

The final percentage will be determined with the filing of Form 1099-DIV.

We also generate income that may be beneficial to shareholders that face interest expense limitations.

Under IRC Section 163(j), a RIC is permitted to designate distributions attributable to net business interest income as section 163(j) interest dividends.

For the 2021 calendar year 65.63% of our taxable ordinary dividends as of December 31, 2021 qualified as section 163(j) interest dividends.

This percentage is based on the best estimates available at the time of this filing.

The final percentage will be determined with the filing of Form 1099-DIV.

For the tax year ending August 31, 2022, the tax character of dividends paid to stockholders through December 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, 2022.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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.

15 unchanged sentences

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

As of September 30, 2021, the cost basis of investments for tax purposes was $6,141,678 resulting in an estimated net unrealized gain of $289,029.

As of September 30, 2021, the gross unrealized gains and losses were $1,336,832 and $1,047,803, respectively.

As of December 31, 2021, the cost basis of investments for tax purposes was $6,553,433 resulting in an estimated net unrealized gain of $449,413.

As of December 31, 2021, the gross unrealized gains and losses were $1,514,719 and $1,065,306, respectively.

As of June 30, 2021, the cost basis of investments for tax purposes was $6,050,304 resulting in an estimated net unrealized gain of $151,474.

As of June 30, 2021, the gross unrealized gains and losses were $1,208,128 and $1,056,654, respectively.

Due to the difference between our fiscal year end and tax year end, the cost basis of our investments for tax purposes as of September 30, 2021 and June 30, 2021 was calculated based on the book cost of investments as of September 30, 2021 and June 30, 2021, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2021 and 2020, respectively.

Due to the difference between our fiscal year end and tax year end, the cost basis of our investments for tax purposes as of December 31, 2021 and June 30, 2021 was calculated based on the book cost of investments as of December 31, 2021 and June 30, 2021, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2021 and 2020, respectively.

In general, we may make certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which may include merger-related items, differences in the book and tax basis of certain assets and liabilities, and nondeductible federal excise taxes, among other items.

During the tax year ended August 31, 2021, we increased overdistributed net investment income by $17 and increased capital in excess of par value by $17.

During the tax year ended August 31, 2020, we decreased overdistributed net investment income by $57 and decreased capital in excess of par value by $57.

Due to the difference between our fiscal and tax year end, the reclassifications for the taxable year ended August 31, 2020 is being recorded in the fiscal year ending June 30, 2021 and the reclassifications for the taxable year ended August 31, 2019 were recorded in the fiscal year ended June 30, 2020.

During the tax year ended August 31, 2021, we decreased overdistributed net investment income by $20 and increased capital in excess of par value by $20.

During the tax year ended August 31, 2020, we increased overdistributed net investment income by $57 and decreased capital in excess of par value by $57.

Due to the difference between our fiscal and tax year end, the reclassifications for the taxable year ended August 31, 2021 are being recorded in the fiscal year ending June 30, 2022 and the reclassifications for the taxable year ended August 31, 2020 were recorded in the fiscal year ended June 30, 2021.

The reclassifications, if any, for the taxable year ended August 31, 2021 will be recorded in the fiscal year ending June 30, 2022 once we file our tax return for the tax year ending August 31, 2021.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Related Party Agreements and Transactions

4 unchanged sentences

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:

For providing these services the Investment Adviser

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

receives a fee from us, consisting of two components:

a base management fee and an incentive fee.

2 unchanged sentences

The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.

The total gross base management fee incurred to the favor of the Investment Adviser was $32,203 and $26,850 during the three months ended September 30, 2021 and September 30, 2020, respectively.

The total gross base management fee incurred to the favor of the Investment Adviser was $33,843 and $27,833 during the three months ended December 31, 2021 and December 31, 2020, respectively.

The total gross base management fee incurred to the favor of the Investment Advisor was $66,046 and $54,683 during the six months ended December 31, 2021 and December 31, 2020, respectively.

The incentive fee has two parts.

