What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-08 compared with 2021-11-08 · 338 added, 254 removed, 838 unchanged (41% of the section changed)

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In these cases, our investment, which is generally equity in the holding company, the holding company’s equity investment in the operating company and any debt from us directly to the operating company structure represents our total exposure for the investment.

As of September 30, 2021, as shown in our Consolidated Schedule of Investments , the cost basis and fair value of our investments in controlled companies was $2,486,474 and $3,046,090, respectively.

As of December 31, 2021, as shown in our Consolidated Schedule of Investments , the cost basis and fair value of our investments in controlled companies was $2,364,241 and $3,057,923, respectively.

This structure gives rise to several of the risks described in our public documents and highlighted elsewhere in this Quarterly Report.

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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).

First Quarter Highlights

Second Quarter Highlights

Investment Transactions

We seek to be a long-term investor with our portfolio companies.

During the three months ended September 30, 2021, we acquired $315,156 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $86,722, funded $4,000 of revolver advances, and recorded PIK interest of $18,790, resulting in gross investment originations of $424,668.

During the three months ended September 30, 2021, we received full repayments totaling $269,230, received $32 of revolver paydowns, and received $54,738 in partial prepayments, scheduled principal amortization payments, and return of capital distributions, resulting in net repayments of $324,000.

During the three months ended December 31, 2021, we acquired $495,268 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $339,183, funded $5,000 of revolver advances, and recorded PIK interest of $15,922, resulting in gross investment originations of $855,373.

During the three months ended December 31, 2021, we received full repayments totaling $179,279, received $52 of revolver paydowns, and received $264,729 in partial prepayments, scheduled principal amortization payments, and return of capital distributions, resulting in net repayments of $444,060.

Debt Issuances and Redemptions

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

During the three months ended December 31, 2021, we repaid $286 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 $74,006 aggregate principal amount of Prospect Capital InterNotes® at par with a weighted average interest rate of 6.03%.

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

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

During the three months ended September 30, 2021, we issued $87,657 aggregate principal amount of Prospect Capital InterNotes® with a weighted average stated interest rate of 3.35%, to extend our borrowing base.

The newly issued notes mature between July 15, 2026 and September 15, 2051 and generated net proceeds of $85,472.

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

On August 26, 2021, we commenced a tender offer to purchase for cash up to $60,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $102.50, plus accrued and unpaid interest (“2022 Notes August 2021 Tender Offer”).

On September 24, 2021, $50,554 aggregate principal amount of the 2022 Notes, representing 45.52% of the previously outstanding 2022 Notes, were validly tendered and accepted.

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

On September 30, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on October 15, 2028 (the “3.437% 2028 Notes”).

The 3.437% 2028 Notes bear interest at a rate of 3.437% per year, payable semi-annually on April 15 and October 15 of each year, beginning on April 15, 2022.

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

The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended December 31, 2021 was $1,743.

During the three months ended December 31, 2021, we issued $32,665 aggregate principal amount of Prospect Capital InterNotes® with a weighted average stated interest rate of 3.26%, to extend our borrowing base.

The newly issued notes mature between October 15, 2026 and December 15, 2051 and generated net proceeds of $31,969.

During the three months ended December 31, 2021, we increased total commitments to the Revolving Credit Facility by $20,000 to $1,297,500 in the aggregate.

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.

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.

Equity Issuances

On July 12, 2021, we entered into an underwriting agreement by and among us, Prospect Capital Management L.P., Prospect Administration LLC, and Morgan Stanley & Co.

LLC, RBC Capital Markets, LLC and UBS Securities LLC, as representatives of the underwriters, relating to the offer and sale of 6,000,000 shares, or $150,000 in aggregate liquidation preference, of our 5.35% Series A Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock” or “5.35% Preferred Stock”), at a public offering price of $25.00 per share.

Pursuant to the Underwriting Agreement, we also granted the underwriters a 30-day option to purchase up to an additional 900,000 shares of Series A Preferred Stock solely to cover over-allotments.

The offering closed on July 19, 2021.

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

At any time prior to the listing of the 5.50% Series A1 Preferred Stock (“Series A1 Preferred Stock”), the 5.50% Series M1 Preferred Stock (“Series M1 Preferred Stock”), the 5.50% Series M2 Preferred Stock (“Series M2 Preferred Stock”), the 5.50% Series AA1 Preferred Stock (“Series AA1 Preferred Stock”) and the 5.50% Series A2 Preferred Stock (“Series A2 Preferred Stock,” and collectively, the “5.50% Preferred Stock”) on a national securities exchange, shares of the 5.50% Preferred Stock are convertible, at the option of the holder of the 5.50% Preferred Stock (the “Holder Optional Conversion”).

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

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.

On October 21, 2021, November 18, 2021, and December 23, 2021, we issued 357,734, 346,308, and 365,384 shares of our common stock in connection with the dividend reinvestment plan, respectively.

During the three months ended December 31, 2021, 3,601 shares of our Series A1 Preferred Stock were converted to 10,116 shares of our common stock, in connection with Holder Optional Conversion.

During the three months ended December 31, 2021, we issued 3,642,372 shares of our Series A1 Preferred Stock for net proceeds of $82,744, and 214,935 shares of our Series M1 Preferred Stock for net proceeds of $5,212, each excluding offering costs and preferred stock dividend reinvestment.

Investment Holdings

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

Our annualized current yield was 11.6% and 11.7% as of September 30, 2021 and June 30, 2021, respectively, across all performing interest bearing investments, excluding equity investments and non-accrual loans.

Our annualized current yield was 9.0% and 9.2% as of September 30, 2021 and June 30, 2021, respectively, across all investments.

At December 31, 2021, we have $7,002,846, or 169.1%, of our net assets applicable to common shares invested in 127 long-term portfolio investments and CLOs.

Our annualized current yield was 10.6% and 11.7% as of December 31, 2021 and June 30, 2021, respectively, across all performing interest bearing investments, excluding equity investments and non-accrual loans.

Our annualized current yield was 8.1% and 9.2% as of December 31, 2021 and June 30, 2021, respectively, across all investments.

Monetization of equity positions that we hold and loans on non-accrual status are not included in this yield calculation.

In many of our portfolio companies we hold equity positions, ranging from minority interests to majority stakes, which we expect over time to contribute to our investment returns.

