PENNANTPARK INVESTMENT CORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

FORWARD-LOOKING STATEMENTS

This Report, including Management's Discussion and Analysis of Financial
Condition and Results of Operations, contains statements that constitute
forward-looking statements, which relate to us and our consolidated subsidiaries
regarding future events or our future performance or future financial condition.
These forward-looking statements are not historical facts, but rather are based
on current expectations, estimates and projections about our Company, our
industry, our beliefs and our assumptions. The forward-looking statements
contained in this Report involve risks and uncertainties, including statements
as to:

• our future operating results;

• our business prospects and the prospects of our prospective portfolio

companies, including as a result of the current pandemic caused by COVID-19

or any worsening there of;

• changes in political, economic or industry conditions, the interest rate

environment or conditions affecting the financial and capital markets that

could result in changes to the value of our assets, including changes from

       the impact of the current COVID-19 pandemic or any worsening there of;


    •  our ability to continue to effectively manage our business due to the
       significant disruptions caused by the current COVID-19 pandemic or any
       worsening there of;

• the dependence of our future success on the general economy and its impact

on the industries in which we invest;

• the impact of a protracted decline in the liquidity of credit markets on

       our business;


  • the impact of investments that we expect to make;

• the impact of fluctuations in interest rates and foreign exchange rates on

       our business and our portfolio companies;


  • our contractual arrangements and relationships with third parties;

• the valuation of our investments in portfolio companies, particularly those

having no liquid trading market;

• the ability of our prospective portfolio companies to achieve their

       objectives;


  • our expected financings and investments;


  • the adequacy of our cash resources and working capital;

• the timing of cash flows, if any, from the operations of our prospective

       portfolio companies;


  • the impact of price and volume fluctuations in the stock market;

• the ability of our Investment Adviser to locate suitable investments for us

and to monitor and administer our investments;

• the impact of future legislation and regulation on our business and our

portfolio companies; and

• the impact of the United Kingdom's withdrawal from the European Union and

other world economic and political issues.

We use words such as "anticipates," "believes," "expects," "intends," "seeks,"
"plans," "estimates" and similar expressions to identify forward-looking
statements. You should not place undue influence on the forward-looking
statements as our actual results could differ materially from those projected in
the forward-looking statements for any reason, including the factors in "Risk
Factors" and elsewhere in this Report.

Although we believe that the assumptions on which these forward-looking
statements are based are reasonable, any of those assumptions could prove to be
inaccurate, and, as a result, the forward-looking statements based on those
assumptions also could be inaccurate. Important assumptions include our ability
to originate new loans and investments, certain margins and levels of
profitability and the availability of additional capital. In light of these and
other uncertainties, the inclusion of a projection or forward- looking statement
in this Report should not be regarded as a representation by us that our plans
and objectives will be achieved.

We have based the forward-looking statements included in this Report on
information available to us on the date of this Report, and we assume no
obligation to update any such forward-looking statements. Although we undertake
no obligation to revise or update any forward-looking statements in this Report,
whether as a result of new information, future events or otherwise, you are
advised to consult any additional disclosures that we may make directly to you
or through reports that we in the future may file with the SEC, including
reports on Form 10-Q/K and current reports on Form 8-K.

You should understand that under Section 27A(b)(2)(B) of the Securities Act and
Section 21E(b)(2)(B) of the Exchange Act, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995 do not apply to forward-looking
statements made in periodic reports we file under the Exchange Act.

The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained elsewhere in this Report.

Overview

PennantPark Investment Corporation is a BDC whose objectives are to generate
both current income and capital appreciation while seeking to preserve capital
through debt and equity investments primarily made to U.S. middle-market
companies in the form of first lien secured debt, second lien secured debt,
subordinated debt and equity investments.

We believe middle-market companies offer attractive risk-reward to investors due
to a limited amount of capital available for such companies. We seek to create a
diversified portfolio that includes first lien secured debt, second lien secured
debt, subordinated debt and equity investments by investing approximately $10
million to $50 million of capital, on average, in the securities of
middle-market companies. We expect this investment size to vary proportionately
with the size of our capital base. We use the term "middle-market" to refer to
companies with annual revenues between $50 million and $1 billion. The companies
in which we invest are typically highly leveraged, and, in most cases, are not
rated by national rating agencies. If such companies were rated, we believe that
they would typically receive a rating below investment grade (between BB and CCC
under the Standard & Poor's system) from the national rating agencies.
Securities rated below investment grade are often referred to as "leveraged
loans" or "high yield" securities or "junk bonds" and are often higher risk
compared to debt instruments that are rated above investment grade and have
speculative characteristics. Our debt investments may generally range in
maturity from three to ten years and are made to U.S. and, to a limited extent,
non-U.S. corporations, partnerships and other business entities which operate in
various industries and geographical regions.

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Our investment activity depends on many factors, including the amount of debt
and equity capital available to middle-market companies, the level of merger and
acquisition activity for such companies, the general economic environment and
the competitive environment for the types of investments we make. We have used,
and expect to continue to use, our debt capital, proceeds from the rotation of
our portfolio and proceeds from public and private offerings of securities to
finance our investment objectives.

Organization and Structure of PennantPark Investment Corporation

PennantPark Investment Corporation, a Maryland corporation organized in January
2007, is a closed-end, externally managed, non-diversified investment company
that has elected to be treated as a BDC under the 1940 Act. In addition, for
federal income tax purposes we have elected to be treated, and intend to qualify
annually, as a RIC under the Code.

SBIC II, our wholly-owned subsidiary, was organized as a Delaware limited
partnership in 2012. SBIC II received a license from the SBA to operate as a
SBIC under Section 301(c) of the 1958 Act. SBIC II's objectives are to generate
both current income and capital appreciation through debt and equity investments
generally by investing with us in SBA eligible businesses that meet the
investment selection criteria used by PennantPark Investment.

Our investment activities are managed by the Investment Adviser. Under our
Investment Management Agreement, we have agreed to pay our Investment Adviser an
annual base management fee based on our average adjusted gross assets as well as
an incentive fee based on our investment performance. PennantPark Investment,
through the Investment Adviser, provides similar services to SBIC II under its
investment management agreement. SBIC II's investment management agreement does
not affect the management and incentive fees on a consolidated basis. We have
also entered into an Administration Agreement with the Administrator. Under our
Administration Agreement, we have agreed to reimburse the Administrator for our
allocable portion of overhead and other expenses incurred by the Administrator
in performing its obligations under our Administration Agreement, including rent
and our allocable portion of the costs of compensation and related expenses of
our Chief Compliance Officer, Chief Financial Officer and their respective
staffs. PennantPark Investment, through the Administrator, provides similar
services to SBIC II under its administration agreement with us. Our board of
directors, a majority of whom are independent of us, provides overall
supervision of our activities, and the Investment Adviser supervises our
day-to-day activities.



COVID-19 Developments



COVID-19 was first detected in December 2019 and has since been identified as a
global pandemic by the World Health Organization. The effect of the ongoing
COVID-19 pandemic or any worsening thereof, uncertainty relating to more
contagious strains of the virus, the length of recovery of certain economic
sectors in the U.S. and globally and the speed and efficiency of the vaccination
process, including the extent to which the available vaccines are ineffective
against any new COVID- 19 variants may create stress on the market and may
affect some of our portfolio companies. We cannot predict the full impact of the
COVID-19 pandemic, including any worsening thereof or its duration in the United
States and globally and any impact to our business operations or the business
operations of our portfolio companies. Depending on the length and magnitude of
the disruption to the operations of our portfolio companies, certain portfolio
companies may experience financial distress and possibly default on their
financial obligations to us and their other capital providers in the future.
These developments could impact the value of our investments in such portfolio
companies.



The COVID-19 pandemic, including any worsening thereof, may have an adverse
impact on certain sectors of the global economy. Particularly, COVID-19 presents
material uncertainty and risk with respect to our future performance and
financial results as well as the future performance and financial results of our
portfolio companies due to the risk of any sever adverse reaction to the
vaccine, politicization of the vaccination process or general public skepticism
of the safety and efficacy of the vaccine. While we are unable to predict the
ultimate adverse effect of the COVID-19 pandemic, or any worsening thereof, on
our results of operation, we have identified certain factors that are likely to
affect market, economic and geopolitical conditions, and thereby may adversely
affect our business, including:



  • U.S. and global economic recovery;


  • changes in interest rates, including LIBOR;


       •  limited availability of credit, both in the United States and
          internationally;


  • disruptions to supply-chains and price volatility;

• changes to existing laws and regulations, or the imposition of new laws

          and regulations; and


  • uncertainty regarding future governmental and regulatory policies.




The business disruption and financial harm resulting from the COVID-19 pandemic
experienced by some of our portfolio companies may reduce, over time, the amount
of interest and dividend income that we receive from such investments and may
require us to provide an increase of capital to such companies in the form of
follow on investments. In connection with the adverse effects of the COVID-19
pandemic, we may also need to restructure the capitalization of some of our
portfolio companies, which could result in reduced interest payments, an
increase in the amount of PIK interest we receive or a permanent reduction in
the value of our investments. If our net investment income decreases, the
percentage of our cash flows dedicated to debt servicing and distribution
payments to stockholders would subsequently increase. This has required us to
reduce the amount of our distributions to stockholders as compared to
distributions in previous years. Although we had no non-accrual assets during
the quarter ended September 30, 2021, the continuing impact of the COVID-19
pandemic, or any worsening thereof, may result in portfolio investments being
placed on non-accrual status in the future.



Additionally, as of September 30, 2021 and September 30, 2020, our asset
coverage ratio, as computed in accordance with the 1940 Act, was 221% and 208%,
respectively. The Truist Credit Facility includes standard covenants and events
of default provisions. If we fail to make the required payments or breach the
covenants therein, it could result in a default under the Truist Credit
Facility. Failure to cure such default or obtain a waiver from the appropriate
party would result in an event of default, and the lenders may accelerate the
repayment of our indebtedness under the Truist Credit Facility, such that all
amounts owed are due immediately at the time of default. Such an action would
negatively affect our liquidity, business, financial condition, results of
operations, cash flows and ability to pay distributions to our stockholders.



We are also subject to financial risks, including changes in market interest
rates. As of September 30, 2021, our debt portfolio consisted of 92%
variable-rate investments. The variable-rate loans are usually based on a
floating interest rate index such as LIBOR and typically have durations of three
months after which they reset to current market interest rates. Variable-rate
investments subject to a floor generally reset by reference to the current
market index after one to nine months only if the index exceeds the floor. In
addition, the Truist Credit Facility also has floating rate interest provisions,
with pricing set at 225 basis points over LIBOR (or an alternative risk-free
floating interest rate index). In connection with the COVID-19 pandemic, the
U.S. Federal Reserve and other central banks have reduced interest rates, which
has caused LIBOR to decrease. Due to such rates, our gross investment income may
decrease, which could result in a decrease in our net investment income if such
decreases in LIBOR are not offset by, among other things, a corresponding
increase in the spread over LIBOR that we earn on such loans or a decrease in
the interest rate of our floating interest rate liabilities tied to LIBOR. See
"Item 3. Quantitative and Qualitative Disclosures About Market Risk" below.



In addition, we have continued to implement our business continuity planning
strategy. Our priority has been to safeguard the health of our employees and to
ensure continuity of business operations on behalf of our investors. As a result
of our business continuity planning strategy, nearly all of our employees have
returned to the office. Our systems and infrastructure have continued to support
our business operations. We implemented a heightened level of communication
across senior management, our investment team and our board of directors, and we
have proactively engaged with our vendors on a regular basis to ensure they
continue to meet our criteria for business continuity.

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Revenues

We generate revenue in the form of interest income on the debt securities we
hold and capital gains and dividends, if any, on investment securities that we
may acquire in portfolio companies. Our debt investments, whether in the form of
first lien secured debt, second lien secured debt or subordinated debt,
typically have a term of three to ten years and bear interest at a fixed or a
floating rate. Interest on debt securities is generally payable quarterly or
semiannually. In some cases, our investments provide for deferred interest
payments and PIK interest. The principal amount of the debt securities and any
accrued but unpaid interest generally becomes due at the maturity date. In
addition, we may generate revenue in the form of amendment, commitment,
origination, structuring or diligence fees, fees for providing significant
managerial assistance and possibly consulting fees. Loan origination fees, OID
and market discount or premium and deferred financing costs on liabilities,
which we do not fair value, are capitalized and accreted or amortized using the
effective interest method as interest income or, in the case of deferred
financing costs, as interest expense. Dividend income, if any, is recognized on
an accrual basis on the ex-dividend date to the extent that we expect to collect
such amounts. From time to time, the Company receives certain fees from
portfolio companies, which are non-recurring in nature. Such fees include loan
prepayment penalties, structuring fees and amendment fees, and are recorded as
other investment income when earned.

Expenses

Our primary operating expenses include the payment of a management fee and the
payment of an incentive fee to our Investment Adviser, if any, our allocable
portion of overhead under our Administration Agreement and other operating costs
as detailed below. Our management fee compensates our Investment Adviser for its
work in identifying, evaluating, negotiating, consummating and monitoring our
investments. Additionally, we pay interest expense on the outstanding debt and
unused commitment fees on undrawn amounts, under our various debt facilities. We
bear all other direct or indirect costs and expenses of our operations and
transactions, including:

* the cost of calculating our net asset value, including the cost of any

third-party valuation services;

* the cost of effecting sales and repurchases of shares of our common stock

and other securities;

* fees payable to third parties relating to, or associated with, making

investments, including fees and expenses associated with performing due

       diligence and reviews of prospective investments or complementary
       businesses;

* expenses incurred by the Investment Adviser in performing due diligence and

       reviews of investments;


  * transfer agent and custodial fees;


  * fees and expenses associated with marketing efforts;


  * federal and state registration fees and any exchange listing fees;


  * federal, state, local and foreign taxes;


  * independent directors' fees and expenses;


  * brokerage commissions;

* fidelity bond, directors and officers, errors and omissions liability

insurance and other insurance premiums;

* direct costs such as printing, mailing, long distance telephone and staff;

* fees and expenses associated with independent audits and outside legal costs;

* costs associated with our reporting and compliance obligations under the

1940 Act, the 1958 Act and applicable federal and state securities laws;

and

* all other expenses incurred by either the Administrator or us in connection

with administering our business, including payments under our

Administration Agreement that will be based upon our allocable portion of

overhead, and other expenses incurred by the Administrator in performing

its obligations under our Administration Agreement, including rent and our

allocable portion of the costs of compensation and related expenses of our

Chief Compliance Officer, Chief Financial Officer and their respective

staffs.

Generally, during periods of asset growth, we expect our general and
administrative expenses to be relatively stable or to decline as a percentage of
total assets and increase during periods of asset declines. Incentive fees,
interest expense and costs relating to future offerings of securities would be
additive to the expenses described above.

PORTFOLIO AND INVESTMENT ACTIVITY

As of September 30, 2021, our portfolio totaled $1,255.3 million and consisted
of $552.5 million of first lien secured debt, $176.9 million of second lien
secured debt, $121.2 million of subordinated debt (including $64.2 million in
PSLF) and $404.7 million of preferred and common equity (including $41.2 million
in PSLF). Our debt portfolio consisted of 92% variable-rate investments and 8%
fixed-rate investments. As of September 30, 2021, we had no portfolio companies
on non-accrual. Overall, the portfolio had net unrealized appreciation of $34.2
million as of September 30, 2021. Our overall portfolio consisted of 97
companies with an average investment size of $12.9 million, had a weighted
average yield on interest bearing debt investments of 9.0% and was invested 44%
in first lien secured debt, 14% in second lien secured debt, 10% in subordinated
debt (including 5% in PSLF) and 32% in preferred and common equity (including 3%
in PSLF). As of September 30, 2021, all of the investments held by PSLF were
first lien secured debt.



As of September 30, 2020, our portfolio totaled $1,081.8 million and consisted
of $439.0 million of first lien secured debt, $220.8 million of second lien
secured debt, $113.6 million of subordinated debt (including $63.0 million in
PSLF) and $308.3 million of preferred and common equity (including $36.3 million
in PSLF). Our debt portfolio consisted of 93% variable-rate investments and 7%
fixed-rate investments. As of September 30, 2020, we had two portfolio companies
on non-accrual, representing 4.9% and 3.4% of our overall portfolio on a cost
and fair value basis, respectively. Overall, the portfolio had net unrealized
depreciation of $83.8 million as of September 30, 2020. Our overall portfolio
consisted of 80 companies with an average investment size of $13.5 million, had
a weighted average yield on interest bearing debt investments of 8.9% and was
invested 41% in first lien secured debt, 20% in second lien secured debt, 10% in
subordinated debt (including 6% in PSLF) and 29% in preferred and common equity
(including 3% in PSLF). As of September 30, 2020, all of the investments held by
PSLF were first lien secured debt.

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For the year ended September 30, 2021, we invested $441.4 million of investments
in 30 new and 49 existing portfolio companies with a weighted average yield on
debt investments of 8.1%. Sales and repayments of investments for the same
period totaled $434.5 million.

For the year ended September 30, 2020, we invested $319.3 million of investments
in 25 new and 58 existing portfolio companies with a weighted average yield on
debt investments of 8.4%. Sales and repayments of investments for the same
period totaled $162.7 million.

PennantPark Senior Loan Fund, LLC

As of September 30, 2021, PSLF's portfolio totaled $405.2 million, consisted of
47 companies with an average investment size of $8.6 million and had a weighted
average yield on debt investments of 7.1%. For the year ended September 30,
2020, PSLF's portfolio totaled $353.4 million, consisted of 37 companies with an
average investment size of $9.6 million and had a weighted average yield on debt
investments of 7.3%.



For the year ended September 30, 2021, PSLF invested $149.4 million (of which
$123.4 million was purchased from the Company) in 18 new and nine existing
portfolio companies with a weighted average yield on debt investments of 7.3%.
PSLF's sales and repayments of investments for the same period totaled $104.9
million.



For the period ended July 31, 2020 through September 30, 2020, PSLF invested
$5.7 million in one new portfolio company with a weighted average yield on debt
investments of 7.5%. PSLF's sales and repayments of investments for the same
period totaled $11.1 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our Consolidated Financial Statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amount of our assets and liabilities at the date of the Consolidated Financial
Statements and the reported amounts of income and expenses during the reported
periods. In the opinion of management, all adjustments, which are of a normal
recurring nature, considered necessary for the fair presentation of financial
statements have been included. Actual results could differ from these estimates
due to changes in the economic and regulatory environment, financial markets and
any other parameters used in determining such estimates and assumptions,
including the credit worthiness of our portfolio companies and the global
outbreak of COVID-19. We may reclassify certain prior period amounts to conform
to the current period presentation. We have eliminated all intercompany balances
and transactions. References to ASC serve as a single source of accounting
literature. Subsequent events are evaluated and disclosed as appropriate for
events occurring through the date the Consolidated Financial Statements are
issued. In addition to the discussion below, we describe our critical accounting
policies in the notes to our Consolidated Financial Statements.

Investment Valuations

We expect that there may not be readily available market values for many of the
investments which are or will be in our portfolio, and we value such investments
at fair value as determined in good faith by or under the direction of our board
of directors using a documented valuation policy and a consistently applied
valuation process, as described in this Report. With respect to investments for
which there is no readily available market value, the factors that our board of
directors may take into account in pricing our investments at fair value
include, as relevant, the nature and realizable value of any collateral, the
portfolio company's ability to make payments and its earnings and discounted
cash flow, the markets in which the portfolio company does business, comparison
to publicly traded securities and other relevant factors. When an external event
such as a purchase transaction, public offering or subsequent equity sale
occurs, we consider the pricing indicated by the external event to corroborate
or revise our valuation. Due to the inherent uncertainty of determining the fair
value of investments that do not have a readily available market value, the
price used in an actual transaction may be different than our valuation and the
difference may be material.

Our portfolio generally consists of illiquid securities, including debt and
equity investments. With respect to investments for which market quotations are
not readily available, or for which market quotations are deemed not reflective
of the fair value, our board of directors undertakes a multi-step valuation
process each quarter, as described below:

(1) Our quarterly valuation process begins with each portfolio company or

investment being initially valued by the investment professionals of our

Investment Adviser responsible for the portfolio investment;

(2) Preliminary valuation conclusions are then documented and discussed with

the management of the Investment Adviser;

(3) Our board of directors also engages independent valuation firms to conduct

independent appraisals of our investments for which market quotations are

not readily available or are readily available but deemed not reflective

of the fair value of the investment. The independent valuation firms

review management's preliminary valuations in light of their own

independent assessment and also in light of any market quotations obtained

from an independent pricing service, broker, dealer or market maker;

(4) The audit committee of our board of directors reviews the preliminary

valuations of the Investment Adviser and those of the independent

valuation firms on a quarterly basis, periodically assesses the valuation

methodologies of the independent valuation firms, and responds to and

supplements the valuation recommendations of the independent valuation

firms to reflect any comments; and

(5) Our board of directors discusses these valuations and determines the fair

value of each investment in our portfolio in good faith, based on the

input of our Investment Adviser, the respective independent valuation

firms and the audit committee.

Our board of directors generally uses market quotations to assess the value of
our investments for which market quotations are readily available. We obtain
these market values from independent pricing services or at the bid prices
obtained from at least two brokers or dealers, if available, or otherwise from a
principal market maker or a primary market dealer. The Investment Adviser
assesses the source and reliability of bids from brokers or dealers. If our
board of directors has a bona fide reason to believe any such market quote does
not reflect the fair value of an investment, it may independently value such
investments by using the valuation procedure that it uses with respect to assets
for which market quotations are not readily available.

Fair value, as defined under ASC 820, is the price that we would receive upon
selling an investment or pay to transfer a liability in an orderly transaction
to a market participant in the principal or most advantageous market for the
investment or liability. ASC 820 emphasizes that valuation techniques maximize
the use of observable market inputs and minimize the use of unobservable inputs.
Inputs refer broadly to the assumptions that market participants would use in
pricing an asset or liability, including assumptions about risk. Inputs may be
observable or unobservable. Observable inputs reflect the assumptions market
participants would use in pricing an asset or liability based on market data
obtained from sources independent of us. Unobservable inputs reflect the
assumptions market participants would use in pricing an asset or liability based
on the best information available to us on the reporting period date.

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

Level 1: Inputs that are quoted prices (unadjusted) in active markets for

             identical assets or liabilities, accessible by us at the 

measurement

             date.

Level 2: Inputs that are quoted prices for similar assets or liabilities in

             active markets, or that are quoted prices for identical or 

similar

             assets or liabilities in markets that are not active and 

inputs that

             are observable for the asset or liability, either directly or
             indirectly, for substantially the full term, if applicable, of the
             financial instrument.


    Level 3: Inputs that are unobservable for an asset or liability because they
             are based on our own assumptions about how market participants would
             price the asset or liability.


A financial instrument's categorization within the valuation hierarchy is based
upon the lowest level of input that is significant to the fair value
measurement. Generally, most of our investments, our Credit Facilities, 2026
Notes and our SBA debentures are classified as Level 3. Our 2019 Notes were, and
our 2024 Notes are, classified as Level 2 as they were valued using the closing
price from the primary exchange. Due to the inherent uncertainty of determining
the fair value of investments that do not have a readily available market value,
the price used in an actual transaction may be different than our valuation and
those differences may be material.

The SEC recently adopted Rule 2a-5 under the 1940 Act which established
requirements for determining fair value in good faith purposes of the 1940 Act.
We will comply with the requirement of the rule before the requirement date in
2022.

In addition to using the above inputs to value cash equivalents, investments,
our 2019 Notes, our SBA debentures, our 2024 Notes, our 2026 Notes and our
Credit Facilities valuations, we employ the valuation policy approved by our
board of directors that is consistent with ASC 820. Consistent with our
valuation policy, we evaluate the source of inputs, including any markets in
which our investments are trading, in determining fair value.

Generally, the carrying value of our consolidated financial liabilities
approximates fair value. We have adopted the principles under ASC Subtopic
825-10, Financial Instruments, or ASC 825-10, which provides companies with an
option to report selected financial assets and liabilities at fair value, and
made an irrevocable election to apply ASC 825-10 to our Credit Facilities and,
prior to their redemption, the 2019 Notes. We elected to use the fair value
option for the Credit Facilities and, prior to their redemption, the 2019 Notes
to align the measurement attributes of both our assets and liabilities while
mitigating volatility in earnings from using different measurement attributes.
Due to that election and in accordance with GAAP, we incurred expenses of zero,
zero and $7.1 million relating to amendment costs on the Credit Facilities
during the years ended September 30, 2021, 2020 and 2019, respectively. ASC
825-10 establishes presentation and disclosure requirements designed to
facilitate comparisons between companies that choose different measurement
attributes for similar types of assets and liabilities and to more easily
understand the effect on earnings of a company's choice to use fair value. ASC
825-10 also requires entities to display the fair value of the selected assets
and liabilities on the face of the Consolidated Statements of Assets and
Liabilities and changes in fair value of the Credit Facilities and, prior to
their redemption, the 2019 Notes are reported in our Consolidated Statements of
Operations. We elect not to apply ASC 825-10 to any other financial assets or
liabilities, including the 2024 Notes, 2026 Notes and SBA debentures.

For the year ended September 30, 2021, the Credit Facility had a net change in
unrealized appreciation of $17.8 million. For the years ended September 30, 2020
and 2019, the Credit Facilities and the 2019 Notes had a net change in
unrealized depreciation of $12.3 million and $5.7 million, respectively. As of
September 30, 2021, the net unrealized depreciation on our Credit Facility
totaled $1.7 million. As of September 30, 2020, the net unrealized depreciation
on our Credit Facilities totaled $19.6 million. We use a nationally recognized
independent valuation service to measure the fair value of our Credit Facilities
and, prior to their redemption, the 2019 Notes in a manner consistent with the
valuation process that the board of directors uses to value our investments.

Revenue Recognition

We record interest income on an accrual basis to the extent that we expect to
collect such amounts. For loans and debt investments with contractual PIK
interest, which represents interest accrued and added to the loan balance that
generally becomes due at maturity, we will generally not accrue PIK interest
when the portfolio company valuation indicates that such PIK interest is not
collectable. We do not accrue as a receivable interest on loans and debt
investments if we have reason to doubt our ability to collect such interest.
Loan origination fees, OID, market discount or premium and deferred financing
costs on liabilities, which we do not fair value, are capitalized and then
accreted or amortized using the effective interest method as interest income or,
in the case of deferred financing costs, as interest expense. We record
prepayment penalties on loans and debt investments as income. Dividend income,
if any, is recognized on an accrual basis on the ex-dividend date to the extent
that we expect to collect such amounts. From time to time, the Company receives
certain fees from portfolio companies, which are non-recurring in nature. Such
fees include loan prepayment penalties, structuring fees and amendment fees, and
are recorded as other investment income when earned.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

We measure realized gains or losses by the difference between the net proceeds
from the repayment or sale and the amortized cost basis of the investment, using
the specific identification method, without regard to unrealized appreciation or
depreciation previously recognized, but considering unamortized upfront fees and
prepayment penalties. Net change in unrealized appreciation or depreciation
reflects the change in the fair values of our portfolio investments, and our
Credit Facilities, including any reversal of previously recorded unrealized
appreciation or depreciation, when gains or losses are realized.

Foreign Currency Translation

Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

1. Fair value of investment securities, other assets and liabilities - at the

exchange rates prevailing at the end of the applicable period; and

2. Purchases and sales of investment securities, income and expenses - at the

exchange rates prevailing on the respective dates of such transactions.

Although net assets and fair values are presented based on the applicable
foreign exchange rates described above, we do not isolate that portion of the
results of operations due to changes in foreign exchange rates on investments,
other assets and debt from the fluctuations arising from changes in fair values
of investments and liabilities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments and liabilities.

Payment-in-Kind, or, PIK Interest

We have investments in our portfolio which contain a PIK interest provision. PIK
interest is added to the principal balance of the investment and is recorded as
income. In order for us to maintain our ability to be subject to tax as a RIC,
substantially all of this income must be paid out to stockholders in the form of
dividends for U.S. federal income tax purposes, even though we may not have
collected any cash with respect to interest on PIK securities.

                                       46

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Federal Income Taxes

We have elected to be treated, and intend to qualify annually to maintain our
election to be treated, as a RIC under Subchapter M of the Code. To maintain our
RIC tax election, we must, among other requirements, meet certain annual
source-of-income and quarterly asset diversification requirements. We also must
annually distribute dividends for U.S. federal income tax purposes to our
stockholders out of the assets legally available for distribution of an amount
generally at least equal to 90% of the sum of our net ordinary income and
realized net short-term capital gains in excess of realized net long-term
capital losses, or investment company taxable income, determined without regard
to any deduction for dividends paid.

Although not required for us to maintain our RIC tax status, in order to
preclude the imposition of a 4% nondeductible U.S. federal excise tax imposed on
RICs, we must distribute dividends for U.S. federal income tax purposes to our
stockholders in respect of each calendar year an amount at least equal to the
sum of (1) 98% of our net ordinary income (subject to certain deferrals and
elections) for the calendar year, (2) 98.2% of the excess, if any, of our
capital gains over our capital losses, or capital gain net income (adjusted for
certain ordinary losses) for the one-year period ending on October 31 of the
calendar year plus (3) the sum of any net ordinary income plus capital gain net
income for preceding years that was not distributed during such years and on
which we did not incur any U.S. federal income tax, or the Excise Tax Avoidance
Requirement. In addition, although we may distribute realized net capital gains
(i.e., net long-term capital gains in excess of net short-term capital losses),
if any, at least annually, out of the assets legally available for such
distributions in the manner described above, we have retained and may continue
to retain such net capital gains or investment company taxable income,
contingent on maintaining our ability to be subject to tax as a RIC, in order to
provide us with additional liquidity.

Because federal income tax regulations differ from GAAP, distributions
characterized in accordance with tax regulations may differ from net investment
income and net realized gain recognized for financial reporting purposes.
Differences between tax regulations and GAAP may be permanent or temporary.
Permanent differences are reclassified among capital accounts in the
Consolidated Financial Statements to reflect their appropriate tax character.
Temporary differences arise when certain items of income, expense, gain or loss
are recognized at some time in the future.

We have formed and expect to continue to form certain taxable subsidiaries,
including the Taxable Subsidiaries, which are subject to tax as corporations.
These taxable subsidiaries allow us to hold equity securities of certain
portfolio companies treated as pass-through entities for U.S. federal income tax
purposes while facilitating our ability to qualify as a RIC under the Code.

RESULTS OF OPERATIONS

Set forth below are the results of operations for the years ended September 30,
2021 and 2020. For information regarding results of operations for the year
ended September 30, 2019, see the Company's Form 10-K for the fiscal year ended
September 30, 2020, as filed with the SEC on November 19, 2020.

Investment Income

Investment income for the year ended September 30, 2021 was $81.6 million and
was attributable to $47.0 million from first lien secured debt, $20.2 million
from second lien secured debt and $7.0 million from subordinated debt and $7.4
from preferred and common equity. The decrease in investment income over the
prior year was primarily due to a decrease in LIBOR and a lower average
investment balance.

Investment income for the year ended September 30, 2020 was $100.2 million and
was attributable to $63.4 million from first lien secured debt, $25.9 million
from second lien secured debt and $8.7 million from subordinated debt and $2.2
from preferred and common equity.

Expenses

Net expenses for the year ended September 30, 2021 totaled $45.1 million. Base
management fee for the same period totaled $17.3 million, incentive fee totaled
$0.6 million, debt related interest and other financing expenses totaled $22.5
million and general and administrative expenses totaled $4.1 million. The
decrease in expenses over the prior year was primarily due to a decrease in debt
related expenses and a decrease in incentive fees.as well as the incentive fee
waiver.

Net expenses for the year ended September 30, 2020 totaled $61.5 million. Base
management fee for the same period totaled $18.6 million, incentive fee totaled
$2.7 million (after a waiver of $1.9 million), debt related interest and other
financing expenses totaled $34.4 million (including one-time costs of $2.2
million associated with the PSLF transaction) and general and administrative
expenses totaled $4.7 million.

Net Investment Income

Net investment income totaled $36.5 million, or $0.54 per share, and $38.7
million, or $0.58 per share, for the years ended September 30, 2021 and 2020,
respectively. The decrease in net investment income per share compared to the
prior year was primarily due to a decrease in LIBOR.

Net Realized Gains or Losses

Sales and repayments of investments for the years ended September 30, 2021 and
2020 totaled $434.5 million and $162.7 million, respectively, and net realized
gain (loss) totaled $30.0 million and ($20.8) million, respectively. The change
in realized gains/losses was primarily due to changes in the market conditions
of our investments and the values at which they were realized, caused by the
fluctuations in the market and in the economy, as discussed above under
"COVID-19 Developments".

Unrealized Appreciation or Depreciation on Investments and Credit Facilities

For the years ended September 30, 2021 and 2020, we reported net change in
unrealized appreciation (depreciation) on investments of $117.9 million and
($46.2) million, respectively. As of September 30, 2021 and 2020, our net
unrealized appreciation (depreciation) on investments totaled $34.2 million and
($83.8) million, respectively. The net change in unrealized
appreciation/depreciation on our investments for the year ended September 30,
2021 compared to the prior year was primarily due to changes in the capital
market conditions of our investments and the values at which they were realized,
caused by the fluctuation in the market and in the economy, as discussed above
under "COVID-19 Developments."

For the years ended September 30, 2021 and 2020, our Credit Facilities had a net
change in unrealized (appreciation) depreciation of $(17.8) million and $12.3
million, respectively. As of September 30, 2021 and 2020, our net unrealized
depreciation on our Credit Facilities totaled $1.7 million and $19.6 million,
respectively. The net change in unrealized depreciation for the year ended
September 30, 2021 compared to the prior year was primarily due to changes in
the capital markets, as further discussed above under "COVID-19 Developments".

Net Change in Net Assets Resulting From Operations

Net change in net assets resulting from operations totaled $166.6 million, or
$2.49 per share, and ($16.0) million, or ($0.24) per share, for the years ended
September 30, 2021 and 2020, respectively. The increase in net assets from
operations for the year ended September 30, 2021 compared to the prior year was
primarily due to appreciation of the portfolio primarily driven by recovery from
the market disruption caused by the COVID-19 pandemic and the uncertainty
surrounding its continued adverse economic impact, as discussed above under
"COVID-19 Developments."

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LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are derived primarily from proceeds of
securities offerings, debt capital and cash flows from operations, including
investment sales and repayments, and income earned. Our primary use of funds
from operations includes investments in portfolio companies and payments of fees
and other operating expenses we incur. We have used, and expect to continue to
use, our debt capital, proceeds from the rotation of our portfolio and proceeds
from public and private offerings of securities to finance our investment
objectives. As of September 30, 2021, in accordance with the 1940 Act, with
certain limited exceptions, we are only allowed to borrow amounts such that we
are in compliance with a 150% asset coverage ratio requirement after such
borrowing, excluding SBA debentures pursuant to exemptive relief from the SEC
received in June 2011. This "Liquidity and Capital Resources" section should be
read in conjunction with the "COVID-19 Developments" section above.

On February 5, 2019, our stockholders approved the application of the modified
asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as
amended by the Consolidated Appropriations Act of 2018 (which includes the
SBCAA) as approved by our board of directors on November 13, 2018. As a result,
the asset coverage requirement applicable to us for senior securities was
reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150%
(i.e., $2 of debt outstanding for each $1 of equity), subject to compliance with
certain disclosure requirements.

As of September 30, 2021 and 2020, our asset coverage ratio, as computed in accordance with the 1940 Act, was 221% and 208%, respectively.

The annualized weighted average cost of debt for the years ended September 30,
2021 and 2020, inclusive of the fee on the undrawn commitment and amendment
costs on the Credit Facilities, amortized upfront fees on SBA debentures and
debt retirement and issuance costs, was 3.5% and 4.0%, respectively.



As of September 30, 2021, we had the multi-currency Truist Credit Facility for
up to $435.0 million (decreased from $475.0 million on May 25, 2021 pursuant to
its terms) in borrowings with certain lenders and Truist Bank (formerly SunTrust
Bank), acting as administrative agent, and JPMorgan Chase Bank, N.A., acting as
syndication agent for the lenders. As of September 30, 2021 and 2020, we had
$316.5 million and $388.3 million, respectively, in outstanding borrowings under
the Truist Credit Facility. The Truist Credit Facility had a weighted average
interest rate of 2.4% and 2.5%, respectively, exclusive of the fee on undrawn
commitments, as of September 30, 2021 and 2020. The Truist Credit Facility is a
revolving facility with a stated maturity date of September 4, 2024, a one-year
term-out period on September 4, 2023 and pricing set at 225 basis points over
LIBOR (or an alternative risk-free floating interest rate index). As of
September 30, 2021 and 2020, we had $118.5 million and $86.7 million of unused
borrowing capacity under the Truist Credit Facility, respectively, subject to
leverage and borrowing base restrictions. The Truist Credit Facility is secured
by substantially all of our assets excluding assets held by SBIC II. As of
September 30, 2021, we were in compliance with the terms of the Truist Credit
Facility.

As of September 30, 2021, we had $86.3 million in aggregate principal amount of
2024 Notes outstanding. Interest on the 2024 Notes is paid quarterly on January
15, April 15, July 15 and October 15, at a rate of 5.5% per year, commencing
January 15, 2020. The 2024 Notes mature on October 15, 2024. The 2024 Notes are
direct unsecured obligations and rank pari passu in right of payment with our
existing and future unsecured unsubordinated indebtedness. The 2024 Notes are
structurally subordinated to all existing and future indebtedness and other
obligations of any of our subsidiaries, financing vehicles, or similar
facilities. The 2024 Notes may be redeemed in whole or in part at our option on
or after October 15, 2021 at a redemption price of 100% of the outstanding
principal amount of the 2024 Notes plus accrued and unpaid interest.

In April 2021, we issued $150.0 million in aggregate principal amount of our
2026 Notes at a public offering price per note of 99.4%. Interest on the 2026
Notes is paid semi-annually on May 1 and November 1 of each year, at a rate of
4.50% per year, commencing November 1, 2021. The 2026 Notes mature on May 1,
2026 and may be redeemed in whole or in part at our option subject to a
make-whole premium if redeemed more than three months prior to maturity. The
2026 Notes are general, unsecured obligations and rank equal in right of payment
with all of our existing and future senior unsecured indebtedness. The 2026
Notes are effectively subordinated to all of our existing and future secured
indebtedness to the extent of the value of the assets securing such indebtedness
and structurally subordinated to all existing and future indebtedness and other
obligations of any of our subsidiaries, financing vehicles, or similar
facilities. We do not intend to list the 2026 Notes on any securities exchange
or automated dealer quotation system.

In September 2014, we issued $250.0 million in aggregate principal amount of
2019 Notes, for net proceeds of $245.5 million after underwriting discounts and
offering costs. Interest on the 2019 Notes was paid semi-annually on April 1 and
October 1, at a rate of 4.5% per year. On March 4, 2019 the 2019 Notes were
redeemed in full and no amounts were outstanding as of September 30, 2021. The
2019 Notes were redeemed on March 4, 2019 at a redemption price equal to
$1,008.65 for each $1,000.00 of principal of notes outstanding, plus accrued and
unpaid interest to March 4, 2019, pursuant to the indenture governing the 2019
Notes. Please refer to our indenture agreement filed as Exhibit (d)(8) to our
post-effective amendment filed on January 22, 2013 and the supplemental
indenture agreement filed as Exhibit (d)(11) to our post-effective amendment
filed on September 23, 2014 for more information.

We may raise additional equity or debt capital through both registered offerings
off our shelf registration statement and private offerings of securities, by
securitizing a portion of our investments or borrowing from the SBA, among other
sources. Any future additional debt capital we incur, to the extent it is
available, may be issued at a higher cost and on less favorable terms and
conditions than our current Credit Facility or SBA debentures. Furthermore, our
Credit Facility availability depends on various covenants and restrictions. The
primary use of existing funds and any funds raised in the future is expected to
be for repayment of indebtedness, investments in portfolio companies, cash
distributions to our stockholders or for other general corporate or strategic
purposes such as our stock repurchase program.

 We have entered into certain contracts under which we have material future
commitments. Under our Investment Management Agreement, which was reapproved by
our board of directors (including a majority of our directors who are not
interested persons of us or the Investment Adviser) in February 2021 PennantPark
Investment Advisers serves as our investment adviser. PennantPark Investment,
through the Investment Adviser, provides similar services to SBIC II under its
investment management agreement with us. SBIC II's investment management
agreement does not affect the management or incentive fees that we pay to the
Investment Adviser on a consolidated basis. Payments under our Investment
Management Agreement in each reporting period are equal to (1) a management fee
equal to a percentage of the value of our average adjusted gross assets and (2)
an incentive fee based on our performance.

Under our Administration Agreement, which was most recently reapproved by our
board of directors, including a majority of our directors who are not interested
persons of us, in February 2021 the Administrator furnishes us with office
facilities and administrative services necessary to conduct our day-to-day
operations. PennantPark Investment, through the Administrator, provides similar
services to SBIC II under its administration agreements, which are intended to
have no effect on the consolidated administration fee. If requested to provide
significant managerial assistance to our portfolio companies, we or the
Administrator will be paid an additional amount based on the services provided.
Payment under our Administration Agreement is based upon our allocable portion
of the Administrator's overhead in performing its obligations under our
Administration Agreement, including rent and our allocable portion of the costs
of our Chief Compliance Officer, Chief Financial Officer and their respective
staffs.

If any of our contractual obligations discussed above are terminated, our costs
under new agreements that we enter into may increase. In addition, we will
likely incur significant time and expense in locating alternative parties to
provide the services we expect to receive under our Investment Management
Agreement and our Administration Agreement. Any new investment management
agreement would also be subject to approval by our stockholders.



On May 9, 2018, we announced a share repurchase program which allowed us to
repurchase up to $30 million of our outstanding common stock in the open market
at prices below our NAV as reported in our then most recently published
consolidated financial statements. The program expired on May 9, 2019. During
the year ended September 30, 2019, we repurchased 2.0 million shares of common
stock, respectively, in open market transactions for an aggregate cost
(including transaction costs) of $14.5 million. From May 9, 2018 through the
program's expiration, we purchased 4.0 million shares of common stock in open
market transactions for an aggregate cost (including transaction costs) of $29.5
million.



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SBIC II is able to borrow funds from the SBA against regulatory capital (which
approximates equity capital) that is paid-in and is subject to customary
regulatory requirements including an examination by the SBA. We have funded SBIC
II with $75.0 million of equity capital and it had SBA debentures outstanding of
$63.5 million as of September 30, 2021. SBA debentures are non-recourse to us
and may be prepaid at any time without penalty. The interest rate of SBA
debentures is fixed at the time of issuance, often referred to as pooling, at a
market-driven spread over 10-year U.S. Treasury Notes. Under current SBA
regulations, a SBIC may individually borrow to a maximum of $175.0 million,
which is up to twice its potential regulatory capital, and as part of a group of
SBICs under common control may borrow a maximum of $350.0 million in the
aggregate.



As of both September 30, 2021 and 2020, SBIC II had an initial $150.0 million in
debt commitments, all of which were drawn. During the years ended September 30,
2021 and 2020, $55.0 million and $31.5 million in SBA debentures were repaid,
respectively. As of September 30, 2021 and 2020, the unamortized fees on the SBA
debentures were $1.3 million and $2.7 million, respectively. The SBA debentures'
upfront fees of 3.4% consist of a commitment fee of 1.0% and an issuance
discount of 2.4%, which are being amortized.

Our fixed-rate SBA debentures were as follows:

                                                     Fixed All-in Coupon      As of September 30, 2021
       Issuance Dates               Maturity              Rate (1)                Principal Balance
September 20, 2017              September 1, 2027                     2.9 %                  27,500,000
March 21, 2018                  March 1, 2028                         3.5                    36,000,000
Weighted Average Rate / Total                                         3.3 %   $              63,500,000

                                                     Fixed All-in Coupon      As of September 30, 2020
       Issuance Dates               Maturity              Rate (1)                Principal Balance
March 23, 2016                  March 1, 2026                         2.9 %                  22,500,000
September 21, 2016              September 1, 2026                     2.4                    10,000,000
September 20, 2017              September 1, 2027                     2.9                    27,500,000
March 21, 2018                  March 1, 2028                         3.5                    58,500,000
Weighted Average Rate / Total                                         3.2 %   $             118,500,000

(1) Excluding 3.4% of upfront fees.

The SBIC program is designed to stimulate the flow of capital into eligible
businesses. Under SBA regulations, SBIC II is subject to regulatory
requirements, including making investments in SBA eligible businesses, investing
at least 25% of regulatory capital in eligible smaller businesses, as defined
under the 1958 Act, placing certain limitations on the financing terms of
investments, prohibiting investment in certain industries and requiring
capitalization thresholds that limit distributions to us, and are subject to
periodic audits and examinations of their financial statements that are prepared
on a basis of accounting other than GAAP (for example, fair value, as defined
under ASC 820, is not required to be used for assets or liabilities for such
compliance reporting). As of September 30, 2021, SBIC II was in compliance with
their regulatory requirements.



In accordance with the 1940 Act, with certain limited exceptions, PennantPark
Investment is only allowed to borrow amounts such that our required 150% asset
coverage ratio is met after such borrowing. As of September 30, 2021 and 2020,
we excluded the principal amounts of our SBA debentures from our asset coverage
ratio pursuant to SEC exemptive relief. In 2011, we received exemptive relief
from the SEC allowing us to modify the asset coverage ratio requirement to
exclude the SBA debentures from the calculation. Accordingly, our ratio of total
assets on a consolidated basis to outstanding indebtedness may be less than 150%
which, while providing increased investment flexibility, also increases our
exposure to risks associated with leverage.

As of September 30, 2021 and 2020, we had cash and cash equivalents of $20.4
million and $25.8 million, respectively, available for investing and general
corporate purposes. We believe our liquidity and capital resources are
sufficient to take advantage of market opportunities.

Our operating activities provided cash of $7.9 million for the year ended
September 30, 2021, and our financing activities used cash of $(13.4) million
for the same period. Our operating activities used cash primarily for our
investment activities and our financing activities provided cash primarily for
net repayments under our Credit Facilities and the repayment of the SBA
debentures.

Our operating activities used cash of $129.6 million for the year ended
September 30, 2020, and our financing activities provided cash of $95.8 million
for the same period. Our operating activities used cash primarily for our
investment activities and our financing activities provided cash primarily for
net borrowings under our Credit Facilities.

For more information regarding our borrowing arrangements, see "Business-Leverage" above.

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Senior Securities



Information about our senior securities is shown in the following table as of
September 30, 2021, 2020, 2019, 2018, 2017, 2016, 2015, 2014, 2013 and 2012. The
report of RSM US LLP, an independent registered public accounting firm, on the
Senior Securities table as of September 30, 2021, is attached as an exhibit to
this Report.



                                                                           Average
                            Total Amount          Asset Coverage        Market Value
 Class and Year            Outstanding (1)       Per Unit (2), (3)        Per Unit
 Truist Credit Facility
 Fiscal 2021              $         316,545     $             2,208               N/A
 Fiscal 2020                        388,252                   2,078               N/A
 Fiscal 2019                        301,636                   2,066               N/A
 Fiscal 2018                         80,520                   2,919               N/A
 Fiscal 2017                         79,393                   2,998               N/A
 Fiscal 2016                         50,340                   2,794               N/A
 Fiscal 2015                        136,864                   2,586               N/A
 Fiscal 2014                         55,226                   3,215               N/A
 Fiscal 2013                        145,500                   4,205               N/A
 Fiscal 2012                        145,000                   5,615               N/A
 BNP Credit Facility
 Fiscal 2019                        171,000                   2,066               N/A
 2019 Notes
 Fiscal 2018                        250,000                   2,919               N/A
 Fiscal 2017                        250,000                   2,998               N/A
 Fiscal 2016                        250,000                   2,794               N/A
 Fiscal 2015                        250,000                   2,586               N/A
 Fiscal 2014                        250,000                   3,215               N/A
 2024 Notes
 Fiscal 2021                         86,250                   2,208     $       25.14   (4)
 Fiscal 2020                         86,250                   2,078             23.47   (4)
 Fiscal 2019                         75,000                   2,066             24.87   (4)
 2025 Notes
 Fiscal 2016                         71,250                   2,794             24.68   (5)
 Fiscal 2015                         71,250                   2,586             25.13   (5)
 Fiscal 2014                         71,250                   3,215             24.51   (5)
 Fiscal 2013                         71,250                   4,205             24.79   (5)
 2026 Notes
 Fiscal 2021                        150,000                   2,208               N/A   (5)

(1) Total cost of each class of senior securities outstanding at the end of the

    period presented in thousands (000s).

(2) The asset coverage ratio for a class of senior securities representing

indebtedness is calculated as our consolidated total assets, less all

liabilities and indebtedness not represented by senior securities, divided by

senior securities representing indebtedness at par. This asset coverage ratio

is multiplied by $1,000 to determine the Asset Coverage Per Unit. (3) These amounts exclude SBA debentures from our total amount outstanding and

asset coverage per unit computation pursuant to an exemptive relief letter

provided by the SEC in June 2011. (4) The average market value per unit is derived based on the daily closing price

of the 2024 Notes trading on The Nasdaq Global Select Market under the symbol

"PNNTG." The 2024 Notes were issued in increments of $25 per unit and

commenced trading on September 30, 2019. (5) The average market value per unit is derived based on the monthly average

closing price of the 2025 Notes, which were traded on the New York Stock

Exchange, or NYSE, under the symbol "PNTA" since issuance. The 2025 Notes

were issued in increments of $25 per unit. On June 29, 2017, the 2025 Notes

    were redeemed in full.

PennantPark Senior Loan Fund, LLC

In July 2020, we and Pantheon formed PSLF, an unconsolidated joint venture. PSLF
invests primarily in middle-market and other corporate debt securities
consistent with our strategy. PSLF was formed as a Delaware limited liability
company. As of September 30, 2021 and 2020 PSLF had total assets of $417.4
million and $361.8 million, respectively. PSLF's portfolio consisted of debt
investments in 47 and 37 portfolio companies as of September 30, 2021 and 2020,
respectively. As of September 30, 2021, at fair value, the largest investment in
a single portfolio company in PSLF was $16.8 million and the five largest
investments totaled $74.4 million. As of September 30, 2020, at fair value, the
largest investment in a single portfolio company in PSLF was $18.4 million and
the five largest investments totaled $77.9 million. PSLF invests in portfolio
companies in the same industries in which we may directly invest.

We provide capital to PSLF in the form of subordinated notes and equity
interests. As of September 30, 2021 and 2020 we and Pantheon owned 60.5% and
39.5%, and 72.0% and 28.0%, respectively, of each of the outstanding
subordinated notes and equity interests of PSLF. As of September 30, 2021 and
2020 , our investment in PSLF consisted of subordinated notes of $64.2 million
and equity interests of $41.2 million and $63.0 million and equity interests of
$36.3 million, respectively.

We and Pantheon each appointed two members to PSLF's four-person Member
Designees' Committee (the "Member Designees' Committee"). All material decisions
with respect to PSLF, including those involving its investment portfolio,
require unanimous approval of a quorum of the Member Designees' Committee.
Quorum is defined as (i) the presence of two members of the Member Designees'
Committee; provided that at least one individual is present that was elected,
designated or appointed by each of us and Pantheon; (ii) the presence of three
members of Member Designees' Committee, provided that the individual that was
elected, designated or appointed us or Pantheon, as the case may be, with only
one individual present shall be entitled to cast two votes on each matter; and
(iii) the presence of four members of the Member Designees' Committee shall
constitute a quorum, provided that two individuals are present that were
elected, designated or appointed by each of us and Pantheon.



Additionally, PSLF, through its wholly-owned subsidiary, or PSLF Subsidiary, has
entered into a $275.0 million (increased from $250.0 million on November 6,
2020) senior secured revolving credit facility which bears interest at LIBOR (or
an alternative risk-free interest rate index) plus 260 basis points, or the PSLF
Credit Facility, with BNP Paribas, subject to leverage and borrowing base
restrictions.



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Below is a summary of PSLF's portfolio at fair value:

                                                       September 30, 2021       September 30, 2020
Total investments                                     $        405,232,480     $        353,366,358
Weighted average yield on debt investments                             7.1 %                    7.3 %
Number of portfolio companies in PSLF                                   47                       37
Largest portfolio company investment                  $         16,816,670     $         18,411,916
Total of five largest portfolio company investments   $         74,444,646     $         77,896,431




Below is a listing of PSLF's individual investments as of September 30, 2021:



                                                                                       Basis Point
                                                                         Current      Spread Above
Issuer Name                      Maturity           Industry             Coupon         Index (1)            Par              Cost          Fair Value (2)
First Lien Secured Debt -
570.7%
Ad.net Acquisition, LLC          05/06/26             Media               7.00%        3M L + 600       $   4,987,500     $   4,919,652     $     4,912,688
Altamira Technologies, LLC       07/24/25     Aerospace and Defense       8.00%         3M L+700              921,231           911,674             863,654
American Insulated Glass, LLC    12/21/23      Building Materials         6.50%         3M L+550           14,625,244        14,480,504          14,478,992
Any Hour Services                07/21/27      Personal, Food and
                                             Miscellaneous Services       6.75%         1M L+525            6,500,000         6,378,125           6,370,000
Apex Service Partners, LLC       07/31/25      Personal, Food and
                                             Miscellaneous Services       6.25%         1M L+550            6,569,222         6,517,624           6,503,530
Apex Service Partners, LLC       07/31/25      Personal, Food and
Term Loan B                                  Miscellaneous Services       6.55%                -            3,346,690         3,313,038           3,313,223
Applied Technical Services,      12/29/26
LLC                                          Environmental Services       6.75%         3M L+575            7,443,750         7,335,875           7,294,875
Bottom Line Systems, LLC         02/13/23   Healthcare, Education and
                                                    Childcare             6.25%         1M L+550           13,729,432        13,673,678          13,729,432
Crash Champions, LLC             08/05/25          Auto Sector            6.00%         1M L+525            5,985,000         5,873,298           5,865,300
DRS Holdings III, Inc.           11/03/25       Consumer Products         7.25%         1M L+625           13,428,053        13,335,008          13,334,057
ECL Entertainment, LLC           03/31/28   Hotels, Motels, Inns and
                                                     Gaming               8.25%         3M L+750            4,603,846         4,559,898           4,707,433
ECM Industries, LLC              12/23/25          Electronics            5.50%         3M L+450            2,826,993         2,804,979           2,770,453
Global Holdings InterCo LLC      03/16/26       Banking, Finance,                                                             7,360,276           7,425,188
                                             Insurance & Real Estate      7.00%         3M L+600            7,462,500
Hancock Roofing and              12/31/26                                                                                     5,819,284           5,895,450
Construction L.L.C.                                 Insurance             6.00%         3M L+500            5,955,000
Holdco Sands Intermediate, LLC   12/19/25     Aerospace and Defense       7.50%         3M L+600           12,070,714        11,934,092          12,010,361
HW Holdco, LLC                   12/10/24             Media               5.50%         3M L+450           14,587,500        14,499,086          14,441,625
IMIA Holdings, Inc.              04/09/27     Aerospace and Defense       6.75%         3M L+600            9,059,429         8,889,612           8,878,241
Integrity Marketing              08/27/25
Acquisition, LLC                                    Insurance             6.50%         3M L+550            7,868,080         7,803,025           7,828,740
Juniper Landscaping of           12/22/21      Personal, Food and
Florida, LLC                                 Miscellaneous Services       6.50%         3M L+550            9,420,290         9,420,290           9,420,290

K2 Pure Solutions NoCal, L.P. 12/20/23 Chemicals, Plastics and

                                                     Rubber               8.00%         1M L+700           14,587,500        14,478,841          14,199,473
LAV Gear Holdings, Inc.          10/31/24      Leisure, Amusement,
                                                Motion Pictures,
                                                  Entertainment           8.50%         3M L+750            2,119,558         2,106,623           1,986,661
Lightspeed Buyer Inc.            02/03/26   Healthcare, Education and
                                                    Childcare             6.75%         1M L+550           12,471,593        12,273,343          12,471,593
Lombart Brothers, Inc.           04/13/23   Healthcare, Education and
                                                    Childcare             7.25%         1M L+825           16,816,670        16,728,518          16,816,670
MAG DS Corp.                     04/01/27     Aerospace and Defense       6.50%         1M L+550            5,836,801         5,581,189           5,253,121
Mars Acquisition Holdings        05/14/26
Corp.                                                 Media               6.50%         1M L+575            8,000,000         7,851,584           7,920,000
MBS Holdings, Inc.               04/16/27      Telecommunications         6.75%         3M L+550            7,481,250         7,337,946           7,331,625
MeritDirect, LLC                 05/23/24             Media               6.50%         3M L+550           13,386,132        13,271,890          13,252,270
PlayPower, Inc.                  05/08/26       Consumer Products         5.65%         3M L+575            3,805,440         3,777,669           3,735,687
Radius Aerospace, Inc.           03/31/25     Aerospace and Defense       6.75%         3M L+600           13,334,912        13,201,809          13,068,214
Rancho Health MSO, Inc.          12/18/25   Healthcare, Education and                                                         5,140,072           5,231,625
                                                    Childcare             6.75%         3M L+550            5,231,625
Recteq, LLC                      01/29/26       Consumer Products         7.00%         3M L+450            9,950,000         9,774,928           9,850,500
Research Now Group, LLC and      12/20/24                                                                                    14,601,817          14,507,887
Dynata, LLC                                     Business Services         6.50%         3M L+600           14,694,656
Riverpoint Medical, LLC          06/20/25   Healthcare, Education and                                                         3,216,526           3,205,984
                                                    Childcare             5.50%         1M L+550            3,245,909
Sales Benchmark Index LLC        01/03/25       Business Services         7.75%         3M L+750            7,632,493         7,526,205           7,441,681
Sargent & Greenleaf Inc.         12/20/24          Electronics            7.00%         3M L+575            5,232,159         5,180,794           5,232,159
Signature Systems Holding        05/03/24    Chemicals, Plastics and                                                         13,396,987          13,365,000
Company                                              Rubber               8.50%         1M L+525           13,500,000
Solutionreach, Inc.              01/17/24        Communications           6.75%         1M L+600           11,881,773        11,758,141          11,881,773
STV Group Incorporated           12/11/26        Transportation           5.33%         1M L+450           12,098,653        12,002,839          12,038,160
TAC LifePort Purchaser, LLC      03/01/26     Aerospace and Defense       7.00%         1M L+525            4,967,133         4,891,093           4,965,530
TeleGuam Holdings, LLC           11/20/25      Telecommunications         5.50%         3M L+525            4,593,270         4,557,883           4,547,337
Teneo Holdings LLC               07/18/25      Financial Services         6.25%         1M L+575            2,996,753         2,883,779           2,980,511
TPC Canada Parent, Inc. and      11/24/25
TPC US Parent, LLC                                    Food                6.25%         1M L+625            5,593,148         5,537,216           5,425,353
TVC Enterprises, LLC             03/26/26        Transportation           6.75%         3M L+550           12,773,152        12,642,764          12,773,152
TWS Acquisition Corporation      06/16/25           Education             7.25%         3M L+450            9,647,753         9,514,502           9,647,753
Tyto Athene, LLC                 04/03/28     Aerospace and Defense       6.25%         1M L+675            9,950,000         9,853,217           9,950,000
UBEO, LLC                        04/03/24    Printing and Publishing      5.50%         1M L+500            4,710,212         4,676,033           4,686,661
Vision Purchaser Corporation     06/10/25             Media               7.75%                            14,248,804        14,055,791          14,035,072
Wildcat Buyerco, Inc.            02/27/26          Electronics            6.00%                             7,424,623         7,360,375           7,387,500

Total First Lien Secured Debt                                                                             409,602,447       405,009,393         405,232,480
Cash and Cash
Equivalents-18.9%
BlackRock Federal FD
Institutional 30                                                                                                             11,013,454          11,013,454
US Bank Cash
Total Cash and Cash
Equivalents                                                                                                                  11,013,454          11,013,454
Total Investments and Cash
Equivalents-592.7%                                                                                                        $ 416,022,848     $   416,245,935
Liabilities in Excess of Other
Assets-(492.7)%                                                                                                                                (348,213,498 )
Members' Equity-100.0%                                                                                                                      $    68,032,437

(1) Represents floating rate instruments that accrue interest at a predetermined

spread relative to an index, typically the applicable LIBOR or "L" or Prime

rate or "P". The spread may change based on the type of rate used. The terms

in the Schedule of Investments disclose the actual interest rate in effect as

    of the reporting period. LIBOR loans are typically indexed to a 30-day,
    60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L,
    respectively), at the borrower's option. All securities are subject to a
    LIBOR or Prime rate floor where a spread is provided, unless noted. The
    spread provided includes PIK interest and other fee rates, if any.

(2) Valued based on PSLF's accounting policy.

                                       51

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Below is a listing of PSLF's individual investments as of: September 30, 2020



                                                                                         Basis Point
                                                                            Current      Spread Above
Issuer Name                       Maturity             Industry             Coupon        Index (1)         Par              Cost          Fair Value (2)
First Lien Secured Debt-701.6%
Advantage Sales & Marketing      07/23/2021            Grocery                  4.25 %       1M L+325      8,627,315     $   8,418,699     $     8,456,926
Altamira Technologies, LLC       07/24/2025     Aerospace and Defense           7.00 %       3M L+600      971,231           958,950               937,238

American Insulated Glass, LLC 12/21/2023 Building Materials

    6.50 %       3M L+550     14,775,105        14,571,097          14,479,603
                                 07/31/2025       Personal, Food and
Apex Service Partners, LLC                      Miscellaneous Services          6.25 %       1M L+525      6,607,449         6,546,594           6,409,225
Bazaarvoice, Inc.                02/01/2024    Printing and Publishing          6.75 %       1M L+575     14,628,085        14,509,210          14,408,664
Bottom Line Systems, LLC         02/13/2023   Healthcare, Education and
                                                      Childcare                 6.25 %       1M L+550     15,000,000        14,895,515          14,683,499
Cano Health, LLC                 06/02/2025   Healthcare, Education and
                                                      Childcare                 8.50 %       1M L+750     18,274,854        18,174,687          18,411,916
Datalot Inc.                     01/24/2025           Insurance                 6.25 %       3M L+525      7,116,895         6,991,975           7,125,435
DRS Holdings III, Inc.           11/03/2025       Consumer Products             6.75 %       1M L+575     13,564,726        13,448,313          13,316,490
ECM Industries, LLC              12/23/2025          Electronics           

5.50 % 1M L+450 2,873,184 2,846,226 2,858,818 Holdco Sands Intermediate, LLC 12/19/2025 Aerospace and Defense

    7.50 %       3M L+600     12,193,571        12,028,384          11,888,732
HW Holdco, LLC                   12/10/2024             Media                   5.50 %       3M L+450     14,737,500        14,619,623          14,295,375
Integrity Marketing              08/27/2025
Acquisition, LLC                                      Insurance                 6.50 %       3M L+550        447,833           444,755             443,354
                                               Chemicals, Plastics and
K2 Pure Solutions NoCal, L.P.    12/20/2023             Rubber                  8.00 %       1M L+700     14,737,500        14,583,983          14,413,275
Kentucky Downs, LLC              03/07/2025    Hotels, Motels, Inns and
                                                        Gaming                  9.50 %       1M L+850     10,153,350         9,978,792          10,001,050
                                              Leisure, Amusement, Motion
LAV Gear Holdings, Inc.          10/31/2024    Pictures, Entertainment          8.50 %       3M L+750      2,015,428         1,998,623           1,856,411
                                 02/03/2026   Healthcare, Education and
Lightspeed Buyer Inc.                                 Childcare                 6.25 %       1M L+525     12,598,209        12,365,207          12,440,731
Lombart Brothers, Inc.           04/13/2023   Healthcare, Education and
                                                      Childcare                 7.25 %       1M L+625     16,914,403        16,770,520          15,882,625
MAG DS Corp.                     04/01/2027     Aerospace and Defense           6.50 %       1M L+550      6,000,000         5,700,000           5,707,500
MeritDirect, LLC                 05/23/2024             Media                   6.50 %       3M L+550     14,076,563        13,914,921          13,407,926
PlayPower, Inc.                  05/08/2026       Consumer Products             5.72 %       3M L+550      4,025,520         3,990,631           3,824,244
Radius Aerospace, Inc.           03/31/2025     Aerospace and Defense           6.75 %       3M L+575     13,779,429        13,608,176          13,503,840
Research Now Group, Inc. and
Survey

Sampling International LLC 12/20/2024 Business Services

    6.50 %       3M L+550     14,847,328        14,728,854          14,023,302
Riverpoint Medical, LLC                       Healthcare, Education and                                                      1,958,417           1,905,678
                                 06/20/2025           Childcare                 5.50 %       3M L+450      1,975,000
Sales Benchmark Index LLC        01/03/2025       Business Services             7.75 %       3M L+600      7,887,195         7,748,712           7,697,903
Sargent & Greenleaf Inc.         12/20/2024          Electronics                7.00 %       1M L+550      5,448,483         5,378,893           5,350,411
Signature Systems Holding                      Chemicals, Plastics and
Company                          05/03/2024             Rubber                  7.50 %       3M L+650     14,250,000        14,096,623          13,786,875
Solutionreach, Inc.              01/17/2024         Communications              6.75 %       3M L+575     12,531,123        12,351,398          12,393,282
STV Group Incorporated           12/11/2026         Transportation              5.40 %       1M L+525     12,351,980        12,238,771          12,228,460
TeleGuam Holdings, LLC           11/20/2025       Telecommunications            5.50 %       1M L+450      5,080,832         5,034,725           4,928,407
Teneo Holdings LLC               07/18/2025       Financial Services       

6.25 % 1M L+525 1,980,000 1,874,970 1,905,750 TPC Canada Parent, Inc. and

                                                 5,593,575
TPC US Parent, LLC               11/24/2025              Food                   6.25 %       3M L+525      5,650,076                             5,480,573
TVC Enterprises, LLC             01/18/2024         Transportation         

6.50 % 1M L+550 14,547,897 14,343,185 14,438,788 TWS Acquisition Corporation 06/16/2025

           Education                 7.25 %       1M L+625      8,644,186         8,469,082           8,471,302
UBEO, LLC                        04/03/2024    Printing and Publishing     

5.50 % 3M L+450 4,738,102 4,700,032 4,453,816 Vision Purchaser Corporation 06/10/2025

             Media               

7.25 % 1M L+625 14,358,203 14,112,113 13,496,711 Whitney, Bradley & Brown, Inc. 10/18/2022 Aerospace and Defense

8.50 % 1M L+750 14,194,162 14,029,177 14,052,223 Total First Lien Secured Debt

                                               358,023,408         353,366,358
Cash and Cash
Equivalents-26.9%
BlackRock Federal FD
Institutional 30                                                                                                             7,353,307           7,353,307
US Bank Cash                                                                                                                   183,412             183,412
Total Cash and Cash
Equivalents                                                                                                                  7,536,719           7,536,719
Total Investments and Cash
Equivalents-1,141.9%                                                                                                     $ 365,560,127     $   360,903,077
Liabilities in Excess of Other
Assets-(1,041.9)%                                                                                                                             (310,538,386 )
Members' Equity-100.0%                                                                                                                     $    50,364,691

(1) Represents floating rate instruments that accrue interest at a predetermined

spread relative to an index, typically the applicable LIBOR, or "L" or Prime

rate or "P". The spread may change based on the type of rate used. The terms

in the Schedule of Investments disclose the actual interest rate in effect as

    of the reporting period. LIBOR loans are typically indexed to a 30-day,
    60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L,
    respectively), at the borrower's option. All securities are subject to a
    LIBOR or Prime rate floor where a spread is provided, unless noted. The
    spread provided includes PIK interest and other fee rates, if any.

(2) Valued based on PSLF's accounting policy.

                                       52

--------------------------------------------------------------------------------

Below is the financial information for PSLF:

                         Statements of Assets and Liabilities
                                                      September 30,      September 30,
                                                           2021               2020
Assets
Investments (cost-$405,009,393 and $358,023,408,
respectively)                                         $  405,232,480     $  

353,366,358

Cash and cash equivalents (cost-$11,013,454 and
$7,536,719, respectively)                                 11,013,454          7,536,719
Interest receivable                                        1,175,230            877,008
Total assets                                             417,421,164        361,780,085
Liabilities
Distribution payable                                       2,800,000          1,393,716
Payable for investments purchased                         12,792,969          5,700,000
Credit facility payable                                  224,000,000        213,500,000
Notes payable to members                                 106,040,612         87,500,000
Interest payable on credit facility                        1,499,406        

1,649,852

Interest payable on members notes                          1,643,629          1,356,250
Accrued other expenses                                       612,111            315,576
Total liabilities                                        349,388,727        311,415,394
Commitments and contingencies (1)                                  -        

-

Members' equity                                           68,032,437        

50,364,691

Total liabilities and members' equity                 $  417,421,164     $  361,780,085

(1) For the years ended of September 30, 2021 and 2020, PSLF did not have any

    unfunded commitments to fund investments.




                                Statements of Operations (1)
                                                             Period Ended       Period Ended
                                                            September 30,      September 30,
                                                                 2021               2020
Investment income:
Interest                                                    $   27,489,180     $    4,504,788
Other income                                                     1,802,790              2,444
Total investment income                                         29,291,970          4,507,232
Expenses:
Interest and expenses on credit facility                         6,283,544  

1,039,327

Interest expense on members notes                                9,532,516  

1,356,250

Administrative services expenses                                 1,171,860  

195,310

Other general and administrative expenses (2)                      446,588            120,266
Total expenses                                                  17,434,508          2,711,153
Net investment income                                           11,857,462          1,796,079
Realized and unrealized gain on investments:
Net realized gain on investments                                   544,547  

254,653

Net change in unrealized appreciation on investments             4,880,137  

2,173,436

Net realized and unrealized gain from investments                5,424,684  

2,428,089

Net increase in members' equity resulting from operations $ 17,282,146

   $    4,224,168

(1) PSLF commenced operations on July 31, 2020.

(2) No management or incentive fees are payable by PSLF.

Recent Developments



Subsequent to September 30, 2021, we entered into an underwriting agreement, or
the Underwriting Agreement, dated October 14, 2021, by and among the Company,
the Investment Adviser, the Administrator and Raymond James & Associates, Inc.,
Keefe, Bruyette & Woods, Inc. and Truist Securities, Inc., as representatives of
the several underwriters named on Schedule A to the Underwriting Agreement, in
connection with the issuance and sale of $165.0 million aggregate principal
amount of our 4.0% Notes due 2026, or the 2026-2 Notes. On October 21, 2021, we
closed the transaction and issued $165.0 million in aggregate principal amount
of our 2026-2 Notes at a public offering price per note of 99.436%. Interest on
the 2026-2 Notes is paid semi-annually on May 1 and November 1 of each year, at
a rate of 4.0% per year, commencing May 1, 2022. The 2026-2 Notes mature on
November 1, 2026 and may be redeemed in whole or in part at our option subject
to a make-whole premium if redeemed more than three months prior to maturity.
The 2026-2 Notes are general, unsecured obligations and rank equal in right of
payment with all of our existing and future senior unsecured indebtedness. The
2026-2 Notes are effectively subordinated to all of our existing and future
secured indebtedness to the extent of the value of the assets securing such
indebtedness and structurally subordinated to all existing and future
indebtedness and other obligations of any of our subsidiaries, financing
vehicles, or similar facilities. We do not intend to list the 2026-2 Notes on
any securities exchange or automated dealer quotation system.



On October 14, 2021, we announced that we will redeem $86,250,000 in principal
amount of the 2024 Notes in full on November 13, 2021. We redeemed in full the
2024 Notes with a principal amount of $86.3 million on November 13, 2021. The
2024 Notes were redeemed at a redemption price of $25 per 2024 Note, plus
accrued and unpaid interest payments otherwise payable for the then-current
quarterly interest period accrued to, but excluding, November 13, 2021.

Subsequent to quarter end, PNNT had new funded investment of $97.8 million, net of sales and repayments.

Distributions

In order to be treated as a RIC for federal income tax purposes and to not be
subject to corporate-level tax on undistributed income or gains, we are
required, under Subchapter M of the Code, to annually distribute dividends for
U.S. federal income tax purposes to our stockholders out of the assets legally
available for distribution of an amount generally at least equal to 90% of our
investment company taxable income, determined without regard to any deduction
for dividends paid.

                                       53

--------------------------------------------------------------------------------


Although not required for us to maintain our RIC tax status, in order to
preclude the imposition of a 4% nondeductible federal excise tax imposed on
RICs, we must distribute dividends for U.S. federal income tax purposes to our
stockholders in respect of each calendar year an amount at least equal to the
Excise Tax Avoidance Requirement. In addition, although we may distribute
realized net capital gains (i.e., net long-term capital gains in excess of net
short-term capital losses), if any, at least annually, out of the assets legally
available for such distributions in the manner described above, we have retained
and may continue to retain such net capital gains or investment company taxable
income, contingent on our ability to be subject to tax as a RIC, in order to
provide us with additional liquidity.

During the years ended September 30, 2021 and 2020, we declared distributions of
$0.48 per share and $0.60 per share, respectively, for total distributions of
$32.2 million and $40.2 million. We monitor available net investment income to
determine if a return of capital for tax purposes may occur for the fiscal year.
To the extent our taxable earnings fall below the total amount of our
distributions for any given fiscal year, stockholders will be notified of the
portion of those distributions deemed to be a tax return of capital. Tax
characteristics of all distributions will be reported to stockholders subject to
information reporting on Form 1099-DIV after the end of each calendar year and
in our periodic reports filed with the SEC.

We intend to continue to make quarterly distributions to our stockholders. Our quarterly distributions, if any, are determined by our board of directors.

We maintain an "opt out" dividend reinvestment plan for our common stockholders.
As a result, if we declare a distribution, then stockholders' cash distributions
will be automatically reinvested in additional shares of our common stock,
unless they specifically "opt out" of the dividend reinvestment plan so as to
receive cash distributions.

We may not be able to achieve operating results that will allow us to make
distributions at a specific level or to increase the amount of these
distributions from time to time. In addition, we may be limited in our ability
to make distributions due to the asset coverage ratio for borrowings applicable
to us as a BDC under the 1940 Act and/or due to provisions in future credit
facilities. If we do not distribute at least a certain percentage of our income
annually, we could suffer adverse tax consequences, including possible loss of
our ability to be subject to tax as a RIC. We cannot assure stockholders that
they will receive any distributions at a particular level.

Recent Accounting Pronouncements

In March 2020, the FASB issued Accounting Standards Update No. 2020-04,
"Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting." The guidance provides optional expedients
and exceptions for applying GAAP to contract modifications, hedging
relationships and other transactions, subject to meeting certain criteria, that
reference LIBOR or another reference rate expected to be discontinued because of
the reference rate reform. ASU 2020-04 is effective for all entities as of March
12, 2020 through December 31, 2022. The Company is evaluating the potential
impact that the adoption of this guidance will have on the Company's financial
statements.

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