10 unchanged sentences

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.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The second part of the incentive fee, the capital gains incentive fee, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.00% of our realized capital gains for the calendar year, if any, computed net of all realized capital losses and unrealized capital depreciation at the end of such year.

6 unchanged sentences

If this number is positive, then the capital gains incentive fee payable is equal to 20.00% of such amount, less the aggregate amount of any capital gains incentive fees paid since inception.

The total income incentive fee incurred was $19,740 and $14,386 during the three months ended September 30, 2021 and September 30, 2020, respectively.

No capital gains incentive fee was incurred during the three months ended September 30, 2021 and September 30, 2020.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

The total income incentive fee incurred was $19,589 and $20,717 during the three months ended December 31, 2021 and December 31, 2020, respectively.

The fees incurred for the six months ended December 31, 2021 and December 31, 2020 were $39,329 and $35,103, respectively.No capital gains incentive fee was incurred during the six months ended December 31, 2021 and December 31, 2020.

Income incentive fee for the three months ended December 31, 2020 includes a $264 adjustment for fees earned in prior periods that were neither expensed nor paid to the Investment Adviser.

Administration Agreement

9 unchanged sentences

Our payments to Prospect Administration are reviewed quarterly by our Board of Directors.

The allocation of net overhead expense from Prospect Administration was $4,526 and $4,657 for the three months ended September 30, 2021 and September 30, 2020, respectively.

Prospect Administration received estimated payments of $2,298 and $66 directly from our portfolio companies, and certain funds managed by the Investment Adviser for legal services during the three months ended September 30, 2021 and September 30, 2020, respectively.

The allocation of net overhead expense from Prospect Administration was $2,239 and $3,426 for the three months ended December 31, 2021 and December 31, 2020, respectively.

The allocation of net overhead expense from Prospect Administration was $6,765 and $8,083 for the six months ended December 31, 2021 and December 31, 2020, respectively.Prospect Administration received estimated payments of $4,315 and $548 directly from our portfolio companies, and certain funds managed by the Investment Adviser for legal services during the six months ended December 31, 2021 and December 31, 2020, respectively.

We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration.

21 unchanged sentences

No income is recognized by Prospect.

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

During the three months ended December 31, 2021 and December 31, 2020, we received payments of $1,835 and $1,973, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration.

During the six months ended December 31, 2021 and December 31, 2020, we received payments of $3,670 and $3,820, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration.

Co-Investments

On January 13, 2020, we received an exemptive order from the SEC (the “Order”), which superseded a prior co-investment exemptive order granted on February 10, 2014, that gave us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by the Investment Adviser or certain affiliates, including Priority Income Fund, Inc.

and Prospect Flexible Income Fund, Inc.

(f/k/a TP Flexible Income Fund, Inc.), where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions included therein.

and Prospect Sustainable Income Fund, Inc.

(f/k/a Prospect 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.

3 unchanged sentences

We reimburse CLO investment valuation services fees initially incurred by Priority Income Fund, Inc.

During the three months ended September 30, 2021 and September 30, 2020, we recognized expenses that were reimbursed for valuation services of $31 and $31, respectively.

Conversely, Priority Income Fund, Inc.

and Prospect Flexible Income Fund, Inc.

(f/k/a TP Flexible Income Fund, Inc.) reimburse us for software fees, expenses which were initially incurred by Prospect.

During the three months ended December 31, 2021 and December 31, 2020, we recognized expenses that were reimbursed for valuation services of $30 and $32, respectively.

During the six months ended December 31, 2021 and December 31, 2020, we recognized expenses that were reimbursed for valuation services of $61 and $63, respectively.Conversely, Priority Income Fund, Inc.

and Prospect Sustainable Income Fund, Inc.

(f/k/a Prospect Flexible Income Fund, Inc.) reimburse us for software fees, expenses which were initially incurred by Prospect.

As of December 31, 2020, we accrued a receivable from Priority Income Fund, Inc.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Sustainable Income Fund, Inc.

(f/k/a Prospect Flexible Income Fund, Inc.) for software fees of $7.

There was no such receivable outstanding as of December 31, 2021.