Some of these equity positions include features such as contractual minimum internal rates of returns, preferred distributions, flip structures and other features expected to generate additional investment returns, as well as contractual protections and preferences over junior equity, in addition to the yield and security offered by our cash flow and collateral debt protections.

Some of these equity positions include features such as contractual minimum internal rates of returns,

preferred distributions, flip structures and other features expected to generate additional investment returns, as well as contractual protections and preferences over junior equity, in addition to the yield and security offered by our cash flow and collateral debt protections.

We are a non-diversified company within the meaning of the 1940 Act.

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“Non-Control/Non-Affiliate Investments” are those that are neither Control Investments nor Affiliate Investments.

As of September 30, 2021, we own controlling interests in the following portfolio companies:

As of December 31, 2021, we own controlling interests in the following portfolio companies:

CP Energy Services Inc.

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

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

(“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 Loan A”) 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, we report our investments in Spartan as control investment.

Spartan remains the direct borrow and guarantor to Prospect for the Spartan Term Loan A.

As of September 30, 2021, we also own affiliated interests in Nixon, Inc.

As of December 31, 2021, we also own affiliated interests in Nixon, Inc.

(“Nixon”), PGX Holdings, Inc.

(“PGX”), RGIS Services, LLC, (“RGIS”), and Targus Cayman HoldCo Limited (“Targus”).

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

September 30, 2021 June 30, 2021

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

December 31, 2021 June 30, 2021

Level of Control Cost % of Portfolio Fair Value % of Portfolio Cost % of Portfolio Fair Value % of Portfolio

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$ 6,541,338 100.0 % $ 7,002,846 100.0 % $ 6,058,124 100.0 % $ 6,201,778 100.0 %

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

September 30, 2021 June 30, 2021

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

December 31, 2021 June 30, 2021

Type of Investment Cost % of Portfolio Fair Value % of Portfolio Cost % of Portfolio Fair Value % of Portfolio

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

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

September 30, 2021 June 30, 2021

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

December 31, 2021 June 30, 2021

Type of Investment Cost % of Portfolio Fair Value % of Portfolio Cost % of Portfolio Fair Value % of Portfolio

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Total Interest Bearing Investments $ 5,837,491 100.0 % $ 5,385,136 100.0 % $ 5,361,525 100.0 % $ 4,897,597 100.0 %

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

September 30, 2021 June 30, 2021

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

December 31, 2021 June 30, 2021

Industry Cost % of Portfolio Fair Value % of Portfolio Cost % of Portfolio Fair Value % of Portfolio

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Auto Components 95,282 1.5 % 96,384 1.4 % 75,323 1.2 % 76,520 1.2 %

Building Products 35,000 0.5 % 35,000 0.5 % — — % — — %

Capital Markets 42,500 0.6 % 42,500 0.6 % — — % — — %

Chemicals — — % — — % 28,745 0.5 % 28,863 0.5 %

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Health Care Providers & Services 673,169 10.3 % 823,165 11.8 % 583,369 9.6 % 714,107 11.5 %

Health Care Technology 65,000 1.0 % 65,000 0.9 % — — % — — %

Hotels, Restaurants & Leisure 24,045 0.4 % 23,652 0.3 % 24,502 0.4 % 23,624 0.4 %

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Professional Services 112,019 1.7 % 111,692 1.6 % 132,015 2.2 % 132,058 2.1 %

Real Estate Management & Development — — % — — % — — % — — %

Software 52,267 0.8 % 52,500 0.7 % 22,240 0.4 % 22,500 0.4 %

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

As of September 30, 2021 and June 30, 2021, Structured Finance includes $90,200 and $90,200, respectively, of senior secured debt investments held through our investment in NPRC and its wholly-owned subsidiary.

As of December 31, 2021 and June 30, 2021, Structured Finance includes $108,600 and $90,200, respectively, of senior secured debt investments held through our investment in NPRC and its wholly-owned subsidiary.

Portfolio Investment Activity

Our origination efforts are focused primarily on secured lending to non-control investments to reduce the risk in the portfolio by investing primarily in first lien loans, though we also continue to close select junior debt and equity investments.

For information regarding investment activity for the three months ended September 30, 2021 and September 30, 2020 are presented below:

Three months ended September 30,

For information regarding investment activity for the six months ended December 31, 2021 and December 31, 2020 are presented below:

Six months ended December 31,

Investments made in new portfolio companies $ 810,424 $ 282,515

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Subordinated Secured Debt 721,825 138,014

Subordinated Structured Notes 9,518 —

Subordinated Unsecured Debt — 2,620

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Subordinated Unsecured Debt — 54,880

Subordinated Structured Notes 9,406 —

Equity — (981)

Total dispositions by portfolio composition $ 768,060 $ 483,420

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

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

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

(3) Weighted average interest rates for new investments by portfolio composition is calculated with the current rate at the end of the period.

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

As of September 30, 2021, there remains to be global uncertainty surrounding the COVID-19 pandemic, which has caused severe disruptions in the global economy and has negatively impacted the fair value and performance of certain investments since the pandemic began.

For the three months ended September 30, 2021, the aggregate increases in fair value and net unrealized dep reciation on investments were driven by the expansion of comparable company trading multiples and/or tightened credit spreads as the level of market volatility generated by the COVID-19 pandemic declined over the three month period.

As of December 31, 2021, there remains to be global uncertainty surrounding the COVID-19 pandemic, which has caused severe disruptions in the global economy and has negatively impacted the fair value and performance of certain investments since the pandemic began.

For the three months ended December 31, 2021, the aggregate increases in fair value and net unrealized dep reciation on investments were driven by the expansion of comparable company trading multiples and/or tightened credit spreads as the level of market volatility generated by the COVID-19 pandemic declined over the three month period.

For certain investments in our portfolio, the valuations continue to reflect factors such as specific industry concerns, uncertainty about the duration of business shutdowns and near-term liquidity needs.

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Equity positions in our portfolio are susceptible to potentially significant changes in value, both increases as well as decreases, due to changes in operating results and market multiples.

Our controlled companies discussed below experienced such changes and we recorded corresponding fluctuati ons in valuations during the three months ended September 30, 2021.

Our controlled companies discussed below experienced such changes and we recorded corresponding fluctuati ons in valuations during the six months ended December 31, 2021.

First Tower Finance Company LLC

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First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company.

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

The increase in premium to amortized cost was driven by strong financial performance .

The fair value of our investment in First Tower increased to $625,097 as of December 31, 2021, representing a premium of $263,152 to its amortized cost basis compared to a fair value of $592,356 as of June 30, 2021, a premium of $236,502 to its amortized cost.

The increase in premium to amortized cost was driven by strong financial performance and expansion of comparable company trading multiples.

InterDent, Inc.

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

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

The increase in premium to amortized cost was driven by strong financial performance.

InterDent is a dental support organization (“DSO”).

InterDent provides business and administrative support services to a regionally-diversified set of dental practices so that dentists can focus on delivering high-quality clinical care and patient satisfaction.

The fair value of our investment in InterDent increased to $448,134 as of December 31, 2021, a premium of $148,942 to its amortized cost basis compared to a fair value of $412,339 as of June 30, 2021, a premium of $129,650 to its amortized cost.

The increase in premium to amortized cost was driven by increased financial performance.

National Property REIT Corp.

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Additionally, through its wholly owned subsidiaries, NPRC invests in online consumer loans and RSSNs.

As of September 30, 2021, we own 100% of the fully-diluted common equity of NPRC.

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

As of December 31, 2021, we own 100% of the fully-diluted common equity of NPRC.

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.

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 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 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, 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 10,925

4 Crestview at Oakleigh, LLC Pensacola, FL 11/15/2013 17,500 13,297

5 Inverness Lakes, LLC Mobile, AL 11/15/2013 29,600 23,722

6 Kings Mill Pensacola, LLC Pensacola, FL 11/15/2013 20,750 16,855

7 Plantations at Pine Lake, LLC Tallahassee, FL 11/15/2013 18,000 13,534

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 84,048

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

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22 Vesper Manhattan KS, LLC Manhattan, KS 9/28/2016 23,250 14,679

Property Name City Acquisition Date Purchase Price Mortgage Outstanding

23 9220 Old Lantern Way, LLC Laurel, MD 1/30/2017 187,250 153,580

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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 26,400

37 Bradford Ridge Holdings, LLC Forest Park, GA 5/9/2018 12,500 10,000

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

Property Name City Acquisition Date Purchase Price Mortgage Outstanding

30 Villages of Wildwood Holdings LLC Fairfield, OH 7/20/2018 46,500 39,525

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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

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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

Th e fair value of our investment in NPRC increased to $1,239,596 as of September 30, 2021, a premium of $509,895 from its amortized cost basis compared to a fair value of $1,189,755 as of June 30, 2021, representing a premium of $436,044.

The fair value of our investment in NPRC increased to $1,223,798 as of December 31, 2021, a premium of $634,613 from its amortized cost basis compared to a fair value of $1,189,755 as of June 30, 2021, representing a premium of $436,044.

The increase in premium is primarily driven by compression of capitalization rates and, to a lesser extent, growth in net operating income in our real estate portfolio.

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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.

(f/k/a NMMB Acquisition, Inc.) (“NMMB”) as of December 31, 2021 and June 30, 2021 , respectively, with NMMB management owning the remaining equity.

NMMB owns 100% of Refuel Agency, Inc.

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NMMB is an advertising media buying business.

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

The fair value of our investment in NMMB increased to $78,715 as of December 31, 2021 , representing a premium of $61,048 to its amortized cost basis, compared to a fair value of $46,888 as of June 30, 2021, representing a premium of $29,145 to its amortized cost basis.

The increase to the premium was driven by strong financial performance.

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

Pacific World Corporation

On May 29, 2018, Prospect exercised its rights and remedies under its loan documents to exercise the shareholder voting rights in respect of the stock of Pacific World Corporation (“Pacific World”) and to appoint a new Board of Directors of Pacific World.

As a result, as of June 30, 2018, Prospect’s investment in Pacific World is classified as a control investment.

Pacific World supplies nail and beauty care products to food, drug, mass, and value retail channels worldwide.

The fair value of our investment in Pacific World decreased to $64,851 as of December 31, 2021, a discount of $193,063 to its amortized cost basis, compared to a fair value of $71,097 as of June 30, 2021, representing discount of $178,148 to its amortized cost.

The increase in discount to amortized cost resulted from a decline in financial performance.

Our controlled investments, including those discussed above, are valued at $693,682 above their amortized cost as of December 31, 2021.

Affiliate and Non-Control Company Investments

We hold three affiliate investments at September 30, 2021 w ith a total fair value of $379,057, a premium of $159,828 from their combined amortized cost, compared to a fair value of $356,734 as of June 30, 2020, representing a $153,791 premium to its amortized cost.

The increase in premium is primarily driven by our investment in Targus Cayman HoldCo Limited (“Targus”), which is valued at a premium of $28,493 as of September 30, 2021 compared to a premium of $23,400 as of June 30, 2021.

The increase in Targus’s premium to amortized cost was driven by strong financial performance.

We hold three affiliate investments at December 31, 2021 with a total fair value of $429,954, a premium of $191,417 from their combined amortized cost, compared to a fair value of $356,734 as of June 30, 2020, representing a $153,791 premium to its amortized cost.

The increase in premium is primarily driven by our investment in PGX Holdings, Inc.

(“Progrexion”).

Progrexion is a consumer credit repair technology and services company.

Progrexion is valued at a premium of $153,759 at December 31, 2021 compared to a premium of $126,933 as of June 30, 2021.

The increase in Progrexion’s premium to amortized cost was driven by strong financial performance and tightening credit spreads.

With the non-control/non-affiliate investments, generally, there is less volatility related to our total investments because our equity positions tend to be smaller than with our control/affiliate investments, and debt investments are generally not as susceptible to large swings in value as equity investments.

For debt investments, the fair value is generally limited on the high side to each loan’s par value, plus any prepayment premium that could be imposed.

However, as of September 30, 2021, two of our non-control/ non-affiliate investments, Engine Group, Inc.

However, as of December 31, 2021, two of our non-control/ non-affiliate investments, Engine Group, Inc.

(“Engine”) and USC are valued at discounts to amortized cost of $27,407 and $97,446, respectively.

As of September 30, 2021, our CLO investment portfolio is valued at a $323,982 discount to amortized cost.

Excluding Engine, USC, and the CLO investment portfolio, the fair value of our non-control/non-affiliate investments at September 30, 2021 are valued at $9,099 above their amortized cost and did not experience significant changes in operating performance or value.

As of December 31, 2021, our CLO investment portfolio is valued at a $306,321 discount to amortized cost.

Excluding Engine, USC, and the CLO investment portfolio, the fair value of our non-control/non-affiliate investments at December 31, 2021 are valued at $7,583 above their amortized cost and did not experience significant changes in operating performance or value.

Our largest non-control/non-affiliate investment is PeopleConnect Holdings, LLC (“PeopleConnect”), which has a fair value equal to its amortized cost basis of $249,831 and represents approximately 6.0% of our Net Asset Value as of December 31, 2021.

PeopleConnect is an online information commerce company.

Capitalization

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We capitalize our business with a combination of debt and equity.

Our debt as of September 30, 2021 consists of:

Our debt as of December 31, 2021 consists of:

a Revolving Credit Facility availing us of the ability to borrow debt subject to borrowing base determinations;

Convertible Notes which we issued in April 2017 (with a follow-on issuance in May 2018) and March 2019;

Public Notes which we issued in March 2013, October 2018, December 2018 (and from time to time through our 2029 Notes Follow-on Program), January 2021, May 2021 and September 2021;

Public Notes which we issued in March 2013, October 2018, January 2021, May 2021 and September 2021;

and Prospect Capital InterNotes® which we issue from time to time.

As of September 30, 2021, our equity capital is comprised of common and preferred equity.

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

As of December 31, 2021, our equity capital is comprised of common and preferred equity.

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

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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.

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

The Unsecured Notes are effectively subordinated to our existing secured indebtedness, such as our credit facility, and future secured

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

The Unsecured

Notes are effectively subordinated to our existing secured indebtedness, such as our credit facility, and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of any of our subsidiaries.

Revolving Credit Facility

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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.

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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.

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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 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.

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

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On October 1, 2020, $6,035 aggregate principal amount of the 2022 Notes, representing 2.64% of the previously outstanding 2022 Notes, were validly tendered and accepted.

On October 19, 2020, we commenced a tender offer to purchase for cash any and all of the $222,785 aggregate principal amount outstanding of the 2022 Notes at the purchase price of $102.625, plus accrued and unpaid interest (“2022 Notes October Tender Offer”).

On October 19, 2020, we commenced a tender offer to purchase for cash any and all

of the $222,785 aggregate principal amount outstanding of the 2022 Notes at the purchase price of $102.625, plus accrued and unpaid interest (“2022 Notes October Tender Offer”).

On November 16, 2020, $59,863 aggregate principal amount of the 2022 Notes, representing 26.87% of the previously outstanding 2022 Notes, were validly tendered and accepted.

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On January 15, 2021, $26,694 aggregate principal amount of the 2022 Notes, representing 16.38% of the previously outstanding 2022 Notes, were validly tendered and accepted.

On February 1, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price

of $103.00, plus accrued and unpaid interest (“2022 Notes February 2021 Tender Offer”).

On February 1, 2021, we commenced a tender offer to purchase for cash up to $30,000 aggregate principal outstanding amount of the 2022 Notes at the purchase price of $103.00, plus accrued and unpaid interest (“2022 Notes February 2021 Tender Offer”).

On March 2, 2021, $25,123 aggregate principal amount of the 2022 Notes, representing 18.44% of the previously outstanding 2022 Notes, were validly tendered and accepted.

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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.

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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.

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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

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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”).

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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”).

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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 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.

On December 5, 2018, we issued $50,000 aggregate principal amount of unsecured notes that mature on June 15, 2029 (the “2029 Notes”).

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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”).

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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.

On May 27, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on November 15, 2026 (the “3.364% 2026 Notes”).

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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.

On September 30, 2021, we issued $300,000 aggregate principal amount of unsecured notes that mature on October 15, 2028 (the “3.437% 2028 Notes”).

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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.

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 InterNotes ®

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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 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 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% 5.490 % July 15, 2027 – October 15, 2027

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

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 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 three months ended September 30, 2021 was $3,719.

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

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 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:

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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.

Net Asset Value Attributable to Common Stockholders

During the three months ended September 30, 2021, our net asset value attributable to common shares increased by $134,786 $0.31 per common share.

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 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.

Net Asset Value Applicable to Common Stockholders

During the six months ended December 31, 2021, our net asset value applicable to common shares increased by $331,651 or $0.79 per common share.

The increase was primarily attributable to an increase in net realized and net change in unrealized gains of $298,818, or $0.77 per basic weighted average common share.

During the three months ended September 30, 2021, net investment income of $81,369, or $0.21 per basic weighted average common share, also exceeded distributions to common and preferred stockholders of $72,450 (including distributions classified as return of capital distributions to common stockholders), or $0.19 per basic weighted average common share, resulting in a net increase of $0.02 per basic weighted average common share.

The increase was primarily offset by $0.01 of dilution per common share related to common stock issuances through our common stock and dividend reinvestment program and by $0.03 of dilution per common share related to the preferred stock issuances for the three months ended September 30, 2021.

The following table shows the calculation of net asset value per common share as of September 30, 2021 and June 30, 2021.

September 30, 2021 June 30, 2021

During the six months ended December 31, 2021, net investment income of $166,926, or $0.43 per basic weighted average common share, also exceeded distributions to common and preferred stockholders of $149,892 (including distributions classified as return of capital distributions to common stockholders), or $0.39 per basic weighted average common share, resulting in a net increase of $0.04 per basic weighted average common share.

The increase was primarily offset by $0.02 of dilution per common share related to common stock issuances through our common stock and dividend reinvestment program for the six months ended December 31, 2021.

The following table shows the calculation of net asset value per common share as of December 31, 2021 and June 30, 2021.

December 31, 2021 June 30, 2021

Net assets $ 4,140,128 $ 3,945,517

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Results of Operations

Operating results for the three months ended September 30, 2021 and September 30, 2020 were as follows:

Three Months Ended September 30,

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

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

2021 2020 2021 2020

Investment income $ 175,376 $ 172,292 $ 344,850 $ 315,172

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Net investment income 85,557 81,561 166,926 139,106

Net realized gains (losses) from investments (601) 2,843

Net realized (losses) gains from investments (9,227) 3,727 (9,828) 6,570

Net change in unrealized gains from investments 181,134 225,773 317,854 333,617

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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

While we seek to maximize gains and minimize losses, our investments in portfolio companies can expose our capital to risks greater than those we may anticipate.

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Changes in any of these factors can have a significant impact on the value of the portfolio company.

These changes, along with those discussed in Investment Valuation above, can cause significant fluctuations in our net change in unrealized gains (losses) from investments, and therefore our net increase (decrease) in net assets resulting from operations attributable to common stockholders, quarter over quarter.

These changes, along with those discussed in Investment Valuation above, can cause significant fluctuations in our net change in unrealized gains (losses) from investments, and therefore our net increase (decrease) in net assets resulting from operations applicable to common stockholders, quarter over quarter.

Investment Income

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The following table describes the various components of investment income and the related levels of debt investments:

Three Months Ended September 30,

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

2021 2020 2021 2020

Interest income $ 142,173 $ 144,787 $ 288,444 $ 277,026

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(2) Excludes equity investments.

The average interest earned on interest bearing performing assets increased from 9.59% for the three months ended September 30, 2020 to 9.91% for the three months ended September 30, 2021.

The increase is primarily driven by an increase in interest income from early repayments causing an increase in accelerated income and prepayment premium income, and an increase due to originations in higher yielding investments, offset by a decrease in income from our structured credit investments due to lower future expected cash flows.

The average interest earned on all interest bearing performing assets increased from 8.88% for the three months ended September 30, 2020 to 9.45% for the three months ended September 30, 2021.

The increase is primarily due to decreases in non-accrual loans.

The average interest earned on interest bearing performing assets decreased from 10.45% for the three months ended December 31, 2020 to 9.25% for the three months ended December 31, 2021.

The average interest earned on all interest bearing assets decreased from 9.85% for the three months ended December 31, 2020 to 8.83% for the three months ended December 31, 2021.

The decrease is primarily due to decreases in interest income due to reduced returns from our structured credit investments.

The average interest earned on interest bearing performing assets decreased from 10.02% for the six months ended December 31, 2020 to 9.57% for the six months ended December 31, 2021.

The average interest earned on all interest bearing assets decreased from 9.36% for the six months ended December 31, 2020 to 9.14% for the six months ended December 31, 2021.

The decrease is primarily due to decreases in interest income due to reduced returns from our structured credit investments.

Investment income is also generated from dividends and other income which is less predictable than interest income.

The following table describes dividend income earned for the three and three months ended September 30, 2021 and September 30, 2020, respectively:

Three Months Ended September 30,

The following table describes dividend income earned for the three and six months ended December 31, 2021 and December 31, 2020, respectively:

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

2021 2020 2021 2020

Dividend income

$ 3,046 $ — $ 3,046 $ —

Valley Electric Company, Inc.

1,700 2,261 1,700 2,261

Nationwide Loan Company LLC 500 — 1,750 —

R-V Industries, Inc.

Other, net 17 19 34 44

Total dividend income $ 5,704 $ 2,280 $ 6,971 $ 2,305

Other income is comprised of structuring fees, advisory fees, amendment fees, royalty interests, settlement of net profits interests, settlement of residual profits interests, administrative agent fees and structured credit rebate income.

The following table describes other income earned for the three months ended September 30, 2021 and September 30, 2020, respectively:

Three Months Ended September 30,

The following table describes other income earned for the three and six months ended December 31, 2021 and December 31, 2020, respectively:

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

2021 2020 2021 2020

Structuring, advisory and amendment fees

Magnate Worldwide, LLC $ 2,850 $ — $ 2,850 $ —

PeopleConnect Intermediate, LLC 2,495 — 2,495 —

Broder 2,239 — 2,239 —

DRI Holding Inc.

2,238 — 2,238 —

BCPE Osprey Buyer, Inc.

1,812 — 1,812 —

BCPE North Star US Holdco 2, Inc.

1,463 — 1,463 —

National Property REIT Corp.

1,222 1,433 1,222 1,433

Victor Technology, LLC 600 — 600 —

Medical Solutions Holdings, Inc.

First Tower Finance Company LLC — 10,000 7,234 10,000

PGX Holdings, Inc.

Ahead Data Blue, LLC — 1,725 — 1,725

Orva Buyer, LLC — 810 — 810

Thermal Product Solutions, Inc.

KM2 Investor, LLC — 500 — 500

Atlantis Health Care Group (Puerto Rico), Inc.

Eze Castle Integration, Inc.

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Total administrative agent fees $ 159 $ 125 $ 327 $ 249

Structured Credit rebate income

Other, net $139 $—

Total structured credit rebate income 139 —

Total other income $ 27,499 $ 25,225 $ 49,435 $ 35,841

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The following table describes the various components of our operating expenses:

Three Months Ended September 30,

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

2021 2020 2021 2020

Base management fee $ 33,843 $ 27,833 $ 66,046 $ 54,683

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Total operating expenses $ 89,819 $ 90,731 $ 177,924 $ 176,066

Total gross and net base management fee was $32,203 and $26,850 for the three months ended September 30, 2021 and September 30, 2020, respectively.

The increase in total gross base management fee is directly related to an increase in average total assets.

For the three months ended September 30, 2021 and September 30, 2020, we incurred $19,740 and $14,386 of income incentive fees, respectively.

This increase was driven by a corresponding increase in pre-incentive fee net investment income from $71,931 for the three months ended September 30, 2020 to $101,109 for the three months ended September 30, 2021.

Total gross and net base management fee was $33,843 and $27,833 for the three months ended December 31, 2021 and December 31, 2020, respectively.

The increase in total gross base management fee is directly related to a increase in average total assets.

Total gross base management fee was $66,046 and $54,683 for the six months ended December 31, 2021 and December 31, 2020, respectively.

The increase in total gross base management fee is directly related to a increase in average total assets.

For the three months ended December 31, 2021 and December 31, 2020, we incurred $19,589 and $20,717 of income incentive fees, respectively.

This decrease was driven by a corresponding decrease in pre-incentive fee net investment income (net of preferred stock dividends) from $102,232 for the three months ended December 31, 2020 to $97,944 for the three months ended December 31, 2021.

No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.

During the three months ended September 30, 2021 and September 30, 2020, we incurred $28,038 and $34,049 respectively, of interest and credit facility expenses related to our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Notes”).

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.

For the six months ended December 31, 2021 and December 31, 2020, we incurred $39,329 and $35,103 of income incentive fees, respectively.

This increase was driven by a corresponding increase in pre-incentive fee net investment income (net of preferred stock dividends) from $174,163 for the six months ended December 31, 2020 to $196,646 for the six months ended December 31, 2021.

No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.

During the three months ended December 31, 2021 and December 31, 2020, we incurred $29,679 and $33,727 respectively, of interest and credit facility expenses related to our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Notes”).

During the six months ended December 31, 2021 and December 31, 2020, we incurred $57,717 and $67,776, respectively, of interest expenses related to our Notes.

These expenses are related directly to the leveraging capacity put into place for each of those periods and the levels of indebtedness actually undertaken in those periods.

The table below describes the various expenses of our Notes and the related indicators of leveraging capacity and indebtedness during these years:

Three Months Ended September 30,

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

2021 2020 2021 2020

Interest on borrowings $ 25,292 $ 29,802 $ 49,537 $ 59,860

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(2) Includes the stated interest expense, amortization of deferred financing costs, accretion of discount on Public Notes and commitment fees on the undrawn portion of our Revolving Credit Facility.

Interest expense decreased from $34,049 for the three months ended September 30, 2020 to $28,038 for the three months ended September 30, 2021.

The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.20% for the three months ended September 30, 2020 to 4.26% for the three months ended September 30, 2021, primarily due to redemptions of our Prospect Capital InterNotes®, as well as repurchases of our Convertible Notes, June 2024 Baby Bond and June 2028 Baby Bond.

In addition to Prospect Capital InterNotes®, the 2026 Notes and 3.364% 2026 Notes were issued this quarter at lower rates.

The allocation of net overhead expense from Prospect Administration was $4,526 and $4,657 for the three months ended September 30, 2021 and September 30, 2020, respectively.

Prospect Administration received estimated payments of $2,298 and $66 directly from our portfolio companies, and certain funds managed by the Investment Adviser for legal services during the three months ended September 30, 2021 and September 30, 2020, respectively.

Interest expense decreased from $33,727 for the three months ended December 31, 2020 to $29,679 for the three months ended December 31, 2021.

The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.19% for the three months ended December 31, 2020 to 4.08% for the three months ended December 31, 2021, primarily due to redemptions of our Prospect Capital InterNotes®, as well as repurchases of our Convertible Notes, June 2024 Baby Bond and June 2028 Baby Bond.

In addition to Prospect Capital InterNotes®, the 2026 Notes, 3.364% 2026 Notes, and the 2028 Bond were issued at lower rates.

Interest expense decreased from $67,776 for the six months ended December 31, 2020 to $57,717 for the six months ended December 31, 2021.

The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.19% for the six months ended December 31, 2020 to 4.17% for the six months ended December 31, 2021.

This decrease is primarily due to redemptions of our Prospect Capital InterNotes®, as well as repurchases of our Convertible Notes, June 2024 Baby Bond and June 2028 Baby Bond.

In addition to Prospect Capital InterNotes®, the 2026 Notes and 3.364% 2026 Notes, and the 2028 Bond were issued at lower rates.

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.

In addition, during the three months ended December 31, 2020, we were given a credit in the amount of $3,522 for legal expenses incurred on behalf of our portfolio companies that were subsequently remitted to Prospect Administration in the subsequent quarter.

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.

In addition, during the six months ended December 31, 2020, we were given a credit in the amount of $3,522 for legal expenses incurred on behalf of our portfolio companies that were subsequently remitted to Prospect Administration in the subsequent quarter.

We were given a credit for these payments as a reduction of the administrative services cost payable by us to Prospect Administration.

Had Prospect Administration not received these payments, Prospect Administration’s charges for its administrative services would have increased by this amount.

Total operating expenses, excluding investment advisory fees, interest and credit facility expenses, and allocation of overhead from Prospect Administration (“Other Operating Expenses”), net of any expense reimbursements, were $3,598 and $5,393 for the three months ended September 30, 2021 and September 30, 2020, respectively.

The decrease was primarily attributable to a decrease in general and administrative expenses and legal fees.

Total operating expenses, excluding investment advisory fees, interest and credit facility expenses, and allocation of overhead from Prospect Administration (“Other Operating Expenses”), net of any expense reimbursements, were $4,469 and $5,028 for the three months ended December 31, 2021 and December 31, 2020, respectively.

The decrease was primarily attributable to a decrease in legal fees.

Total operating expenses, excluding investment advisory fees, interest and credit facility expenses, and allocation of overhead from Prospect Administration (“Other Operating Expenses”), net of any expense reimbursements, were $8,067 and $10,421 for the six months ended December 31, 2021 and December 31, 2020, respectively.

The decrease was primarily attributable to a decrease in legal fees and a decrease in general and administrative expenses.

Net Realized Gains (Losses)

The following table details net realized gains (losses) from investments for the three months ended September 30, 2021 and September 30, 2020:

Three Months Ended September 30,

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

Three Months Ended December 31,

Portfolio Company 2021 2020

Spartan Energy Services, LLC - Term Loan B — 2,832

Edmentum Ultimate Holdings, LLC — 3,724

Sudbury Mill CLO, Ltd.

Other, net 179 3

Net realized gains (losses) $ (601) $ 2,843

Net realized (losses) gains $ (9,227) $ 3,727

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

Six Months Ended December 31,

Portfolio Company 2021 2020

Edmentum Ultimate Holdings, LLC — 3,724

Spartan - Term Loan B — 2,832

Sudbury Mill CLO, Ltd.

Other, net (422) 14

Net realized (losses) gains $ (9,828) $ 6,570

Net Realized Loss from Extinguishment of Debt

During the three months ended September 30, 2021 and September 30, 2020, we recorded a net realized loss from the extinguishment of debt of $5,357 and $486, respectively.

During the three months ended December 31, 2021 and December 31, 2020, we recorded a net realized loss from the extinguishment of debt of $3,851 and $5,094, respectively.

During the six months ended December 31, 2021 and December 31, 2020, we recorded a net realized loss from the extinguishment of debt of $9,208 and $5,580, respectively.

Refer to Capitalization for additional discussion.

Change in Unrealized Gains (Losses)

The following table details net change in unrealized (losses) gains for our portfolio for the three months ended September 30, 2021 and September 30, 2020, respectively:

Three Months Ended September 30,

The following table details net change in unrealized (losses) gains for our portfolio for the six months ended December 31, 2021 and December 31, 2020, respectively:

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

2021 2020 2021 2020

Control investments $ 134,066 $ 168,053 $ 256,396 $ 181,588

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Net change in unrealized gains (losses) $ 181,134 $ 225,773 $ 317,854 $ 333,617

The following table details reflects net change in unrealized gains (losses) on investments for the three months ended September 30, 2021:

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

Net Change in Unrealized Gains (Losses)

National Property REIT Corp.

PGX Holdings, Inc.

Subordinated Structured Notes 17,661

First Tower Finance Company LLC 11,247

Other, net 5,303

InterDent, Inc.

Pacific World Corporation (11,905)

Net change in unrealized gains $ 181,134

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

Net Change in Unrealized Gains (Losses)

InterDent, Inc.

National Property REIT Corp.

PGX Holdings, Inc.

Other, net 22,292

First Tower Finance Company LLC 20,529

Subordinated Structured Notes 15,575

Credit Central Loan Company, LLC 8,554

Targus Cayman HoldCo Limited 5,093

Other, net (1,193)

Valley Electric Company, Inc.

Echelon Transportation, LLC (7,808)

Edmentum Ultimate Holdings, LLC (10,394)

Net change in unrealized gains $ 225,773

The following table reflects net change in unrealized gains (losses) on investments for the three months ended September 30, 2020:

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

Net Change in Unrealized Gains (Losses)

PGX Holdings, Inc.

Other, net 22,428

National Property REIT Corp.

Subordinated Structured Notes 27,745

PGX Holdings, Inc.

First Tower Finance Company LLC 26,650

InterDent, Inc.

Targus Cayman HoldCo Limited 9,305

Credit Central Loan Company, LLC 7,661

Other, net 2,266

Echelon Transportation, LLC (9,339)

Pacific World Corporation (14,915)

Edmentum Ultimate Holdings, LLC 4,924

Net change in unrealized gains $ 317,854

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

Net Change in Unrealized Gains (Losses)

PGX Holdings, Inc.

National Property REIT Corp.

InterDent, Inc.

First Tower Finance Company LLC 27,075

Subordinated Structured Notes 25,264

Other, net 18,196

Valley Electric Company, Inc.

Engine Group, Inc.

Targus Cayman HoldCo Limited 3,778

Pacific World Corporation 8,457

R-V Industries 8,304

Securus Technologies Holdings, Inc.

CP Energy Services, Inc.

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Recently, the CLOs we are invested in have included, or have been amended to include, language permitting the CLO investment manager to implement a market replacement rate (like SOFR) upon the occurrence of certain material disruption events.

However, we cannot ensure that all CLOs in which we are invested will have such provisions, nor

can we ensure the CLO investment managers will undertake the suggested amendments when able.

However, we cannot ensure that all CLOs in which we are invested will have such provisions, nor can we ensure the CLO investment managers will undertake the suggested amendments when able.

In addition, the effect of a phase out of LIBOR on U.S.

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To the extent that any replacement rate utilized for senior secured loans differs from that utilized for a CLO that holds those loans, the CLO would experience an interest rate mismatch between its assets and liabilities which could have an adverse impact on the Company’s net investment income and portfolio returns.

For the three months ended September 30, 2021 and September 30, 2020, our operating activities used $10,115 and provided $4,567 of cash, respectively.

The change is primarily driven by net originations for the current quarter, which out-paced the cash components of net investment income.

There were no investing activities for the three months ended September 30, 2021 and September 30, 2020.

Financing activities used $11,339 and $20,825 of cash during the three months ended September 30, 2021 and September 30, 2020, respectively, which included dividend payments of $64,034 and $42,265, respectively.

For the six months ended December 31, 2021 and December 31, 2020, our operating activities used $301,585 and provided $92,648 of cash, respectively.

The change in our operating activities is primarily driven by an increase in net originations for the six months ended December 31, 2021.

There were no investing activities for the six months ended December 31, 2021 and December 31, 2020.

Financing activities provided $283,001 and used $87,112 of cash during the six months ended December 31, 2021 and December 31, 2020, respectively, which included dividend payments of $131,356 and $84,175, respectively.

The change in our financing activities is primarily driven by an increase in proceeds from issuance of preferred stock used to finance our increase in net originations for the six months ended December 31, 2021.

Our primary uses of funds have been to continue to invest in portfolio companies, through both debt and equity investments, repay outstanding borrowings and to make cash distributions to our stockholders.

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Our objective is to put in place such borrowings in order to enable us to expand our portfolio.

During the three months ended September 30, 2021, we borrowed $417,618 and we made repayments totaling $690,018 under the Revolving Credit Facility.

As of September 30, 2021, our outstanding balance on the Revolving Credit Facility was $84,537.

As of September 30, 2021, we had, net of unamortized discount and debt issuance costs, $213,253 outstanding on the Convertible Notes, $1,407,410 outstanding on the Public Notes and $373,350 outstanding on the Prospect Capital InterNotes® (See “Capitalization” above).

During the six months ended December 31, 2021, we borrowed $968,618 and we made repayments totaling $852,947 under the Revolving Credit Facility.

As of December 31, 2021, our outstanding balance on the Revolving Credit Facility was $472,608.

As of December 31, 2021, we had, net of unamortized discount and debt issuance costs, $213,563 outstanding on the Convertible Notes, $1,340,617 outstanding on the Public Notes and $332,870 outstanding on the Prospect Capital InterNotes® (See “Capitalization” above).

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

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

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

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 .

On February 13, 2020, we filed a registration statement on Form N-2 (File No.

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In connection with such offering, on October 30, 2020, we filed Articles Supplementary with the SDAT, reclassifying and designating an additional 20,000,000 shares of the Company’s authorized and unissued shares of common stock into shares of preferred stock as Convertible Preferred Stock.

On May 19, 2021, we entered into an Underwriting Agreement with UBS Securities LLC, relating to the offer and sale of 187,000 shares, par value $0.001 per share, of 5.50% Series A2 Preferred Stock, with a liquidation preference of $25.00 per share (the “Series A2 Preferred Stock”, and together with the Series A1 Preferred Stock,

Series M1 Preferred Stock, Series M2 Preferred Stock and Series AA1 Preferred Stock, the “5.50% Preferred Stock”).

The issuance of the Series A2 Preferred Stock settled on May 26, 2021.

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Beginning on the Redemption Eligibility Date, we may elect to settle any Issuer Optional Conversion in cash without limitation or restriction.

In the event that we exercise an Issuer Optional

Conversion with respect to any shares of 5.50% Preferred Stock, the holder of such 5.50% Preferred Stock may instead elect a Holder Optional Conversion with respect to such 5.50% Preferred Stock provided that the date of conversion for such Holder Optional Conversion would occur prior to the date of conversion for an Issuer Optional Conversion.

In the event that we exercise an Issuer Optional Conversion with respect to any shares of 5.50% Preferred Stock, the holder of such 5.50% Preferred Stock may instead elect a Holder Optional Conversion with respect to such 5.50% Preferred Stock provided that the date of conversion for such Holder Optional Conversion would occur prior to the date of conversion for an Issuer Optional Conversion.

On July 12, 2021, we entered into an underwriting agreement by and among us, Prospect Capital Management L.P., Prospect Administration LLC, and Morgan Stanley & Co.

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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.

We determined the estimated value as of September 30, 2021 of our Preferred Stock, with a $25.00 stated value per share.

We engaged a third-party valuation service to assist in our determination based on the calculation resulting from the total equity on our Consolidated Statements of Assets and Liabilities in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 (the “Form 10-Q”), which was prepared in accordance with U.S.

We determined the estimated value as of December 31, 2021 of our Preferred Stock, with a $25.00 stated value per share.

We engaged a third-party valuation service to assist in our determination based on the calculation resulting from the total equity on our Consolidated Statements of Assets and Liabilities in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 (the “Form 10-Q”), which was prepared in accordance with U.S.

generally accepted accounting principles in the United States of America, adjusted for the fair value of our investments (i.e.

from our Consolidated Schedule of Investments ) and total liabilities, divided by the number of shares of our Preferred Stock outstanding.

Based on this methodology and because the result from the calculation above is greater than the $25.00 per share stated value of our Preferred Stock, the estimated value of our Preferred Stock as of September 30, 2021 is $25.00 per share.

Our common stockholders’ equity accounts as of September 30, 2021 and June 30, 2021 reflect cumulative shares issued, net of shares repurchased, as of those respective dates.

Our common stockholders’ equity accounts as of December 31, 2021 and June 30, 2021 reflect cumulative shares issued, net of shares repurchased, as of those respective dates.

Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our dividend reinvestment plan and in connection with the acquisition of certain controlled portfolio companies.

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All underwriting fees and offering expenses were borne by us.

We did not repurchase any shares of our common stock for the three months ended September 30, 2021 or September 30, 2020.

Off-Balance Sheet Arrangements

As of September 30, 2021, we did not have any off-balance sheet liabilities or other contractual obligations that are reasonably likely to have a current or future material effect on our financial condition, other than those which originate from 1) the investment advisory and management agreement and the administration agreement and 2) the portfolio companies.

We did not repurchase any shares of our common stock for the six months ended December 31, 2021 or December 31, 2020.

Recent Developments

On October 8, 2021, we commenced a tender offer to purchase for cash any and all of the $81,389 aggregate principal amount of our outstanding 6.375% 2024 Notes at a purchase price of $107.750, plus accrued and unpaid interest (the “6.375% 2024 Notes October Tender Offer”).

The 6.375% 2024 Notes October Tender Offer expired at 5:00 p.m., New York City time, on October 15, 2021.

As of the settlement date, $149 aggregate principal amount of the 6.375% 2024 Notes were validly tendered and accepted.

Following settlement of the 6.375% 2024 Notes October Tender Offer on October 20, 2021, approximately $81,240 aggregate principal amount of the 6.375% 2024 Notes remains outstanding.

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

The Delayed Draw Term Loan and Revolving Line of Credit were unfunded at close.

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

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

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

On January 20, 2022, we made a new $87,500 First Lien Term Loan investment in Belnick, LLC, an importer and online seller of furniture and furnishings to both commercial and retail customers primarily through long-term e-commerce partnerships.

On January 21, 2022, we increased total commitments of the Revolving Credit Facility to the maximum accordion facility size of $1,500,000.

On February 7, 2022, we made an additional $75,000 Second Lien Term Loan investment in Global Tel*Link Corporation.

We expect the additional investment to settle on or about February 11, 2022.

On February 8, 2022, we announced the declaration of monthly dividends for our 5.50% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.50% of the Stated Value of $25 per share as set forth in the Articles Supplementary for the Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date (the first business day of the month, with no additional dividend accruing in January as a result), as follows:

Monthly Cash 5.50% Preferred Shareholder Distribution Record Date Payment Date Monthly Amount ($ per share), before pro ration for partial periods

December 2021 12/15/2021 1/3/2022 $0.114583

January 2022 1/19/2022 2/1/2022 $0.114583

February 2022 2/16/2022 3/1/2022 $0.114583

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

March 2022 3/23/2022 4/1/2022 $0.114583

April 2022 4/20/2022 5/2/2022 $0.114583

May 2022 5/18/2022 6/1/2022 $0.114583

On February 8, 2022, we announced the declaration of quarterly dividends for our 5.35% Preferred Stock for holders of record on the following dates based on an annual rate equal to 5.35% of the Stated Value of $25.00 per share as set forth in the Articles Supplementary for the 5.35% Preferred Stock, from the date of issuance or, if later from the most recent dividend payment date, as follows:

Quarterly Cash 5.35% Preferred Shareholder Distribution Record Date Payment Date Amount ($ per share)

November 2021 - January 2022 1/19/2022 2/1/2022 $0.334375

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

February 2022 - April 2022 4/20/2022 5/2/2022 $0.334375

On February 8, 2022, we announced the declaration of monthly dividends on our common stock as follows:

Monthly Cash Common Shareholder Distribution Record Date Payment Date Amount ($ per share)

November 2021 11/26/2021 12/23/2021 $0.0600

December 2021 12/29/2021 1/20/2022 $0.0600

January 2022 1/27/2022 2/17/2022 $0.0600

February 2022 2/24/2022 3/22/2022 $0.0600

March 2022 3/29/2022 4/20/2022 $0.0600

April 2022 4/27/2022 5/19/2022 $0.0600

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis