PROSPECT CAPITAL CORPORATION

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PROSPECT CAPITAL CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/09/2022 | 05:16pm EDT

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


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

Overview

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


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

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

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

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

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

We currently have four primary strategies that guide our origination of
investment opportunities: (1) lending to companies, including companies
controlled by private equity sponsors and not controlled by private equity
sponsors, and including both directly-originated loans and syndicated loans, (2)
lending to companies and purchasing controlling equity positions in such
companies, including both operating companies and financial services companies,
(3) purchasing controlling equity positions and lending to real estate
companies, and (4) investing in structured credit. We may also invest in other
strategies and opportunities from time to time that we view as attractive. We
continue to evaluate other origination strategies in the ordinary course of
business with no specific top-down allocation to any single origination
strategy.

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

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

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

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

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

We hold many of our control investments in a two-tier structure consisting of a
holding company and one or more related operating companies for tax purposes.
These holding companies serve various business purposes including concentration
of management teams, optimization of third-party borrowing costs, improvement of
supplier, customer, and insurance terms, and enhancement of co-investments by
the management teams. In these cases, our investment, which is generally equity
in the holding company, the holding company's equity investment in the operating
company and any debt from us directly to the operating company structure
represents our total exposure for the investment. As of March 31, 2022, as shown
in our Consolidated Schedule of Investments, the cost basis and fair value of
our investments in controlled companies was $2,588,661 and $3,378,505,
respectively. This structure gives rise to several of the risks described in our
public documents and highlighted elsewhere in this Quarterly Report. We
consolidate all wholly owned and substantially wholly owned holding companies
formed by us for the purpose of holding our controlled investments in operating
companies. There is no significant effect of consolidating these holding
companies as they hold minimal assets other than their investments in the
controlled operating companies. Investment company accounting prohibits the
consolidation of any operating companies.

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

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On March 14, 2022, we filed a notice of meeting and the definitive proxy
statement in connection with a special meeting of our stockholders that is
scheduled to be held on June 10, 2022 for the purpose of asking our stockholders
to vote on a proposal to authorize us, with approval of our Board of Directors,
to sell shares of our common stock at a price or prices below our then current
net asset value per share in one or more offerings during the next 12 months
following such approval, subject to certain conditions.

Third Quarter Highlights

Investment Transactions


We seek to be a long-term investor with our portfolio companies. During the
three months ended March 31, 2022, we acquired $187,393 of new investments,
completed follow-on investments in existing portfolio companies totaling
approximately $351,117, and recorded PIK interest of $26,317, resulting in gross
investment originations of $564,827. During the three months ended March 31,
2022, we received full repayments totaling $96,824, received $4,451 in sales,
received $1,552 of revolver paydowns, and received $81,734 in partial
prepayments, scheduled principal amortization payments, and return of capital
distributions, resulting in net repayments of $184,561.

Debt Issuances and Redemptions


During the three months ended March 31, 2022, we repaid $266 aggregate principal
amount of Prospect Capital InterNotes® at par in accordance with the Survivor's
Option, as defined in the InterNotes® Offering prospectus. In order to replace
short maturity debt with longer-term debt, we redeemed $35,084 aggregate
principal amount of Prospect Capital InterNotes® at par with a weighted average
interest rate of 6.38%. As a result of these transactions, we recorded a loss in
the amount of the unamortized debt issuance costs. The net loss on the
extinguishment of Prospect Capital InterNotes® in the three months ended March
31, 2022 was $941.

During the three months ended March 31, 2022, we issued $35,587 aggregate
principal amount of Prospect Capital InterNotes® with a weighted average stated
interest rate of 4.03%, to extend our borrowing base. The newly issued notes
mature between February 15, 2025 and March 15, 2052 and generated net proceeds
of $34,999.

During the three months ended March 31, 2022, we increased total commitments to the Revolving Credit Facility by $202,500 to $1,500,000 in the aggregate.

Equity Issuances


On January 20, 2022, February 17, 2022, and March 22, 2022, we issued 357,288,
378,344, and 384,588 shares of our common stock in connection with the dividend
reinvestment plan, respectively.

During the three months ended March 31, 2022, 2,600 shares of our Series A1 Preferred Stock and 2,000 shares of our Series M1 Preferred Stock were converted to 13,661 shares of our common stock, in connection with Holder Optional Conversions and Optional Redemptions Following Death of a Holder.


During the three months ended March 31, 2022, we issued 4,641,270 shares of our
Series A1 Preferred Stock and 862,920 shares of our Series M1 Preferred Stock
for net proceeds of $125,355, each excluding offering costs and preferred stock
dividend reinvestment.

On January 1, 2022, February 1, 2022, and March 1, 2022, we issued 876, 1,672,
and 1,721 shares of our Series A1 and M1 Preferred Stock in connection with the
dividend reinvestment plan, respectively.

On March 14, 2022, we filed a notice of meeting and the definitive proxy
statement in connection with a special meeting of our stockholders that is
scheduled to be held on June 10, 2022 for the purpose of asking our stockholders
to vote on a proposal to authorize us, with approval of our Board of Directors,
to sell shares of our common stock at a price or prices below our then current
net asset value per share in one or more offerings during the next 12 months
following such approval, subject to certain conditions.

Investment Holdings

At March 31, 2022, we have $7,429,931, or 175.4%, of our net assets applicable to common shares invested in 127 long-term portfolio investments and CLOs.

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Our annualized current yield was 10.6% and 11.7% as of March 31, 2022 and June
30, 2021, respectively, across all performing interest bearing investments,
excluding equity investments and non-accrual loans. Our annualized current yield
was 8.1% and 9.2% as of March 31, 2022 and June 30, 2021, respectively, across
all investments. In many of our portfolio companies we hold equity positions,
ranging from minority interests to majority stakes, which we expect over time to
contribute to our investment returns. Some of these equity positions include
features such as contractual minimum internal rates of returns, preferred
distributions, flip structures and other features expected to generate
additional investment returns, as well as contractual protections and
preferences over junior equity, in addition to the yield and security offered by
our cash flow and collateral debt protections.

We are a non-diversified company within the meaning of the 1940 Act. As required
by the 1940 Act, we classify our investments by level of control. As defined in
the 1940 Act, "Control Investments" are those where there is the ability or
power to exercise a controlling influence over the management or policies of a
company. Control is generally deemed to exist when a company or individual
possesses or has the right to acquire within 60 days or less, a beneficial
ownership of 25% or more of the voting securities of an investee company. Under
the 1940 Act, "Affiliate Investments" are defined by a lesser degree of
influence and are deemed to exist through the possession outright or via the
right to acquire within 60 days or less, beneficial ownership of 5% or more of
the outstanding voting securities of another person. "Non-Control/Non-Affiliate
Investments" are those that are neither Control Investments nor Affiliate
Investments.

As of March 31, 2022, we own controlling interests in the following portfolio
companies: CP Energy Services Inc. ("CP Energy"); Credit Central Loan Company,
LLC ("Credit Central"); Echelon Transportation, LLC ("Echelon"); First Tower
Finance Company LLC ("First Tower Finance"); Freedom Marine Solutions, LLC
("Freedom Marine"); InterDent, Inc. ("InterDent"); Kickapoo Ranch Pet Resort
("Kickapoo"); MITY, Inc. ("MITY"); NPRC; Nationwide Loan Company LLC
("Nationwide"); NMMB, Inc. ("NMMB"); Pacific World Corporation ("Pacific
World"); R-V Industries, Inc. ("R-V"); Universal Turbine Parts, LLC ("UTP");
USES Corp. ("United States Environmental Services" or "USES"); and Valley
Electric Company, Inc. ("Valley Electric"). In June 2019, CP Energy purchased a
controlling interest of the common equity of Spartan Energy Holdings, Inc.
("Spartan Holdings"), which owns 100% of Spartan Energy Services, LLC
("Spartan"), a portfolio company of Prospect with $26,258 in senior secured term
loans (the "Spartan Term Loan A") due to us as of March 31, 2022. As a result of
CP Energy's purchase, and given Prospect's controlling interest in CP Energy, we
report our investments in Spartan as control investment. Spartan remains the
direct borrow and guarantor to Prospect for the Spartan Term Loan A.

As of March 31, 2022, we also own affiliated interests in Nixon, Inc. ("Nixon"), PGX Holdings, Inc. ("PGX"), RGIS Services, LLC, ("RGIS"), and Targus Cayman HoldCo Limited ("Targus").

The following shows the composition of our investment portfolio by level of control as of March 31, 2022 and June 30, 2021:


                                                                                        March 31, 2022                                                                       June 30, 2021
                    Level of Control                          Cost          % of Portfolio        Fair Value       % of Portfolio                 Cost  

% of Portfolio Fair Value % of Portfolio Control Investments

                                      $ 2,588,661                    37.6  % $ 3,378,505                    45.5  %       $ 2,482,431                    41.0  % $ 2,919,717                    47.1  %
Affiliate Investments                                        237,845                     3.5  %     417,652                     5.6  %           202,943                     3.3  %     356,734                     5.8  %
Non-Control/Non-Affiliate Investments                      4,061,431                    58.9  %   3,633,774                    48.9  %         3,372,750                    55.7  %   2,925,327                    47.1  %
Total Investments                                        $ 6,887,937                   100.0  % $ 7,429,931                   100.0  %       $ 6,058,124                   100.0  % $ 6,201,778                   100.0  %


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The following shows the composition of our investment portfolio by type of investment as of March 31, 2022 and June 30, 2021:

                                                                 March 31, 2022                                                                   June 

30, 2021

        Type of Investment               Cost         % of Portfolio       Fair Value      % of Portfolio                Cost         % of Portfolio       Fair Value      % of Portfolio
First Lien Revolving Line of Credit $    36,235                   0.5  % $    36,214                   0.5  %       $    27,522                   0.5  % $    27,503                   0.4  %
First Lien Debt                       3,629,580                  52.7  %   3,561,170                  47.9  %         3,166,861                  52.2  %   3,128,845                  50.4  %
1.5 Lien Debt                                 -                     -  %           -                     -  %            18,164                   0.3  %      18,164                   0.3  %

Second Lien Debt                      1,480,241                  21.5  %   1,373,240                  18.5  %         1,047,653                  17.3  %     959,311                  15.5  %
Third Lien Debt                               -                     -  %           -                     -  %             3,950                   0.1  %       3,950                   0.1  %
Unsecured Debt                            7,200                   0.1  %       5,719                   0.1  %             7,200                   0.1  %       3,715                   0.1  %
Subordinated Structured Notes         1,016,280                  14.8  %     728,833                   9.8  %         1,090,175                  18.0  %     756,109                  12.2  %
Preferred Stock                         345,602                   5.0  %      62,826                   0.8  %           308,713                   5.1  %      23,056                   0.4  %
Common Stock                            192,573                   2.8  %   1,223,201                  16.5  %           207,661                   3.4  %     894,819                  14.4  %
Membership Interest                     180,226                   2.6  %     373,551                   5.0  %           180,225                   3.0  %     349,942                   5.6  %
Participating Interest                        -                     -  %      65,177                   0.9  %                 -                     -  %      36,364                   0.6  %
Total Investments                   $ 6,887,937                 100.0  % $ 7,429,931                 100.0  %       $ 6,058,124                 100.0  % $ 6,201,778                 100.0  %


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

The following shows our investments in interest bearing securities by type of investment as of March 31, 2022 and June 30, 2021:


                                                               March 31, 2022                                                                   June 

30, 2021

       Type of Investment              Cost         % of Portfolio       Fair Value      % of Portfolio                Cost         % of Portfolio       Fair Value      % of Portfolio
First Lien                        $ 3,665,815                  59.4  % $ 3,597,384                  63.1  %       $ 3,194,383                  59.7  % $ 3,156,348                  64.4  %
1.5 Lien                                    -                     -  %           -                     -  %            18,164                   0.3  %      18,164                   0.4  %
Second Lien                         1,480,241                  24.0  %   1,373,240                  24.1  %         1,047,653                  19.5  %     959,311                  19.6  %
Third Lien                                  -                     -  %           -                     -  %             3,950                   0.1  %       3,950                   0.1  %
Unsecured                               7,200                   0.1  %       5,719                   0.1  %             7,200                   0.1  %       3,715                   0.1  %
Subordinated Structured Notes       1,016,280                  16.5  %     728,833                  12.7  %         1,090,175                  20.3  %     756,109                  15.4  %
Total Interest Bearing
Investments                       $ 6,169,536                 100.0  % $ 5,705,176                 100.0  %       $ 5,361,525                 100.0  % $ 4,897,597                 100.0  %



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The following shows the composition of our investment portfolio by industry as of March 31, 2022 and June 30, 2021:

                                                                         March 31, 2022                                                                   June 30, 2021
                 Industry                        Cost         % of Portfolio       Fair Value      % of Portfolio                Cost         % of Portfolio       Fair Value      % of Portfolio
Aerospace & Defense                         $   108,790                   1.6  % $    67,959                   0.9  %       $    98,144                   1.6  % $    84,240                   1.4  %
Air Freight & Logistics                         125,566                   1.8  %     125,566                   1.7  %            12,500                   0.2  %      12,500                   0.2  %
Auto Components                                  95,334                   1.4  %      87,682                   1.2  %            75,323                   1.2  %      76,520                   1.2  %
Building Products                                35,000                   0.5  %      35,000                   0.5  %                 -                     -  %           -                     -  %
Capital Markets                                  42,500                   0.6  %      42,500                   0.6  %                 -                     -  %           -                     -  %
Chemicals                                             -                     -  %           -                     -  %            28,745                   0.5  %      28,863                   0.5  %
Commercial Services & Supplies                  397,655                   5.8  %     336,179                   4.5  %           257,617                   4.3  %     196,117                   3.3  %
Communications Equipment                         59,763                   0.9  %      59,496                   0.8  %            59,709                   1.0  %      58,881                   0.9  %
Construction & Engineering                       67,618                   1.0  %     148,367                   2.0  %            69,935                   1.2  %     149,695                   2.4  %
Consumer Finance                                559,699                   8.1  %     822,754                  11.1  %           531,844                   8.8  %     771,601                  12.4  %
Distributors                                    275,634                   4.0  %     177,819                   2.4  %           272,672                   4.5  %     175,768                   2.8  %
Diversified Consumer Services                   246,126                   3.6  %     389,013                   5.2  %           211,193                   3.5  %     339,633                   5.5  %
Diversified Financial Services                   36,971                   0.5  %      36,971                   0.5  %            30,165                   0.5  %      30,165                   0.5  %
Diversified Telecommunication Services          147,233                   2.1  %     148,270                   2.0  %            66,333                   1.1  %      67,448                   1.1  %
Energy Equipment & Services                     291,730                   4.2  %     130,399                   1.8  %           277,227                   4.6  %      83,204                   1.3  %
Entertainment                                    21,857                   0.3  %      22,093                   0.3  %            40,585                   0.7  %      40,928                   0.7  %
Equity Real Estate Investment Trusts
(REITs)                                         574,116                   8.3  %   1,358,696                  18.2  %           656,911                  10.8  %   1,092,955                  17.7  %
Food Products                                   130,959                   1.9  %     128,983                   1.7  %            61,409                   1.0  %      61,948                   1.0  %
Health Care Equipment & Supplies                  7,482                   0.1  %       6,900                   0.1  %             7,478                   0.1  %       6,721                   0.1  %
Health Care Providers & Services                637,437                   9.3  %     733,779                   9.9  %           583,369                   9.6  %     714,107                  11.5  %
Health Care Technology                           64,838                   0.9  %      64,838                   0.9  %                 -                     -  %           -                     -  %
Hotels, Restaurants & Leisure                    23,514                   0.3  %      23,119                   0.3  %            24,502                   0.4  %      23,624                   0.4  %
Household Durables                              118,712                   1.7  %     119,650                   1.6  %            12,913                   0.2  %      15,403                   0.2  %
Household Products                               20,999                   0.3  %      20,999                   0.3  %            21,186                   0.3  %      21,186                   0.3  %
Insurance                                        21,952                   0.3  %      22,280                   0.3  %            21,911                   0.4  %      22,280                   0.4  %
Interactive Media & Services                    242,681                   3.5  %     242,681                   3.3  %           180,127                   3.0  %     180,127                   2.9  %
Internet & Direct Marketing Retail               59,695                   0.9  %      59,298                   0.8  %            54,677                   0.9  %      56,114                   0.9  %
IT Services                                     286,711                   4.2  %     286,667                   3.9  %           260,899                   4.3  %     261,718                   4.3  %
Leisure Products                                 44,869                   0.7  %      44,705                   0.6  %            20,242                   0.3  %      20,287                   0.3  %
Machinery                                       109,065                   1.6  %     127,878                   1.7  %            97,853                   1.6  %     111,682                   1.8  %
Media                                           108,551                   1.6  %     132,239                   1.8  %           105,958                   1.7  %     107,819                   1.7  %
Online Lending                                   29,080                   0.4  %      29,080                   0.4  %             6,600                   0.1  %       6,600                   0.1  %
Paper & Forest Products                          11,454                   0.2  %       9,457                   0.1  %            15,847                   0.3  %      15,815                   0.3  %
Personal Products                               259,108                   3.8  %      56,787                   0.8  %           249,245                   4.1  %      71,097                   1.1  %
Professional Services                           111,955                   1.6  %     111,368                   1.5  %           132,015                   2.2  %     132,058                   2.1  %

Software                                         52,281                   0.8  %      52,500                   0.7  %            22,240                   0.4  %      22,500                   0.4  %
Technology Hardware, Storage & Peripherals       12,443                   0.2  %      12,500                   0.2  %            12,431                   0.2  %      12,500                   0.2  %
Textiles, Apparel & Luxury Goods                226,255                   3.3  %     260,059                   3.5  %           202,312                   3.3  %     225,359                   3.6  %
Trading Companies & Distributors                 65,224                   0.9  %      25,767                   0.3  %            65,248                   1.1  %      27,106                   0.4  %
Transportation Infrastructure                         -                     -  %           -                     -  %            30,384                   0.5  %      30,900                   0.5  %
Subtotal                                    $ 5,730,857                  83.2  % $ 6,560,298                  88.4  %       $ 4,877,749                  80.5  % $ 5,355,469                  86.4  %
Structured Finance(1)                       $ 1,157,080                  16.8  % $   869,633                  11.6  %       $ 1,180,375                  19.5  % $   846,309                  13.6  %
Total Investments                           $ 6,887,937                 100.0  % $ 7,429,931                 100.0  %       $ 6,058,124                 100.0  % $ 6,201,778                 100.0  %

(1) Our SSN investments do not have industry concentrations and as such have been separated in the tables above. As of March 31, 2022 and June 30, 2021, Structured Finance includes $140,800 and $90,200, respectively, of senior secured debt investments held through our investment in NPRC and its wholly-owned subsidiary.

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Portfolio Investment Activity


Our origination efforts are focused primarily on secured lending to non-control
investments to reduce the risk in the portfolio by investing primarily in first
lien loans, though we also continue to close select junior debt and equity
investments. For information regarding investment activity for the nine months
ended March 31, 2022 and March 31, 2021 are presented below:

                                                                   Nine 

months ended March 31,

                                                                 2022                        2021
Investments made in new portfolio companies             $          997,817           $         459,277
Follow-on investments made in existing portfolio
companies (1)                                                      777,022                     259,111
Revolver advances                                                    9,000                       4,000
PIK interest (2)                                                    61,030                      58,750
Total acquisitions                                      $        1,844,869           $         781,138

Acquisitions by portfolio composition
First Lien Debt                                         $        1,021,834           $         575,545
Second Lien Debt                                                   796,351                     176,780
Subordinated Structured Notes                                        9,518                           -
Unsecured Debt                                                           -                       2,620
Equity                                                              17,166                      26,193
Total acquisitions by portfolio composition             $        1,844,869           $         781,138

Investments sold                                        $            4,451           $               -
Partial repayments (3)                                             401,201                     148,951
Full repayments                                                    545,333                     513,636
Revolver paydowns                                                    1,636                       3,291
Total dispositions                                      $          952,621           $         665,878

Dispositions by portfolio composition
First Lien Debt                                         $          592,601           $         364,083
1.5 Lien Debt                                                       18,164                           -
Second Lien Debt                                                   300,292                     249,421
Third Lien Debt                                                      3,950                           -
Unsecured Debt                                                           -                      53,738
Subordinated Structured Notes                                        9,406                           -
Equity                                                              28,208                      (1,364)
Total dispositions by portfolio composition             $          952,621  

$ 665,878


Weighted average interest rates for new investments by
portfolio composition (4)
First Lien Debt                                                       8.30   %                    9.32  %
Second Lien Debt                                                      9.54   %                    9.41  %

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


(2) During the nine months ended March 31, 2022, approximately $56,824 of PIK
interest capitalized was accrued as interest income and the remaining $4,206 is
included due to the timing of interest payment dates and resulting
capitalization occurring in the current year. During the nine months ended March
31, 2021, approximately $53,729 of PIK interest capitalized was accrued as
interest income and the remaining $5,021 was included due to the timing of
interest payment dates and resulting capitalization occurring during the prior
year.

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

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

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Investment Valuation


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

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

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

The Board of Directors looked at several factors in determining where within the
range to value the asset including: recent operating and financial trends for
the asset, independent ratings obtained from third parties, comparable multiples
for recent sales of companies within the industry and discounted cash flow
models for our investments in CLOs. The composite of all these various valuation
techniques, applied to each investment, was a total valuation of $7,429,931.

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

Impact of the novel coronavirus (the "COVID-19") pandemic


As of March 31, 2022, there remains to be global uncertainty surrounding the
COVID-19 pandemic, which has caused severe disruptions in the global economy and
has negatively impacted the fair value and performance of certain investments
since the pandemic began. For the three months ended March 31, 2022, the
aggregate increases in fair value and net unrealized depreciation on investments
were driven by the expansion of comparable company trading multiples and/or
tightened credit spreads as the level of market volatility generated by the
COVID-19 pandemic declined over the three month period. For certain investments
in our portfolio, the valuations continue to reflect factors such as specific
industry concerns, uncertainty about the duration of business shutdowns and
near-term liquidity needs.
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Control Company Investments


Control investments offer increased risk and reward over straight debt
investments. Operating results and changes in market multiples can result in
dramatic changes in values from quarter to quarter. Significant downturns in
operations can further result in our looking to recoveries on sales of assets
rather than the enterprise value of the investment. Equity positions in our
portfolio are susceptible to potentially significant changes in value, both
increases as well as decreases, due to changes in operating results and market
multiples. Our controlled companies discussed below experienced such changes and
we recorded corresponding fluctuations in valuations during the nine months
ended March 31, 2022.

CP Energy Services, Inc.


Prospect owns 100% of the equity of CP Holdings, a Consolidated Holding Company.
CP Holdings owns 99.8% of the equity of CP Energy, and the remaining equity is
owned by CP Energy management. CP Energy provides oilfield flowback services and
fluid hauling and disposal services through its subsidiaries.

In June 2019, CP Energy purchased a controlling interest in the common equity of
Spartan Energy Holdings, Inc. ("Spartan Holdings"), which owns 100% of Spartan
Energy Services, LLC ("Spartan") a portfolio company of Prospect with $26,258 in
first lien term loans (the "Spartan Term Loans") due to us as of March 31, 2022.
As a result of CP Energy's purchase, and given Prospect's controlling interest
in CP Energy, our Spartan Term Loans are presented as control investments under
CP Energy beginning June 30, 2019. Spartan remains the direct borrow and
guarantor to Prospect for the Spartan Term Loans.

The fair value of our investment in CP Energy increased to $118,461 as of March
31, 2022, which is a discount of $128,777 from its amortized cost, compared to a
fair value of $71,487 as of June 30, 2021, representing a discount of $161,249
to its amortized cost. The decrease in discount to amortized cost resulted from
improved performance and increased activity in the oil and gas industry

Echelon Transportation, LLC

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


The fair value of our investment in Echelon decreased to $67,959 as of March 31,
2022, representing a discount of $40,831 to its amortized cost basis, compared
to a fair value of $84,240 as of June 30, 2021, representing a discount of
$13,904 to its amortized cost basis. The increase in discount to amortized cost
resulted from lower aircraft residual values.

First Tower Finance Company LLC


Prospect owns 100% of the equity of First Tower Delaware, a consolidated holding
company. First Tower Delaware owns 80.03% of First Tower Finance. First Tower
Finance owns 100% of First Tower, LLC ("First Tower"), a multiline specialty
finance company.

The fair value of our investment in First Tower increased to $645,156 as of
March 31, 2022, representing a premium of $265,526 to its amortized cost basis
compared to a fair value of $592,356 as of June 30, 2021, a premium of $236,502
to its amortized cost. The increase in premium to amortized cost was driven by
strong financial performance.

InterDent, Inc.


During the year ended June 30, 2018, Prospect exercised its rights and remedies
under its loan documents to exercise the shareholder voting rights in respect of
the stock of InterDent and to appoint a new Board of Directors of InterDent, all
the members of which are our Investment Adviser's professionals. As a result,
Prospect's investment in InterDent is classified as a control investment.
InterDent is a dental support organization ("DSO"). InterDent provides business
and administrative support services to a regionally-diversified set of dental
practices so that dentists can focus on delivering high-quality clinical care
and patient satisfaction.

The fair value of our investment in InterDent decreased to $409,757 as of March
31, 2022, a premium of $95,973 to its amortized cost basis compared to a fair
value of $412,339 as of June 30, 2021, a premium of $129,650 to its amortized
cost. The decrease in premium to amortized cost was driven by a decline in
financial performance.

National Property REIT Corp.


NPRC is a Maryland corporation and a qualified REIT for federal income tax
purposes. NPRC is held for purposes of investing, operating, financing, leasing,
managing and selling a portfolio of real estate assets and engages in any and
all other activities that may be necessary, incidental, or convenient to perform
the foregoing. NPRC acquires real estate assets, including, but not

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limited to, industrial, commercial, and multi-family properties, self-storage,
and student housing properties. NPRC may acquire real estate assets directly or
through joint ventures by making a majority equity investment in a
property-owning entity. Additionally, through its wholly owned subsidiaries,
NPRC invests in online consumer loans and RSSNs. As of March 31, 2022, we own
100% of the fully-diluted common equity of NPRC.

During the nine months ended March 31, 2022, we received partial repayments of
$289,882 of our loans previously outstanding with NPRC and provided $268,547 of
debt financing and $11,620 of equity financing to NPRC for the acqusition of
real estate properties, to fund capital expenditures for existing real estate
properties, to provide working capital, to fund purchases of rated secured
structured notes, and to support the purchase of high yield corporate debt.

The online consumer loan investments held by certain of NPRC's wholly owned
subsidiaries are unsecured obligations of individual borrowers that are issued
in amounts ranging from $1 to $50, with fixed terms ranging from 36 to 84
months. As of March 31, 2022, the outstanding investment in online consumer
loans by certain of NPRC's wholly-owned subsidiaries was comprised of 626
individual loans, residual interest in four securitizations, and one high yield
corporate bond, and had an aggregate fair value of $40,279. The average
outstanding individual loan balance is approximately $4 and the loans mature on
dates ranging from April 1, 2022 to April 19, 2025 with a weighted-average
outstanding term of 14 months as of March 31, 2022. Fixed interest rates range
from 6.0% to 36.0% with a weighted-average current interest rate of 20.0%. As of
March 31, 2022, our investment in NPRC and its wholly-owned subsidiaries
relating to online consumer lending had a fair value of $29,080.

As of March 31, 2022, based on outstanding principal balance, 24.1% of the
portfolio was invested in super prime loans (borrowers with a Fair Isaac
Corporation ("FICO") score, of 720 or greater), 38.5% of the portfolio in prime
loans (borrowers with a FICO score of 660 to 719) and 37.5% of the portfolio in
near prime loans (borrowers with a FICO score of 580 to 659, a portion of which
are considered sub-prime).

                               Outstanding Principal                                                                    Weighted Average
       Loan Type                      Balance                Fair Value              Interest Rate Range                 Interest Rate*
Super Prime                   $                545          $      539                   8.0% - 20.5%                        12.4%
Prime                                          871                 841                   6.0% - 25.0%                        18.3%
Near Prime                                     848                 854                  17.0% - 36.0%                        26.7%

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


The rated secured structured note investments held by certain of NPRC's wholly
owned subsidiaries are subordinated debt interests in broadly syndicated loans
managed by established collateral management teams with many years of experience
in the industry. As of March 31, 2022, the outstanding investment in rated
secured structured notes by certain of NPRC's wholly owned subsidiaries was
comprised of 58 investments with a fair value of $303,060 and face value of
$315,813. The average outstanding note is approximately $5,445 with an expected
maturity date ranging from April 2026 to January 2032 and weighted-average
expected maturity of 7 years as of March 31, 2022. Coupons range from
three-month LIBOR ("3ML") plus 5.31% to 9.45% with a weighted-average coupon of
3ML + 7.1%. As of March 31, 2022, our investment in NPRC and its wholly-owned
subsidiaries relating to rated secured structured notes had a fair value of
$140,800.

As of March 31, 2022, based on outstanding notional balance, 17.8% of the portfolio was invested in Single - B rated tranches and 82.2% of the portfolio in BB rated tranches.


As of March 31, 2022, our investment in NPRC and its wholly-owned subsidiaries
had an amortized cost of $743,996 and a fair value of $1,528,576, including our
investment in online consumer lending and rated secured structured notes as
discussed above. The fair value of $1,358,696 related to NPRC's real estate
portfolio was comprised of forty-seven multi-family properties, eight student
housing properties and three commercial properties. The following table shows
the location, acquisition date, purchase price, and mortgage outstanding due to
other parties for each of the properties held by NPRC as of March 31, 2022

                                                                                                                                           Mortgage
No.          Property Name                        City                              Acquisition Date           Purchase Price            Outstanding
1            Filet of Chicken                     Forest Park, GA                            10/24/2012       $        7,400          $             -
2            Arlington Park Marietta, LLC         Marietta, GA                                 5/8/2013               14,850                   13,494
3            Taco Bell, OK                        Yukon, OK                                    6/4/2014                1,719                        -
4            Taco Bell, MO                        Marshall, MO                                 6/4/2014                1,405                        -
5            Abbie Lakes OH Partners, LLC         Canal Winchester, OH                        9/30/2014               12,600                   15,144
6            Kengary Way OH Partners, LLC         Reynoldsburg, OH                            9/30/2014               11,500                   15,310
             Lakeview Trail OH Partners,
7            LLC                                  Canal Winchester, OH                        9/30/2014               26,500                   29,207


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                                                                                                                                             Mortgage
No.          Property Name                          City                               Acquisition Date            Purchase Price           Outstanding
8            Lakepoint OH Partners, LLC             Pickerington, OH                             9/30/2014                11,000                16,620
9            Sunbury OH Partners, LLC               Columbus, OH                                 9/30/2014                13,000                16,852
10           Heatherbridge OH Partners, LLC         Blacklick, OH                                9/30/2014                18,416                24,093
11           Jefferson Chase OH Partners, LLC       Blacklick, OH                                9/30/2014                13,551                18,749
12           Goldenstrand OH Partners, LLC          Hilliard, OH                                10/29/2014                 7,810                11,431
13           SSIL I, LLC                            Aurora, IL                                   11/5/2015                34,500                25,488
14           Vesper Tuscaloosa, LLC                 Tuscaloosa, AL                               9/28/2016                54,500                42,748
15           Vesper Iowa City, LLC                  Iowa City, IA                                9/28/2016                32,750                24,654
16           Vesper Corpus Christi, LLC             Corpus Christi, TX                           9/28/2016                14,250                10,726
17           Vesper Campus Quarters, LLC            Corpus Christi, TX                           9/28/2016                18,350                14,077
18           Vesper College Station, LLC            College Station, TX                          9/28/2016                41,500                31,837
19           Vesper Kennesaw, LLC                   Kennesaw, GA                                 9/28/2016                57,900                50,704
20           Vesper Statesboro, LLC                 Statesboro, GA                               9/28/2016                 7,500                 7,480
21           Vesper Manhattan KS, LLC               Manhattan, KS                                9/28/2016                23,250                14,679
22           9220 Old Lantern Way, LLC              Laurel, MD                                   1/30/2017               187,250               153,580
             7915 Baymeadows Circle Owner,
23           LLC                                    Jacksonville, FL                            10/31/2017                95,700                76,560
             8025 Baymeadows Circle Owner,
24           LLC                                    Jacksonville, FL                            10/31/2017                15,300                12,240
25           23275 Riverside Drive Owner, LLC       Southfield, MI                               11/8/2017                52,000                54,591
26           23741 Pond Road Owner, LLC             Southfield, MI                               11/8/2017                16,500                18,934
27           150 Steeplechase Way Owner, LLC        Largo, MD                                    1/10/2018                44,500                36,668
28           Olentangy Commons Owner LLC            Columbus, OH                                  6/1/2018               113,000                92,876
             Villages of Wildwood Holdings
29           LLC                                    Fairfield, OH                                7/20/2018                46,500                39,525
30           Falling Creek Holdings LLC             Richmond, VA                                  8/8/2018                25,000                25,374
31           Crown Pointe Passthrough LLC           Danbury, CT                                  8/30/2018               108,500                89,400
32           Lorring Owner LLC                      Forestville, MD                             10/30/2018                58,521                47,680
33           Hamptons Apartments Owner, LLC         Beachwood, OH                                 1/9/2019                96,500                79,520
34           5224 Long Road Holdings, LLC           Orlando, FL                                  6/28/2019                26,500                21,200
35           Druid Hills Holdings LLC               Atlanta, GA                                  7/30/2019                96,000                79,104
36           Bel Canto NPRC Parcstone LLC           Fayetteville, NC                            10/15/2019                45,000                42,793
37           Bel Canto NPRC Stone Ridge LLC         Fayetteville, NC                            10/15/2019                21,900                21,545
38           Sterling Place Holdings LLC            Columbus, OH                                10/28/2019                41,500                34,196
39           SPCP Hampton LLC                       Dallas, TX                                   11/2/2020                36,000                27,590
40           Palmetto Creek Holdings LLC            North Charleston, SC                        11/10/2020                33,182                25,865
41           Valora at Homewood Holdings LLC        Homewood, AL                                11/19/2020                81,250                63,844
42           NPRC Fairburn LLC                      Fairburn, GA                                12/14/2020                52,140                43,900
43           NPRC Grayson LLC                       Grayson, GA                                 12/14/2020                47,860                40,500
44           NPRC Taylors LLC                       Taylors, SC                                  1/27/2021                18,762                14,075
             Parkside at Laurel West Owner
45           LLC                                    Spartanburg, SC                              2/26/2021                57,005                42,025
46           Willows at North End Owner LLC         Spartanburg, SC                              2/26/2021                23,255                19,000
47           SPCP Edge CL Owner LLC                 Webster, TX                                  3/12/2021                34,000                25,496
48           Jackson Pear Orchard LLC               Ridgeland, MS                                6/28/2021                50,900                38,175
49           Jackson Lakeshore Landing LLC          Ridgeland, MS                                6/28/2021                22,600                16,950
50           Jackson Reflection Pointe LLC          Flowood, MS                                  6/28/2021                45,100                31,050
51           Jackson Crosswinds LLC                 Pearl, MS                                    6/28/2021                41,400                33,825
52           Elliot Apartments Norcross, LLC        Norcross, GA                                11/30/2021               128,000                98,800
             Orlando 442 Owner, LLC (West Vue
53           Apartments)                            Orlando, FL                                 12/30/2021                97,500                73,000
54           NPRC Wolfchase LLC                     Memphis, TN                                  3/18/2022                82,100                60,000
55           NPRC Twin Oaks LLC                     Hattiesburg. MS                              3/18/2022                44,850                33,830
56           NPRC Lancaster LLC                     Birmingham, AL                               3/18/2022                37,550                28,350
57           NPRC Rutland LLC                       Macon, GA                                    3/18/2022                29,750                22,500
             Southport Owner LLC (Southport
58           Crossing)                              Indianapolis, IN                             3/29/2022                48,100                36,075

                                                                                                                 $     2,525,726          $  2,083,929


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The fair value of our investment in NPRC increased to $1,528,576 as of March 31,
2022, a premium of $784,580 from its amortized cost basis compared to a fair
value of $1,189,755 as of June 30, 2021, representing a premium of $436,044. The
increase in premium is primarily driven by compression of capitalization rates
and, to a lesser extent, growth in net operating income in our real estate
portfolio.

NMMB, Inc.


Prospect owns 100% of the equity of NMMB Holdings, Inc. ("NMMB Holdings"), a
Consolidated Holding Company. NMMB Holdings owns 90.42% and 94.82% of the
fully-diluted equity of NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) ("NMMB") as of
March 31, 2022 and June 30, 2021, respectively, with NMMB management owning the
remaining equity. NMMB owns 100% of Refuel Agency, Inc. ("Refuel Agency").
Refuel Agency owns 100% of Armed Forces Communications, Inc. ("Armed Forces").
NMMB is an advertising media buying business.

The fair value of our investment in NMMB increased to $80,268 as of March 31,
2022, representing a premium of $50,508 to its amortized cost basis, compared to
a fair value of $46,888 as of June 30, 2021, representing a premium of $29,145
to its amortized cost basis. The increase to the premium was driven by strong
financial performance.

Pacific World Corporation

On May 29, 2018, Prospect exercised its rights and remedies under its loan
documents to exercise the shareholder voting rights in respect of the stock of
Pacific World Corporation ("Pacific World") and to appoint a new Board of
Directors of Pacific World. As a result, as of June 30, 2018, Prospect's
investment in Pacific World is classified as a control investment. Pacific World
supplies nail and beauty care products to food, drug, mass, and value retail
channels worldwide.

The fair value of our investment in Pacific World decreased to $56,787 as of
March 31, 2022, representing a discount of $202,321 to its amortized cost basis,
compared to a fair value of $71,097 as of June 30, 2021, representing discount
of $178,148 to its amortized cost. The increase in discount to amortized cost
resulted from a decline in financial performance.

Our controlled investments, including those discussed above, are valued at $789,844 above their amortized cost as of March 31, 2022.

Affiliate and Non-Control Company Investments


We hold four affiliate investments at March 31, 2022 (PGX Holdings, Inc.
("Progrexion"), Nixon, Inc., RGIS Services, LLC, ("RGIS"), and Targus Cayman
HoldCo Limited ("Targus")) with a total fair value of $417,652, a premium of
$179,807 from their combined amortized cost as of March 31, 2022, compared to a
fair value of $356,734 as of June 30, 2021, representing a $153,791 premium to
its amortized cost. The increase in premium is primarily driven by our
investment in Progrexion, which is valued at a premium of $141,123 at March 31,
2022 compared to a premium of $126,933 as of June 30, 2021. The increase in
Progrexion's premium to amortized cost was driven by strong financial
performance.

With the non-control/non-affiliate investments, generally, there is less
volatility related to our total investments because our equity positions tend to
be smaller than with our control/affiliate investments, and debt investments are
generally not as susceptible to large swings in value as equity investments. For
debt investments, the fair value is generally limited on the high side to each
loan's par value, plus any prepayment premium that could be imposed. However, as
of March 31, 2022, two of our non-control/ non-affiliate investments, Engine
Group, Inc. ("Engine") and USC are valued at discounts to amortized cost of
$26,820 and $97,446, respectively. As of March 31, 2022, our CLO investment
portfolio is valued at a $287,447 discount to amortized cost. Excluding Engine,
USC, and the CLO investment portfolio, the fair value of our
non-control/non-affiliate investments at March 31, 2022 are valued at $15,944
below their amortized cost and did not experience significant changes in
operating performance or value.

Our largest non-control/non-affiliate investment is PeopleConnect Holdings, LLC
("PeopleConnect"), which has a fair value equal to its amortized cost basis of
$242,681 and represents approximately 5.7% of our Net Asset Value as of March
31, 2022. PeopleConnect is an online information commerce company.

Capitalization


Our investment activities are capital intensive and the availability and cost of
capital is a critical component of our business. We capitalize our business with
a combination of debt and equity. Our debt as of March 31, 2022 consists of: a
Revolving Credit Facility availing us of the ability to borrow debt subject to
borrowing base determinations; Convertible Notes which we issued in April 2017
(with a follow-on issuance in May 2018) and March 2019; Public Notes which we
issued in March 2013, October 2018, January 2021, May 2021 and September 2021;
and Prospect Capital InterNotes® which we issue from time to time. As of March
31, 2022, our equity capital is comprised of common and preferred equity.

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The following table shows our outstanding debt as of March 31, 2022:

                                                         Unamortized
                                  Principal            Discount & Debt          Net Carrying                                     Effective Interest
                                 Outstanding           Issuance Costs               Value                Fair Value(1)                  Rate
Revolving Credit Facility(2)   $    699,440          $         11,504          $    699,440      (3)   $      699,440                      1ML+2.05%   (6)

2022 Notes                           60,501                       121                60,380                    60,751      (4)               5.63  %   (7)
2025 Notes                          156,168                     2,673               153,495                   167,009      (4)               6.63  %   (7)
Convertible Notes                   216,669                                         213,875                   227,760

2023 Notes                          284,219                       804               283,415                   290,847      (4)               6.07  %   (7)
6.375% 2024 Notes                    81,240                       339                80,901                    83,502      (4)               6.57  %   (7)
2026 Notes                          400,000                     7,600               392,400                   378,172      (4)               3.98  %   (7)
3.364% 2026 Notes                   300,000                     6,342               293,658                   275,646      (4)               3.60  %   (7)
3.437% 2028 Notes                   300,000                     8,516               291,484                   258,249      (4)               3.64  %   (7)
Public Notes                      1,365,459                                       1,341,858                 1,286,416

Prospect Capital InterNotes®        340,774                     7,196               333,578                   361,624      (5)               5.73  %   (8)
Total                          $  2,622,342                                    $  2,588,751            $    2,575,240

(1)As permitted by ASC 825-10-25, we have not elected to value our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® at fair value. The fair value of these debt obligations are categorized as Level 2 under ASC 820 as of March 31, 2022.

(2)The maximum draw amount of the Revolving Credit facility as of March 31, 2022 is $1,500,000.

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

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


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

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

(7)The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs.


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

The following table shows the contractual maturities of our Revolving Credit
Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of
March 31, 2022:

                                                                            

Payments Due by Period

                                               Total              Less than 1 Year           1 - 3 Years          3 - 5 Years           After 5 Years
Revolving Credit Facility                  $   699,440          $               -          $          -          $   699,440          $            -
Convertible Notes                              216,669                     60,501               156,168                    -                       -
Public Notes                                 1,365,459                    284,219                81,240              700,000                 300,000
Prospect Capital InterNotes®                   340,774                          -                 2,161               88,361                 250,252
Total Contractual Obligations              $ 2,622,342          $         344,720          $    239,569          $ 1,487,801          $      550,252


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

                                                                            

Payments Due by Period

                                               Total              Less than 1 Year           1 - 3 Years           3 - 5 Years           After 5 Years
Revolving Credit Facility                  $   356,937          $               -          $          -          $    356,937          $            -
Convertible Notes                              267,223                          -               111,055               156,168                       -
Public Notes                                 1,134,778                          -               365,608               400,000                 369,170
Prospect Capital InterNotes®                   508,711                          -                11,744                51,822                 445,145
Total Contractual Obligations              $ 2,267,649          $           

- $ 488,407 $ 964,927 $ 814,315



We may from time to time seek to cancel or purchase our outstanding debt through
cash purchases and/or exchanges, in open market purchases, privately negotiated
transactions or otherwise. The amounts involved may be material. In addition, we
may from time to time enter into additional debt facilities, increase the size
of existing facilities or issue additional debt securities, including secured
debt, unsecured debt and/or debt securities convertible into common stock. Any
such purchases or exchanges of outstanding debt would be subject to prevailing
market conditions, our liquidity requirements, contractual and regulatory
restrictions and other factors.
Historically, we have funded a portion of our cash needs through borrowings from
banks, issuances of senior securities, including secured, unsecured and
convertible debt securities, or issuances of common equity. For flexibility, we
maintain a universal shelf registration statement that allows for the public
offering and sale of our debt securities, common stock, preferred stock,
subscription rights, and warrants and units to purchase such securities up to an
indeterminate amount. We may from time to time issue securities pursuant to the
shelf registration statement or otherwise pursuant to private offerings. The
issuance of debt or equity securities will depend on future market conditions,
funding needs and other factors and there can be no assurance that any such
issuance will occur or be successful.

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

Revolving Credit Facility


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

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

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

On April 28, 2021, we amended the 2019 Facility and closed an expanded five year
revolving credit facility (the "2021 Facility" and collectively with the 2014
Facility, the 2018 Facility, and the 2019 Facility, the "Revolving Credit
Facility"). The lenders had extended commitments of $1,500,000 as of March 31,
2022. The 2021 Facility includes an accordion feature which allows commitments
to be increased up to $1,500,000 in the aggregate. The Revolving Credit Facility
matures on April 27, 2026. It includes a revolving period that extends through
April 27, 2025, followed by an additional one-year amortization period, with
distributions allowed to Prospect after the completion of the revolving period.
During such one-year amortization period, all principal payments on the pledged
assets will be applied to reduce the balance. At the end of the one-year
amortization period, the remaining balance will become due, if required by the
lenders.
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The Revolving Credit Facility contains restrictions pertaining to the geographic
and industry concentrations of funded loans, maximum size of funded loans,
interest rate payment frequency of funded loans, maturity dates of funded loans
and minimum equity requirements. The Revolving Credit Facility also contains
certain requirements relating to portfolio performance, including required
minimum portfolio yield and limitations on delinquencies and charge-offs,
violation of which could result in the early termination of the Revolving Credit
Facility. The Revolving Credit Facility also requires the maintenance of a
minimum liquidity requirement. As of March 31, 2022, we were in compliance with
the applicable covenants.

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

For the nine months ended March 31, 2022 and March 31, 2021, the average stated
interest rate (i.e., rate in effect plus the spread) and average outstanding
borrowings for the Revolving Credit Facility were as follows:

                                               Three Months Ended March 31,                                     Nine Months Ended March 31,
                                       2022                                   2021                          2022                             2021
Average stated interest rate                    2.14%                                  2.32%                        2.14%                         

2.35%

Average outstanding balance                  $737,280                               $373,734                     $546,080                       $376,646



As of March 31, 2022 and June 30, 2021, we had $730,410 and $640,853,
respectively, available to us for borrowing under the Revolving Credit Facility,
net of $699,440 and $356,937 outstanding borrowings as of the respective balance
sheet dates. As of March 31, 2022, the investments, including cash and cash
equivalents, used as collateral for the Revolving Credit Facility had an
aggregate fair value of $2,559,645, which represents 34.3% of our total
investments, including cash and cash equivalents. These assets are held and
owned by PCF, a bankruptcy remote special purpose entity, and, as such, these
investments are not available to our general creditors. As additional eligible
investments are transferred to PCF and pledged under the Revolving Credit
Facility, PCF will generate additional availability up to the current commitment
amount of $1,500,000. The release of any assets from PCF requires the approval
of the facility agent.

In connection with the origination and amendments of the Revolving Credit
Facility, we incurred $18,746 of new fees and $7,509 were carried over from the
previous facilities, all of which are being amortized over the term of the
facility in accordance with ASC 470-50. As of March 31, 2022, $11,504 remains to
be amortized and is reflected as deferred financing costs on the Consolidated
Statements of Assets and Liabilities.

During the three months ended March 31, 2022 and March 31, 2021, we recorded
$6,452 and $4,509, respectively, of interest costs, unused fees and amortization
of financing costs on the Revolving Credit Facility as interest expense. During
the nine months ended March 31, 2022 and March 31, 2021, we recorded $16,153 and
$13,772, respectively, of interest costs, unused fees and amortization of
financing costs on the Revolving Credit Facility as interest expense.

Convertible Notes


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

On October 18, 2019, we repurchased $22,941 aggregate principal amount of the
2022 Notes at a price of $102.8 including commissions. As a result of this
transaction, we recorded a loss of $1,072 in the amount of the difference
between the reacquisition price and the net carrying amount of the 2022 Notes,
net of the proportionate amount of unamortized debt

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issuance costs. On November 7, 2019, we commenced a tender offer to purchase for
cash up to $50,000 aggregate principal amount of the 2022 Notes ("2022 Notes
November Tender Offer"). On December 7, 2019, $13,432 aggregate principal amount
of the 2022 Notes, representing 4.4% of the previously outstanding 2022 Notes,
were validly tendered and accepted. The 2022 Notes November Tender Offer
resulted in our recognizing a loss of $599, in the amount of the difference
between the reacquisition price and the net carrying amount of the 2022 Notes,
net of the proportionate amount of unamortized debt issuance costs.

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

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

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

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

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

On August 26, 2021, we commenced a tender offer to purchase for cash up to
$60,000 aggregate principal outstanding amount of the 2022 Notes at the purchase
price of $102.50, plus accrued and unpaid interest ("2022 Notes August 2021
Tender Offer"). On September 24, 2021, $50,554 aggregate principal amount of the
2022 Notes, representing 45.52% of the previously outstanding 2022 Notes, were
validly tendered and accepted. The 2022 Notes August 2021 Tender Offer resulted
in our recognizing a loss of $1,584. As of March 31, 2022, the outstanding
aggregate principal amount of the 2022 Notes is $60,501.

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

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On December 28, 2020, we commenced a tender offer to purchase for cash up to
$20,000 aggregate principal amount of the 2025 Notes at the purchase price of
$111.00, plus accrued and unpaid interest ("2025 Notes December 2020 Tender
Offer"). On January 27, 2021, $20,000 aggregate principal amount of the 2025
Notes, representing 9.94% of the previously outstanding 2025 Notes, were validly
tendered and accepted. The 2025 Notes December 2020 Tender Offer resulted in our
recognizing a loss of $2,676 during the three months ended March 31, 2021. On
February 16, 2021, we repurchased an additional $25,082 aggregate principal
amount of the 2025 Notes, representing 13.84% of the previously outstanding 2025
Notes, at a price of $107.50, including commissions. As a result of this
transaction, we recorded a loss of $2,466, in the amount of the difference
between the reacquisition price and the net carrying amount of the 2025 Notes,
net of the proportionate amount of unamortized debt issuance costs. As of March
31, 2022, the outstanding aggregate principal amount of the 2025 Notes is
$156,168.

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


                                                             2022 Notes     

2025 Notes

          Initial conversion rate(1)                         100.2305       

110.7420

          Initial conversion price                         $     9.98      

$ 9.03

          Conversion rate at March 31, 2022(1)(2)            100.2305       

110.7420

Conversion price at March 31, 2022(2)(3) $ 9.98 $ 9.03

          Last conversion price calculation date              4/11/2021     

3/1/2022

Dividend threshold amount (per share)(4) $ 0.083330 $ 0.060000

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

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

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


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

Interest accrues from the date of the original issuance of the Convertible Notes
or from the most recent date to which interest has been paid or duly provided.
Upon conversion, the holder will receive a separate cash payment with respect to
the notes surrendered for conversion representing accrued and unpaid interest
to, but not including, the conversion date. Any such payment will be made on the
settlement date applicable to the relevant conversion on the Convertible Notes.
If a holder converts the Convertible Notes after a record date for an interest
payment but prior to the corresponding interest payment date, the holder will
receive shares of our common stock based on the conversion formula described
above, a cash payment representing accrued and unpaid interest through the
record date in the normal course and a separate cash payment representing
accrued and unpaid interest from the record date to the conversion date.

No holder of Convertible Notes will be entitled to receive shares of our common
stock upon conversion to the extent (but only to the extent) that such receipt
would cause such converting holder to become, directly or indirectly, a
beneficial owner (within the meaning of Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder) of more than
5.0% of the shares of our common stock outstanding at such time. The 5.0%
limitation shall no longer apply following the effective date of any fundamental
change. We will not issue any shares in connection with the conversion or
redemption of the Convertible Notes which would equal or exceed 20% of the
shares outstanding at the time of the transaction in accordance with NASDAQ
rules.

Subject to certain exceptions, holders may require us to repurchase, for cash,
all or part of their Convertible Notes upon a fundamental change at a price
equal to 100% of the principal amount of the Convertible Notes being repurchased
plus any accrued and unpaid interest up to, but excluding, the fundamental
change repurchase date. In addition, upon a fundamental change that constitutes
a non-stock change of control we will also pay holders an amount in cash equal
to the present value of all remaining interest payments (without duplication of
the foregoing amounts) on such Convertible Notes through and including the
maturity date.

In connection with the issuance of the Convertible Notes, we recorded a discount
of $3,369 and debt issuance costs of $9,035 which are being amortized over the
terms of the Convertible Notes. As of March 31, 2022, $1,643 of the original
issue discount

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and $1,151 of the debt issuance costs remain to be amortized and is included as
a reduction within Convertible Notes on the Consolidated Statement of Assets and
Liabilities.

During the three months ended March 31, 2022 and March 31, 2021, we recorded
$3,550 and $4,870, respectively, of interest costs and amortization of financing
costs on the Convertible Notes as interest expense. During the nine months ended
March 31, 2022 and March 31, 2021, we recorded $11,333 and $17,905,
respectively, of interest costs and amortization of financing costs on the
Covertible Notes as interest expense.

Public Notes


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

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

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

On April 7, 2021, we commenced a tender offer to purchase for cash up to $30,000
aggregate principal amount of the 2023 Notes at the purchase price of $104.15,
plus accrued and unpaid interest ("2023 Notes April 2021 Tender Offer"). On May
4, 2021, $836 aggregate principal amount of the 2023 Notes were tendered,
representing 0.29% of the previously outstanding 2023 Notes. The 2023 Notes
April 2021 Tender Offer resulted in our recognizing a loss of $43 during the
three months ended June 30, 2021. As of March 31, 2022, the outstanding
aggregate principal amount of the 2023 Notes is $284,219.

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

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

On February 16, 2021, we redeemed $233,788 of the aggregate principal amount of
the 2024 Notes. The transaction resulted in our recognizing a loss of $3,391
during the three months ended March 31, 2021. Following the redemption, none of
the 2024 Notes remained outstanding.
On June 7, 2018, we issued $55,000 aggregate principal amount of unsecured notes
that mature on June 15, 2028 (the "2028 Notes"). The 2028 Notes bear interest at
a rate of 6.25% per year, payable quarterly on March 15, June 15, September 15,
and December 15 of each year, beginning September 15, 2018. Total proceeds from
the issuance of the 2028 Notes, net of underwriting discounts and offering costs
were $53,119. On July 2, 2018, we entered into an ATM program with B. Riley FBR,
Inc. and BB&T Capital Markets, and on August 31, 2018 with Comerica Securities,
Inc., through which we could sell, by means of ATM offerings, up to $100,000 in
aggregate principal amount of our existing 2028 Notes ("2028 Notes ATM" or "2028
Notes Follow-on Program"). The 2028 Notes are listed on the NYSE and trade
thereon under the ticker "PBY." During the year ended June 30, 2019, we issued
an additional $15,761 aggregate principal amount under the 2028 Notes ATM, for
net proceeds of $15,530, after commissions and offering costs.

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

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

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

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

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

On October 8, 2021, we commenced a tender offer to purchase for cash any and all
of the $81,389 aggregate principal amount of the 6.375% 2024 Notes at a purchase
price of $107.75, plus accrued and unpaid interest ("6.375% 2024 Notes October
2021 Tender Offer"). On October 15, 2021, $149 aggregate principal amount of the
6.375% 2024 Notes, representing 0.18% of the previously outstanding 6.375% 2024
Notes, were validly tendered and accepted. The 6.375% 2024 Notes October 2021
Tender Offer resulted in our recognizing a loss of $12. As of March 31, 2022,
the outstanding aggregate principal amount of the 6.375% 2024 Notes is $81,240.

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On December 5, 2018, we issued $50,000 aggregate principal amount of unsecured
notes that mature on June 15, 2029 (the "2029 Notes"). The 2029 Notes bear
interest at a rate of 6.875% per year, payable quarterly on March 15, June 15,
September 15, and December 15 of each year, beginning March 15, 2019. Total
proceeds from the issuance of the 2029 Notes, net of underwriting discounts and
offering costs, were $48,057. On February 9, 2019, we entered into an ATM
program with B. Riley FBR, Inc., BB&T Capital Markets, and Comerica Securities,
Inc., through which we could sell, by means of ATM offerings, up to $100,000 in
aggregate principal amount of our existing 2029 Notes ("2029 Notes ATM" or "2029
Notes Follow-on Program"). The 2029 Notes are listed on the NYSE and trade
thereon under the ticker "PBC." During the year ended June 30, 2019, we issued
an additional $19,170 aggregate principal amount under the 2029 Notes ATM, for
net proceeds of $18,523, after commissions and offering costs. On December 30,
2021, we redeemed $69,170 of the aggregate principal amount of the 2029 Notes.
The transaction resulted in our recognizing a loss of $2,044 during the three
months ended December 31, 2021. Following the redemption, none of the 2029 Notes
remained outstanding.

On January 22, 2021, we issued $325,000 aggregate principal amount of unsecured
notes that mature on January 22, 2026 (the "Original 2026 Notes"). The Original
2026 Notes bear interest at a rate of 3.706% per year, payable semi-annually on
July 22, and January 22 of each year, beginning on July 22, 2021. Total proceeds
from the issuance of the 2026 Notes, net of underwriting discounts and offering
costs, were $317,720. On February 19, 2021, we issued an additional $75,000
aggregate principal amount of unsecured notes that mature on January 22, 2026
(the "Additional 2026 Notes", and together with the Original 2026 Notes, the
"2026 Notes"). The Additional 2026 Notes were a further issuance of, and are
fully fungible and rank equally in right of payment with, the Original 2026
Notes and bear interest at a rate of 3.706% per year, payable semi-annually on
July 22 and January 22 of each year, beginning July 22, 2021. Total proceeds
from the issuance of the Additional 2026 Notes, net of underwriting discounts
and offering costs, were $74,061. As of March 31, 2022, the outstanding
aggregate principal amount of the 2026 Notes is $400,000.

On May 27, 2021, we issued $300,000 aggregate principal amount of unsecured
notes that mature on November 15, 2026 (the "3.364% 2026 Notes"). The 3.364%
2026 Notes bear interest at a rate of 3.364% per year, payable semi-annually on
November 15, and May 15 of each year, beginning on November 15, 2021. Total
proceeds from the issuance of the 3.364% 2026 Notes, net of underwriting
discounts and offering costs, were $293,283. As of March 31, 2022, the
outstanding aggregate principal amount of the 3.364% 2026 Notes is $300,000.

On September 30, 2021, we issued $300,000 aggregate principal amount of
unsecured notes that mature on October 15, 2028 (the "3.437% 2028 Notes"). The
3.437% 2028 Notes bear interest at a rate of 3.437% per year, payable
semi-annually on April 15 and October 15 of each year, beginning on April 15,
2022. Total proceeds from the issuance of the 3.437% 2028 Notes, net of
underwriting discounts and offering costs, were $291,798. As of March 31, 2022,
the outstanding aggregate principal amount of the 3.437% 2028 Notes is $300,000.

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

In connection with the issuance of the Public Notes we recorded a discount of
$15,802 and debt issuance costs of $17,834, which are being amortized over the
term of the notes. As of March 31, 2022, $11,854 of the original issue discount
and $11,747 of the debt issuance costs remain to be amortized and are included
as a reduction within Public Notes on the Consolidated Statement of Assets and
Liabilities.

During the three months ended March 31, 2022 and March 31, 2021, we recorded
$15,581 and $12,879, respectively, of interest costs and amortization of
financing costs on the Public Notes as interest expense. During the nine months
ended March 31, 2022 and March 31, 2021, we recorded $46,336 and $38,441,
respectively, of interest costs and amortization of financing costs on the
Public Notes as interest expense.

Prospect Capital InterNotes®


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

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

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Prospect Capital InterNotes® under the Original Selling Agent Agreement, May 2019 Selling Agent Agreement, and September 2019 Selling Agent Agreement (collectively the "Previous Selling Agent Agreements").


On February 13, 2020, the September 2019 Selling Agent Agreement was terminated,
and we entered into a new selling agent agreement with InspereX LLC (the
"Selling Agent Agreement"), authorizing the issuance and sale from time to time
of up to $1,000,000 of Prospect Capital InterNotes® (collectively with the
previously authorized selling agent agreements, the "InterNotes® Offerings").
Additional agents may be appointed by us from time to time in connection with
the InterNotes® Offering and become parties to the Selling Agent Agreement. We
have, from time to time, repurchased certain notes issued through the
InterNotes® Offerings and, therefore, as of March 31, 2022, $340,774 aggregate
principal amount of Prospect Capital InterNotes® were outstanding.

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

During the nine months ended March 31, 2022, we issued $155,909 aggregate
principal amount of Prospect Capital InterNotes® for net proceeds of $152,441.
These notes were issued with stated interest rates ranging from 2.25% to 4.63%
with a weighted average interest rate of 3.48%. These notes mature between
February 15, 2025 and March 15, 2052.

The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2022:

     Tenor at                                                                   Weighted
    Origination             Principal             Interest Rate                  Average
    (in years)               Amount                   Range                   Interest Rate                  Maturity Date Range
         3                $    1,499                          2.50%                       2.50%       February 15, 2025 - March 15, 2025
         5                    58,068                  2.25% - 4.50%                       3.26%           July 15, 2026 - March 15, 2027
         7                    20,929                  2.75% - 4.25%                       3.02%        July 15, 2028 - February 15, 2029
        10                    22,435                  3.15% - 4.50%                       3.38%           July 15, 2031 - March 15, 2032
        12                     2,422                          3.70%                       3.70%                            July 15, 2033
        15                    15,041                  3.50% - 4.50%                       3.84%        July 15, 2036 - February 15, 2037
        30                    35,515                  4.00% - 4.63%                       4.06%           July 15, 2051 - March 15, 2052
                          $  155,909

During the nine months ended March 31, 2021, we issued $109,562 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $107,830. These notes were issued with stated interest rates ranging from 1.50% to 6.00% with a weighted average interest rate of 4.70%. These notes mature between Janaury 15, 2024 and April 15, 2031.

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


   Tenor at                                             Weighted

Origination Principal Interest Rate Average

  (in years)        Amount            Range           Interest Rate         

Maturity Date Range

      3           $     662              1.50  %                1.50%                    January 15, 2024
      5              62,567        3.00% - 5.50%                4.60%     

July 15, 2025 - April 15, 2026

      7              16,921        3.25% - 5.75%                4.84%     

July 15, 2027 - April 15, 2028

      10             29,412        3.50% - 6.00%                4.90%     

July 15, 2030 - April 15, 2031

                  $ 109,562


During the nine months ended March 31, 2022, we repaid $1,223 aggregate
principal amount of Prospect Capital InterNotes® at par in accordance with the
Survivor's Option, as defined in the InterNotes® Offering prospectus. In order
to replace short maturity debt with longer-term debt, we redeemed $322,623
aggregate principal amount of Prospect Capital InterNotes® at par with a
weighted average interest rate of 5.45%. As a result of these transactions, we
recorded a loss in the amount of the unamortized debt issuance costs. The net
loss on the extinguishment of Prospect Capital InterNotes® in the nine months
ended March 31, 2022 was $6,403.

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The following table summarizes the Prospect Capital InterNotes® outstanding as
of March 31, 2022:

     Tenor at                                                                   Weighted
    Origination             Principal             Interest Rate                  Average
    (in years)               Amount                   Range                   Interest Rate                  Maturity Date Range
         3                $    2,161                  1.50% - 2.50%                       2.19%        January 15, 2024 - March 15, 2025
         5                    88,361                  2.25% - 4.50%                       3.17%        January 15, 2026 - March 15, 2027
         6                    15,107                          3.00%                       3.00%            June 15, 2027 - July 15, 2027
                                                                                                         January 15, 2028 - February 15,
         7                    29,252                  2.75% - 4.25%                       3.17%                                     2029
         8                     3,511                  3.40% - 3.50%                       3.45%            June 15, 2029 - July 15, 2029
        10                    77,185                  3.15% - 4.50%                       3.85%         August 15, 2029 - March 15, 2032
        12                    15,066                  3.70% - 4.00%                       3.95%            June 15, 2033 - July 15, 2033
        15                    15,041                  3.50% - 4.50%                       3.84%        July 15, 2036 - February 15, 2037
        18                     3,085                  4.50% - 5.00%                       4.73%        January 15, 2031 - April 15, 2031
        20                     1,597                          5.75%                       5.75%                        November 15, 2032
        25                     8,036                  6.25% - 6.50%                       6.37%         November 15, 2038 - May 15, 2039
        30                    82,372                  4.00% - 6.63%                       5.29%       November 15, 2042 - March 15, 2052
                          $  340,774


During the nine months ended March 31, 2021, we repaid $4,022 aggregate
principal amount of Prospect Capital InterNotes® at par in accordance with the
Survivor's Option, as defined in the InterNotes® Offering prospectus. In order
to replace short maturity debt with longer-term debt, we redeemed $112,489
aggregate principal amount of Prospect Capital InterNotes® at par with a
weighted average interest rate of 5.45%. As a result of these transactions, we
recorded a loss in the amount of the unamortized debt issuance costs. The net
loss on the extinguishment of Prospect Capital InterNotes® in the nine months
ended March 31, 2021 was $1,100.

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

     Tenor at                                                                   Weighted
    Origination             Principal             Interest Rate                  Average
    (in years)               Amount                   Range                   Interest Rate                  Maturity Date Range
         3                $      662                          1.50%                       1.50%                         January 15, 2024
         5                    46,968                  3.00% - 4.25%                       3.28%           August 15, 2024 - May 15, 2026
         6                    15,107                          3.00%                       3.00%            June 15, 2027 - July 15, 2027
         7                    59,729                  3.25% - 5.75%                       4.31%             July 15, 2024 - May 15, 2028
         8                     3,511                  3.40% - 3.50%                       3.45%            June 15, 2029 - July 15, 2029
        10                   201,285                  3.50% - 6.25%                       5.09%         January 15, 2024 - July 15, 2031
        12                    14,432                  4.00% - 6.00%                       4.25%        November 15, 2025 - July 15, 2033
        15                    16,801                  5.75% - 6.00%                       5.79%         May 15, 2028 - November 15, 2028
                                                                                                          December 15, 2030 - August 15,
        18                    18,487                  4.50% - 6.25%                       5.59%                                     2031
                                                                                                         November 15, 2032 - October 15,
        20                     3,777                  5.75% - 6.00%                       5.89%                                     2033
        25                    30,344                  6.25% - 6.50%                       6.39%           August 15, 2038 - May 15, 2039
                                                                                                         November 15, 2042 - October 15,
        30                    97,608                  5.50% - 6.75%                       6.25%                                     2043
                          $  508,711


In connection with the issuance of Prospect Capital InterNotes®, we incurred
$25,485 of fees which are being amortized over the term of the notes, of which
$7,196 remains to be amortized and is included as a reduction within Prospect
Capital InterNotes® on the Consolidated Statement of Assets and Liabilities as
of March 31, 2022.

During the three months ended March 31, 2022 and March 31, 2021, we recorded
$3,652 and $10,515, respectively, of interest costs and amortization of
financing costs on the Prospect Capital InterNotes® as interest expense. During
the nine months ended March 31, 2022 and March 31, 2021, we recorded $13,130 and
$30,431, respectively, of interest costs and amortization of financing costs on
the Prospect Capital InterNotes® as interest expense.

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Net Asset Value Applicable to Common Stockholders


During the nine months ended March 31, 2022, our net asset value applicable to
common shares increased by $427,534 or $1.00 per common share. The increase was
primarily attributable to an increase in net realized and net change in
unrealized gains of $376,109, or $0.96 per basic weighted average common share.
During the nine months ended March 31, 2022, net investment income of $253,931,
or $0.65 per basic weighted average common share, also exceeded distributions to
common and preferred stockholders of $227,470 (including distributions
classified as return of capital distributions to common stockholders), or $0.58
per basic weighted average common share, resulting in a net increase of $0.07
per basic weighted average common share. The increase was primarily offset by
$0.03 of dilution per common share related to common stock issuances through our
dividend reinvestment program for the nine months ended March 31, 2022. The
following table shows the calculation of net asset value per common share as of
March 31, 2022 and June 30, 2021.

                                                       March 31, 2022       June 30, 2021
   Net assets                                         $     4,236,011      $    3,945,517
   Less: Preferred Stock                                            -            (137,040)

Net assets available to common stockholders $ 4,236,011 $ 3,808,477

Shares of common stock issued and outstanding 391,718,136

388,419,573

   Net asset value per common share                   $         10.81      $         9.81



Results of Operations

Operating results for the three and nine months ended March 31, 2022 and March 31, 2021 were as follows:


                                                       Three Months Ended 

March 31, Nine Months Ended March 31,

                                                          2022                  2021           2022                  2021
Investment income                                  $       181,431          $ 159,456    $      526,281          $ 474,628
Operating expenses                                          94,426             86,054           272,350            262,120
Net investment income                                       87,005             73,402           253,931            212,508
Net realized (losses) gains from investments                (2,254)               881           (12,082)             7,451
Net change in unrealized gains from investments             80,486            184,960           398,340            518,577
Net realized losses on extinguishment of debt                 (941)           (12,835)          (10,149)           (18,415)
Net increase in net assets resulting from
operations                                                 164,296            246,408           630,040            720,121
Preferred stock dividend                                     7,139                400            16,748                446

Net Increase in Net Assets Resulting from Operations applicable to Common Stockholders $ 157,157 $ 246,008 $ 613,292 $ 719,675





While we seek to maximize gains and minimize losses, our investments in
portfolio companies can expose our capital to risks greater than those we may
anticipate. These companies typically do not issue securities rated investment
grade, and have limited resources, limited operating history, and concentrated
product lines or customers. These are generally private companies with limited
operating information available and are likely to depend on a small core of
management talents. Changes in any of these factors can have a significant
impact on the value of the portfolio company. These changes, along with those
discussed in Investment Valuation above, can cause significant fluctuations in
our net change in unrealized gains (losses) from investments, and therefore our
net increase (decrease) in net assets resulting from operations applicable to
common stockholders, quarter over quarter.

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Investment Income


We generate revenue in the form of interest income on the debt securities that
we own, dividend income on any common or preferred stock that we own, and fees
generated from the structuring of new deals. Our investments, if in the form of
debt securities, will typically have a term of one to ten years and bear
interest at a fixed or floating rate. To the extent achievable, we will seek to
collateralize our investments by obtaining security interests in our portfolio
companies' assets. We also may acquire minority or majority equity interests in
our portfolio companies, which may pay cash or in-kind dividends on a recurring
or otherwise negotiated basis. In addition, we may generate revenue in other
forms including prepayment penalties and possibly consulting fees. Any such fees
generated in connection with our investments are recognized as earned.

Investment income consists of interest income, including accretion of loan
origination fees and prepayment penalty fees, dividend income and other income,
including settlement of net profits interests, overriding royalty interests and
structuring fees.

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

                                                     Three Months Ended March 31,                  Nine Months Ended March 31,
                                                       2022                   2021                  2022                   2021
Interest income                                 $      142,489           $   139,583          $      430,933          $   416,609
Dividend income                                          5,306                 1,402                  12,277                3,707
Other income                                            33,636                18,471                  83,071               54,312
Total investment income                         $      181,431           $  

159,456 $ 526,281 $ 474,628


Average debt principal of performing interest
bearing investments(1)                          $    6,371,203           $ 

5,483,233 $ 6,052,339 $ 5,432,414 Weighted average interest rate earned on performing interest bearing investments(1)

                8.95  %              10.18  %                 9.35  %             10.08  %
Average debt principal of all interest bearing
investments(2)                                  $    6,658,993           $ 

5,800,685 $ 6,335,575 $ 5,793,085 Weighted average interest rate earned on all interest bearing investments(2)

                           8.56  %               9.63  %                 8.94  %              9.45  %


(1) Excludes equity investments and non-accrual loans. (2) Excludes equity investments.


The average interest earned on interest bearing performing assets decreased from
10.18% for the three months ended March 31, 2021 to 8.95% for the three months
ended March 31, 2022. The average interest earned on all interest bearing assets
decreased from 9.63% for the three months ended March 31, 2021 to 8.56% for the
three months ended March 31, 2022. The decrease is primarily due to reduced
returns from our structured credit investments.

The average interest earned on interest bearing performing assets decreased from
10.08% for the nine months ended March 31, 2021 to 9.35% for the nine months
ended March 31, 2022. The average interest earned on all interest bearing assets
decreased from 9.45% for the nine months ended March 31, 2021 to 8.94% for the
nine months ended March 31, 2022. The decrease is primarily due to reduced
returns from our structured credit investments.

Investment income is also generated from dividends and other income which is
less predictable than interest income. The following table describes dividend
income earned for the three and nine months ended March 31, 2022 and March 31,
2021, respectively:

                                       Three Months Ended March 31,                    Nine Months Ended March 31,
                                        2022                   2021                    2022                    2021
Dividend income

NMMB, Inc.                        $        3,988          $          -          $         7,034          $           -
Valley Electric Company, Inc.                809                     -                    2,509                  2,261
Nationwide Loan Company LLC                  400                 1,384                    2,150                  1,384

R-V Industries, Inc.                           -                     -                      441                      -
Other, net                                   109                    18                      143                     62
Total dividend income             $        5,306          $      1,402          $        12,277          $       3,707



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Other income is comprised of structuring fees, advisory fees, amendment fees,
royalty interests, settlement of net profits interests, settlement of residual
profits interests, administrative agent fees and other miscellaneous and sundry
cash receipts. The following table describes other income earned for the three
and nine months ended March 31, 2022 and March 31, 2021, respectively:

                                                Three Months Ended March 31,                  Nine Months Ended March 31,
                                                  2022                   2021                  2022                   2021
Structuring, advisory and amendment fees
Belnick, LLC                               $         1,750          $         -          $        1,750          $         -
National Property REIT Corp.                         1,593                  904                   2,815                2,337
Global Tel*Link Corporation                          1,500                    -                   1,500                    -
SEOTownCenter, Inc.                                  1,040                    -                   1,040                    -
USG Intermediate, LLC                                  687                    -                     687                    -
Magnate Worldwide, LLC                                 666                    -                   3,516                    -
First Tower Finance Company LLC                        664                5,443                   7,898               15,443
PeopleConnect Intermediate, LLC                          -                    -                   2,495                    -
Broder                                                   -                    -                   2,239                    -
DRI Holding Inc.                                         -                    -                   2,238                    -
BCPE Osprey Buyer, Inc.                                  -                    -                   1,812                    -
BCPE North Star US Holdco 2, Inc.                        -                    -                   1,463                    -
Victor Technology, LLC                                   -                    -                     600                    -
Medical Solutions Holdings, Inc.                         -                    -                     530                    -
PGX Holdings, Inc.                                       -                    -                   3,779                    -
Ahead Data Blue, LLC                                     -                    -                       -                1,725
Interventional Management Services, LLC                  -                1,510                       -                1,510
Orva Buyer, LLC                                          -                    -                       -                  810
Thermal Product Solutions, Inc.                          -                    -                       -                  689
H.I.G. KM2 Investor, LLC                                 -                    -                       -                  500
Atlantis Health Care Group (Puerto Rico),
Inc.                                                     -                    -                       -                  445
Eze Castle Integration, Inc.                             -                    -                       -                1,250
OneTouchPoint Corp.                                      -                  810                       -                  810
Other, net                                           2,249                  208                   4,601                  774
Total structuring, advisory and amendment
fees                                       $        10,149          $     

8,875 $ 38,963 $ 26,293 Royalty and net revenue interests National Property REIT Corp.

               $        23,112          $     

9,297 $ 43,052 $ 27,134 Other, net

                                             173                  167                     527                  504

Total royalty and net revenue interests $ 23,285 $ 9,464 $ 43,579 $ 27,638 Administrative agent fees Other, net

                                 $           202          $       132          $          529          $       381
Total administrative agent fees            $           202          $       132          $          529          $       381

Total other income                         $        33,636          $    18,471          $       83,071          $    54,312






Operating Expenses

Our primary operating expenses consist of investment advisory fees (base
management and income incentive fees), borrowing costs, legal and professional
fees, overhead-related expenses and other operating expenses. These expenses
include our allocable portion of overhead under the Administration Agreement
with Prospect Administration under which Prospect Administration provides
administrative services and facilities for us. Our investment advisory fees
compensate the Investment Adviser for its work in identifying, evaluating,
negotiating, closing and monitoring our investments. We bear all other costs and
expenses of our operations and transactions.

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


                                           Three Months Ended March 31,                  Nine Months Ended March 31,
                                             2022                   2021                  2022                  2021
Base management fee                   $        36,426          $    29,183          $      102,472          $   83,866
Income incentive fee                           19,967               18,251                  59,296              53,354
Interest and credit facility expenses          29,235               32,773                  86,952             100,549
Allocation of overhead from Prospect
Administration                                  4,126                2,685                  10,891              10,768
Audit, compliance and tax related
fees                                              994                  989                   1,940               2,267
Directors' fees                                   131                  113                     360                 339
Other general and administrative
expenses                                        3,547                2,060                  10,439              10,977
Total operating expenses              $        94,426          $    86,054          $      272,350          $  262,120


Total gross and net base management fee was $36,426 and $29,183 for the three
months ended March 31, 2022 and March 31, 2021, respectively. The increase in
total gross base management fee is directly related to a increase in average
total assets.

Total gross base management fee was $102,472 and $83,866 for the nine months
ended March 31, 2022 and March 31, 2021, respectively. The increase in total
gross base management fee is directly related to a increase in average total
assets.

For the three months ended March 31, 2022 and March 31, 2021, we incurred
$19,967 and $18,251 of income incentive fees, respectively. This increase was
driven by a corresponding increase in pre-incentive fee net investment income
(net of preferred stock dividends) from $91,253 for the three months ended March
31, 2021 to $99,833 for the three months ended March 31, 2022. No capital gains
incentive fee has yet been incurred pursuant to the Investment Advisory
Agreement. Income incentive fee for the nine months ended March 31, 2021
includes a $264 adjustment for fees earned in prior periods that were neither
expensed nor paid to the Investment Adviser.

For the nine months ended March 31, 2022 and March 31, 2021, we incurred $59,296
and $53,354 of income incentive fees, respectively. This increase was driven by
a corresponding increase in pre-incentive fee net investment income (net of
preferred stock dividends) from $265,416 for the nine months ended March 31,
2021 to $296,479 for the nine months ended March 31, 2022. No capital gains
incentive fee has yet been incurred pursuant to the Investment Advisory
Agreement.

During the three months ended March 31, 2022 and March 31, 2021, we incurred
$29,235 and $32,773 respectively, of interest and credit facility expenses
related to our Revolving Credit Facility, Convertible Notes, Public Notes and
Prospect Capital InterNotes® (collectively, our "Notes"). During the nine months
ended March 31, 2022 and March 31, 2021, we incurred $86,952 and $100,549,
respectively, of interest expenses related to our Notes. These expenses are
related directly to the leveraging capacity put into place for each of those
periods and the levels of indebtedness actually undertaken in those periods.

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

                                                         Three Months Ended March 31,                  Nine Months Ended March 31,
                                                           2022                   2021                  2022                   2021
Interest on borrowings                              $       25,131         

$ 28,849 $ 74,668 $ 88,709 Amortization of deferred financing costs

                     2,137                 1,756                   6,242                5,526
Accretion of discount on unsecured debt                        744                   365                   2,063                  903
Facility commitment fees                                     1,223                 1,803                   3,979                5,411

Total interest and credit facility expenses $ 29,235

$ 32,773 $ 86,952 $ 100,549


Average principal debt outstanding                  $    2,657,523          

$ 2,395,361 $ 2,469,905 $ 2,334,905 Annualized weighted average stated interest rate on borrowings(1)

                                                 3.78   %              4.82  %                 4.03  %              5.07  %
Annualized weighted average interest rate on
borrowings(2)                                                 4.40   %              5.47  %                 4.69  %              5.74  %


(1)Includes only the stated interest expense.

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


Interest expense decreased from $28,849 for the three months ended March 31,
2021 to $25,131 for the three months ended March 31, 2022. The weighted average
stated interest rate on borrowings (excluding amortization, accretion and
undrawn facility fees) decreased from 4.82% for the three months ended March 31,
2021 to 3.78% for the three months ended March 31, 2022, primarily due to
redemptions of our Prospect Capital InterNotes®, increased utilization of our
Revolving Credit Facility, and repurchases of our Convertible Notes, June 2024
Baby Bond, June 2028 Baby Bond and June 2029 Baby Bond. In addition to Prospect
Capital InterNotes®, the 2026 Notes, 3.364% 2026 Notes, and the 2028 Bond were
issued at lower rates.

Interest expense decreased from $88,709 for the nine months ended March 31, 2021
to $74,668 for the nine months ended March 31, 2022. The weighted average stated
interest rate on borrowings (excluding amortization, accretion and undrawn
facility fees) decreased from 5.07% for the nine months ended March 31, 2021 to
4.03% for the nine months ended March 31, 2022. This decrease is primarily due
to redemptions of our Prospect Capital InterNotes®, increased utilization of our
Revolving Credit Facility, and repurchases of our Convertible Notes, June 2024
Baby Bond, June 2028 Baby Bond and June 2029 Baby Bond. In addition to Prospect
Capital InterNotes®, the 2026 Notes and 3.364% 2026 Notes, and the 2028 Bond
were issued at lower rates.

The allocation of net overhead expense from Prospect Administration was $4,126
and $2,685 for the three months ended March 31, 2022 and March 31, 2021,
respectively. In addition, during the three months ended March 31, 2021, we were
given a credit in the amount of $3,522 for legal expenses incurred on behalf of
our portfolio companies that were subsequently remitted to Prospect
Administration in the subsequent quarter.

The allocation of net overhead expense from Prospect Administration was $10,891
and $10,768 for the nine months ended March 31, 2022 and March 31, 2021,
respectively. Prospect Administration received estimated payments of $5,391 and
$1,038 directly from our portfolio companies, and certain funds managed by the
Investment Adviser for legal services during the nine months ended March 31,
2022 and March 31, 2021, respectively. In addition, during the nine months ended
March 31, 2021, we were given a credit in the amount of $3,522 for legal
expenses incurred on behalf of our portfolio companies that were subsequently
remitted to Prospect Administration in the subsequent quarter. We were given a
credit for these payments as a reduction of the administrative services cost
payable by us to Prospect Administration. Had Prospect Administration not
received these payments, Prospect Administration's charges for its
administrative services would have increased by this amount. We were given no
such credit during the nine months ended March 31, 2022.

Total operating expenses, excluding investment advisory fees, interest and
credit facility expenses, and allocation of overhead from Prospect
Administration ("Other Operating Expenses"), net of any expense reimbursements,
were $4,672 and $3,162 for the three months ended March 31, 2022 and March 31,
2021, respectively. The increase was primarily attributable to a increase in
legal fees offset by a decrease in general and administrative expenses.

Total operating expenses, excluding investment advisory fees, interest and
credit facility expenses, and allocation of overhead from Prospect
Administration ("Other Operating Expenses"), net of any expense reimbursements,
were $12,739 and $13,583 for the nine months ended March 31, 2022 and March 31,
2021, respectively. The decrease was primarily attributable to a decrease in
general and administrative expenses.

Net Realized Gains (Losses)

The following table details net realized gains (losses) from investments for the three months ended March 31, 2022 and March 31, 2021:


                                             Three Months Ended March 31,
Portfolio Company                                   2022                    

2021


Edmentum Ultimate Holdings, LLC     $                 -                     $ 745

Sudbury Mill CLO, Ltd.                              516                         -
Brookside Mill CLO                               (7,683)                        -
Dunn Paper, Inc.                                   (385)
NMMB Inc.                                         5,294                         -
Other, net                                            4                       136
Net realized (losses) gains         $            (2,254)                    $ 881


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The following table details net realized gains (losses) from investments for the nine months ended March 31, 2022 and March 31, 2021:


                                           Nine Months Ended March 31,
Portfolio Company                               2022                   2021

Edmentum Ultimate Holdings, LLC     $              -                 $ 4,469

Spartan - Term Loan B                              -                   2,832
Brookside Mill CLO                            (7,683)                      -
Sudbury Mill CLO, Ltd.                        (8,890)                      -
Dunn Paper, Inc.                                (385)                      -
NMMB Inc.                                      5,294                       -
Other, net                                      (418)                    150
Net realized (losses) gains         $        (12,082)                $ 7,451

Net Realized Loss from Extinguishment of Debt


During the three months ended March 31, 2022 and March 31, 2021, we recorded a
net realized loss from the extinguishment of debt of $941 and $12,835,
respectively. During the nine months ended March 31, 2022 and March 31, 2021, we
recorded a net realized loss from the extinguishment of debt of $10,149 and
$18,415, respectively. Refer to Capitalization for additional discussion.

Change in Unrealized Gains (Losses)


The following table details net change in unrealized (losses) gains for our
portfolio for the three and nine months ended March 31, 2022 and March 31, 2021,
respectively:

                                                           Three Months Ended March 31,                 Nine Months Ended March 31,
                                                            2022                   2021                  2022                   2021
Control investments                                   $       96,162          $   142,379          $      352,558          $   323,967
Affiliate investments                                        (11,610)                 21,876                  26,016              107,582
Non-control/non-affiliate investments                         (4,066)              20,705                  19,766               87,028
Net change in unrealized gains (losses)               $       80,486        

$ 184,960 $ 398,340 $ 518,577

The following table details reflects net change in unrealized gains (losses) on investments for the three months ended March 31, 2022:

                                          Net Change in Unrealized Gains (Losses)
National Property REIT Corp.             $                                149,967
CP Energy Services Inc.                                                    31,164
Subordinated Structured Notes                                              18,874
Other, net                                                                  4,367
Curo Group Holdings Corp.                                                  (6,254)
Credit Central Loan Company, LLC                                           (6,531)
K&N Parent, Inc.                                                           (8,110)
Pacific World Corporation                                                  (9,258)
NMMB, Inc.                                                                (10,540)
PGX Holdings, Inc.                                                        (12,636)
Echelon Transportation, LLC                                               

(17,588)

InterDent, Inc.                                                           

(52,969)

Net change in unrealized gains           $                                 80,486





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


                                           Net Change in Unrealized Gains 

(Losses)

InterDent, Inc.                           $                                 

54,955

First Tower Finance Company LLC                                             47,983
National Property REIT Corp.                                                36,628
PGX Holdings, Inc.                                                          19,457
Other, net                                                                  16,853
Subordinated Structured Notes                                               11,527
CP Energy Services Inc.                                                      5,306
NMMB, Inc.                                                                   5,161
Credit Central Loan Company, LLC                                            

(6,091)

Echelon Transportation, LLC                                                 

(6,819)

Net change in unrealized gains            $                                

184,960

The following table details net change in unrealized gains (losses) on investments for the nine months ended March 31, 2022:

                                         Net Change in Unrealized Gains (Losses)
National Property REIT Corp.            $                                348,536
Subordinated Structured Notes                                             46,619
CP Energy Services Inc.                                                   32,471
First Tower Finance Company LLC                                           29,024
NMMB, Inc.                                                                21,363
PGX Holdings, Inc.                                                        14,189
Targus Cayman HoldCo Limited                                              10,331
MITY, Inc.                                                                 6,432
R-V Industries, Inc.                                                       4,062
Other, net                                                                (5,257)
USES Corp.                                                                (7,899)
K&N Parent, Inc.                                                          (8,189)
Curo Group Holdings Corp.                                                 (8,565)
Pacific World Corporation                                                (24,173)
Echelon Transportation, LLC                                              (26,927)
InterDent, Inc.                                                          (33,677)
Net change in unrealized gains          $                                398,340










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

                                             Net Change in Unrealized Gains (Losses)
InterDent, Inc.                             $                                121,247
PGX Holdings, Inc.                                                           107,828
National Property REIT Corp.                                                 107,149
First Tower Finance Company LLC                                             

75,057

Subordinated Structured Notes                                                 36,791
Other, net                                                                    36,303
USES Corp.                                                                    18,076
Valley Electric Company, Inc.                                                 15,350
R-V Industries, Inc.                                                           9,798
Pacific World Corporation                                                      9,634
NMMB, Inc.                                                                     9,101
Securus Technologies Holdings, Inc.                                            6,935
ACE Cash Express, Inc.                                                         5,348
Targus Cayman HoldCo Limited                                                   5,225
Engine Group, Inc.                                                             4,452
Edmentum Ultimate Holdings, LLC                                             

(5,471)

MITY, Inc.                                                                  

(8,702)

Credit Central Loan Company, LLC                                            

(10,145)

Echelon Transportation, LLC                                                 

(12,456)

CP Energy Services, Inc.                                                    

(12,943)

Net change in unrealized gains              $                               

518,577

Financial Condition, Liquidity and Capital Resources


On July 27, 2017, the Financial Conduct Authority ("FCA") announced that it will
no longer persuade or compel banks to submit rates for the calculation of the
LIBOR rates after 2021 (the "FCA Announcement"). Furthermore, in the United
States, efforts to identify a set of alternative U.S. dollar reference interest
rates include proposals by the Alternative Reference Rates Committee of the
Federal Reserve Board ("ARRC") and the Federal Reserve Bank of New York. On
August 24, 2017, the Federal Reserve Board requested public comment on a
proposal by the Federal Reserve Bank of New York, in cooperation with the Office
of Financial Research, to produce three new reference rates intended to serve as
alternatives to LIBOR. These alternative rates are based on overnight repurchase
agreement transactions secured by U.S. Treasury Securities. On December 12,
2017, following consideration of public comments, the Federal Reserve Board
concluded that the public would benefit if the Federal Reserve Bank of New York
published the three proposed reference rates as alternatives to LIBOR (the
"Federal Reserve Board Notice"). In April 2018, the Federal Reserve System, in
conjunction with the ARRC, announced the replacement of LIBOR with a new index,
calculated by short term repurchase agreements collateralized by U.S. Treasury
securities, called the Secured Overnight Financing Rate ("SOFR"). On June 12,
2019, the Staff from the SEC's Division of Corporate Finance, Division of
Investment Management, Division of Trading and Markets, and Office of the Chief
Accountant issued a statement about the potentially significant effects on
financial markets and market participants when LIBOR is discontinued in 2021 and
no longer available as a reference benchmark rate. The Staff encouraged all
market participants to identify contracts that reference LIBOR and begin
transitions to alternative rates. Although SOFR appears to be the preferred
replacement rate for U.S. dollar LIBOR, at this time, it is not possible to
predict the effect of any such changes, any establishment of alternative
reference rates or other reforms to LIBOR that may be enacted in the United
States, United Kingdom or elsewhere or, whether the COVID-19 will have further
effect on LIBOR transition plans. The elimination of LIBOR or any other changes
or reforms to the determination or supervision of LIBOR could have an adverse
impact on the market for or value of any LIBOR-linked securities, loans, and
other financial obligations or extensions of credit held by or due
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to us or on our overall financial condition or results of operations.


At this time, it is not possible to predict the effect of the FCA Announcement
or other regulatory changes or announcements, any establishment of any
alternative reference rates, including SOFR and its market acceptance, or any
other reforms to LIBOR that may be enacted in the United Kingdom, the United
States or elsewhere. As such, the potential effect of any such event on our net
investment income cannot yet be determined. The CLOs in which the Company is
invested generally contemplate a scenario where LIBOR is no longer available by
requiring the CLO administrator to calculate a replacement rate primarily
through dealer polling on the applicable measurement date. However, there is
uncertainty regarding the effectiveness of the dealer polling processes,
including the willingness of banks to provide such quotations, which could
adversely impact our net investment income. Recently, the CLOs we are invested
in have included, or have been amended to include, language permitting the CLO
investment manager to implement a market replacement rate (like SOFR) upon the
occurrence of certain material disruption events. However, we cannot ensure that
all CLOs in which we are invested will have such provisions, nor can we ensure
the CLO investment managers will undertake the suggested amendments when able.
In addition, the effect of a phase out of LIBOR on U.S. senior secured loans,
the underlying assets of the CLOs in which we invest, is currently unclear, even
if certain statutory regimes may apply, e.g., N.Y. Gen. Oblig. Law § 18-401 or
the Adjustable Interest Rate (LIBOR) Act. To the extent that any replacement
rate utilized for senior secured loans differs from that utilized for a CLO that
holds those loans, the CLO would experience an interest rate mismatch between
its assets and liabilities which could have an adverse impact on the Company's
net investment income and portfolio returns.

For the nine months ended March 31, 2022 and March 31, 2021, our operating
activities used $589,727 and provided $131,003 of cash, respectively. The change
in our operating activities is primarily driven by an increase in net
originations for the nine months ended March 31, 2022. There were no investing
activities for the nine months ended March 31, 2022 and March 31, 2021.
Financing activities provided $562,519 and used $74,575 of cash during the nine
months ended March 31, 2022 and March 31, 2021, respectively, which included
dividend payments of $199,697 and $132,671, respectively. The change in our
financing activities is primarily driven by an increase in proceeds from
issuance of preferred stock used to finance our increase in net originations for
the nine months ended March 31, 2022.

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


Our primary sources of funds have historically been issuances of debt and
equity. We have and may continue to fund a portion of our cash needs through
repayments and opportunistic sales of our existing investment portfolio. We may
also securitize a portion of our investments in unsecured or senior secured
loans or other assets. Our objective is to put in place such borrowings in order
to enable us to expand our portfolio. During the nine months ended March 31,
2022, we borrowed $1,627,051 and we made repayments totaling $1,284,548 under
the Revolving Credit Facility. As of March 31, 2022, our outstanding balance on
the Revolving Credit Facility was $699,440. As of March 31, 2022, we had, net of
unamortized discount and debt issuance costs, $213,875 outstanding on the
Convertible Notes, $1,341,858 outstanding on the Public Notes and $333,578
outstanding on the Prospect Capital InterNotes® (See "Capitalization" above).

Undrawn committed revolvers and delayed draw term loans to our portfolio
companies incur commitment and unused fees ranging from 0.00% to 7.25%. As of
March 31, 2022 and June 30, 2021, we had $43,351 and $67,385, respectively, of
undrawn revolver and delayed draw term loan commitments to our portfolio
companies. The fair value of our undrawn committed revolvers and delayed draw
term loans was zero as of March 31, 2022 and June 30, 2021.

We have guaranteed $2,737 in standby letters of credit issued through a
financial intermediary and $1,835 of equipment lease obligations on behalf of
InterDent, Inc. ("InterDent") as of March 31, 2022. Under these arrangements, we
would be required to make payments to the financial intermediary or equipment
lease provider, respectively, if InterDent was to default on their related
payment obligations. As of March 31, 2022, we have not recorded a liability on
the statement of assets and liabilities for these guarantees as the likelihood
of default on the standby letters of credit or equipment lease is deemed to be
remote.

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

Preferred Stock


On August 3, 2020, we entered into a Dealer Manager Agreement with Preferred
Capital Securities, LLC ("PCS"), pursuant to which PCS has agreed to serve as
the Company's agent, principal distributor and dealer manager for the Company's
offering of
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up to 40,000,000 shares, par value $0.001 per share, of preferred stock, with a
liquidation preference of $25.00 per share. Such preferred stock will initially
be issued in multiple series, including the 5.50% Series A1 Preferred Stock
("Series A1 Preferred Stock"), the 5.50% Series M1 Preferred Stock ("Series M1
Preferred Stock"), and the 5.50% Series M2 Preferred Stock ("Series M2 Preferred
Stock"). In connection with such offering, on August 3, 2020, we filed Articles
Supplementary with the State Department of Assessments and Taxation of Maryland
("SDAT"), reclassifying and designating 120,000,000 shares of the Company's
authorized and unissued shares of common stock into shares of preferred stock as
"Convertible Preferred Stock." On October 30, 2020, and amended on February 18,
2022, we entered into a Dealer Manager Agreement with InspereX LLC, pursuant to
which InspereX LLC has agreed to serve as the Company's agent and dealer manager
for the Company's offering of up to 10,000,000 shares, par value $0.001 per
share, of preferred stock, with a liquidation preference of $25.00 per share.
Such preferred stock will initially be issued in multiple series, including the
5.50% Series AA1 Preferred Stock (the "Series AA1 Preferred Stock") and the
5.50% Series MM1 Preferred Stock (the "Series MM1 Preferred Stock" and together
with the Series M1 Preferred Stock and the Series M2 Preferred Stock, the
"Series M Preferred Stock"). In connection with such offering, on October 30,
2020 and February 17, 2022, we filed Articles Supplementary with the SDAT,
reclassifying and designating an additional 40,000,000 shares of the Company's
authorized and unissued shares of common stock into shares of preferred stock as
Convertible Preferred Stock. On May 19, 2021, we entered into an Underwriting
Agreement with UBS Securities LLC, relating to the offer and sale of 187,000
shares, par value $0.001 per share, of 5.50% Series A2 Preferred Stock, with a
liquidation preference of $25.00 per share (the "Series A2 Preferred Stock", and
together with the Series A1 Preferred Stock, Series M1 Preferred Stock, Series
M2 Preferred Stock, Series AA1 Preferred Stock, and Series MM1 Preferred Stock,
the "5.50% Preferred Stock"). The issuance of the Series A2 Preferred Stock
settled on May 26, 2021. In connection with such offering, on May 19, 2021, we
filed Articles Supplementary with the SDAT, reclassifying and designating an
additional 1,000,000 shares of the Company's authorized and unissued shares of
common stock into shares of preferred stock as Convertible Preferred Stock.

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

Each series of 5.50% Preferred Stock ranks (with respect to the payment of
dividends and rights upon liquidation, dissolution or winding up) (a) senior to
our common stock, (b) on parity with each other series of our preferred stock,
and (c) junior to our existing and future secured and unsecured indebtedness.
See Note 8, Fair Value and Maturity of Debt Outstanding for further discussion
on our senior securities.

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

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

Subject to certain limitations, each share of 5.50% Preferred Stock may be
converted at our option (the "Issuer Optional Conversion"). We will settle any
Issuer Optional Conversion by paying or delivering, as the case may be, (A) any
portion of the

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

On July 12, 2021, we entered into an underwriting agreement by and among us,
Prospect Capital Management L.P., Prospect Administration LLC, and Morgan
Stanley & Co. LLC, RBC Capital Markets, LLC and UBS Securities LLC, as
representatives of the underwriters, relating to the offer and sale of 6,000,000
shares, or $150,000 in aggregate liquidation preference, of our 5.35% Series A
Fixed Rate Cumulative Perpetual Preferred Stock, par value $0.001 per share (the
"Series A Preferred Stock" or "5.35% Preferred Stock"), at a public offering
price of $25.00 per share. Pursuant to the Underwriting Agreement, we also
granted the underwriters a 30-day option to purchase up to an additional 900,000
shares of Series A Preferred Stock solely to cover over-allotments. The offer
settled on July 19, 2021, and no additional shares of Series A Preferred Stock
were issued pursuant to the option. In connection with such offering, on July
15, 2021, we filed Articles Supplementary with SDAT, reclassifying and
designating 6,900,000 shares of the Company's authorized and unissued shares of
Common Stock into shares of Series A Preferred Stock.

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

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

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

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

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

•6.03865, subject to certain adjustments,

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


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

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

"Change of Control Triggering Event" means the occurrence of any of the following:


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

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

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

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

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

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

"Excluded Transaction" means (i) any transaction that does not result in any
reclassification, conversion, exchange or cancellation of all or substantially
all of the outstanding shares of our Voting Stock; (ii) any changes resulting
from a subdivision or combination or a change solely in par value; (iii) any
transaction where the shares of our Voting Stock

                                      147
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outstanding immediately prior to such transaction constitute, or are converted
into or exchanged for, a majority of the Voting Stock of the surviving "person"
(as that term is used in Section 13(d)(3) of the Exchange Act) or any direct or
indirect parent company of the surviving "person" (as that term is used in
Section 13(d)(3) of the Exchange Act) immediately after giving effect to such
transaction; (iv) any transaction if (A) we become a direct or indirect
wholly-owned subsidiary of a holding company and (B)(1) the direct or indirect
holders of the Voting Stock of such holding company immediately following that
transaction are substantially the same as the holders of our Voting Stock
immediately prior to that transaction or (2) immediately following that
transaction no "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) is the beneficial owner, directly or indirectly, of more than 50%
of the Voting Stock of such holding company; or (v) any transaction primarily
for the purpose of changing our jurisdiction of incorporation or form of
organization.

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

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

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


For so long as the Series A Preferred Stock is outstanding, we will not exercise
any option we have to convert any other series of our outstanding preferred
stock to common stock, including the Issuer Optional Conversion, or any other
security ranking junior to such preferred stock. As a result, and in accordance
with ASC 480, we have presented both our 5.50% Preferred Stock and Series A
Preferred Stock within temporary equity on our Consolidated Statement of Assets
and Liabilities as of March 31, 2022.

We determined the estimated value as of March 31, 2022 of our 5.50% Preferred
Stock, with a $25.00 stated value per share. We engaged a third-party valuation
service to assist in our determination based on the calculation resulting from
the total equity on our Consolidated Statements of Assets and Liabilities in our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the "Form
10-Q"), which was prepared in accordance with U.S. generally accepted accounting
principles in the United States of America, adjusted for the fair value of our
investments (i.e. from our Consolidated Schedule of Investments) and total
liabilities, divided by the number of shares of our Preferred Stock outstanding.
Based on this methodology and because the result from the calculation above is
greater than the $25.00 per share stated value of our 5.50% Preferred Stock, the
estimated value of our 5.50% Preferred Stock as of March 31, 2022 is $25.00 per
share.

Common Stock

Our common stockholders' equity accounts as of March 31, 2022 and June 30, 2021
reflect cumulative shares issued, net of shares repurchased, as of those
respective dates. Our common stock has been issued through public offerings, a
registered direct offering, the exercise of over-allotment options on the part
of the underwriters, our dividend reinvestment plan and in connection with the
acquisition of certain controlled portfolio companies and in connection with our
5.50%   Preferred Stock Holder Optional Conversion. When our common stock is
issued, the related offering expenses have been charged against paid-in capital
in excess of par. All underwriting fees and offering expenses were borne by us.

We did not repurchase any shares of our common stock for the nine months ended March 31, 2022 or March 31, 2021.

Recent Developments


On April 26, 2022, we made a new $18,500 First Lien Term Loan investment and a
$75,000 Second Lien Term Loan investment in DTI Holdco, Inc., a
technology-enabled e-discovery legal service provider, offering solutions to
both corporate and law firm clients. Our investment settled on May 2, 2022.

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On May 9, 2022, we announced the declaration of monthly dividends for our 5.50%
Preferred Stock for holders of record on the following dates based on an annual
rate equal to 5.50% of the Stated Value of $25 per share as set forth in the
Articles Supplementary for the Preferred Stock, from the date of issuance or, if
later from the most recent dividend payment date, as follows:

                                                                            

Monthly Amount ($ per share),

 Monthly Cash 5.50% Preferred Shareholder                                   

before pro ration for partial

               Distribution                    Record Date        Payment Date                 periods
                June 2022                       6/22/2022           7/1/2022                  $0.114583
                July 2022                       7/20/2022           8/1/2022                  $0.114583
               August 2022                      8/17/2022           9/1/2022                  $0.114583


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

Quarterly Cash 5.35% Preferred Shareholder

               Distribution                    Record Date        Payment Date              Amount ($ per share)
           May 2022 - July 2022                 7/20/2022           8/1/2022                      $0.334375


On May 9, 2022, we announced the declaration of monthly dividends on our common stock as follows:

Monthly Cash Common Shareholder

               Distribution                      Record Date            Payment Date            Amount ($ per share)
                 May 2022                         5/27/2022              6/21/2022                    $0.0600
                June 2022                         6/28/2022              7/20/2022                    $0.0600
                July 2022                         7/27/2022              8/18/2022                    $0.0600
               August 2022                        8/29/2022              9/21/2022                    $0.0600


Critical Accounting Policies and Estimates

For discussion of critical accounting policies and estimates, refer to our Annual Report on Form 10-K for the year ended June 30, 2021.

Recent Accounting Pronouncements

For discussion of recent accounting pronouncements, refer to Note 2 within the accompanying notes to the consolidated financial statements.

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