Transactions with Controlled Companies

2 unchanged sentences

As such, transactions with these Consolidated Holding Companies are presented on a consolidated basis.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

CP Energy Services Inc.

19 unchanged sentences

CP Energy acquired 100% of our equity investment in Wolf Energy, which is reflected in our valuation of the CP Energy common stock as of December 31, 2019.

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income

2 unchanged sentences

Interest Income from Spartan

363 302 723 605

Total Interest Income $ 1,672 $ 1,464 $ 3,303 $ 2,894

2 unchanged sentences

Realized Gain $ — $ — $ — $ 2,832

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Additions $ — $ — $ — $ 26,193

Interest Income Capitalized as PIK

CP Energy 1,309 1,161 2,581 2,288

Spartan 364 — 363 —

Total Interest Income Capitalized as PIK $ 1,673 $ 1,161 $ 2,944 $ 2,288

Repayment of Loan Receivable — — — 23,361

Return of Capital — — — 1

September 30, 2021 June 30, 2021

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

December 31, 2021 June 30, 2021

Interest Receivable (1)

2 unchanged sentences

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

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Credit Central Loan Company, LLC

6 unchanged sentences

Credit Central is a branch-based provider of installment loans.

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income $ 3,751 $ 3,549 $ 7,401 $ 6,919

Managerial Assistance (1)

175 175 350 350

Reimbursement of Legal, Tax, etc.

(1) No income recognized by Prospect.

MA payments were paid from Credit Central to Prospect and subsequently remitted to PA.

Three Months Ended

September 30, 2021 September 30, 2020

(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 Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Accreted Original Issue Discount $ 147 $ 109 $ 284 $ 210

Interest Income Capitalized as PIK 1,802 3,438 3,557 6,706

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Interest Receivable (3)

5 unchanged sentences

Echelon owns 60.7% of the equity of AerLift Leasing Limited (“AerLift”).

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income $ 2,756 $ 2,404 $ 5,457 $ 4,742

Managerial Assistance (1)

Reimbursement of Legal, Tax, etc.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

(1) No income recognized by Prospect.

MA payments were paid from Credit Central to Prospect and subsequently remitted to PA.

Three Months Ended

September 30, 2021 September 30, 2020

(2) Paid from Echelon to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to Echelon (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 Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Additions (3)

$ — $ 525 $ — $ 525

Interest Income Capitalized as PIK — — 5,104 4,325

September 30, 2021 June 30, 2021

(3) During the six months ended December 31, 2020, Prospect made a follow-on $525 first lien senior secured debt.

December 31, 2021 June 30, 2021

Interest Receivable (4)

3 unchanged sentences

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

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Energy Solutions Holdings Inc.

17 unchanged sentences

First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company.

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income $ 18,441 $ 15,302 $ 36,779 $ 30,782

2 unchanged sentences

Managerial Assistance (1)

$ 600 $ 600 $ 1,200 $ 1,200

(1) No income recognized by Prospect.

MA payments were paid from First Tower to Prospect and subsequently remitted to PA.

Three Months Ended

September 30, 2021 September 30, 2020

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income Capitalized as PIK $ 3,473 $ — $ 7,250 $ —

Repayment of loan receivable 851 12 1,159 4,899

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Interest Receivable (2)

6 unchanged sentences

Freedom Marine owns 100% of each of Vessel, Vessel II, and Vessel III.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Other Receivables $ 4 $ 1

5 unchanged sentences

The principal contributions were made gross of all previously accrued and unpaid interest paid-in-kind.

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income $ 6,605 $ 5,786 $ 12,933 $ 10,723

Three Months Ended

September 30, 2021 September 30, 2020

Managerial Assistance (1)

Reimbursement of Legal, Tax, etc.

1,443 — 1,443 —

(1) No income recognized by Prospect.

MA payments were paid from InterDent to Prospect and subsequently remitted to PA.

(2) Paid from InterDent to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to InterDent (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 Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

$ — $ — $ 7,778 $ —

Interest Income Capitalized as PIK 4,553 4,040 8,971 7,322

Repayment of loan receivable 123 — 246 —

September 30, 2021 June 30, 2021

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

December 31, 2021 June 30, 2021

Interest Receivable (3)

5 unchanged sentences

Kickapoo is a luxury pet boarding facility.

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Other Receivables (1)

10 unchanged sentences

MITY is a designer, manufacturer and seller of multipurpose room furniture and specialty healthcare seating products.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

During the three months ended December 31, 2016, Prospect formed a separate legal entity, MITY FSC, Inc., (“MITY FSC”) in which Prospect owns 100% of the equity.

2 unchanged sentences

We recognize such commission, if any, as other income.

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income

4 unchanged sentences

Managerial Assistance (1)

$ — $ 75 $ — $ 150

Reimbursement of Legal, Tax, etc.

Realized Gain 3 — 6 —

1 unchanged sentence

MA payments were paid from MITY to Prospect and subsequently remitted to PA.

Three Months Ended

September 30, 2021 September 30, 2020

(2) Paid from Mity to PA as reimbursement for legal, tax, and portfolio level accounting services provided directly to Mity (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 Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income Capitalized as PIK $ 1,669 $ 873 $ 3,276 $ 1,724

Repayment of loan receivable — 147 — 292

September 30, 2021 June 30, 2021

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

December 31, 2021 June 30, 2021

Interest Receivable (3)

17 unchanged sentences

We received structuring fees of $3,669 as a result of the amendment.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income $ 16,564 $ 14,441 $ 32,561 $ 27,843

Structuring Fee

$ 1,222 $ 1,433 $ 1,222 $ 1,433

Royalty/Net Interest

2 unchanged sentences

Managerial Assistance (1)

$ 525 $ 525 $ 1,050 $ 1,050

Reimbursement of Legal, Tax, etc.

593 530 2,711 694

(1) No income recognized by Prospect.

1 unchanged sentence

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

Three Months Ended

September 30, 2021 September 30, 2020

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Additions $ 105,466 $ 83,024 $ 115,356 $ 121,770

Repayment of loan receivable 245,982 23,421 279,882 38,750

September 30, 2021 June 30, 2021

December 31, 2021 June 30, 2021

Interest Receivable (3)

6 unchanged sentences

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

Three Months Ended

September 30, 2021 September 30, 2020

Three Months Ended Six Months Ended

December 31, 2021 December 31, 2020 December 31, 2021 December 31, 2020

Interest Income $ 1,035 $ 1,035 $ 2,071 $ 2,068

Dividend Income (1)

Managerial Assistance (2)

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

(2) No income recognized by Prospect.

MA payments were paid from Nationwide to Prospect and subsequently remitted to PA.

Three Months Ended

September 30, 2021 September 30, 2020

Interest Income Capitalized as PIK $ — $ 173

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

September 30, 2021 June 30, 2021

Interest Receivable (3)

Other Receivables (4)

(3 ) Interest income recognized but not yet paid.

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

Prospect owns 100% of the equity of NMMB Holdings, Inc.

(“NMMB Holdings”), a Consolidated Holding Company.

NMMB Holdings owns 95.17% and 94.82% of the fully-diluted equity of NMMB, Inc.

(f/k/a NMMB Acquisition, Inc.) (“NMMB”) as of September 30, 2021 and June 30, 2021 , respectively, with NMMB management owning the remaining equity.

NMMB owns 100% of Refuel Agency, Inc.

(“Refuel Agency”).

Refuel Agency owns 100% of Armed Forces Communications, Inc.

(“Armed Forces”).

NMMB is an advertising media buying business.

On December 30, 2019, NMMB executed a dividend recapitalization whereby Prospect invested $15,100 of a first lien term loan to repay NMMB’s existing term loan, provide a shareholder distribution, and pay fees and expenses.

As part of the recapitalization, Prospect converted its Series A and Series B preferred securities into 92.42% common equity and received a dividend distribution of $2,797.

Three Months Ended

September 30, 2021 September 30, 2020

Interest Income

Interest Income from NMMB

Total Interest Income $ 131 $ 135

Managerial Assistance (1)

(1) No income recognized by Prospect.

MA payments were paid from NMMB to Prospect and subsequently remitted to PA.

Three Months Ended

September 30, 2021 September 30, 2020

Repayment of loan receivable

Repayment from NMMB $ 38 $ 38

Total Repayment of loan receivable (2)

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

September 30, 2021 June 30, 2021

Interest Receivable (3)

Other Receivables (4)

(3) Interest income recognized but not yet paid.

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

Pacific World Corporation

Prospect owns 100% of the preferred equity of Pacific World Corporation (“Pacific World”), which represents a 99.97% and 99.97% ownership interest of Pacific World as of September 30, 2021 and June 30, 2021, respectively.

As a result, Prospect’s investment in Pacific World is classified as a control investment.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Effective June 30, 2020, we restructured our investment in Pacific World whereby we contributed 100% of the outstanding aggregate principal amount of our Senior Secured Term Loan B and all but $39,082 of the outstanding aggregate principal amount of our Senior Secured Term Loan A to the capital of Pacific World.

The principal contributions were made gross of all previously accrued and unpaid interest paid-in-kind.

Three Months Ended

September 30, 2021 September 30, 2020

Interest Income $ 1,124 $ 1,141

Three Months Ended

September 30, 2021 September 30, 2020

Additions (1)

Interest Income Capitalized as PIK 683 634

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

September 30, 2021 June 30, 2021

Interest Receivable (2)

Other Receivables (3)

(2) Interest income recognized but not yet paid.

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

R-V Industries, Inc.

Prospect owns 88.27% of the fully-diluted equity of R-V Industries, Inc.

(“R-V”), with R-V management owning the remaining 11.73% of the equity.

On December 15, 2020 we restructured our $28,622 Senior Subordinated Note with R-V into a $28,622 Senior Secured Note.

No realized gain or loss was recorded as a result of the transaction.

Three Months Ended

September 30, 2021 September 30, 2020

Interest Income $ 716 $ 716

500 — 1,750 —

Managerial Assistance (2)

100 100 200 200

Reimbursement of Legal, Tax, etc.

(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).

September 30, 2021 June 30, 2021

Interest Receivable (3)

(3) Interest income recognized but not yet paid.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

SB Forging Company, Inc.

As of June 30, 2014, Prospect owned 79.53% of the fully-diluted common, 85.76% of the Series A Preferred and 100% of the Series B Preferred equity of ARRM Services, Inc.

(f/k/a ARRM Holdings, Inc.) (“ARRM”).

ARRM owned 100% of the equity of Ajax Rolled Ring & Machine, LLC (f/k/a Ajax Rolled Ring & Machine, Inc.) (“Ajax”).

Ajax forges large seamless steel rings on two forging mills in the company’s York, South Carolina facility.

The rings are used in a range of industrial applications, including in construction equipment and power turbines.

Ajax also provides machining and other ancillary services.

SB Forging Company II, Inc.

(f/k/a Gulf Coast Machine & Supply Company)

Prospect owns 100% of the preferred equity of Gulf Coast Machine & Supply Company (“Gulf Coast”).

Gulf Coast is a provider of value-added forging solutions to energy and industrial end markets.

On November 14, 2017, we received proceeds of $1,363 from our insurance carrier related to our investment in Gulfco.

The $1,363 reimbursed us for covered third-party legal expenses incurred and expensed in prior periods, for which we recorded the amount received as a reduction to our legal fees for the current period.

Prospect Administration also received $1,430 from the insurance carrier related to covered legal services provided by Prospect Administration which was recorded as a reduction of allocation of overhead from Prospect Administration.

In June 2018, SB Forging Company II, Inc.

received escrow proceeds of $2,050 related to the sale.

The escrow proceeds and $154 of excess cash held at SB Forging Company II, Inc.

were subsequently distributed and in connection with the liquidation of our investment, we recorded a realized gain of $2,204 in our Consolidated Statement of Operations during the year ended June 30, 2019.

Universal Turbine Parts, LLC

On December 10, 2018, UTP Holdings Group, Inc.

(“UTP Holdings”) purchased all of the voting stock of Universal Turbine Parts, LLC (“UTP”) and appointed a new Board of Directors to UTP Holdings, consisting of three employees of the Investment Advisor.

Three Months Ended

September 30, 2021 September 30, 2020

Interest Income $ 593 $ 594

Managerial Assistance (1)

(1) No income recognized by Prospect.

MA payments were paid from UTP to Prospect and subsequently remitted to PA.

Three Months Ended

September 30, 2021 September 30, 2020

Repayment of loan receivable $ 8 $ 170

September 30, 2021 June 30, 2021

Interest Receivable (2)

Other Receivables (3)

(2) Interest income recognized but not yet paid.

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

On June 15, 2016, we provided additional $1,300 debt financing to USES Corp.

(“United States Environmental Services” or “USES”) and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

financing, USES issued to us 99,900 shares of its common stock.

On June 29, 2016, we provided additional $2,200 debt financing to USES and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 169,062 shares of its common stock.

As a result of such debt financing and recapitalization, as of June 29, 2016, we held 268,962 shares of USES common stock representing a 99.96% common equity ownership interest in USES.

As such, USES became a controlled company on June 30, 2016.

Three Months Ended

September 30, 2021 September 30, 2020

Interest Income $ 51 $ —

September 30, 2021 June 30, 2021

Interest Receivable (1)

(1) Interest income recognized but not yet paid.

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

Valley Electric Company, Inc.

Prospect owns 100% of the common stock of Valley Electric Holdings I, Inc.

(“Valley Holdings I”), a Consolidated Holding Company.

Valley Holdings I owns 100% of Valley Electric Holdings II, Inc.

(“Valley Holdings II”), a Consolidated Holding Company.

Valley Holdings II owns 94.99% of Valley Electric Company, Inc.

(“Valley Electric”), with Valley Electric management owning the remaining 5.01% of the equity.

Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co.

(“Valley”), a leading provider of specialty electrical services in the state of Washington and among the top 50 electrical contractors in the United States.

Three Months Ended

September 30, 2021 September 30, 2020

Interest Income

Interest Income from Valley

Interest Income from Valley Electric

Total Interest Income $ 1,778 $ 1,778

Residual Profit Interest

Total Other Income $ 167 $ 167

Managerial Assistance (1)

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

(2) No income recognized by Prospect.

MA payments were paid from Valley Electric to Prospect and subsequently remitted to PA.

September 30, 2021 June 30, 2021

Interest Receivable (2)

Other Receivables (3)

(2) Interest income recognized but not yet paid.

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

Wolf Energy, LLC

Prospect owns 100% of the equity of Wolf Energy Holdings Inc.

(“Wolf Energy Holdings”), a Consolidated Holding Company.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

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

Coalbed, LLC (“Coalbed”);

and Wolf Energy, LLC (“Wolf Energy”).

AEH owns 100% of C&S Operating, LLC.

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

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.

From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business.

These matters may relate to intellectual property, employment, tax, regulation, contract or other matters.

The resolution of such matters as may arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources.

We are not aware of any material legal proceedings as of September 30, 2021.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(Continued)

(in thousands, except share and per share data)

Financial Highlights

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

Three Months Ended September 30,

Per Share Data

Net asset value per common share at beginning of period $ 9.81 $ 8.18

Net investment income (1)

Net realized and change in unrealized gains (1)

Net increase from operations 0.54 0.45

Distributions of net investment income to preferred stockholders (0.01) —

Distributions of net investment income to common stockholders (0.18) (8) (0.15) (8)

Return of Capital to common stockholders — (8) (0.03) (8)

Common stock transactions (2)

(0.01) (0.05)

Offering costs from issuance of preferred stock (0.03) —

Net asset value per common share at end of period $ 10.12 $ 8.40

Per common share market value at end of period $ 7.70 $ 5.03

Total return based on market value (3)

(6.06 %) 2.15 %

Total return based on net asset value (3)

5.59 % 6.57 %

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements