Prospect Capital - 10-Q quarterly report FY

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2017 OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 814-00659

PROSPECT CAPITAL CORPORATION

(Exact name of Registrant as specified in its charter)



Maryland	43-2048643
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
10 East 40th Street, 42nd Floor
New York, New York	10016
(Address of principal executive offices)	(Zip Code)
Registrant's telephone number, including area code: (212) 448-0702

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer ý	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No ý

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.



Class of Common Stock		Outstanding at May 9, 2017
$0.001 par value		359,939,220

Table of Contents



		Page
	Forward-Looking Statements	1
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of March 31, 2017 (unaudited) and June 30, 2016	2
	Consolidated Statements of Operations for the three and nine months ended March 31, 2017 and March 31, 2016 (unaudited)	3
	Consolidated Statements of Changes in Net Assets for the nine months ended March 31, 2017 and March 31, 2016 (unaudited)	4
	Consolidated Statements of Cash Flows for the nine months ended March 31, 2017 and March 31, 2016 (unaudited)	5
	Consolidated Schedules of Investments as of March 31, 2017 (unaudited) and June 30, 2016	6
	Notes to Consolidated Financial Statements	38
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	104
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	139
Item 4.	Controls and Procedures	139
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	141
Item 1A.	Risk Factors	141
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	141
Item 3.	Defaults Upon Senior Securities	141
Item 4.	Mine Safety Disclosures	141
Item 5.	Other Information	141
Item 6.	Exhibits and Financial Statement Schedules	142
	Signatures

FORWARD-LOOKING STATEMENTS

This report contains information that may constitute “forward-looking statements.” Generally, the words “believe,” “expect,”

“intend,” “estimate,” “anticipate,” “project,” “will” and similar expressions identify forward-looking statements, which generally are not historical in nature. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to volume growth, share of sales and earnings per share growth, and statements expressing general views about future operating results—are forward-looking statements. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part II, “Item 1A. Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended June 30, 2016, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

PART I

Item 1. Financial Statements

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(in thousands, except share and per share data)



	March 31, 2017			June 30, 2016
	March 31, 2017			June 30, 2016
	(Unaudited)			(Audited)
Assets
Investments at fair value:
Control investments (amortized cost of $1,939,427 and $1,768,220, respectively)	$	1,892,719		$	1,752,449
Affiliate investments (amortized cost of $8,530 and $10,758, respectively)	7,239			11,320
Non-control/non-affiliate investments (amortized cost of $4,305,472 and $4,312,122, respectively)	4,124,808			4,133,939
Total investments at fair value (amortized cost of $6,253,429 and $6,091,100, respectively)	6,024,766			5,897,708
Cash	111,804			317,798
Receivables for:
Interest, net	10,255			12,127
Other	100			168
Prepaid expenses	716			855
Deferred financing costs on Revolving Credit Facility (Note 4)	5,463			7,525
Total Assets	6,153,104			6,236,181

Liabilities
Revolving Credit Facility (Notes 4 and 8)	—			—
Prospect Capital InterNotes® (Notes 7 and 8)	991,345			893,210
Convertible Notes (Notes 5 and 8)	910,782			1,074,361
Public Notes (Notes 6 and 8)	737,802			699,368
Due to Prospect Capital Management (Note 13)	49,098			54,149
Interest payable	33,763			40,804
Dividends payable	29,989			29,758
Due to Prospect Administration (Note 13)	1,847			1,765
Accrued expenses	4,292			2,259
Other liabilities	2,018			3,633
Due to broker	—			957
Total Liabilities	2,760,936			2,800,264
Commitments and Contingencies (Note 3)	—			—
Net Assets	$	3,392,168		$	3,435,917

Components of Net Assets
Common stock, par value $0.001 per share (1,000,000,000 common shares authorized; 359,885,703 and 357,107,231 issued and outstanding, respectively) (Note 9)	$	360		$	357
Paid-in capital in excess of par (Note 9)	3,989,703			3,967,397
Accumulated overdistributed net investment income	(33,719		)	(3,623		)
Accumulated net realized loss	(335,513		)	(334,822		)
Net unrealized loss	(228,663		)	(193,392		)
Net Assets	$	3,392,168		$	3,435,917

Net Asset Value Per Share (Note 16)	$	9.43		$	9.62

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(Unaudited)



	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
Investment Income
Interest income:
Control investments	$	41,353		$	50,762		$	135,543		$	154,135
Affiliate investments	—			—			—			896
Non-control/non-affiliate investments	83,794			83,986			257,919			265,855
Structured credit securities	36,564			44,244			114,690			135,912
Total interest income	161,711			178,992			508,152			556,798
Dividend income:
Control investments	728			8,288			4,250			25,046
Non-control/non-affiliate investments	89			13			330			16
Total dividend income	817			8,301			4,580			25,062
Other income:
Control investments	2,953			1,758			9,749			7,436
Non-control/non-affiliate investments	5,551			442			11,863			9,639
Total other income (Note 10)	8,504			2,200			21,612			17,075
Total Investment Income	171,032			189,493			534,344			598,935
Operating Expenses
Base management fee (Note 13)	30,549			30,977			92,227			95,712
Income incentive fee (Note 13)	18,270			21,906			59,101			69,940
Interest and credit facility expenses	41,464			41,719			123,981			125,881
Allocation of overhead from Prospect Administration (Note 13)	3,581			2,936			9,771			9,114
Audit, compliance and tax related fees	1,223			1,596			3,676			4,665
Directors’ fees	113			94			338			282
Excise Tax	—			400			(1,100		)	1,700
Other general and administrative expenses	2,752			2,239			9,946			11,880
Total Operating Expenses	97,952			101,867			297,940			319,174
Net Investment Income	73,080			87,626			236,404			279,761
Net Realized and Change in Unrealized Gains (Losses) from Investments
Net realized gains (losses)
Control investments	1			16			184			7
Affiliate investments	—			(14,194		)	137			(14,194		)
Non-control/non-affiliate investments	177			3,394			489			(4,050		)
Net realized gains (losses)	178			(10,784		)	810			(18,237		)
Net change in unrealized (losses) gains
Control investments	(33,235		)	36,508			(30,937		)	(40,779		)
Affiliate investments	(581		)	189			(1,854		)	535
Non-control/non-affiliate investments	(19,930		)	(38,008		)	(2,480		)	(212,989		)
Net change in unrealized losses	(53,746		)	(1,311		)	(35,271		)	(253,233		)
Net Realized and Change in Unrealized Losses from Investments	(53,568		)	(12,095		)	(34,461		)	(271,470		)
Net realized losses on extinguishment of debt	(20		)	(23		)	(205		)	(86		)
Net Increase in Net Assets Resulting from Operations	$	19,492		$	75,508		$	201,738		$	8,205
Net increase in net assets resulting from operations per share	$	0.05		$	0.21		$	0.56		$	0.02
Dividends declared per share	$	(0.25	)	$	(0.25	)	$	(0.75	)	$	(0.75	)

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

(in thousands, except share data)

(Unaudited)



	Nine Months Ended March 31,
	2017			2016
Operations
Net investment income	$	236,404		$	279,761
Net realized gains (losses)	605			(18,323		)
Net change in unrealized losses	(35,271		)	(253,233		)
Net Increase in Net Assets Resulting from Operations	201,738			8,205

Distributions to Shareholders
Distribution from net investment income	(268,989		)	(266,920		)
Net Decrease in Net Assets Resulting from Distributions to Shareholders	(268,989		)	(266,920		)

Common Stock Transactions
Offering costs from issuance of common stock	—			118
Repurchase of common stock under stock repurchase program	—			(34,140		)
Value of shares issued through reinvestment of dividends	23,502			12,104
Net Increase (Decrease) in Net Assets Resulting from Common Stock Transactions	23,502			(21,918		)

Total Decrease in Net Assets	(43,749		)	(280,633		)
Net assets at beginning of period	3,435,917			3,703,049
Net Assets at End of Period (Accumulated Overdistributed Net Investment Income of $33,719 and $3,623, respectively)	$	3,392,168		$	3,422,416

Common Stock Activity
Shares repurchased under stock repurchase program	—			(4,708,750		)
Shares issued through reinvestment of dividends	2,778,472			1,731,768
Net shares issued (repurchased) due to common stock activity	2,778,472			(2,976,982		)
Shares issued and outstanding at beginning of period	357,107,231			359,090,759
Shares Issued and Outstanding at End of Period	359,885,703			356,113,777

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share data)

(Unaudited)



	Nine Months Ended March 31,
	2017			2016
Operating Activities
Net increase in net assets resulting from operations	$	201,738		$	8,205
Net realized losses on extinguishment of debt	205			86
Net realized (gains) losses from investments	(810		)	18,237
Net change in unrealized losses on investments	35,271			253,233
Amortization of discounts and premiums, net	42,937			62,631
Accretion of discount on Public Notes (Note 6)	200			148
Amortization of deferred financing costs	10,128			10,156
Payment-in-kind interest	(14,326		)	(7,475		)
Structuring fees	(11,674		)	(6,932		)
Change in operating assets and liabilities:
Payments for purchases of investments	(1,240,294		)	(670,657		)
Proceeds from sale of investments and collection of investment principal	1,061,839			955,415
Decrease in interest receivable, net	1,872			1,529
Decrease in other receivables	68			1,958
Decrease (increase) in prepaid expenses	139			(511		)
Decrease in due to broker	(957		)	(26,778		)
Decrease in interest payable	(7,041		)	(5,935		)
Increase (decrease) in due to Prospect Administration	82			(2,339		)
(Decrease) increase in due to Prospect Capital Management	(5,051		)	52,471
Increase (decrease) in accrued expenses	2,033			(255		)
Decrease in other liabilities	(1,615		)	(50		)
Net Cash Provided by Operating Activities	74,744			643,137
Financing Activities
Borrowings under Revolving Credit Facility (Note 4)	557,000			615,000
Principal payments under Revolving Credit Facility (Note 4)	(557,000		)	(983,700		)
Issuances of Public Notes, net of original issue discount (Note 6)	37,466			160,000
Redemptions of Convertible Notes (Note 5)	(167,500		)	(150,500		)
Issuances of Prospect Capital InterNotes® (Note 7)	109,221			74,862
Redemptions of Prospect Capital InterNotes®, net (Note 7)	(12,170		)	(3,769		)
Financing costs paid and deferred	(2,500		)	(6,759		)
Cost of shares repurchased under stock repurchase program	—			(34,140		)
Offering costs from issuance of common stock	—			118
Dividends paid	(245,255		)	(255,063		)
Net Cash Used in Financing Activities	(280,738		)	(583,951		)

Net (Decrease) Increase in Cash	(205,994		)	59,186
Cash at beginning of period	317,798			110,026
Cash at End of period	$	111,804		$	169,212

Supplemental Disclosures
Cash paid for interest	$	120,694		$	121,512
Non-Cash Financing Activities
Value of shares issued through reinvestment of dividends	$	23,502		$	12,104
Cost basis of investments written off as worthless	$	2,535		$	22,407

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value	Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

Control Investments (greater than 25.00% voting control)(45)

Arctic Energy Services, LLC(17)	Wyoming / Energy Equipment & Services	Class D Units (32,915 units)(15)		$	31,640	$	15,258	0.4%
		Class E Units (21,080 units)(15)		20,230		—		—%
		Class A Units (700 units)(15)		9,006		—		—%
		Class C Units (10 units)(15)		—		—		—%
				60,876		15,258		0.4%
CCPI Inc.(18)	Ohio / Electronic Equipment, Instruments & Components	Senior Secured Term Loan A (10.00%, due 12/31/2017)(3)	11,975	11,975		11,975		0.4%
		Senior Secured Term Loan B (12.00% plus 7.00% PIK, due 12/31/2017)(3)(44)	9,320	9,320		9,320		0.3%
		Common Stock (14,857 shares)		6,759		20,703		0.5%
				28,054		41,998		1.2%
CP Energy Services Inc.(19)	Oklahoma / Energy Equipment & Services	Series B Convertible Preferred Stock (1,043 shares)(15)		98,273		71,205		2.1%
		Common Stock (2,924 shares)(15)		15,227		—		—%
				113,500		71,205		2.1%
Credit Central Loan Company, LLC(20)	South Carolina / Consumer Finance	Subordinated Term Loan (10.00% plus 10.00% PIK, due 6/26/2019)(13)(44)	51,855	44,897		51,855		1.5%
		Class A Units (10,640,642 units)(13)(15)		13,731		8,342		0.2%
		Net Revenues Interest (25% of Net Revenues)(13)(15)		—		2,775		0.2%
				58,628		62,972		1.9%
Echelon Aviation LLC	New York / Aerospace & Defense	Senior Secured Term Loan (11.75% (LIBOR + 9.75% with 2.00% LIBOR floor) plus 2.25% PIK, due 3/31/2022)(10)(12)(44)	31,055	31,055		31,055		0.9%
		Senior Secured Term Loan (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 1.00% PIK, due 12/7/2024)(10)(12)(44)	16,044	16,044		16,044		0.5%
		Membership Interest (99%)		22,738		31,676		0.9%
				69,837		78,775		2.3%
Edmentum Ultimate Holdings, LLC(21)	Minnesota / Diversified Consumer Services	Second Lien Revolving Credit Facility to Edmentum, Inc. – $7,834 Commitment (5.00%, due 6/9/2020)(8)(14)	4,896	4,896		4,896		0.1%
		Unsecured Senior PIK Note (8.50% PIK, due 6/9/2020)(8)(44)	6,763	6,763		6,763		0.2%
		Unsecured Junior PIK Note (10.00% PIK, in non-accrual status effective 1/1/2017, due 6/9/2020)(8)	31,102	23,829		29,701		0.9%
		Class A Units (370,964 units)(15)		6,577		—		—%
				42,065		41,360		1.2%
First Tower Finance Company LLC(22)	Mississippi / Consumer Finance	Subordinated Term Loan to First Tower, LLC (10.00% plus 7.00% PIK, due 6/24/2019)(13)(44)	258,869	258,869		258,869		7.6%
		Class A Units (93,997,533 units)(13)(15)		78,481		90,556		2.7%
				337,350		349,425		10.3%
Freedom Marine Solutions, LLC(23)	Louisiana / Energy Equipment & Services	Membership Interest (100%)(15)		41,811		23,994		0.7%
				41,811		23,994		0.7%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

Control Investments (greater than 25.00% voting control)(45)

Gulf Coast Machine & Supply Company	Texas / Energy Equipment & Services	Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), in non-accrual status effective 1/1/2015, due 10/12/2017)(10)(11)	$	47,163	$	39,403	$	7,144	0.2%
		Series A Convertible Preferred Stock (99,900 shares)(15)			25,950		—		—%
		Common Stock (100 shares)(15)			—		—		—%
					65,353		7,144		0.2%
MITY, Inc.(24)	Utah / Commercial Services & Supplies	Senior Secured Note A (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 1/30/2020)(3)(10)(11)	26,250		26,250		26,250		0.8%
		Senior Secured Note B (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor) plus 10.00% PIK, due 1/30/2020)(3)(10)(11)(44)	24,442		24,442		24,442		0.7%
		Subordinated Unsecured Note to Broda Enterprises ULC (10.00%, due on demand)(13)	5,531		7,200		5,531		0.2%
		Common Stock (42,053 shares)			6,849		19,441		0.5%
					64,741		75,664		2.2%
National Property REIT Corp.(25)	Various / Equity Real Estate Investment Trusts (REITs) / Online Lending	Senior Secured Term Loan A (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(10)(11)(44)	297,065		297,065		297,065		8.8%
		Senior Secured Term Loan E (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 5.00% PIK, due 4/1/2019)(10)(11)(44)	132,741		132,741		132,741		3.9%
		Senior Secured Term Loan C to ACL Loan Holdings, Inc. (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 5.00% PIK, due 4/1/2019)(10)(11)(13)(44)	99,934		99,934		99,934		2.9%
		Senior Secured Term Loan C to American Consumer Lending Limited (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 5.00% PIK, due 12/15/2020)(10)(11)(13)(44)	46,918		46,918		46,918		1.4%
		Common Stock (2,266,143 shares)(15)			244,044		292,221		8.6%
		Net Operating Income Interest (5% of Net Operating Income)(15)			—		90,738		2.7%
					820,702		959,617		28.3%
Nationwide Loan Company LLC(26)	Illinois / Consumer Finance	Senior Subordinated Term Loan to Nationwide Acceptance LLC (10.00% plus 10.00% PIK, due 6/18/2019)(13)(44)	16,819		16,819		16,819		0.5%
		Class A Units (29,559,899 units)(13)			16,293		19,285		0.6%
					33,112		36,104		1.1%
NMMB, Inc.(27)	New York / Media	Senior Secured Note (14.00%, due 5/6/2021)	3,714		3,714		3,714		0.1%
		Senior Secured Note to Armed Forces Communications, Inc. (14.00%, due 5/6/2021)	7,000		7,000		7,000		0.2%
		Series A Preferred Stock (7,200 shares)(15)			7,200		3,598		0.1%
		Series B Preferred Stock (5,669 shares)(15)			5,669		2,833		0.1%
					23,583		17,145		0.5%
R-V Industries, Inc.	Pennsylvania / Machinery	Senior Subordinated Note (10.15% (LIBOR + 9.00% with 1.00% LIBOR floor), due 3/31/2022)(3)(10)(11)	28,622		28,622		28,622		0.8%
		Common Stock (745,107 shares)			6,866		8,601		0.3%
					35,488		37,223		1.1%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

Control Investments (greater than 25.00% voting control)(45)

USES Corp.(28)	Texas / Commercial Services & Supplies	Senior Secured Term Loan A (9.00% PIK, in non-accrual status effective 4/1/2016, due 3/31/2019)	$	29,433	$	27,658	$	23,458	0.7%
		Senior Secured Term Loan B (15.50% PIK, in non-accrual status effective 4/1/2016, due 3/31/2019)	39,892		35,568		—		—%
		Common Stock (268,962 shares)(15)			—		—		—%
					63,226		23,458		0.7%
Valley Electric Company, Inc.(29)	Washington / Construction & Engineering	Senior Secured Note to Valley Electric Co. of Mt. Vernon, Inc. (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor) plus 2.50% PIK, due 12/31/2019)(3)(10)(11)(44)	10,430		10,430		10,430		0.3%
		Senior Secured Note (10.00% plus 8.50% PIK, due 6/23/2019)(44)	25,091		25,091		22,367		0.7%
		Common Stock (50,000 shares)(15)			26,204		—		—%
					61,725		32,797		1.0%
Wolf Energy, LLC(30)	Kansas / Energy Equipment & Services	Senior Secured Promissory Note secured by assets formerly owned by H&M (18.00%, in non-accrual status effective 4/15/2013, due 4/15/2018)	41,757		—		93		0.1%
		Membership Interest (100%)(15)			—		—		—%
		Membership Interest in Wolf Energy Services Company, LLC (100%)(15)	—		19,376		18,472		0.5%
		Net Profits Interest (8% of Equity Distributions)(4)(15)			—		15		—%
					19,376		18,580		0.6%
					$	1,939,427	$	1,892,719	55.8%



Affiliate Investments (5.00% to 24.99% voting control)(46)

Targus International, LLC(31)	California / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan A (15.00% PIK, in non-accrual status effective 10/1/15, due 12/31/2019)(8)	$	1,474	$	1,263	$	1,474	—%
		Senior Secured Term Loan B (15.00% PIK, in non-accrual status effective 10/1/15, due 12/31/2019)(8)	4,423		3,788		4,423		0.2%
		Common Stock (1,262,737 shares)(15)			3,479		1,342		—%
					8,530		7,239		0.2%
					$	8,530	$	7,239	0.2%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value	Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

AFI Shareholder, LLC (f/k/a Aircraft Fasteners International, LLC)	California / Trading Companies & Distributors	Class A Units (32,500 units)(15)		$	272	$	1,081	—%
				272		1,081		—%
American Gilsonite Company(32)	Utah / Chemicals	Membership Interest (1.93%)(15)		—		—		—%
				—		—		—%
Apidos CLO IX	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 0.00%, due 7/15/2023)(5)(13)(16)	23,525	18,659		15,659		0.5%
				18,659		15,659		0.5%
Apidos CLO XI	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 11.38%, due 10/17/28)(5)(13)	40,500	30,085		25,879		0.8%
				30,085		25,879		0.8%
Apidos CLO XII	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 10.11%, due 4/15/2025)(5)(13)	44,063	31,781		28,485		0.8%
				31,781		28,485		0.8%
Apidos CLO XV	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 12.18%, due 10/20/2025)(5)(13)	36,515	29,352		25,307		0.7%
				29,352		25,307		0.7%
Apidos CLO XXII	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.20%, due 10/20/2027)(5)(6)(13)	31,350	27,083		26,695		0.8%
				27,083		26,695		0.8%
Ark-La-Tex Wireline Services, LLC	Louisiana / Energy Equipment & Services	Senior Secured Term Loan B (12.50% (LIBOR + 11.50% with 1.00% LIBOR floor), in non-accrual status effective 4/1/2016, due 4/8/2019)(10)(12)	26,080	21,447		1,450		—%
				21,447		1,450		—%
Armor Holding II LLC	New York / Commercial Services & Supplies	Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 12/26/2020)(3)(8)(10)(11)	7,000	6,923		6,923		0.2%
				6,923		6,923		0.2%
Atlantis Health Care Group (Puerto Rico), Inc.	Puerto Rico / Health Care Providers & Services	Revolving Line of Credit – $7,000 Commitment (9.50% (LIBOR + 8.00% with 1.50% LIBOR floor), due 8/21/2018)(10)(11)(14)	2,350	2,350		2,350		0.1%
		Senior Term Loan (9.50% (LIBOR + 8.00% with 1.50% LIBOR floor), due 2/21/2020)(3)(10)(11)	79,764	79,764		79,764		2.3%
				82,114		82,114		2.4%
Babson CLO Ltd. 2014-III	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 15.02%, due 1/15/2026)(5)(6)(13)	52,250	42,815		39,221		1.2%
				42,815		39,221		1.2%
Broder Bros., Co.	Pennsylvania / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan A (7.00% (LIBOR + 5.75% with 1.25% LIBOR floor), due 6/03/2021)(3)(10)(12)	118,524	118,524		118,524		3.5%
		Senior Secured Term Loan B (13.50% (LIBOR + 12.25% with 1.25% LIBOR floor), due 6/03/2021)(10)(12)	119,999	119,999		119,999		3.5%
				238,523		238,523		7.0%
Brookside Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 7.49%, due 4/17/2025)(5)(13)	26,000	18,235		16,243		0.5%
				18,235		16,243		0.5%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

California Street CLO IX Ltd. (f/k/a Symphony CLO IX Ltd.)	Cayman Islands / Structured Finance	Preference Shares (Residual Interest, current yield 13.98%, due 10/16/2028)(5)(13)	$	58,915	$	41,073	$	36,024	1.1%
					41,073		36,024		1.1%
Capstone Logistics Acquisition, Inc.	Georgia / Commercial Services & Supplies	Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 10/7/2022)(3)(8)(10)(11)	101,828		101,362		100,741		3.0%
					101,362		100,741		3.0%
Carlyle Global Market Strategies CLO 2016-3, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.49%, due 10/20/2029)(5)(6)(13)	32,200		32,520		28,924		0.9%
					32,520		28,924		0.9%
Cent CLO 17 Limited	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 7.39%, due 1/30/2025)(5)(13)	24,870		18,168		15,487		0.5%
					18,168		15,487		0.5%
Cent CLO 20 Limited	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 6.51%, due 1/25/2026)(5)(13)	40,275		31,502		24,797		0.7%
					31,502		24,797		0.7%
Cent CLO 21 Limited	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 10.68%, due 7/27/2026)(5)(6)(13)	48,528		35,952		30,947		0.9%
					35,952		30,947		0.9%
Centerfield Media Holding Company(33)	California / Internet Software and Services	Senior Secured Term Loan A (8.15% (LIBOR + 7.00% with 1.00% LIBOR floor), due 1/17/2022)(3)(8)(10)(11)	67,660		67,660		67,660		2.0%
		Senior Secured Term Loan B (13.65% (LIBOR + 12.50% with 1.00% LIBOR floor), due 1/17/2022)(8)(10)(11)	68,000		68,000		68,000		2.0%
					135,660		135,660		4.0%
CIFC Funding 2013-III, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.68%, due 10/24/2025)(5)(13)	44,100		31,118		30,495		0.9%
					31,118		30,495		0.9%
CIFC Funding 2013-IV, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 18.72%, due 11/27/2024)(5)(13)	45,500		33,065		34,293		1.0%
					33,065		34,293		1.0%
CIFC Funding 2014-IV Investor, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 16.37%, due 10/17/2026)(5)(6)(13)	41,500		30,538		31,185		0.9%
					30,538		31,185		0.9%
CIFC Funding 2016-I, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 17.50%, due 10/21/2028)(5)(6)(13)	34,000		31,369		29,896		0.9%
					31,369		29,896		0.9%
Cinedigm DC Holdings, LLC	New York / Media	Senior Secured Term Loan (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/31/2021)(10)(11)(44)	54,656		54,606		54,656		1.6%
					54,606		54,656		1.6%
Coverall North America, Inc.	Florida / Commercial Services & Supplies	Senior Secured Term Loan A (7.15% (LIBOR + 6.00% with 1.00% LIBOR floor), due 11/02/2020)(3)(10)(11)	23,500		23,500		23,500		0.7%
		Senior Secured Term Loan B (12.15% (LIBOR + 11.00% with 1.00% LIBOR floor), due 11/02/2020)(3)(10)(11)	25,000		25,000		25,000		0.7%
					48,500		48,500		1.4%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Crosman Corporation	New York / Leisure Products	Senior Secured Term Loan A (9.68% (LIBOR + 8.70% with .30% LIBOR floor) plus 4.00% PIK, due 8/5/2020)(3)(10)(12)(44)	$	55,652	$	55,652	$	55,652	1.6%
		Senior Secured Term Loan B (16.68% (LIBOR + 15.70% with .30% LIBOR floor) plus 4.00% PIK, due 8/5/2020)(10)(12)(44)	42,402		42,402		42,402		1.3%
					98,054		98,054		2.9%
CURO Financial Technologies Corp.	Canada / Consumer Finance	Senior Secured Notes (12.00%, due 3/1/2022)(8)(13)	10,000		9,822		10,000		0.3%
					9,822		10,000		0.3%
Digital Room LLC	California / Commercial Services & Supplies	Second Lien Term Loan (11.00% (LIBOR + 10.00% with 1.00% LIBOR floor), due 5/21/2023)(3)(8)(10)(12)	34,000		33,363		33,363		1.0%
					33,363		33,363		1.0%
Dunn Paper, Inc.	Georgia / Paper & Forest Products	Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 8/26/2023)(3)(8)(10)(11)	11,500		11,287		11,313		0.3%
					11,287		11,313		0.3%
Easy Gardener Products, Inc.	Texas / Household Durables	Senior Secured Term Loan (11.15% (LIBOR + 10.00% with .25% LIBOR floor), due 09/30/2020)(3)(10)(11)	17,238		17,238		17,238		0.5%
					17,238		17,238		0.5%
EZShield Parent, Inc.	Maryland / Internet Software & Services	Senior Secured Term Loan A (7.75% (LIBOR + 6.75% with 1.00% LIBOR floor), due 2/26/2021)(10)(12)	15,000		15,000		15,000		0.4%
		Senior Secured Term Loan B (12.75% (LIBOR + 11.75% with 1.00% LIBOR floor), due 2/26/2021)(10)(12)	15,000		15,000		15,000		0.4%
					30,000		30,000		0.8%
Fleetwash, Inc.	New Jersey / Commercial Services & Supplies	Senior Secured Term Loan B (10.65% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/30/2019)(3)(10)(11)	23,402		23,402		23,402		0.7%
		Delayed Draw Term Loan – $15,000 Commitment (9.65% (LIBOR + 8.50% with 1.00% LIBOR floor)expires 4/30/2019)(10)(14)	—		—		—		—%
					23,402		23,402		0.7%
Galaxy XV CLO, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.81%, due 4/15/2025)(5)(13)	50,525		34,526		37,277		1.1%
					34,526		37,277		1.1%
Galaxy XVI CLO, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 13.80%, due 11/16/2025)(5)(13)	24,575		18,253		17,448		0.5%
					18,253		17,448		0.5%
Galaxy XVII CLO, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 12.72%, due 7/15/2026)(5)(6)(13)	39,905		30,210		28,854		0.9%
					30,210		28,854		0.9%
Global Employment Solutions, Inc.	Colorado / Professional Services	Senior Secured Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 6/26/2020)(3)(10)(12)	49,125		49,125		49,125		1.4%
					49,125		49,125		1.4%
Halcyon Loan Advisors Funding 2012-1 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 0.00%, due 8/15/2023)(5)(13)(16)	23,188		15,774		13,141		0.4%
					15,774		13,141		0.4%
Halcyon Loan Advisors Funding 2013-1 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 12.90%, due 4/15/2025)(5)(13)	40,400		28,538		28,011		0.8%
					28,538		28,011		0.8%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Halcyon Loan Advisors Funding 2014-1 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 13.38%, due 4/18/2026)(5)(13)	$	24,500	$	16,713	$	16,213	0.5%
					16,713		16,213		0.5%
Halcyon Loan Advisors Funding 2014-2 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 14.73%, due 4/28/2025)(5)(6)(13)	41,164		28,035		28,193		0.8%
					28,035		28,193		0.8%
Halcyon Loan Advisors Funding 2015-3 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.12%, due 10/18/2027)(5)(6)(13)	39,598		34,900		36,256		1.1%
					34,900		36,256		1.1%
Harbortouch Payments, LLC	Pennsylvania / Commercial Services & Supplies	Escrow Receivable(15)			—		2,209		0.1%
					—		2,209		0.1%
HarbourView CLO VII, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 20.66%, due 11/18/2026)(5)(6)(13)	19,025		15,003		14,413		0.4%
					15,003		14,413		0.4%
Harley Marine Services, Inc.	Washington / Marine	Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 12/20/2019)(3)(8)(10)(11)	9,000		8,910		8,813		0.3%
					8,910		8,813		0.3%
Hollander Sleep Products, LLC	Florida / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 10/21/2020)(3)(10)(11)	21,860		21,860		21,639		0.6%
					21,860		21,639		0.6%
Inpatient Care Management Company, LLC	Florida / Health Care Providers & Services	Senior Secured Term Loan (11.65% (LIBOR + 10.50% with 1.00% LIBOR floor), due 6/8/2021(10)(12)	26,023		26,023		26,023		0.8%
					26,023		26,023		0.8%
Instant Web, LLC	Minnesota / Media	Senior Secured Term Loan A (5.65% (LIBOR + 4.50% with 1.00% LIBOR floor), due 3/28/2019)(10)(11)	121,447		121,447		121,447		3.6%
		Senior Secured Term Loan B (12.15% (LIBOR + 11.00% with 1.00% LIBOR floor), due 3/28/2019)(3)(10)(11)	158,100		158,100		158,100		4.7%
		Senior Secured Term Loan C-1 (12.90% (LIBOR + 11.75% with 1.00% LIBOR floor), due 3/28/2019)(10)(11)	27,000		27,000		27,000		0.8%
		Senior Secured Term Loan C-2 (13.65% (LIBOR + 12.50% with 1.00% LIBOR floor), due 3/28/2019)(10)(11)	25,000		25,000		25,000		0.7%
					331,547		331,547		9.8%
InterDent, Inc.	California / Health Care Providers & Services	Senior Secured Term Loan A (6.48% (LIBOR + 5.50% with 0.75% LIBOR floor), due 8/3/2017)(10)(12)	78,876		78,876		78,876		2.3%
		Senior Secured Term Loan B (11.48% (LIBOR + 10.50% with 0.75% LIBOR floor), due 8/3/2017)(3)(10)(12)	131,125		131,125		131,125		3.9%
					210,001		210,001		6.2%
JD Power and Associates	California / Capital Markets	Second Lien Term Loan (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor), due 9/7/2024)(3)(8)(10)(11)	15,000		14,790		15,000		0.4%
					14,790		15,000		0.4%
Jefferson Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 11.42%, due 7/20/2027)(5)(6)(13)	19,500		16,919		14,213		0.4%
					16,919		14,213		0.4%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

K&N Parent, Inc.	California / Auto Components	Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 10/20/2024)(8)(10)(11)	$	13,000	$	12,754	$	13,000	0.4%
					12,754		13,000		0.4%
Keystone Peer Review Organization Holdings, Inc.	Pennsylvania / Health Care Providers & Services	Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 7/28/2023)(3)(8)(10)	45,000		45,000		45,000		1.3%
					45,000		45,000		1.3%
LaserShip, Inc.	Virginia / Air Freight & Logistics	Senior Secured Term Loan A (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 3/18/2019)(3)(10)(12)	33,955		33,955		33,955		1.0%
		Senior Secured Term Loan B (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 3/18/2019)(3)(10)(12)	20,851		20,851		20,851		0.6%
					54,806		54,806		1.6%
LCM XIV Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 16.15%, due 7/15/2025)(5)(13)	30,500		21,752		22,344		0.7%
					21,752		22,344		0.7%
Madison Park Funding IX, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 0.11%, due 8/15/2022)(5)(13)	43,110		28,613		27,895		0.8%
					28,613		27,895		0.8%
Matrixx Initiatives, Inc.	New Jersey / Pharmaceuticals	Senior Secured Term Loan A (7.65% (LIBOR + 6.50% with 1.00% LIBOR floor), due 2/24/2020)(3)(10)(11)	66,802		66,802		66,802		2.0%
		Senior Secured Term Loan B (12.65% (LIBOR + 11.50% with 1.00% LIBOR floor), due 2/24/2020)(3)(10)(11)	52,562		52,562		52,562		1.5%
					119,364		119,364		3.5%
Maverick Healthcare Equity, LLC	Arizona / Health Care Providers & Services	Preferred Units (1,250,000 units)(15)			1,252		751		—%
		Class A Common Units (1,250,000 units)(15)			—		—		—%
					1,252		751		—%
Memorial MRI & Diagnostic, LLC	Texas / Health Care Providers & Services	Senior Secured Term Loan (9.65% (LIBOR + 8.50% with 1.00% LIBOR floor), due 3/16/2022)(10)(11)	38,000		38,000		38,000		1.1%
					38,000		38,000		1.1%
Mineral Fusion Natural Brands(34)	Colorado / Personal Products	Membership Interest (1.43%)(15)			—		157		—%
					—		157		—%
Mountain View CLO 2013-I Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 14.48%, due 4/12/2024)(5)(13)	43,650		29,920		29,395		0.9%
					29,920		29,395		0.9%
Mountain View CLO IX Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 15.27%, due 7/15/2027)(5)(6)(13)	47,830		41,480		40,635		1.2%
					41,480		40,635		1.2%
National Home Healthcare Corp.	Michigan / Health Care Providers & Services	Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 12/8/2022)(3)(8)(10)	15,407		15,189		15,189		0.4%
					15,189		15,189		0.4%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

NCP Finance Limited Partnership(35)	Ohio / Consumer Finance	Subordinated Secured Term Loan (11.00% (LIBOR + 9.75% with 1.25% LIBOR floor), due 9/30/2018)(3)(8)(10)(12)(13)	$	26,960	$	26,471	$	25,751	0.8%
					26,471		25,751		0.8%
Nixon, Inc.	California / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan (9.50% plus 3.00% PIK, plus 2.00% default interest, in non-accrual status effective 7/1/2016, due 4/16/2018)(8)	15,978		14,197		1,552		—%
					14,197		1,552		—%
Octagon Investment Partners XV, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 6.57%, due 1/19/2025)(5)(13)	32,921		24,385		19,764		0.6%
					24,385		19,764		0.6%
Octagon Investment Partners XVIII, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 18.45%, due 12/16/2024)(5)(6)(13)	28,200		18,473		18,234		0.5%
					18,473		18,234		0.5%
Outerwall Inc.	Washington / Specialty Retail	Senior Secured Term Loan B (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 9/27/2024)(3)(8)(10)(11)	40,000		39,443		40,000		1.2%
					39,443		40,000		1.2%
Pacific World Corporation	California / Personal Products	Revolving Line of Credit – $15,000 Commitment (8.00% (LIBOR + 7.00% with 1.00% LIBOR floor), due 9/26/2020)(10)(12)(14)	13,225		13,225		13,225		0.4%
		Senior Secured Term Loan A (6.00% (LIBOR + 5.00% with 1.00% LIBOR floor), due 9/26/2020)(3)(10)(12)	97,500		97,500		93,915		2.8%
		Senior Secured Term Loan B (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/26/2020)(3)(10)(12)	97,500		97,500		70,296		2.1%
					208,225		177,436		5.3%
Pelican Products, Inc.	California / Chemicals	Second Lien Term Loan (9.40% (LIBOR + 8.25% with 1.00% LIBOR floor), due 4/9/2021)(3)(8)(10)(12)	17,500		17,488		17,073		0.5%
					17,488		17,073		0.5%
PeopleConnect Intermediate, LLC (f/k/a Intelius, Inc.)	Washington / Internet Software & Services	Revolving Line of Credit – $1,000 Commitment (9.65% (LIBOR + 8.50% with 1.00% LIBOR floor), due 8/11/17)(10)(11)(14)	—		—		—		—%
		Senior Secured Term Loan A (6.65% (LIBOR + 5.50% with 1.00% LIBOR floor), due 7/1/2020)(3)(10)(11)	19,841		19,841		19,730		0.6%
		Senior Secured Term Loan B (12.65% (LIBOR + 11.50% with 1.00% LIBOR floor), due 7/1/2020)(3)(10)(11)	20,670		20,670		20,496		0.6%
					40,511		40,226		1.2%
PGX Holdings, Inc.(37)	Utah / Diversified Consumer Services	Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/29/2021)(3)(10)(12)	143,767		143,767		143,767		4.2%
					143,767		143,767		4.2%
Photonis Technologies SAS	France / Aerospace & Defense	First Lien Term Loan (8.65% (LIBOR + 7.50% with 1.00% LIBOR floor), due 9/18/2019)(8)(10)(11)(13)	9,927		9,796		9,186		0.3%
					9,796		9,186		0.3%
Pinnacle (US) Acquisition Co. Limited	Texas / Electronic Equipment, Instruments & Components	Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 8/3/2020)(8)(10)(11)	7,037		6,940		5,259		0.2%
					6,940		5,259		0.2%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

PlayPower, Inc.	North Carolina / Leisure Products	Second Lien Term Loan (9.90% (LIBOR + 8.75% with 1.00% LIBOR floor), due 6/23/2022)(3)(8)(10)(11)	$	11,000	$	10,874	$	11,000	0.3%
					10,874		11,000		0.3%
PrimeSport, Inc.	Georgia / Hotels, Restaurants & Leisure	Senior Secured Term Loan A (8.15% (LIBOR + 7.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(10)(11)	53,274		53,274		50,540		1.5%
		Senior Secured Term Loan B (13.15% (LIBOR + 12.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(10)(11)	74,500		74,500		64,785		1.9%
					127,774		115,325		3.4%
Prince Mineral Holding Corp.	New York / Metals & Mining	Senior Secured Term Loan (11.50%, due 12/15/2019)(8)	10,000		9,948		10,000		0.3%
					9,948		10,000		0.3%
Rocket Software, Inc.	Massachusetts / Software	Second Lien Term Loan (10.65% (LIBOR + 9.50% with 1.00% LIBOR floor), due 10/14/2024)(8)(10)(11)	50,000		49,063		50,000		1.5%
					49,063		50,000		1.5%
Royal Holdings, Inc.	Indiana / Chemicals	Second Lien Term Loan (8.65% (LIBOR + 7.50% with 1.00% LIBOR floor), due 6/19/2023)(3)(8)(10)(11)	2,759		2,729		2,759		0.1%
					2,729		2,759		0.1%
SCS Merger Sub, Inc.	Texas / IT Services	Second Lien Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 10/30/2023)(3)(8)(10)(12)	20,000		19,512		20,000		0.6%
					19,512		20,000		0.6%
SESAC Holdco II LLC	Tennessee / Media	Second Lien Term Loan (8.30% (LIBOR + 7.25% with 1.00% LIBOR floor), due 2/23/2025)(8)(10)(12)	3,000		2,970		2,970		0.1%
					2,970		2,970		0.1%
SITEL Worldwide Corporation	Tennessee / Commercial Services & Supplies	Second Lien Term Loan (10.65% (LIBOR + 9.50% with 1.00% LIBOR floor), due 9/18/2022)(3)(8)(10)(11)	21,750		21,206		21,750		0.6%
					21,206		21,750		0.6%
Small Business Whole Loan Portfolio(40)	New York / Online Lending	1,059 Small Business Loans purchased from On Deck Capital, Inc.	11,075		11,075		10,521		0.3%
					11,075		10,521		0.3%
Spartan Energy Services, Inc.	Louisiana / Energy Equipment & Services	Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), in non-accrual status effective 4/1/2016, due 12/28/2018)(10)(12)	13,156		12,172		8,188		0.2%
		Senior Secured Term Loan B (13.00% (LIBOR + 12.00% with 1.00% LIBOR floor), in non-accrual status effective 4/1/2016, due 12/28/2018)(10)(12)	15,583		13,669		—		—%
					25,841		8,188		0.2%
Stryker Energy, LLC	Ohio / Oil, Gas & Consumable Fuels	Overriding Royalty Interests(9)			—		—		—%
					—		—		—%
Sudbury Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 8.39%, due 1/17/2026)(5)(13)	28,200		19,662		16,210		0.5%
					19,662		16,210		0.5%
Symphony CLO XIV Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 11.48%, due 7/14/2026)(5)(6)(13)	49,250		37,787		35,096		1.0%
					37,787		35,096		1.0%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Symphony CLO XV, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 14.57%, due 10/17/2026)(5)(13)	$	50,250	$	41,397	$	38,390	1.1%
					41,397		38,390		1.1%
TouchTunes Interactive Networks, Inc.	New York / Internet Software & Services	Second Lien Term Loan (9.35% (LIBOR + 8.25% with 1.00% LIBOR floor), due 5/29/2022)(3)(8)(10)(11)	14,000		13,902		13,902		0.4%
					13,902		13,902		0.4%
Traeger Pellet Grills LLC	Oregon / Household Durables	Senior Secured Term Loan A (6.50% (LIBOR + 4.50% with 2.00% LIBOR floor), due 6/18/2019)(3)(10)(11)	53,525		53,525		53,525		1.6%
		Senior Secured Term Loan B (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 6/18/2019)(3)(10)(11)	56,175		56,175		56,175		1.7%
					109,700		109,700		3.3%
Transaction Network Services, Inc.	Virginia / Diversified Telecommunication Services	Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 8/14/2020)(3)(8)(10)(11)	4,410		4,395		4,395		0.1%
					4,395		4,395		0.1%
Turning Point Brands, Inc.	Kentucky / Tobacco	Second Lien Term Loan (11.00%, due 8/17/2022)(3)(8)	14,500		14,359		14,359		0.4%
					14,359		14,359		0.4%
United Sporting Companies, Inc.(42)	South Carolina / Distributors	Second Lien Term Loan (12.75% (LIBOR + 11.00% with 1.75% LIBOR floor), due 5/16/2018)(3)(10)(12)	140,847		140,847		132,644		3.9%
					140,847		132,644		3.9%
Universal Fiber Systems, LLC	Virginia / Textiles, Apparel & Luxury Goods	Second Lien Term Loan (10.53% (LIBOR + 9.50% with 1.00% LIBOR floor), due 10/02/2022)(3)(8)(10)(12)	37,000		36,419		37,000		1.1%
					36,419		37,000		1.1%
Universal Turbine Parts, LLC	Alabama / Trading Companies & Distributors	Senior Secured Term Loan A (6.75% (LIBOR + 5.75% with 1.00% LIBOR floor), due 7/22/2021)(3)(10)(11)	32,175		32,175		32,175		0.9%
		Senior Secured Term Loan B (12.75% (LIBOR + 11.75% with 1.00% LIBOR floor), due 7/22/2021)(3)(10)(11)	32,500		32,500		32,500		1.0%
					64,675		64,675		1.9%
USG Intermediate, LLC	Texas / Leisure Products	Revolving Line of Credit – $2,500 Commitment (10.75% (LIBOR + 9.75% with 1.00% LIBOR floor), due 4/15/2017)(10)(12)(14)	1,000		1,000		1,000		—%
		Senior Secured Term Loan A (8.25% (LIBOR + 7.25% with 1.00% LIBOR floor), due 4/15/2020)(3)(10)(12)	15,969		15,969		15,969		0.5%
		Senior Secured Term Loan B (13.25% (LIBOR + 12.25% with 1.00% LIBOR floor), due 4/15/2020)(3)(10)(12)	19,701		19,701		19,701		0.6%
		Equity(15)			1		—		—%
					36,671		36,670		1.1%
VC GB Holdings, Inc.	Illinois / Household Durables	Subordinated Secured Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 2/28/2025)(8)(10)	20,000		19,703		19,818		0.6%
					19,703		19,818		0.6%
Venio LLC	Pennsylvania / Professional Services	Second Lien Term Loan (12.00% (LIBOR + 9.50% with 2.50% LIBOR floor) plus 2.00% default interest, in non-accrual status effective 12/31/15, due 2/19/2020)(10)(11)	17,000		16,484		8,437		0.2%
					16,484		8,437		0.2%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			March 31, 2017 (Unaudited)
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Vivid Seats LLC	Illinois / Internet & Direct Marketing Retail	Second Lien Term Loan (10.75% (LIBOR + 9.75% with 1.00% LIBOR floor), due 10/12/2023)(8)(10)(11)	$	22,500	$	22,082	$	22,378	0.7%
					22,082		22,378		0.7%
Voya CLO 2012-2, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 0.00%, due 10/15/2022)(5)(13)(16)	38,070		26,245		23,598		0.7%
					26,245		23,598		0.7%
Voya CLO 2012-3, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 0.00%, due 10/15/2022)(5)(13)(16)	46,632		32,021		27,671		0.8%
					32,021		27,671		0.8%
Voya CLO 2012-4, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 14.95%, due 10/15/2028)(5)(13)	40,613		31,242		31,197		0.9%
					31,242		31,197		0.9%
Voya CLO 2014-1, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 17.24%, due 4/18/2026)(5)(6)(13)	32,383		25,103		27,200		0.8%
					25,103		27,200		0.8%
Voya CLO 2016-3, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 15.10%, due 10/18/2027%)(5)(6)(13)	28,100		28,296		26,669		0.8%
					28,296		26,669		0.8%
Washington Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 10.21%, due 4/20/2026)(5)(6)(13)	22,600		17,027		14,663		0.4%
					17,027		14,663		0.4%
Water Pik, Inc.	Colorado / Personal Products	Second Lien Term Loan (9.90% (LIBOR + 8.75% with 1.00% LIBOR floor), due 1/8/2021)(3)(8)(10)(11)	13,740		13,468		13,740		0.4%
		Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 1/8/2021)	708		694		708		—%
					14,162		14,448		0.4%
Wheel Pros, LLC	Colorado / Auto Components	Senior Subordinated Secured Note (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020)(3)(10)(11)	12,000		12,000		12,000		0.4%
		Senior Subordinated Secured Note (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020)(3)(10)(11)	5,460		5,460		5,460		0.3%
					17,460		17,460		0.7%
Total Non-Control/Non-Affiliate Investments (Level 3)					$	4,305,472	$	4,124,808	121.6%

Total Portfolio Investments					$	6,253,429	$	6,024,766	177.6%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value	Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

Control Investments (greater than 25.00% voting control)(47)

Arctic Energy Services, LLC(17)	Wyoming / Energy Equipment & Services	Class D Units (32,915 units)(15)		$	31,640	$	35,815	1.0%
		Class E Units (21,080 units)(15)		20,230		2,525		0.1%
		Class A Units (700 units)(15)		9,006		—		—%
		Class C Units (10 units)(15)		—		—		—%
				60,876		38,340		1.1%
CCPI Inc.(18)	Ohio / Electronic Equipment, Instruments & Components	Senior Secured Term Loan A (10.00%, due 12/31/2017)(3)	12,313	12,313		12,313		0.4%
		Senior Secured Term Loan B (12.00% plus 7.00% PIK, due 12/31/2017)(44)	9,320	9,320		9,320		0.3%
		Common Stock (14,857 shares)		6,635		19,723		0.5%
				28,268		41,356		1.2%
CP Energy Services Inc.(19)	Oklahoma / Energy Equipment & Services	Series B Convertible Preferred Stock (1,043 shares)(39)		98,273		76,002		2.2%
		Common Stock (2,924 shares)(15)		15,227		—		—%
				113,500		76,002		2.2%
Credit Central Loan Company, LLC(20)	South Carolina / Consumer Finance	Subordinated Term Loan (10.00% plus 10.00% PIK, due 6/26/2019)(13)(40)	36,931	36,931		36,931		1.1%
		Class A Units (7,500,000 units)(13)(15)		11,633		11,707		0.3%
		Net Revenues Interest (25% of Net Revenues)(13)(15)		—		3,616		0.1%
				48,564		52,254		1.5%
Echelon Aviation LLC	New York / Aerospace & Defense	Senior Secured Term Loan (11.75% (LIBOR + 9.75% with 2.00% LIBOR floor) plus 2.25% PIK, due 3/31/2022)(10)(12)(44)	37,855	37,855		37,855		1.1%
		Membership Interest (99%)		19,907		22,966		0.7%
				57,762		60,821		1.8%
Edmentum Ultimate Holdings, LLC(21)	Minnesota / Diversified Consumer Services	Second Lien Revolving Credit Facility to Edmentum, Inc. – $7,834 Commitment (5.00%, due 6/9/2020)(14)	6,424	6,424		6,424		0.2%
		Unsecured Senior PIK Note (8.50% PIK, due 6/9/2020)(44)	6,341	6,341		6,341		0.2%
		Unsecured Junior PIK Note (10.00% PIK, due 6/9/2020)(44)	28,834	22,337		25,569		0.7%
		Class A Units (370,964 units)(15)		6,576		6,012		0.2%
				41,678		44,346		1.3%
First Tower Finance Company LLC(22)	Mississippi / Consumer Finance	Subordinated Term Loan to First Tower, LLC (10.00% plus 12.00% PIK, due 6/24/2019)(13)(44)	255,762	255,762		255,762		7.4%
		Class A Units (86,711,625 units)(13)(15)		70,476		96,904		2.8%
				326,238		352,666		10.2%
Freedom Marine Solutions, LLC(23)	Louisiana / Energy Equipment & Services	Membership Interest (100%)(15)		40,810		26,618		0.8%
				40,810		26,618		0.8%
Gulf Coast Machine & Supply Company	Texas / Energy Equipment & Services	Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), in non-accrual status effective 1/1/2015, due 10/12/2017)(10)(11)	38,892	34,425		7,312		0.2%
		Series A Convertible Preferred Stock (99,900 shares)(15)		25,950		—		—%
				60,375		7,312		0.2%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

Control Investments (greater than 25.00% voting control)(47)

MITY, Inc.(24)	Utah / Commercial Services & Supplies	Senior Secured Note A (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 3/19/2019)(3)(10)(11)	$	18,250	$	18,250	$	18,250	0.5%
		Senior Secured Note B (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor) plus 10.00% PIK, due 3/19/2019)(3)(10)(11)(39)	16,442		16,442		16,442		0.5%
		Subordinated Unsecured Note to Broda Enterprises ULC (10.00%, due on demand)(13)	7,200		7,200		5,667		0.2%
		Common Stock (42,053 shares)			6,848		13,690		0.4%
					48,740		54,049		1.6%
National Property REIT Corp.(25)	Various / Equity Real Estate Investment Trusts (REITs) / Online Lending	Senior Secured Term Loan A (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(10)(11)(44)	248,677		248,677		248,677		7.2%
		Senior Secured Term Loan E (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 5.00% PIK, due 4/1/2019)(10)(11)(44)	212,819		212,819		212,819		6.2%
		Senior Secured Term Loan C to ACL Loan Holdings, Inc. (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 5.00% PIK, due 4/1/2019)(10)(11)(13)(44)	99,972		99,972		99,972		2.9%
		Common Stock (1,533,899 shares)(15)			165,908		215,491		6.3%
		Net Operating Income Interest (5% of Net Operating Income)(15)			—		66,974		2.0%
					727,376		843,933		24.6%
Nationwide Loan Company LLC(26)	Illinois / Consumer Finance	Senior Subordinated Term Loan to Nationwide Acceptance LLC (10.00% plus 10.00% PIK, due 6/18/2019)(13)(44)	16,696		16,696		16,696		0.5%
		Class A Units (29,343,795 units)(13)			16,201		19,117		0.5%
					32,897		35,813		1.0%
NMMB, Inc.(27)	New York / Media	Senior Secured Note (14.00%, due 5/6/2021)	3,714		3,714		3,442		0.1%
		Senior Secured Note to Armed Forces Communications, Inc. (14.00%, due 5/6/2021)	7,000		7,000		6,487		0.2%
		Series A Preferred Stock (7,200 shares)(15)			7,200		44		—%
		Series B Preferred Stock (5,669 shares)(15)			5,669		34		—%
					23,583		10,007		0.3%
R-V Industries, Inc.	Pennsylvania / Machinery	Senior Subordinated Note (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 6/12/2018)(3)(10)(11)	28,622		28,622		28,622		0.8%
		Common Stock (545,107 shares)			5,087		6,039		0.2%
		Warrant (to purchase 200,000 shares of Common Stock, expires 6/30/2017)			1,682		2,216		0.1%
					35,391		36,877		1.1%
USES Corp.(28)	Texas / Commercial Services & Supplies	Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor) plus 2.00% default interest, in non-accrual status effective 4/1/2016, due 3/31/2019)(10)(11)	26,300		26,158		26,300		0.8%
		Senior Secured Term Loan B (13.50% (LIBOR + 12.50% with 1.00% LIBOR floor) plus 2.00% default interest, in non-accrual status effective 4/1/2016, due 3/31/2019)(10)(11)	36,000		35,568		13,986		0.4%
		Common Stock (268,962 shares)(15)			—		—		—%
					61,726		40,286		1.2%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

Control Investments (greater than 25.00% voting control)(47)

Valley Electric Company, Inc.(29)	Washington / Construction & Engineering	Senior Secured Note to Valley Electric Co. of Mt. Vernon, Inc. (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor) plus 2.50% PIK, due 12/31/2019)(3)(10)(11)(44)	$	10,430	$	10,430	$	10,430	0.3%
		Senior Secured Note (10.00% plus 8.50% PIK, due 6/23/2019)(44)	23,802		23,802		20,661		0.6%
		Common Stock (50,000 shares)(15)			26,204		—		—%
					60,436		31,091		0.9%
Wolf Energy, LLC(30)	Kansas / Energy Equipment & Services	Senior Secured Promissory Note secured by assets formerly owned by H&M (18.00%, in non-accrual status effective 4/15/2013, due 4/15/2018)	38,257		—		659		—%
		Membership Interest (100%)(15)			—		—		—%
		Net Profits Interest (8% of Equity Distributions)(4)(15)			—		19		—%
					—		678		—%
					$	1,768,220	$	1,752,449	51.0%



Affiliate Investments (5.00% to 24.99% voting control)(48)

BNN Holdings Corp.	Michigan / Health Care Technology	Series A Preferred Stock (9,925.455 shares)(7)(15)		$	1,780	$	2,270	0.1%
		Series B Preferred Stock (1,753.636 shares)(7)(15)		448		572		—%
				2,228		2,842		0.1%
Targus International, LLC(31)	California / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan A (15.00% PIK, in non-accrual status effective 10/1/15, due 12/31/2019)(8)	1,319	1,263		1,319		—%
		Senior Secured Term Loan B (15.00% PIK , in non-accrual status effective 10/1/15, due 12/31/2019)(8)	3,957	3,788		3,957		0.1%
		Common Stock (1,262,737 shares)(15)		3,479		3,202		0.1%
				8,530		8,478		0.2%
				$	10,758	$	11,320	0.3%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value	Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

AFI Shareholder, LLC (f/k/a Aircraft Fasteners International, LLC)	California / Trading Companies & Distributors	Class A Units (32,500 units)(15)		$	330	$	511	—%
				330		511		—%
Airmall Inc.	Pennsylvania / Real Estate Management & Development	Escrow Receivable		3,916		3,900		0.1%
				3,916		3,900		0.1%
Ajax Rolled Ring & Machine, LLC(39)	South Carolina / Metals & Mining	Escrow Receivable		—		608		—%
				—		608		—%
ALG USA Holdings, LLC	Pennsylvania / Hotels, Restaurants & Leisure	Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 2/28/2020)(8)(10)(11)	11,771	11,630		11,771		0.3%
				11,630		11,771		0.3%
American Gilsonite Company(32)	Utah / Metals & Mining	Membership Interest (1.93%)(15)		—		—		—%
				—		—		—%
Apidos CLO IX	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.98%, due 7/15/2023)(5)(13)	23,525	19,997		19,966		0.6%
				19,997		19,966		0.6%
Apidos CLO XI	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 11.95%, due 1/17/2023)(5)(13)	38,340	29,763		26,057		0.8%
				29,763		26,057		0.8%
Apidos CLO XII	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 13.39%, due 4/15/2025)(5)(13)	44,063	34,598		30,638		0.9%
				34,598		30,638		0.9%
Apidos CLO XV	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 10.72%, due 10/20/2025)(5)(13)	36,515	31,479		25,335		0.7%
				31,479		25,335		0.7%
Apidos CLO XXII	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 17.29%, due 10/20/2027)(5)(6)(13)	31,350	26,948		25,369		0.7%
				26,948		25,369		0.7%
Arctic Glacier U.S.A., Inc.	Minnesota / Food Products	Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 11/10/2019)(3)(10)(11)	150,000	150,000		145,546		4.2%
				150,000		145,546		4.2%
Ark-La-Tex Wireline Services, LLC	Louisiana / Energy Equipment & Services	Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), in non-accrual status effective 4/1/2016, due 4/8/2019)(10)(12)	21,322	21,088		11,779		0.3%
		Senior Secured Term Loan B (12.50% (LIBOR + 11.50% with 1.00% LIBOR floor), in non-accrual status effective 4/1/2016, due 4/8/2019)(10)(12)	23,981	23,239		—		—%
				44,327		11,779		0.3%
Armor Holding II LLC	New York / Commercial Services & Supplies	Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 12/26/2020)(3)(8)(10)(11)	7,000	6,907		6,907		0.2%
				6,907		6,907		0.2%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Atlantis Health Care Group (Puerto Rico), Inc.	Puerto Rico / Health Care Providers & Services	Revolving Line of Credit – $7,000 Commitment (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 8/21/2017)(10)(11)(14)	$	2,350	$	2,350	$	2,350	0.1%
		Senior Term Loan (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 2/21/2018)(3)(10)(11)	38,166		38,166		38,166		1.1%
					40,516		40,516		1.2%
Babson CLO Ltd. 2014-III	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 12.25%, due 1/15/2026)(5)(6)(13)	52,250		44,075		40,312		1.2%
					44,075		40,312		1.2%
Broder Bros., Co.	Pennsylvania / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan A (7.00% (LIBOR + 5.75% with 1.25% LIBOR floor), due 6/03/2021)(3)(10)(12)	120,737		120,737		120,737		3.5%
		Senior Secured Term Loan B (13.50% (LIBOR + 12.25% with 1.25% LIBOR floor), due 6/03/2021)(10)(12)	121,475		121,475		121,475		3.5%
					242,212		242,212		7.0%
Brookside Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 14.44%, due 4/17/2025)(5)(13)	26,000		19,875		18,990		0.6%
					19,875		18,990		0.6%
California Street CLO IX Ltd. (f/k/a Symphony CLO IX Ltd.)	Cayman Islands / Structured Finance	Preference Shares (Residual Interest, current yield 14.11%, due 4/16/2022)(5)(13)	45,500		32,629		29,267		0.9%
					32,629		29,267		0.9%
Capstone Logistics Acquisition, Inc.	Georgia / Commercial Services & Supplies	Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 10/7/2022)(3)(8)(10)(12)	101,828		101,298		97,752		2.8%
					101,298		97,752		2.8%
Cent CLO 17 Limited	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 12.64%, due 1/30/2025)(5)(13)	24,870		18,839		16,695		0.5%
					18,839		16,695		0.5%
Cent CLO 20 Limited	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 10.19%, due 1/25/2026)(5)(13)	40,275		32,835		26,501		0.8%
					32,835		26,501		0.8%
Cent CLO 21 Limited	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 11.64%, due 7/27/2026)(5)(6)(13)	48,528		38,125		31,467		0.9%
					38,125		31,467		0.9%
CIFC Funding 2013-III, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 15.72%, due 10/24/2025)(5)(13)	44,100		32,338		29,634		0.9%
					32,338		29,634		0.9%
CIFC Funding 2013-IV, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.13%, due 11/27/2024)(5)(13)	45,500		33,414		32,752		0.9%
					33,414		32,752		0.9%
CIFC Funding 2014-IV Investor, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 15.05%, due 10/17/2026)(5)(6)(13)	41,500		31,729		30,378		0.9%
					31,729		30,378		0.9%
Cinedigm DC Holdings, LLC	New York / Media	Senior Secured Term Loan (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/31/2021)(10)(11)(44)	65,990		65,940		65,990		1.9%
					65,940		65,990		1.9%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Coverall North America, Inc.	Florida / Commercial Services & Supplies	Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 11/02/2020)(3)(10)(11)	$	24,250	$	24,250	$	24,250	0.7%
		Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 11/02/2020)(3)(10)(11)	25,000		25,000		25,000		0.7%
					49,250		49,250		1.4%
Crosman Corporation	New York / Leisure Products	Senior Secured Term Loan A (9.16% (LIBOR + 8.70% with .30% LIBOR floor) plus 4.00% PIK, due 8/5/2020)(3)(10)(12)(44)	54,185		54,185		53,935		1.6%
		Senior Secured Term Loan B (16.16% (LIBOR + 15.70% with .30% LIBOR floor) plus 4.00% PIK, due 8/5/2020)(10)(12)(44)	41,284		41,284		40,458		1.1%
					95,469		94,393		2.7%
CURO Group Holdings Corp. (f/k/a Speedy Cash Holdings Corp.)	Canada / Consumer Finance	Senior Unsecured Notes (12.00%, due 11/15/2017)(8)(13)	15,000		15,000		8,081		0.2%
					15,000		8,081		0.2%
Easy Gardener Products, Inc.	Texas / Household Durables	Senior Secured Term Loan (10.63% (LIBOR + 10.00% with .25% LIBOR floor), due 09/30/2020)(3)(10)(11)	17,369		17,369		17,369		0.5%
					17,369		17,369		0.5%
Empire Today, LLC	Illinois / Distributors	Senior Secured Note (11.375%, due 2/1/2017)(8)	50,426		49,988		49,938		1.4%
					49,988		49,938		1.4%
Fleetwash, Inc.	New Jersey / Commercial Services & Supplies	Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/30/2019)(3)(10)(11)	23,402		23,402		23,402		0.7%
		Delayed Draw Term Loan – $15,000 Commitment (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor)expires 4/30/2019)(10)(11)(14)	—		—		—		—%
					23,402		23,402		0.7%
Focus Brands, Inc.	Georgia / Food & Staples Retailing	Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 8/21/2018)(8)(10)(12)	18,000		17,876		18,000		0.5%
					17,876		18,000		0.5%
Galaxy XV CLO, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 18.19%, due 4/15/2025)(5)(13)	39,275		29,037		30,452		0.9%
					29,037		30,452		0.9%
Galaxy XVI CLO, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.22%, due 11/16/2025)(5)(13)	24,575		19,195		18,925		0.5%
					19,195		18,925		0.5%
Galaxy XVII CLO, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 15.77%, due 7/15/2026)(5)(6)(13)	39,905		31,077		29,820		0.9%
					31,077		29,820		0.9%
Generation Brands Holdings, Inc.	Illinois / Household Durables	Subordinated Secured Term Loan (11.00% (LIBOR + 10.00% with 1.00% LIBOR floor), due 12/10/2022)(8)(10)(11)	19,000		18,437		19,000		0.6%
					18,437		19,000		0.6%
Global Employment Solutions, Inc.	Colorado / Professional Services	Senior Secured Term Loan (10.25% (LIBOR + 9.25% with 1.00% LIBOR floor), due 6/26/2020)(3)(10)(12)	49,312		49,312		49,312		1.4%
					49,312		49,312		1.4%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Halcyon Loan Advisors Funding 2012-1 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 17.90%, due 8/15/2023)(5)(13)	$	23,188	$	18,245	$	18,140	0.5%
					18,245		18,140		0.5%
Halcyon Loan Advisors Funding 2013-1 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 18.01%, due 4/15/2025)(5)(13)	40,400		31,897		32,212		0.9%
					31,897		32,212		0.9%
Halcyon Loan Advisors Funding 2014-1 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 13.66%, due 4/18/2026)(5)(13)	24,500		18,255		17,076		0.5%
					18,255		17,076		0.5%
Halcyon Loan Advisors Funding 2014-2 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.91%, due 4/28/2025)(5)(6)(13)	41,164		30,795		30,532		0.9%
					30,795		30,532		0.9%
Halcyon Loan Advisors Funding 2015-3 Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 15.86%, due 10/18/2027)(5)(6)(13)	39,598		36,746		35,202		1.0%
					36,746		35,202		1.0%
Harbortouch Payments, LLC	Pennsylvania / Commercial Services & Supplies	Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor) plus 3.00% PIK, due 5/31/2023)(10)(11)(44)	27,500		27,500		27,500		0.8%
		Escrow Receivable(15)			—		1,602		—%
					27,500		29,102		0.8%
HarbourView CLO VII, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 17.35%, due 11/18/2026)(5)(6)(13)	19,025		14,454		13,005		0.4%
					14,454		13,005		0.4%
Harley Marine Services, Inc.	Washington / Marine	Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 12/20/2019)(3)(8)(10)(11)	9,000		8,886		8,886		0.3%
					8,886		8,886		0.3%
Hollander Sleep Products, LLC	Florida / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 10/21/2020)(3)(10)(12)	21,860		21,860		21,098		0.6%
					21,860		21,098		0.6%
ICV-CAS Holdings, LLC	New York / Air Freight & Logistics	Escrow Receivable			—		6		—%
					—		6		—%
Inpatient Care Management Company, LLC	Florida / Health Care Providers & Services	Senior Secured Term Loan (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor), due 6/8/2021(10)(12)	17,000		17,000		17,000		0.5%
					17,000		17,000		0.5%
Instant Web, LLC	Minnesota / Media	Senior Secured Term Loan A (5.50% (LIBOR + 4.50% with 1.00% LIBOR floor), due 3/28/2019)(10)(11)	122,943		122,943		122,943		3.6%
		Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 3/28/2019)(3)(10)(11)	158,100		158,100		158,100		4.6%
		Senior Secured Term Loan C-1 (12.75% (LIBOR + 11.75% with 1.00% LIBOR floor), due 3/28/2019)(10)(11)	27,000		27,000		27,000		0.8%
		Senior Secured Term Loan C-2 (13.50% (LIBOR + 12.50% with 1.00% LIBOR floor), due 3/28/2019)(10)(11)	25,000		25,000		25,000		0.7%
					333,043		333,043		9.7%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

InterDent, Inc.	California / Health Care Providers & Services	Senior Secured Term Loan A (6.25% (LIBOR + 5.50% with 0.75% LIBOR floor), due 8/3/2017)(10)(12)	$	79,538	$	79,538	$	79,538	2.3%
		Senior Secured Term Loan B (11.25% (LIBOR + 10.50% with 0.75% LIBOR floor), due 8/3/2017)(3)(10)(12)	131,125		131,125		130,582		3.8%
					210,663		210,120		6.1%
JAC Holding Corporation	Michigan / Auto Components	Senior Secured Note (11.50%, due 10/1/2019)(8)	2,868		2,868		2,868		0.1%
					2,868		2,868		0.1%
Jefferson Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 9.75%, due 7/20/2027)(5)(6)(13)	19,500		16,915		13,072		0.4%
					16,915		13,072		0.4%
JHH Holdings, Inc.	Texas / Health Care Providers & Services	Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor) plus 0.50% PIK, due 3/30/2019)(3)(10)(11)(44)	35,477		35,477		35,477		1.0%
					35,477		35,477		1.0%
LaserShip, Inc.	Virginia / Air Freight & Logistics	Senior Secured Term Loan A (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor) plus 2.00% PIK, due 3/18/2019)(3)(10)(12)(44)	34,570		34,570		32,113		0.9%
		Senior Secured Term Loan B (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor) plus 2.00% PIK, due 3/18/2019)(3)(10)(12)(44)	21,214		21,214		19,705		0.6%
					55,784		51,818		1.5%
LCM XIV Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 18.80%, due 7/15/2025)(5)(13)	30,500		22,890		23,376		0.7%
					22,890		23,376		0.7%
Madison Park Funding IX, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 21.15%, due 8/15/2022)(5)(13)	31,110		22,259		21,174		0.6%
					22,259		21,174		0.6%
Matrixx Initiatives, Inc.	New Jersey / Pharmaceuticals	Senior Secured Term Loan A (7.50% (LIBOR + 6.00% with 1.50% LIBOR floor), due 8/9/2018)(3)(10)(11)	30,177		30,177		30,177		0.9%
		Senior Secured Term Loan B (12.50% (LIBOR + 11.00% with 1.50% LIBOR floor), due 8/9/2018)(3)(10)(11)	40,562		40,562		40,562		1.2%
					70,739		70,739		2.1%
Maverick Healthcare Equity, LLC	Arizona / Health Care Providers & Services	Preferred Units (1,250,000 units)(15)			1,252		2,037		0.1%
		Class A Common Units (1,250,000 units)(15)			—		353		—%
					1,252		2,390		0.1%
Mineral Fusion Natural Brands(34)	Colorado / Personal Products	Membership Interest (1.43%)(15)			—		266		—%
					—		266		—%
Mountain View CLO 2013-I Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 14.72%, due 4/12/2024)(5)(13)	43,650		33,156		30,928		0.9%
					33,156		30,928		0.9%
Mountain View CLO IX Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 16.23%, due 7/15/2027)(5)(6)(13)	47,830		43,088		40,218		1.2%
					43,088		40,218		1.2%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Nathan's Famous, Inc.	New York / Hotels, Restaurants & Leisure	Senior Secured Notes (10.00%, due 3/15/2020)(8)	$	3,000	$	3,000	$	3,000	0.1%
					3,000		3,000		0.1%
NCP Finance Limited Partnership(35)	Ohio / Consumer Finance	Subordinated Secured Term Loan (11.00% (LIBOR + 9.75% with 1.25% LIBOR floor), due 9/30/2018)(3)(8)(10)(12)(13)	27,199		26,504		25,838		0.7%
					26,504		25,838		0.7%
Nixon, Inc.	California / Textiles, Apparel & Luxury Goods	Senior Secured Term Loan (9.50% plus 3.00% PIK, due 4/16/2018)(3)(8)(44)	14,311		14,197		11,776		0.3%
					14,197		11,776		0.3%
Octagon Investment Partners XV, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 16.54%, due 1/19/2025)(5)(13)	32,921		26,213		24,027		0.7%
					26,213		24,027		0.7%
Octagon Investment Partners XVIII, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 20.29%, due 12/16/2024)(5)(6)(13)	28,200		20,046		19,701		0.6%
					20,046		19,701		0.6%
Onyx Payments(36)	Texas / IT Services	Revolving Line of Credit – $5,000 Commitment (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 9/10/2016)(10)(11)(14)	1,000		1,000		1,000		—%
		Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 9/10/2019)(3)(10)(11)	48,352		48,352		48,352		1.4%
		Senior Secured Term Loan B (13.50% (LIBOR + 12.50% with 1.00% LIBOR floor), due 9/10/2019)(3)(10)(11)	59,389		59,389		59,389		1.8%
					108,741		108,741		3.2%
Pacific World Corporation	California / Personal Products	Revolving Line of Credit – $15,000 Commitment (8.00% (LIBOR + 7.00% with 1.00% LIBOR floor), due 9/26/2020)(10)(12)(14)	2,500		2,500		2,500		0.1%
		Senior Secured Term Loan A (6.00% (LIBOR + 5.00% with 1.00% LIBOR floor), due 9/26/2020)(10)(12)	97,994		97,994		93,624		2.7%
		Senior Secured Term Loan B (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/26/2020)(3)(10)(12)	97,994		97,994		81,567		2.4%
					198,488		177,691		5.2%
Pelican Products, Inc.	California / Chemicals	Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 4/9/2021)(3)(8)(10)(12)	17,500		17,486		15,744		0.5%
					17,486		15,744		0.5%
PeopleConnect Intermediate, LLC (f/k/a Intelius, Inc.)	Washington / Internet Software & Services	Revolving Line of Credit – $1,500 Commitment (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor), due 8/11/16)(10)(11)(14)	—		—		—		—%
		Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 7/1/2020)(3)(10)(11)	20,379		20,379		19,907		0.6%
		Senior Secured Term Loan B (12.50% (LIBOR + 11.50% with 1.00% LIBOR floor), due 7/1/2020)(3)(10)(11)	20,938		20,938		20,215		0.6%
					41,317		40,122		1.2%
PGX Holdings, Inc.(37)	Utah / Diversified Consumer Services	Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 9/29/2021)(3)(10)(12)	135,000		135,000		135,000		3.9%
					135,000		135,000		3.9%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Photonis Technologies SAS	France / Electronic Equipment, Instruments & Components	First Lien Term Loan (8.50% (LIBOR + 7.50% with 1.00% LIBOR floor), due 9/18/2019)(8)(10)(12)(13)	$	9,927	$	9,756	$	9,015	0.3%
					9,756		9,015		0.3%
Pinnacle (US) Acquisition Co. Limited	Texas / Energy Equipment & Services	Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 8/3/2020)(8)(10)(11)	7,037		6,918		5,425		0.2%
					6,918		5,425		0.2%
PlayPower, Inc.	North Carolina / Leisure Products	Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 6/23/2022)(3)(8)(10)(11)	11,000		10,856		10,911		0.3%
					10,856		10,911		0.3%
Prime Security Services Borrower, LLC	Illinois / Commercial Services & Supplies	Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 7/1/2022)(8)(10)(12)	10,000		9,870		10,000		0.3%
					9,870		10,000		0.3%
PrimeSport, Inc.	Georgia / Hotels, Restaurants & Leisure	Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(10)(11)	53,683		53,683		53,683		1.6%
		Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 2/11/2021)(3)(10)(11)	74,500		74,500		74,500		2.1%
					128,183		128,183		3.7%
Prince Mineral Holding Corp.	New York / Metals & Mining	Senior Secured Term Loan (11.50%, due 12/15/2019)(8)	10,000		9,934		8,701		0.3%
					9,934		8,701		0.3%
Rocket Software, Inc.	Massachusetts / Software	Second Lien Term Loan (10.25% (LIBOR + 8.75% with 1.50% LIBOR floor), due 2/8/2019)(3)(8)(10)(12)	20,000		19,854		20,000		0.6%
					19,854		20,000		0.6%
Royal Holdings, Inc.	Indiana / Chemicals	Second Lien Term Loan (8.50% (LIBOR + 7.50% with 1.00% LIBOR floor), due 6/19/2023)(8)(10)(11)	5,000		4,967		4,819		0.1%
					4,967		4,819		0.1%
SCS Merger Sub, Inc.	Texas / IT Services	Second Lien Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 10/30/2023)(3)(8)(10)(12)	20,000		19,456		19,655		0.6%
					19,456		19,655		0.6%
Security Alarm Financing Enterprises, L.P.(38)	California / Electronic Equipment, Instruments & Components	Subordinated Unsecured Notes (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 12/19/2020)(10)(12)	25,000		25,000		22,700		0.7%
					25,000		22,700		0.7%
SESAC Holdco II LLC	Tennessee / Media	Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 4/22/2021)(3)(8)(10)(11)	10,000		9,878		9,878		0.3%
					9,878		9,878		0.3%
SITEL Worldwide Corporation	Tennessee / Commercial Services & Supplies	Second Lien Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 9/18/2022)(8)(10)(11)	16,000		15,715		15,715		0.5%
					15,715		15,715		0.5%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

Small Business Whole Loan Portfolio(40)	New York / Online Lending	741 Individual Small Business Loans purchased from On Deck Capital, Inc.	$	14,603	$	14,603	$	14,215	0.4%
					14,603		14,215		0.4%
Spartan Energy Services, Inc.	Louisiana / Energy Equipment & Services	Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), in non-accrual status effective 4/1/2016, due 12/28/2017)(10)(12)	13,156		12,923		11,368		0.3%
		Senior Secured Term Loan B (13.00% (LIBOR + 12.00% with 1.00% LIBOR floor), in non-accrual status effective 4/1/2016, due 12/28/2017)(10)(12)	14,123		13,669		984		0.1%
					26,592		12,352		0.4%
Stryker Energy, LLC	Ohio / Oil, Gas & Consumable Fuels	Overriding Royalty Interests(9)	—		—		—		—%
					—		—		—%
Sudbury Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 12.64%, due 1/17/2026)(5)(13)	28,200		20,865		17,395		0.5%
					20,865		17,395		0.5%
Symphony CLO XIV Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 13.12%, due 7/14/2026)(5)(6)(13)	49,250		39,602		35,703		1.0%
					39,602		35,703		1.0%
Symphony CLO XV, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 13.76%, due 10/17/2026)(5)(13)	50,250		44,141		39,523		1.2%
					44,141		39,523		1.2%
System One Holdings, LLC	Pennsylvania / Professional Services	Senior Secured Term Loan (11.25% (LIBOR + 10.50% with 0.75% LIBOR floor), due 11/17/2020)(3)(10)(12)	104,553		104,553		104,553		3.0%
					104,553		104,553		3.0%
TouchTunes Interactive Networks, Inc.	New York / Internet Software & Services	Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 5/29/2022)(8)(10)(12)	5,000		4,936		4,936		0.1%
					4,936		4,936		0.1%
Traeger Pellet Grills LLC	Oregon / Household Durables	Senior Secured Term Loan A (6.50% (LIBOR + 4.50% with 2.00% LIBOR floor), due 6/18/2018)(3)(10)(11)	34,519		34,519		34,519		1.0%
		Senior Secured Term Loan B (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 6/18/2018)(3)(10)(11)	36,506		36,506		36,506		1.1%
					71,025		71,025		2.1%
Transaction Network Services, Inc.	Virginia / Diversified Telecommunication Services	Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 8/14/2020)(8)(10)(12)	4,410		4,392		4,392		0.1%
					4,392		4,392		0.1%
Trinity Services Group, Inc.(41)	Florida / Commercial Services & Supplies	Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 8/13/2019)(10)(11)	9,626		9,626		9,626		0.3%
		Senior Secured Term Loan B (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor), due 8/13/2019)(3)(10)(11)	125,000		125,000		125,000		3.6%
					134,626		134,626		3.9%
United Sporting Companies, Inc.(43)	South Carolina / Distributors	Second Lien Term Loan (12.75% (LIBOR + 11.00% with 1.75% LIBOR floor), due 5/16/2018)(3)(10)(12)	140,847		140,847		136,668		4.0%
					140,847		136,668		4.0%
Universal Fiber Systems, LLC	Virginia / Textiles, Apparel & Luxury Goods	Second Lien Term Loan (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 10/02/2022)(3)(8)(10)(12)	37,000		36,340		36,340		1.1%
					36,340		36,340		1.1%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)



			June 30, 2016
Portfolio Company	Locale / Industry	Investments(1)	Principal Value		Amortized Cost		Fair Value(2)		% of Net Assets

LEVEL 3 PORTFOLIO INVESTMENTS

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

USG Intermediate, LLC	Texas / Leisure Products	Revolving Line of Credit – $2,500 Commitment (10.75% (LIBOR + 9.75% with 1.00% LIBOR floor), due 4/15/2017)(10)(12)(14)	$	1,000	$	1,000	$	1,000	—%
		Senior Secured Term Loan A (8.25% (LIBOR + 7.25% with 1.00% LIBOR floor), due 4/15/2020)(3)(10)(12)	16,779		16,779		16,779		0.5%
		Senior Secured Term Loan B (13.25% (LIBOR + 12.25% with 1.00% LIBOR floor), due 4/15/2020)(3)(10)(12)	19,960		19,960		19,960		0.6%
		Equity(15)			1		—		—%
					37,740		37,739		1.1%
Venio LLC	Pennsylvania / Professional Services	Second Lien Term Loan (12.00% (LIBOR + 9.50% with 2.50% LIBOR floor) plus 2.00% default interest, in non-accrual status effective 12/31/15, due 2/19/2020)(10)(11)	17,000		17,000		12,876		0.4%
					17,000		12,876		0.4%
Voya CLO 2012-2, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 18.84%, due 10/15/2022)(5)(13)	38,070		28,112		28,982		0.8%
					28,112		28,982		0.8%
Voya CLO 2012-3, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 18.51%, due 10/15/2022)(5)(13)	46,632		34,597		34,319		1.0%
					34,597		34,319		1.0%
Voya CLO 2012-4, Ltd.	Cayman Islands / Structured Finance	Income Notes (Residual Interest, current yield 19.09%, due 10/15/2023)(5)(13)	40,613		30,772		30,756		0.9%
					30,772		30,756		0.9%
Voya CLO 2014-1, Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 19.32%, due 4/18/2026)(5)(6)(13)	32,383		26,133		26,741		0.8%
					26,133		26,741		0.8%
Washington Mill CLO Ltd.	Cayman Islands / Structured Finance	Subordinated Notes (Residual Interest, current yield 9.52%, due 4/20/2026)(5)(6)(13)	22,600		18,406		15,056		0.4%
					18,406		15,056		0.4%
Water Pik, Inc.	Colorado / Personal Products	Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 1/8/2021)(8)(10)(11)	15,439		15,097		15,097		0.4%
					15,097		15,097		0.4%
Wheel Pros, LLC	Colorado / Auto Components	Senior Subordinated Secured Note (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020)(3)(10)(11)	12,000		12,000		12,000		0.4%
		Senior Subordinated Secured Note (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020)(3)(10)(11)	5,460		5,460		5,460		0.2%
					17,460		17,460		0.6%
Total Non-Control/Non-Affiliate Investments (Level 3)					$	4,312,122	$	4,133,939	120.3%

Total Portfolio Investments					$	6,091,100	$	5,897,708	171.6%

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016

(1)

The terms “Prospect,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise. The securities in which Prospect has invested were acquired in transactions that were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). These securities may be resold only in transactions that are exempt from registration under the Securities Act.


(2)	Fair value is determined by or under the direction of our Board of Directors. As of March 31, 2017 and June 30, 2016, all of our investments were classified as Level 3. ASC 820 classifies such unobservable inputs used to measure fair value as Level 3 within the valuation hierarchy. See Notes 2 and 3 within the accompanying notes to consolidated financial statements for further discussion.

(3)

Security, or a portion thereof, is held by Prospect Capital Funding LLC (“PCF”), our wholly-owned subsidiary and a bankruptcy remote special purpose entity, and is pledged as collateral for the Revolving Credit Facility and such security is not available as collateral to our general creditors (see Note 4). The fair values of the investments held by PCF at March 31, 2017 and June 30, 2016 were $1,508,598 and $1,348,577, respectively, representing 25.0% and 22.9% of our total investments, respectively.


(4)	In addition to the stated returns, the net profits interest held will be realized upon sale of the borrower or a sale of the interests.

(5)

This investment is in the equity class of a collateralized loan obligation (“CLO”) security. The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The current estimated yield is based on the current projections of this excess cash flow taking into account assumptions which have been made regarding expected prepayments, losses and future reinvestment rates. These assumptions are periodically reviewed and adjusted. Ultimately, the actual yield may be higher or lower than the estimated yield if actual results differ from those used for the assumptions.


(6)	Co-investment with another fund managed by an affiliate of our investment adviser, Prospect Capital Management L.P. See Note 13 for further discussion.


(7)	On a fully diluted basis represents 10.00% of voting common shares.


(8)	Syndicated investment which was originated by a financial institution and broadly distributed.


(9)	The overriding royalty interests held receive payments at the stated rates based upon operations of the borrower.


(10)	Security, or a portion thereof, has a floating interest rate which may be subject to a LIBOR or PRIME floor. The interest rate was in effect at March 31, 2017 and June 30, 2016.


(11)	The interest rate on these investments is subject to the base rate of 3-Month LIBOR, which was 1.15% and 0.65% at March 31, 2017 and June 30, 2016, respectively. The current base rate for each investment may be different from the reference rate on March 31, 2017 and June 30, 2016.


(12)	The interest rate on these investments is subject to the base rate of 1-Month LIBOR, which was 0.98% and 0.47% at March 31, 2017 and June 30, 2016, respectively. The current base rate for each investment may be different from the reference rate on March 31, 2017 and June 30, 2016.

(13)

Investment has been designated as an investment not “qualifying” under Section 55(a) of the Investment Company Act of 1940 (the “1940 Act”). Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time such acquisition is made, qualifying assets represent at least 70% of our total assets. As of March 31, 2017 and June 30, 2016, our qualifying assets as a percentage of total assets, stood at 72.07% and 74.58%, respectively. We monitor the status of these assets on an ongoing basis.


(14)	Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 4.00%. As of March 31, 2017 and June 30, 2016, we had $26,863 and $40,560, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies.


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

(16)

As of March 31, 2017, the effective yield has been estimated to be 0% as expected future cash flows are anticipated to not be sufficient to repay the investment at cost. If the expected investment proceeds increase, there is a potential for future investment income from the investment. Distributions, once received, will be recognized solely as return of capital with any remaining unamortized investment costs written off if the actual distributions are less than the amortized investment cost.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016 (Continued)

(17)

Arctic Oilfield Equipment USA, Inc. (“Arctic Oilfield”), a consolidated entity in which we own 100% of the common equity, owns 70% of the equity units of Arctic Energy Services, LLC (“Arctic Energy”), the operating company. We report Arctic Energy as a separate controlled company. On September 30, 2015, we restructured our investment in Arctic Energy. Concurrent with the restructuring, we exchanged our $31,640 senior secured loan and our $20,230 subordinated loan for Class D and Class E Units in Arctic Energy. Our ownership of Arctic Oilfield includes a preferred interest in their holdings of all the Class D, Class E, Class C, and Class A Units (in order of priority returns). These unit classes are senior to management’s interests in the F and B Units.


(18)	CCPI Holdings Inc., a consolidated entity in which we own 100% of the common stock, owns 94.59% of CCPI Inc. (“CCPI”), the operating company, as of March 31, 2017 and June 30, 2016. We report CCPI as a separate controlled company.

(19)

CP Holdings of Delaware LLC, a consolidated entity in which we own 100% of the membership interests, owns 82.3% of CP Energy Services Inc. (“CP Energy”) as of March 31, 2017 and June 30, 2016. As of June 30, 2016, CP Energy owned directly or indirectly 100% of each of CP Well Testing, LLC; Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. We report CP Energy as a separate controlled company. Effective December 31, 2014, CP Energy underwent a corporate reorganization in order to consolidate certain of its wholly-owned subsidiaries. On October 30, 2015, we restructured our investment in CP Energy. Concurrent with the restructuring, we exchanged our $86,965 senior secured loan and $15,924 subordinated loan for Series B Redeemable Preferred Stock in CP Energy.

(20)

Credit Central Holdings of Delaware, LLC, a consolidated entity in which we own 100% of the membership interests, owns 99.91% and 74.93% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC (“Credit Central”)) as of March 31, 2017 and June 30, 2016, respectively. Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC, the operating companies. We report Credit Central as a separate controlled company. On September 28, 2016, we have made an additional $12,523 second lien debt and $2,098 equity investment in Credit Central, increasing its ownership to 99.91%.


(21)	Prospect owns 37.1% of the equity of Edmentum Ultimate Holdings, LLC as of March 31, 2017 and June 30, 2016.


(22)	First Tower Holdings of Delaware LLC, a consolidated entity in which we own 100% of the membership interests, owns 80.1% of First Tower Finance Company LLC (“First Tower Finance”), which owns 100% of First Tower, LLC, the operating company as of March 31, 2017 and June 30, 2016. We report First Tower Finance as a separate controlled company.

(23)

Energy Solutions Holdings Inc., a consolidated entity in which we own 100% of equity, owns 100% of Freedom Marine Solutions, LLC (“Freedom Marine”), which owns Vessel Company, LLC, Vessel Company II, LLC and Vessel Company III, LLC. We report Freedom Marine as a separate controlled company. On October 30, 2015, we restructured our investment in Freedom Marine. Concurrent with the restructuring, we exchanged our $32,500 senior secured loans for additional membership interest in Freedom Marine.

(24)

MITY Holdings of Delaware Inc. (“MITY Delaware”), a consolidated entity in which we own 100% of the common stock, owns 95.48% and 95.83% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”), as of March 31, 2017 and June 30, 2016, respectively. MITY owns 100% of each of MITY-Lite, Inc. (“Mity Lite”); Broda Enterprises USA, Inc.; and Broda Enterprises ULC (“Broda Canada”). We report MITY as a separate controlled company. MITY Delaware has a subordinated unsecured note issued and outstanding to Broda Canada that is denominated in Canadian Dollars (CAD). As of March 31, 2017 and June 30, 2016, the principal balance of this note was CAD 7,371. In accordance with ASC 830, Foreign Currency Matters (“ASC 830”), this note was remeasured into our functional currency, US Dollars (USD), and is presented on our Consolidated Schedule of Investments in USD. We formed a separate legal entity, MITY FSC, Inc., (“MITY FSC”) in which Prospect owns 96.88% of the equity, and MITY-Lite management owns the remaining portion. MITY FSC does not have material operations. This entity earns commission payments from MITY-Lite based on its sales to foreign customers, and distribute it to its shareholders based on pro-rata ownership. During the three months ended December 31, 2016, we received $406 of such commission, which we recognized as other income. On January 17, 2017, we invested an additional $8,000 of Senior Secured Term Loan A and $8,000 of Senior Secured Term Loan B debt investments in MITY, to fund an acquisition.

(25)

NPH Property Holdings, LLC, a consolidated entity in which we own 100% of the membership interests, owns 100% of the common equity of National Property REIT Corp. (“NPRC”) (f/k/a National Property Holdings Corp.), a property REIT which holds investments in several real estate properties. Additionally, NPRC invests in online consumer loans through ACL Loan Holdings, Inc. (“ACLLH”) and American Consumer Lending Limited (“ACLL”), its wholly-owned subsidiaries. We report NPRC as a separate controlled company. See Note 3 for further discussion of the properties held by NPRC. On August 1, 2016, we made an investment into ACLL, under the ACLL credit agreement, for senior secured term loans, Term Loan C, with the same terms as the existing ACLLH Term Loan C due to us. On January 1, 2017, we restructured our investment in NPRC and exchanged $55,000 of Senior Secured Term Loan E for common stock.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016 (Continued)

(26)

Nationwide Acceptance Holdings LLC, a consolidated entity in which we own 100% of the membership interests, owns 94.48% and 93.79% of Nationwide Loan Company LLC (f/k/a Nationwide Acceptance LLC), the operating company, as of March 31, 2017 and June 30, 2016, respectively. We report Nationwide Loan Company LLC as a separate controlled company. On June 1, 2015, Nationwide Acceptance LLC completed a reorganization and was renamed Nationwide Loan Company LLC ( “Nationwide”) and formed two new wholly-owned subsidiaries: Pelican Loan Company LLC (“Pelican”) and Nationwide Consumer Loans LLC. Nationwide assigned 100% of the equity interests in its other subsidiaries to Pelican which, in turn, assigned these interests to a new operating company wholly-owned by Pelican named Nationwide Acceptance LLC (“New Nationwide”). New Nationwide also assumed the existing senior subordinated term loan due to Prospect.


(27)	NMMB Holdings, a consolidated entity in which we own 100% of the equity, owns 96.33% of the fully diluted equity of NMMB, Inc. (“NMMB”) as of March 31, 2017 and June 30, 2016. NMMB owns 100% of Refuel Agency, Inc., which owns 100% of Armed Forces Communications, Inc. We report NMMB as a separate controlled company.


(28)	Prospect owns 99.96% of the equity of USES Corp. as of March 31, 2017 and June 30, 2016.

(29)

Valley Electric Holdings I, Inc., a consolidated entity in which we own 100% of the common stock, owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), another consolidated entity. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”). Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc.. We report Valley Electric as a separate controlled company.

(30)

On March 14, 2017, assets previously held by Ark-La-Tex Wireline Services, LLC (“Ark-La-Tex”) were assigned to Wolf Energy Services Company, LLC, a new wholly-owned subsidiary of Wolf Energy Holdings, in exchange for a full reduction of Ark-La-Tex’s Senior Secured Term Loan A and a partial reduction of the Senior Secured Term Loan B cost basis, in total equal to $22,145. The cost basis of the transferred assets is equal to the appraised fair value of assets at the time of transfer.


(31)	Prospect owns 12.63% of the equity in Targus Cayman HoldCo Limited, the parent company of Targus International LLC as of March 31, 2017 and June 30, 2016.

(32)

We own 99.9999% of AGC/PEP, LLC. AGC/PEP, LLC owns 2,038 out of a total of 93,485 shares (including 7,456 vested and unvested management options) of American Gilsonite Holding Company which owns 100% of American Gilsonite Company. On October 24, 2016, American Gilsonite Company filed for a joint prepackaged plan of reorganization under Chapter 11 of the bankruptcy code. As of March 31, 2017, AGC/PEP, LLC has emerged from bankruptcy and Prospect received a total of 131 shares, representing a total ownership stake of 0.05%.


(33)	Centerfield Media Holding Company and Oology Direct Holdings, Inc. are joint borrowers and guarantors on the senior secured loan facilities.


(34)	As of March 31, 2017 and June 30, 2016, we own 1.43% (13,220 shares) of the common and preferred interest of Mineral Fusion Natural, LLC, a subsidiary of Caleel + Hayden, LLC.


(35)	NCP Finance Limited Partnership, NCP Finance Ohio, LLC, and certain affiliates thereof are joint borrowers on the subordinated secured term loan.


(36)	Pegasus Business Intelligence, LP, Paycom Acquisition, LLC, and Paycom Acquisition Corp. are joint borrowers on the senior secured loan facilities. Paycom Intermediate Holdings, Inc. is the parent guarantor of this debt investment. These entities transact business internationally under the trade name Onyx Payments.


(37)	As of March 31, 2017 and June 30, 2016, PGX Holdings, Inc. is the sole borrower on the second lien term loan.


(38)	Security Alarm Financing Enterprises, L.P. and California Security Alarms, Inc. are joint borrowers on the senior subordinated note.

(39)

SB Forging Company, Inc., a consolidated entity in which we own 100% of the equity, owned 100% of Ajax Rolled Ring & Machine, LLC, the operating company, which was sold on October 10, 2014. As part of the sale there was $3,000 being held in escrow, of which $802 and $1,750 was received on May 6, 2015 and May 31, 2016, respectively, for which Prospect realized a gain of the same amount. During the quarter ended September 30, 2016, we determined that the remaining balance of the escrow will not be collected.


(40)	Our wholly-owned subsidiary Prospect Small Business Lending, LLC purchases small business whole loans from small business loan originators, including On Deck Capital, Inc.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016 (Continued)


(41)	Trinity Services Group, Inc. and Trinity Services I, LLC are joint borrowers on the senior secured loan facility.


(42)	Turning Point Brands, Inc. and North Atlantic Trading Company, Inc. are joint borrowers and guarantors on the secured loan facility.


(43)	Ellett Brothers, LLC, Evans Sports, Inc., Jerry’s Sports, Inc., Simmons Gun Specialties, Inc., Bonitz Brothers, Inc., and Outdoor Sports Headquarters, Inc. are joint borrowers on the second lien term loan. United Sporting Companies, Inc. is a parent guarantor of this debt investment.


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

The following table provides additional details on these PIK investments, including the maximum annual PIK interest rate allowed under the existing credit agreements, as of and for three months ended March 31, 2017:



Security Name	PIK Rate - Capitalized	PIK Rate - Paid as cash	Maximum Current PIK Rate
CCPI Inc.	—%	7.00%	7.00%
Cinedigm DC Holdings, LLC	—%	2.50%	2.50%
Credit Central Loan Company	5.09%	4.91%	10.00%
Crosman Corporation - Senior Secured Term Loan A	4.00%	—%	4.00%
Crosman Corporation - Senior Secured Term Loan B	4.00%	—%	4.00%
Echelon Aviation LLC	—%	2.25%	2.25%
Echelon Aviation LLC	—%	1.00%	1.00%
Edmentum Ultimate Holdings, LLC - Unsecured Senior PIK Note	8.50%	—%	8.50%
First Tower Finance Company LLC	2.42%	4.58%	7.00%	(A)
MITY, Inc.	—%	10.00%	10.00%
National Home Healthcare Corp.	0.75%	—%	0.75%	(B)
National Property REIT Corp. - Senior Secured Term Loan A	—%	5.50%	5.50%
National Property REIT Corp. - Senior Secured Term Loan E	—%	5.00%	5.00%
National Property REIT Corp. - Senior Secured Term Loan C to ACL Loan Holdings, Inc.	—%	5.00%	5.00%
National Property REIT Corp. - Senior Secured Term Loan C to American Consumer Lending Limited	—%	5.00%	5.00%
Nationwide Loan Company LLC	—%	10.00%	10.00%
Valley Electric Co. of Mt. Vernon, Inc.	—%	2.50%	2.50%
Valley Electric Company, Inc.	8.50%	—%	8.50%

(A) Investment capitalized PIK of 0.41% on January 3, 2017. Effective January 3, 2017, the PIK rate was amended from 12.00% to 7.00%.

(B) During the three months ended December 31, 2016, the PRIME investment capitalized PIK of 0.75% on January 3, 2017 as the rate was above 11.00%. For the three months ended March 31, 2017, the investment converted to LIBOR.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016 (Continued)



Security Name	PIK Rate - Capitalized	PIK Rate - Paid as cash	Maximum Current PIK Rate
CCPI Inc.	—%	7.00%	7.00%
Cinedigm DC Holdings, LLC	—%	2.50%	2.50%
Credit Central Loan Company	6.49%	3.51%	10.00%
Crosman Corporation - Senior Secured Term Loan A	4.00%	—%	4.00%
Crosman Corporation - Senior Secured Term Loan B	4.00%	—%	4.00%
Echelon Aviation LLC	—%	2.25%	2.25%
Edmentum Ultimate Holdings, LLC - Unsecured Senior PIK Note	8.50%	—%	8.50%
Edmentum Ultimate Holdings, LLC - Unsecured Junior PIK Note	10.00%	—%	10.00%
First Tower Finance Company LLC	0.80%	11.20%	12.00%
Harbortouch Payments, LLC	N/A	N/A	3.00%	(C)
JHH Holdings, Inc.	0.50%	—%	0.50%
LaserShip , Inc. - Term Loan A	2.00%	—%	2.00%
LaserShip , Inc. - Term Loan B	2.00%	—%	2.00%
MITY, Inc.	—%	10.00%	10.00%
National Property REIT Corp. - Senior Secured Term Loan A	—%	5.50%	5.50%
National Property REIT Corp. - Senior Secured Term Loan E	—%	5.00%	5.00%
National Property REIT Corp. - Senior Secured Term Loan C to ACL Loan Holdings, Inc.	—%	5.00%	5.00%
Nationwide Loan Company LLC	—%	10.00%	10.00%
Nixon, Inc.	3.00%	—%	3.00%
Valley Electric Co. of Mt. Vernon, Inc.	—%	2.50%	2.50%
Valley Electric Company, Inc.	3.42%	5.08%	8.50%

(C) PIK is capitalized quarterly. The issuer capitalized 3.00% PIK interest on the next payment/capitalization date, which was August 31, 2016.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016 (Continued)


(45)	As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the nine months ended March 31, 2017 with these controlled investments were as follows:



Portfolio Company	Fair Value at June 30, 2016		Gross Additions (Cost)*		Gross Reductions (Cost)**			Net unrealized gains (losses)			Fair Value at March 31, 2017		Interest income		Dividend income		Other income		Net realized gains (losses)
Arctic Energy Services, LLC	38,340		—		—			(23,082		)	15,258		—		—		—		—
CCPI Inc.	41,356		—		(214		)	856			41,998		2,243		123		—		—
CP Energy Services Inc.	76,002		—		—			(4,797		)	71,205		—		—		—		—
Credit Central Loan Company, LLC	52,254		10,467		(403		)	654			62,972		7,893		—		—		—
Echelon Aviation LLC	60,821		18,875		(6,800		)	5,879			78,775		4,149		200		1,121		—
Edmentum Ultimate Holdings, LLC	44,346		6,812		(6,424		)	(3,374		)	41,360		1,487		—		—		—
First Tower Finance Company LLC	352,666		13,001		(1,889		)	(14,353		)	349,425		39,936		—		—		—
Freedom Marine Solutions, LLC	26,618		1,001		—			(3,625		)	23,994		—		—		—		—
Gulf Coast Machine & Supply Company	7,312		8,000		(3,022		)	(5,146		)	7,144		—		—		—		—
MITY, Inc.	54,049		16,000		—			5,615			75,664		4,810		468		886		12
National Property REIT Corp.	843,933		235,327		(142,001		)	22,358			959,617		64,988		—		7,618		—
Nationwide Loan Company LLC	35,813		216		—			75			36,104		2,556		3,310		—		—
NMMB, Inc.	10,007		—		—			7,138			17,145		1,142		—		—		—
R-V Industries, Inc.	36,877		—		96			250			37,223		2,149		149		124		172
USES Corp.	40,286		1,500		—			(18,328		)	23,458		—		—		—		—
Valley Electric Company, Inc.	31,091		1,288		—			418			32,797		4,190		—		—		—
Wolf Energy, LLC	678		22,145		(2,768		)	(1,475		)	18,580		—		—		—		—
Total	$	1,752,449	$	334,632	$	(163,425	)	$	(30,937	)	$	1,892,719	$	135,543	$	4,250	$	9,749	$	184

* Gross additions include increases in the cost basis of the investments resulting from new portfolio investments, OID accretion and PIK interest.

** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales and impairments.


(46)	As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the nine months ended March 31, 2017 with these affiliated investments were as follows:



Portfolio Company	Fair Value at June 30, 2016		Gross Additions (Cost)*		Gross Reductions (Cost)**			Net unrealized gains (losses)			Fair Value at March 31, 2017		Interest income		Dividend income		Other income		Net realized gains (losses)
BNN Holdings Corp.	2,842		—		(2,227		)	(615		)	—		—		—		—		137
Targus International LLC	8,478		—		—			(1,239		)	7,239		—		—		—		—
Total	$	11,320	$	—	$	(2,227	)	$	(1,854	)	$	7,239	$	—	$	—	$	—	$	137

* Gross additions include increases in the cost basis of the investments resulting from new portfolio investments and PIK interest.

** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales and impairments.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016 (Continued)


(47)	As defined in the 1940 Act, we are deemed to “Control” these portfolio companies because we own more than 25% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2016 with these controlled investments were as follows:



Portfolio Company	Fair Value at June 30, 2015		Gross Additions (Cost)*			Gross Reductions (Cost)**			Net unrealized gains (losses)			Fair Value at June 30, 2016		Interest income			Dividend income		Other income		Net realized gains (losses)
American Property REIT Corp.***	$	118,256	$	2,826		$	(103,017	)	$	(18,065	)	$	—	$	7,306		$	11,016	$	899	$	—
Arctic Energy Services, LLC	60,364		—			—			(22,024		)	38,340		1,123			—		—		—
CCPI Inc.	41,352		475			(6,368		)	5,897			41,356		3,123			3,196		—		—
CP Energy Services Inc.	91,009		(2,819		)	—			(12,188		)	76,002		(390		)	—		—		—
Credit Central Loan Company, LLC	55,172		921			(323		)	(3,516		)	52,254		7,398			—		2,067		—
Echelon Aviation LLC	68,941		—			(2,954		)	(5,166		)	60,821		5,700			7,250		—		—
Edmentum Ultimate Holdings, LLC	37,216		9,358			(4,896		)	2,668			44,346		3,650			—		—		—
First Tower Finance Company LLC	365,950		8,866			(679		)	(21,471		)	352,666		56,698			—		—		—
Freedom Marine Solutions, LLC	27,090		1,000			—			(1,472		)	26,618		1,112			—		—		—
Gulf Coast Machine & Supply Company	6,918		9,500			(1,075		)	(8,031		)	7,312		—			—		—		—
Harbortouch Payments, LLC	376,936		9,503			(314,962		)	(71,477		)	—		33,419			—		12,909		(5,419		)
MITY, Inc.	50,795		139			—			3,115			54,049		5,762			711		—		13
National Property REIT Corp.****	471,889		256,737			20,979			94,328			843,933		62,690			—		5,375		—
Nationwide Loan Company LLC	34,550		3,583			(300		)	(2,020		)	35,813		3,212			3,963		—		—
NMMB, Inc.	12,052		—			—			(2,045		)	10,007		1,525			—		—		—
R-V Industries, Inc.	40,508		—			(614		)	(3,017		)	36,877		2,908			299		—		—
SB Forging Company, Inc.	—		—			—			—			—		—			—		—		—
United Property REIT Corp.***	84,685		7,531			(83,159		)	(9,057		)	—		6,778			—		1,278		—
USES Corp.	—		55,297			(150		)	(14,861		)	40,286		—			—		—		—
Valley Electric Company, Inc.	30,497		1,599			—			(1,005		)	31,091		5,363			—		—		—
Wolf Energy, LLC	22		—			—			656			678		—			—		—		—
Total	$	1,974,202	$	364,516		$	(497,518	)	$	(88,751	)	$	1,752,449	$	207,377		$	26,435	$	22,528	$	(5,406	)

* Gross additions include increases in the cost basis of the investments resulting from new portfolio investments and PIK interest.

** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales and impairments.

***Effective May 23, 2016, American Property REIT Corp. (“APRC”) and United Property REIT Corp. (“UPRC”) merged with and into NPRC, to consolidate all of our real estate holdings, with NPRC as the surviving entity. No gain or loss was recognized upon the merger.

****NPRC’s gross reductions include the amortized amounts of $73,314 and $75,592 transferred in from APRC and UPRC, respectively, in conjunction with the merger described above.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULES OF INVESTMENTS (CONTINUED)

(in thousands, except share data)

Endnote Explanations as of March 31, 2017 (Unaudited) and June 30, 2016 (Continued)


(48)	As defined in the 1940 Act, we are deemed to be an “Affiliated company” of these portfolio companies because we own more than 5% of the portfolio company’s outstanding voting securities. Transactions during the year ended June 30, 2016 with these affiliated investments were as follows:



Portfolio Company	Fair Value at June 30, 2015		Gross Additions (Cost)*		Gross Reductions (Cost)**			Net unrealized gains (losses)			Fair Value at June 30, 2016		Interest income		Dividend income		Other income		Net realized gains (losses)
BNN Holdings Corp.	$	45,945	$	—	$	(42,922	)	$	(181	)	$	2,842	$	896	$	—	$	—	$	—
Targus International LLC	—		22,724		(14,194		)	(52		)	8,478		—		—		—		(14,194		)
Total	$	45,945	$	22,724	$	(57,116	)	$	(233	)	$	11,320	$	896	$	—	$	—	$	(14,194	)

* Gross additions include increases in the cost basis of the investments resulting from new portfolio investments and PIK interest.

** Gross reductions include decreases in the cost basis of investments resulting from principal collections related to investments repayments or sales and impairments.

See notes to consolidated financial statements.

PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Note 1. Organization

In this report, the terms “Prospect,” “we,” “us” and “our” mean Prospect Capital Corporation and its subsidiaries unless the context specifically requires otherwise.

Prospect Capital Corporation 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 purchases small business whole loans on a recurring basis 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 our investments in collateralized loan obligations (“CLOs”). 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: AMU Holdings Inc.; APH Property Holdings, LLC (“APH”); Arctic Oilfield Equipment USA, Inc.; CCPI Holdings Inc.; CP Holdings of Delaware LLC; Credit Central Holdings of Delaware, LLC; Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC; Harbortouch Holdings of Delaware Inc.; MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc.; NPH Property Holdings, LLC (“NPH”); STI Holding, Inc.; UPH Property Holdings, LLC (“UPH”); Valley Electric Holdings I, Inc.; Valley Electric Holdings II, Inc.; and Wolf Energy Holdings Inc. (“Wolf Energy Holdings”). On October 10, 2014, concurrent with the sale of the operating company, our ownership increased to 100% of the outstanding equity of ARRM Services, Inc. (“ARRM”) which was renamed SB Forging Company, Inc. (“SB Forging”). As such, we began consolidating SB Forging on October 11, 2014. Effective May 23, 2016, in connection with the merger of American Property REIT Corp. (“APRC”) and United Property REIT Corp. (“UPRC”) with and into National Property REIT Corp. (“NPRC”), APH and UPH merged with and into NPH, and were dissolved. We collectively refer to these entities as the “Consolidated Holding Companies.”

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

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

Note 2. Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) pursuant to the requirements for reporting on Form 10-Q, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6, 10 and 12 of Regulation S-X. Under the 1940 Act, ASC 946, and the regulations pursuant to Article 6 of Regulation S-X, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services to benefit us. Our consolidated financial statements include the accounts of Prospect, PCF, PSBL, PYC, and the Consolidated Holding Companies. All intercompany balances and transactions have been eliminated in consolidation. The financial results of our non-substantially wholly-owned holding companies and operating portfolio company investments are not consolidated in the financial statements. Any operating companies owned by the Consolidated Holding Companies are not consolidated.

Reclassifications

Certain reclassifications have been made in the presentation of prior consolidated financial statements and accompanying notes to conform to the presentation as of and for the three and nine months ended March 31, 2017.

Use of Estimates

The preparation of the consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income, expenses, and gains and losses during the reported period. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material.

Investment Classification

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

Investment Transactions

Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. In accordance with ASC 325-40, Beneficial Interest in Securitized Financial Assets, investments in CLOs are periodically assessed for other-than-temporary impairment (“OTTI”). When the Company determines that a CLO has OTTI, the amortized cost basis of the CLO is written down to its fair value as of the date of the determination based on events and information evaluated and that write-down is recognized as a realized loss. For the periods ended March 31, 2017 and June 30, 2016, there were no OTTI assessed for any CLO investment within our portfolio. Amounts for investments traded but not yet settled are reported in Due to Broker or Due from Broker, respectively, in the Consolidated Statements of Assets and Liabilities.

Foreign Currency

Foreign currency amounts are translated into US Dollars (USD) on the following basis:


i.	fair value of investment securities, other assets and liabilities—at the spot exchange rate on the last business day of the period; and


ii.	purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such investment transactions, income or expenses.

We do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in fair values of investments held or disposed of during the period. Such fluctuations are included within the net realized and unrealized gains or losses from investments in the Consolidated Statements of Operations.

Investment Risks

Our investments are subject to a variety of risks. Those risks include the following:

Market Risk

Market risk represents the potential loss that can be caused by a change in the fair value of the financial instrument.

Credit Risk

Credit risk represents the risk that we would incur if the counterparties failed to perform pursuant to the terms of their agreements with us.

Liquidity Risk

Liquidity risk represents the possibility that we may not be able to rapidly adjust the size of our investment positions in times of high volatility and financial stress at a reasonable price.

Interest Rate Risk

Interest rate risk represents a change in interest rates, which could result in an adverse change in the fair value of an interest-bearing financial instrument.

Prepayment Risk

Many of our debt investments allow for prepayment of principal without penalty. Downward changes in interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the security and making us less likely to fully earn all of the expected income of that security and reinvesting in a lower yielding instrument.

Structured Credit Related Risk

CLO investments may be riskier and less transparent to us than direct investments in underlying companies. CLOs typically will have no significant assets other than their underlying senior secured loans. Therefore, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans.

Online consumer and Small-and-Medium-Sized Business Lending Risk

With respect to our online consumer and small-and-medium-sized business (“SME”) lending initiative, we invest primarily in marketplace loans through marketplace lending facilitators. 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 facilitators 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 facilitator's 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 facilitator, we may incur unanticipated losses which could adversely impact our operating results.

Foreign Currency

Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.

Investment Valuation

To value our investments, we follow the guidance of ASC 820, Fair Value Measurement (“ASC 820”), that defines fair value, establishes a framework for measuring fair value in conformity with GAAP, and requires disclosures about fair value measurements. In accordance with ASC 820, the fair value of our investments is defined as the price that we would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market in which that investment is transacted.

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

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date.

Level 2: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3: Unobservable inputs for the asset or liability.

In all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment.

Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.

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

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


1.	Each portfolio company or investment is reviewed by our investment professionals with independent valuation firms engaged by our Board of Directors.


2.	The independent valuation firms prepare independent valuations for each investment based on their own independent assessments and issue their report.


3.	The Audit Committee of our Board of Directors reviews and discusses with the independent valuation firms the valuation reports, and then makes a recommendation to the Board of Directors of the value for each investment.


4.	The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the Audit Committee.

Our non-CLO investments are valued utilizing a yield analysis, enterprise value (“EV”) analysis, net asset value analysis, liquidation analysis, discounted cash flow analysis, or a combination of methods, as appropriate. The yield analysis uses loan spreads for loans, dividend yields for certain investments and other relevant information implied by market data involving identical or comparable assets or liabilities. Under the EV analysis, the EV of a portfolio company is first determined and allocated over the portfolio company’s securities in order of their preference relative to one another (i.e., “waterfall” allocation). To determine the EV, we typically use a market multiples approach that considers relevant and applicable market trading data of guideline public companies, transaction metrics from precedent merger and acquisitions transactions and/or a discounted cash flow analysis. The net asset value analysis is used to derive a value of an underlying investment (such as real estate property) by dividing a relevant earnings stream by an appropriate capitalization rate. For this purpose, we consider capitalization rates for similar properties as may be obtained from guideline public companies and/or relevant transactions. The liquidation analysis is intended to approximate the net recovery value of an investment based on, among other things, assumptions regarding liquidation proceeds based on a hypothetical liquidation of a portfolio company’s assets. The discounted cash flow analysis uses valuation techniques to convert future cash flows or earnings to a range of fair values from which a single estimate may be derived utilizing an appropriate discount rate. The measurement is based on the net present value indicated by current market expectations about those future amounts.

In applying these methodologies, additional factors that we consider in valuing our investments may include, as we deem relevant: security covenants, call protection provisions, and information rights; the nature and realizable value of any collateral; the portfolio company’s ability to make payments; the principal markets in which the portfolio company does business; publicly available financial ratios of peer companies; the principal market; and enterprise values, among other factors.

Our investments in CLOs are classified as Level 3 securities under ASC 820 and are valued primarily using a discounted multi-path cash flow model. The CLO structures are analyzed to identify the risk exposures and appropriate call date (i.e., expected maturity). These risk factors are sensitized using Monte Carlo simulations to generate probability-weighted (i.e., multi-path) cash flows for the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market and certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the discount rate that would be effective for the corresponding multi-path estimate of value. We are not responsible for and have no influence over the asset management of the portfolios underlying the CLO investments we hold as those portfolios are managed by non-affiliated third party CLO collateral managers. The main risk factors are: default risk, interest rate risk, downgrade risk, and credit spread risk.

Valuation of Other Financial Assets and Financial Liabilities

and financial liabilities. See Note 8 for disclosure of the fair value of our financial liabilities that are measured using another measurement attribute.

Convertible Notes

We have recorded the Convertible Notes at their contractual amounts. We have determined that the embedded conversion options in the Convertible Unsecured Notes are not required to be separately accounted for as a derivative under ASC 815, Derivatives and Hedging. See Note 5 for further discussion.

Revenue Recognition

Realized gains or losses on the sale of investments are calculated using the specific identification method.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Loan origination fees, original issue discount, and market discounts are capitalized and accreted into interest income over the respective terms of the applicable loans using the effective interest method or straight-line, as applicable, and adjusted only for material amendments or prepayments. Upon a prepayment of a loan, prepayment premiums, original issue discount, or market discounts are recorded as interest income. Other income generally includes amendment fees, commitment fees, administrative agent fees and structuring fees which are recorded when earned.

Loans are placed on non-accrual status when there is reasonable doubt that principal or interest will be collected. Unpaid accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to the cost basis depending upon management’s judgment of the collectibility of the loan receivable. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, is likely to remain current. As of March 31, 2017, approximately 1.4% of our total assets at fair value are in non-accrual status.

Interest income from investments in the “equity” class of security of CLO funds (typically preferred shares, income notes or subordinated notes) and “equity” class of security of securitized trust is recorded based upon an estimation of an effective yield to expected maturity utilizing assumed cash flows in accordance with ASC 325-40, Beneficial Interests in Securitized Financial Assets. We monitor the expected cash inflows from our CLO and securitized trust equity investments, including the expected residual payments, and the effective yield is determined and updated periodically.

Dividend income is recorded on the ex-dividend date.

Structuring fees and similar fees are recognized as income is earned, usually when paid. Structuring fees, excess deal deposits, net profits interests and overriding royalty interests are included in other income. See Note 10 for further discussion.

Federal and State Income Taxes

We have elected to be treated as a RIC and intend to continue to comply with the requirements of the Code applicable to regulated investment companies. We are required to distribute at least 90% of our investment company taxable income and intend to distribute (or retain through a deemed distribution) all of our investment company taxable income and net capital gain to stockholders; therefore, we have made no provision for income taxes. The character of income and gains that we will distribute is determined in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.

If we do not distribute (or are not deemed to have distributed) at least 98% of our annual ordinary income and 98.2% of our capital gains in the calendar year earned, we will generally be required to pay an excise tax equal to 4% of the amount by which 98% of our annual ordinary income and 98.2% of our capital gains exceed the distributions from such taxable income for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income. As of March 31, 2017, we do not expect to have any excise tax due for the 2017 calendar year. Thus, we have not accrued any excise tax for this period.

our accumulated earnings and profits attributable to non-RIC years. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.

We follow ASC 740, Income Taxes (“ASC 740”). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. As of March 2017 and for the three and nine months then ended, we did not record any unrecognized tax benefits or liabilities. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof. Although we file both federal and state income tax returns, our major tax jurisdiction is federal. Our federal tax returns for the tax years ended August 31, 2013 and thereafter remain subject to examination by the Internal Revenue Service.

Dividends and Distributions

Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a monthly dividend or distribution is approved by our Board of Directors quarterly and is generally based upon our management’s estimate of our future earnings. Net realized capital gains, if any, are distributed at least annually.

Financing Costs

We record origination expenses related to our Revolving Credit Facility, and Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Unsecured Notes”) as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method over the stated life of the obligation for our Revolving Credit Facility. The same methodology is used to approximate the effective yield method for our Prospect Capital InterNotes® and our at-the-market offering of our existing unsecured notes that mature on June 15, 2024 (“2024 Notes Follow-on Program”). The effective interest method is used for our remaining Unsecured Notes over the respective expected life or maturity. In the event that we modify or extinguish our debt before maturity, we follow the guidance in ASC 470-50, Modification and Extinguishments (“ASC 470-50”). For modifications to or exchanges of our Revolving Credit Facility, any unamortized deferred costs relating to lenders who are not part of the new lending group are expensed. For extinguishments of our Unsecured Notes, any unamortized deferred costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.

For the year ending June 30, 2017, we have changed our method of presentation relating to debt issuance costs in accordance with ASU 2015-03, Interest - Imputation of Interest (Subtopic 835-30). Prior to July 1, 2016, our policy was to present debt issuance costs in Deferred financing costs as an asset on the Consolidated Statements of Assets and Liabilities, net of accumulated amortization. Beginning with the period ended September 30, 2016, we have presented these costs, except those incurred by the Revolving Credit Facility, as a direct deduction to our Unsecured Notes. Unamortized deferred financing costs of $40,526, $44,140, $57,010, $37,607, and $15,693 previously reported as an asset on the Consolidated Statements of Assets and Liabilities for the years ended June 30, 2016, 2015, 2014, 2013, and 2012, respectively, have been reclassified as a direct deduction to the respective Unsecured Notes (see Notes 5, 6, and 7).

We may record registration expenses related to shelf filings as prepaid expenses. These expenses consist principally of the Securities and Exchange Commission (“SEC”) registration fees, legal fees and accounting fees incurred. These prepaid expenses are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is completed. As of March 31, 2017 and June 30, 2016, there are no prepaid expenses related to registration expenses and all amounts incurred have been expensed.

Guarantees and Indemnification Agreements

We follow ASC 460, Guarantees (“ASC 460”). ASC 460 elaborates on the disclosure requirements of a guarantor in its interim and annual consolidated financial statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, for those guarantees that are covered by ASC 460, the fair value of the obligation undertaken in issuing certain guarantees.

Per Share Information

Net increase or decrease in net assets resulting from operations per share is calculated using the weighted average number of common shares outstanding for the period presented. In accordance with ASC 946, convertible securities are not considered in the calculation of net asset value per share.

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements— Going Concern (Subtopic 205-40) (“ASU 2014-15”), which provides guidance regarding management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance requires management to perform a going concern assessment by evaluating their ability to meet their obligations for a look-forward period of one year from the financial statement issuance date (or date the financial statements are available to be issued). Disclosures are required if it is probable an entity will be unable to meet its obligations within the look-forward period. Incremental substantial doubt disclosure is required if the probability is not mitigated by management’s plans to mitigate those relevant conditions or events. ASU 2014-15 applies to all entities for the first annual period ending after December 15, 2016. Management is responsible for assessing going concern uncertainties at each annual and interim reporting period thereafter. The adoption of the amended guidance in ASU 2014-15 is not expected to have a significant effect on our consolidated financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which amends the financial instruments impairment guidance so that an entity is required to measure expected credit losses for financial assets based on historical experience, current conditions and reasonable and supportable forecasts. As such, an entity will use forward-looking information to estimate credit losses. ASU 2016-13 also amends the guidance in FASB ASC Subtopic No. 325-40, Investments-Other, Beneficial Interests in Securitized Financial Assets, related to the subsequent measurement of accretable yield recognized as interest income over the life of a beneficial interest in securitized financial assets under the effective yield method. ASU 2016-13 is effective for financial statements issued for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the impact, if any, of adopting this ASU on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), which addresses certain aspects of cash flow statement classification. One such amendment requires cash payments for debt prepayment or debt extinguishment costs to be classified as cash outflows for financing activities. ASU 2016-15 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The adoption of the amended guidance in ASU 2016-15 is not expected to have a significant effect on our consolidated financial statements and disclosures.

In October 2016, the SEC adopted significant reforms under the 1940 Act that impose extensive new disclosure and reporting obligations on most 1940 Act funds (collectively, the “Reporting Rules”). The Reporting Rules greatly expand the volume of information regarding fund portfolio holdings and investment practices that must be disclosed. The adopted amendments to Regulation S-X for 1940 Act funds and BDCs include an update to the disclosures for investments in and advances to affiliates, and the requirement to include in their financial statements a standardized schedule containing detailed information about derivative investments (among other changes). The amendments to Regulation S-X are effective August 1, 2017, and adoption of the amended reform is not expected to have a significant effect on our consolidated financial statements and disclosures.

Note 3. Portfolio Investments

At March 31, 2017, we had investments in 125 long-term portfolio investments, which had an amortized cost of $6,253,429 and a fair value of $6,024,766. At June 30, 2016, we had investments in 125 long-term portfolio investments, which had an amortized cost of $6,091,100 and a fair value of $5,897,708.

The original cost basis of debt placement and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $1,266,294 and $685,064 during the nine months ended March 31, 2017 and March 31, 2016, respectively. Debt repayments and considerations from sales of equity securities of approximately $1,061,839 and $955,415 were received during the nine months ended March 31, 2017 and March 31, 2016, respectively.

The following table shows the composition of our investment portfolio as of March 31, 2017 and June 30, 2016.



	March 31, 2017				June 30, 2016
	Cost		Fair Value		Cost		Fair Value
Revolving Line of Credit	$	21,471	$	21,471	$	13,274	$	13,274
Senior Secured Debt	3,090,513		2,922,332		3,072,839		2,941,722
Subordinated Secured Debt	1,239,061		1,230,677		1,228,598		1,209,604
Subordinated Unsecured Debt	37,792		41,995		75,878		68,358
Small Business Loans	11,075		10,521		14,603		14,215
CLO Residual Interest	1,145,589		1,072,517		1,083,540		1,009,696
Equity	707,928		725,253		602,368		640,839
Total Investments	$	6,253,429	$	6,024,766	$	6,091,100	$	5,897,708

In the previous table and throughout the remainder of this footnote, we aggregate our portfolio investments by type of investment, which may differ slightly from the nomenclature used by the constituent instruments defining the rights of holders of the investment, as disclosed on our Consolidated Schedules of Investments (“SOI”). The following investments are included in each category:


•	Revolving Line of Credit includes our investments in delayed draw term loans.


•	Senior Secured Debt includes investments listed on the SOI such as senior secured term loans, senior term loans, secured promissory notes, senior demand notes, and first lien term loans.


•	Subordinated Secured Debt includes investments listed on the SOI such as subordinated secured term loans, subordinated term loans, senior subordinated notes, and second lien term loans.


•	Subordinated Unsecured Debt includes investments listed on the SOI such as subordinated unsecured notes and senior unsecured notes.


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


•	CLO Residual Interest includes our investments in the “equity” class of security of CLO funds such as income notes, preference shares, and subordinated notes.


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

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of March 31, 2017.



	Level 1		Level 2		Level 3		Total
Revolving Line of Credit	$	—	$	—	$	21,471	$	21,471
Senior Secured Debt	—		—		2,922,332		2,922,332
Subordinated Secured Debt	—		—		1,230,677		1,230,677
Subordinated Unsecured Debt	—		—		41,995		41,995
Small Business Loans	—		—		10,521		10,521
CLO Residual Interest	—		—		1,072,517		1,072,517
Equity	—		—		725,253		725,253
Total Investments	$	—	$	—	$	6,024,766	$	6,024,766

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of June 30, 2016.



	Level 1		Level 2		Level 3		Total
Revolving Line of Credit	$	—	$	—	$	13,274	$	13,274
Senior Secured Debt	—		—		2,941,722		2,941,722
Subordinated Secured Debt	—		—		1,209,604		1,209,604
Subordinated Unsecured Debt	—		—		68,358		68,358
Small Business Loans	—		—		14,215		14,215
CLO Residual Interest	—		—		1,009,696		1,009,696
Equity	—		—		640,839		640,839
Total Investments	$	—	$	—	$	5,897,708	$	5,897,708

The following tables show the aggregate changes in the fair value of our Level 3 investments during the nine months ended March 31, 2017.



	Fair Value Measurements Using Unobservable Inputs (Level 3)
	Control Investments			Affiliate Investments			Non-Control/ Non-Affiliate Investments			Total
Fair value as of June 30, 2016	$	1,752,449		$	11,320		$	4,133,939		$	5,897,708
Net realized gains (losses) on investments	184			137			(1,438		)	(1,117		)
Net change in unrealized losses	(30,937		)	(1,854		)	(2,480		)	(35,271		)
Net realized and unrealized losses	(30,753		)	(1,717		)	(3,918		)	(36,388		)
Purchases of portfolio investments	300,921			—			951,047			1,251,968
Payment-in-kind interest	11,003			—			3,323			14,326
Accretion (amortization) of discounts and premiums	563			—			(43,500		)	(42,937		)
Repayments and sales of portfolio investments	(163,609		)	(2,364		)	(893,938		)	(1,059,911		)
Transfers within Level 3(1)	22,145			—			(22,145		)	—
Transfers in (out) of Level 3(1)	—			—			—			—
Fair value as of March 31, 2017	$	1,892,719		$	7,239		$	4,124,808		$	6,024,766



	Revolving Line of Credit			Senior Secured Debt			Subordinated Secured Debt			Subordinated Unsecured Debt			Small Business Loans			CLO Debt		CLO Residual Interest			Equity			Total
Fair value as of June 30, 2016	$	13,274		$	2,941,722		$	1,209,604		$	68,358		$	14,215		$	—	$	1,009,696		$	640,839		$	5,897,708
Net realized gains (losses) on investments	—			238			146			5			(2,378		)	—		—			872			(1,117		)
Net change in unrealized (losses) gains	—			(37,062		)	10,610			11,723			(167		)	—		773			(21,148		)	(35,271		)
Net realized and unrealized (losses) gains	—			(36,824		)	10,756			11,728			(2,545		)	—		773			(20,276		)	(36,388		)
Purchases of portfolio investments	15,621			683,381			328,791			—			42,164			—		108,676			73,335			1,251,968
Payment-in-kind interest	—			4,364			8,048			1,914			—			—		—			—			14,326
Accretion (amortization) of discounts and premiums	—			499			3,192			—			—			—		(46,628		)	—			(42,937		)
Repayments and sales of portfolio investments	(7,424		)	(593,665		)	(329,714		)	(40,005		)	(43,313		)	—		—			(45,790		)	(1,059,911		)
Transfers within Level 3(1)	—			(77,145		)	—			—			—			—		—			77,145			—
Transfers in (out) of Level 3(1)	—			—			—			—			—			—		—			—			—
Fair value as of March 31, 2017	$	21,471		$	2,922,332		$	1,230,677		$	41,995		$	10,521		$	—	$	1,072,517		$	725,253		$	6,024,766


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

The following tables show the aggregate changes in the fair value of our Level 3 investments during the nine months ended March 31, 2016.



	Fair Value Measurements Using Unobservable Inputs (Level 3)
	Control Investments			Affiliate Investments			Non-Control/ Non-Affiliate Investments			Total
Fair value as of June 30, 2015	$	1,974,202		$	45,945		$	4,589,151		$	6,609,298
Net realized gains (losses) on investments	7			(14,194		)	(6,872		)	(21,059		)
Net change in unrealized (losses) gains	(40,779		)	535			(212,792		)	(253,036		)
Net realized and unrealized losses	(40,772		)	(13,659		)	(219,664		)	(274,095		)
Purchases of portfolio investments	224,058			1,263			452,268			677,589
Payment-in-kind interest	3,524			—			3,951			7,475
Amortization of discounts and premiums	—			—			(62,631		)	(62,631		)
Repayments and sales of portfolio investments	(162,989		)	(42,922		)	(746,620		)	(952,531		)
Transfers within Level 3(1)	—			21,461			(21,461		)	—
Transfers in (out) of Level 3(1)	—			—			—			—
Fair value as of March 31, 2016	$	1,998,023		$	12,088		$	3,994,994		$	6,005,105



	Revolving Line of Credit			Senior Secured Debt			Subordinated Secured Debt			Subordinated Unsecured Debt			Small Business Loans			CLO Debt			CLO Residual Interest			Equity			Total
Fair value as of June 30, 2015	$	30,546		$	3,533,447		$	1,205,303		$	144,271		$	50,892		$	32,398		$	1,113,023		$	499,418		$	6,609,298
Net realized (losses) gains on investments	—			(1,245		)	(7,457		)	8			(4,875		)	3,911			—			(11,401		)	(21,059		)
Net change in unrealized (losses) gains	(202		)	(51,642		)	10,160			(3,853		)	(294		)	(3,784		)	(149,736		)	(53,685		)	(253,036		)
Net realized and unrealized (losses) gains	(202		)	(52,887		)	2,703			(3,845		)	(5,169		)	127			(149,736		)	(65,086		)	(274,095		)
Purchases of portfolio investments	6,142			367,732			90,604			—			62,621			—			96,620			53,870			677,589
Payment-in-kind interest	—			4,838			540			2,097			—			—			—			—			7,475
Accretion (amortization) of discounts and premiums	—			194			763			—			—			390			(63,978		)	—			(62,631		)
Repayments and sales of portfolio investments	(27,096		)	(639,265		)	(72,447		)	(72,706		)	(87,570		)	(32,915		)	—			(20,532		)	(952,531		)
Transfers within Level 3(1)	—			(124,585		)	(75,232		)	—			—			—			—			199,817			—
Transfers in (out) of Level 3(1)	—			—			—			—			—			—			—			—			—
Fair value as of March 31, 2016	$	9,390		$	3,089,474		$	1,152,234		$	69,817		$	20,774		$	—		$	995,929		$	667,487		$	6,005,105


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

The net change in unrealized depreciation on the investments that use Level 3 inputs was $(46,678) and $(266,054) for investments still held as of March 31, 2017 and March 31, 2016, respectively.

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of March 31, 2017 were as follows:

Unobservable Input

Asset Category

Fair Value

Primary Valuation Technique

Input

Range

Weighted

Average

Senior Secured Debt

2,064,999

Discounted Cash Flow

(Yield analysis)

Market Yield

5.7%-22.8%

11.0%

Senior Secured Debt

207,265

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

4.0x-9.0x

6.8x

Senior Secured Debt

37,543

Enterprise Value Waterfall (Market approach)

Revenue Multiple

0.3x-0.6x

0.5x

Senior Secured Debt

47,099

Enterprise Value Waterfall (Discounted cash flow)

Discount Rate

6.6%-8.6%

7.6%

Senior Secured Debt

10,239

Liquidation Analysis

N/A

Senior Secured Debt (1)

279,593

Enterprise Value Waterfall

Loss-adjusted discount rate

3.0%-14.4%

11.2%

Senior Secured Debt (2)

297,065

Enterprise Value Waterfall (NAV Analysis)

Capitalization Rate

3.4%-8.3%

5.9%

Discounted Cash Flow

Discount Rate

6.5%-7.5%

7.0%

Subordinated Secured Debt

874,512

Discounted Cash Flow

(Yield analysis)

Market Yield

8.6%-27.5%

12.7%

Subordinated Secured Debt

28,622

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

5.8x-6.8x

6.3x

Subordinated Secured Debt (3)

327,543

Enterprise Value Waterfall (Market approach)

Book Value Multiple

1.2x-3.5x

2.5x

Enterprise Value Waterfall (Market approach)

Earnings Multiple

7.0x-11.0x

10.2x

Subordinated Unsecured Debt

41,995

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

5.8x-8.5x

7.7x

Small Business Loans (4)

10,521

Discounted Cash Flow

Loss-adjusted Discount Rate

3.1%-32.3%

31.8%

CLO Residual Interest

1,072,517

Discounted Cash Flow

Discount Rate

12.9%-22.4%

16.2%

Preferred Equity

8,263

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

4.0x-10.0x

5.5x

Preferred Equity

71,205

Enterprise Value Waterfall (Market approach)

Revenue Multiple

2.8x-3.3x

3.0x

Common Equity/Interests/Warrants

48,902

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

4.0x-9.0x

6.0x

Common Equity/Interests/Warrants

16,600

Enterprise Value Waterfall (Market approach)

Revenue Multiple

0.3x-3.3x

1.6x

Common Equity/Interests/Warrants (1)

103,794

Enterprise Value Waterfall

Loss-adjusted discount rate

3.0%-14.4%

11.2%

Common Equity/Interests/Warrants (2)

188,427

Enterprise Value Waterfall (NAV analysis)

Capitalization Rate

3.4%-8.3%

5.9%

Discounted Cash Flow

Discount Rate

6.5%-7.5%

7.0%

Common Equity/Interests/Warrants (3)

118,183

Enterprise Value Waterfall (Market approach)

Book Value Multiple

1.2x-3.5x

2.3x

Enterprise Value Waterfall (Market approach)

Earnings Multiple

7.0x-11.0x

10.0x

Common Equity/Interests/Warrants (5)

90,738

Discounted Cash Flow

Discount Rate

6.5%-7.5%

7.0%

Common Equity/Interests/Warrants

31,676

Discounted Cash Flow

Discount Rate

6.6%-8.6%

7.6%

Common Equity/Interests/Warrants

2,775

Discounted Cash Flow

(Yield analysis)

Market Yield

16.0%-18.0%

17.0%

Common Equity/Interests/Warrants

42,481

Liquidation Analysis

N/A

Escrow Receivable

2,209

Discounted Cash Flow

Discount Rate

7.2%-8.3%

7.8%

Total Level 3 Investments

6,024,766

(1)

Represents an investment in a Real Estate Investment subsidiary. The Enterprise Value analysis includes the fair value of our investments in such indirect subsidiary’s consumer loans purchased from online consumer lending platforms, which are valued using a discounted cash flow valuation technique. The key unobservable input to the discounted cash flow analysis is noted above. In addition, the valuation also used projected loss rates as an unobservable input ranging from 0.31-21.89%, with a weighted average of 9.49%.


(2)	Represents our REIT investments. EV waterfall methodology uses both the net asset value analysis and discounted cash flow analysis, which are weighted equally (50%).

(3)

Represents investments in consumer finance subsidiaries. The enterprise value waterfall methodology utilizes book value and earnings multiples, as noted above. In addition, the valuation of certain consumer finance companies utilizes the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies each observable input (book value multiple, earnings multiple and discount rate) is weighted equally. For these companies the discount rate ranged from 14.5% to 18.0% with a weighted average of 15.6%.


(4)	Includes our investments in small business whole loans purchased from OnDeck. Valuation also used projected loss rates as an unobservable input ranging from 0.00%-0.90%, with a weighted average of 0.46%.


(5)	Represents net operating income interests in our REIT investments.

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of June 30, 2016 were as follows:

Unobservable Input

Asset Category

Fair Value

Primary Valuation Technique

Input

Range

Weighted

Average

Senior Secured Debt

2,167,389

Discounted Cash Flow

(Yield analysis)

Market Yield

5.3%-27.6%

11.6%

Senior Secured Debt

115,893

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

4.5x-6.8x

5.9x

Senior Secured Debt

64,418

Enterprise Value Waterfall (Market approach)

Revenue Multiple

0.4x-0.6x

0.5x

Senior Secured Debt

37,856

Enterprise Value Waterfall (Discounted cash flow)

Discount Rate

6.5%-8.5%

7.5%

Senior Secured Debt

7,972

Liquidation Analysis

N/A

Senior Secured Debt (1)

99,972

Enterprise Value Waterfall

Loss-adjusted discount rate

3.0%-18.0%

13.5%

Senior Secured Debt (2)

461,496

Enterprise Value Waterfall (NAV Analysis)

Capitalization Rate

3.4%-8.3%

5.9%

Enterprise Value Waterfall (Income approach)

Discount Rate

6.5%-7.5%

7.0%

Subordinated Secured Debt

871,593

Discounted Cash Flow

(Yield Analysis)

Market Yield

5.3%-25.7%

12.6%

Subordinated Secured Debt

28,622

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

7.0x-8.0x

7.5x

Subordinated Secured Debt (3)

309,389

Enterprise Value Waterfall (Market approach)

Book Value Multiple

1.2x-3.7x

2.5x

Enterprise Value Waterfall (Market approach)

Earnings Multiple

7.0x-11.0x

10.2x

Subordinated Unsecured Debt

30,781

Discounted Cash Flow

(Yield Analysis)

Market Yield

14.1%-71.9%

28.9%

Subordinated Unsecured Debt

37,577

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

5.8x-8.5x

7.7x

Small Business Loans (4)

14,215

Discounted Cash Flow

Loss-Adjusted Discount Rate

12.7%-33.6%

21.8%

CLO Residual Interest

1,009,696

Discounted Cash Flow

Discount Rate

15.6%-23.9%

18.0%

Preferred Equity (6)

76,081

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

4.5x-7.0x

6.7x

Preferred Equity

2,842

Discounted Cash Flow

Discount Rate

6.2%-7.3%

6.8%

Common Equity/Interests/Warrants (7)

92,391

Enterprise Value Waterfall (Market approach)

EBITDA Multiple

4.8x-9.0x

6.0x

Common Equity/Interests/Warrants (2)

215,490

Enterprise Value Waterfall (NAV analysis)

Capitalization Rate

3.4%-8.3%

5.9%

Enterprise Value Waterfall (Income approach)

Discount Rate

6.5%-7.5%

7.0%

Common Equity/Interests/Warrants (3)

127,727

Enterprise Value Waterfall (Market approach)

Book Value Multiple

1.2x-3.7x

2.3x

Enterprise Value Waterfall (Market approach)

Earnings Multiple

7.0x-11.0x

10.0x

Common Equity/Interests/Warrants (5)

66,973

Discounted Cash Flow

Discount Rate

6.5%-7.5%

7.0%

Common Equity/Interests/Warrants

22,965

Discounted Cash Flow

Discount Rate

6.5%-8.5%

7.5%

Common Equity/Interests/Warrants

3,616

Discounted Cash Flow

(Yield analysis)

Market Yield

16.0%-18.0%

17.0%

Common Equity/Interests/Warrants

26,638

Liquidation Analysis

N/A

Escrow Receivable

6,116

Discounted Cash Flow

Discount Rate

6.2%-7.5%

6.8%

Total Level 3 Investments

5,897,708

(1)


(2)	Represents our REIT investments. EV waterfall methodology uses both the net asset value analysis and discounted cash flow analysis, which are weighted equally (50%).

(3)


(4)	Includes our investments in small business whole loans purchased from OnDeck. Valuation also used projected loss rates as an unobservable input ranging from 0.71%-5.25%, with a weighted average of 1.22%.


(5)	Represents net operating income interests in our REIT investments.


(6)	In addition, the valuation of certain controlled energy companies utilizes the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies each observable input is weighted equally. For these companies the discounted rate ranged from 20.0% to 21.0% with a weighted average of 20.5%.


(7)	In addition, the valuation of certain energy companies utilizes the discounted cash flow technique whereby the significant unobservable input is the discount rate. For these companies each observable input is weighted equally. For these companies the discounted rate ranged from 20.5% to 21.5% with a weighted average of 21.0%.

In determining the range of values for debt instruments, 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 analysis was then prepared 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 earnings before income tax, interest, depreciation and amortization (“EBITDA”) multiples, the discounted cash flow technique, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions. For stressed debt and equity investments, a liquidation analysis was prepared. During the year ended June 30, 2016, we changed the valuation methodology for our REITs portfolio (APRC, NPRC, and UPRC) from averaging the net asset value and dividend yield method to averaging the net asset value and discounted cash flow method utilizing capitalization rates for similar guideline companies and/or similar recent investment transactions.

In determining the range of values for our investments in CLOs, management and the independent valuation firm use primarily 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 using Monte Carlo simulations to generate probability-weighted (i.e., multi-path) cash flows for the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market and certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the discount rate that would be effective for the corresponding multi-path estimate of value.

Our portfolio consists of residual interests in CLOs, which involve a number of significant risks. CLOs are typically very highly levered (10 - 14 times), and therefore the residual interest tranches that we invest in are subject to a higher degree of risk of total loss. In particular, investors in CLO residual interests indirectly bear risks of the underlying loan investments held by such CLOs. We generally have the right to receive payments only from the CLOs, and generally do not have direct rights against the underlying borrowers or the entity that sponsored the CLOs. While the CLOs we target generally enable the investor to acquire interests in a pool of senior loans without the expenses associated with directly holding the same investments, the prices of indices and securities underlying our CLOs will rise or fall. These prices (and, therefore, the prices of the CLOs) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. The failure by a CLO investment in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that a CLO fails certain tests, holders of debt senior to us would be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.

The interests we have acquired in CLOs are generally thinly traded or have only a limited trading market. CLOs are typically privately offered and sold, even in the secondary market. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO residual interests carry additional risks,

including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO investment or unexpected investment results. Our net asset value may also decline over time if our principal recovery with respect to CLO residual interests is less than the cost of those investments. Our CLO investments and/or the underlying senior secured loans may prepay more quickly than expected, which could have an adverse impact on our value.

An increase in LIBOR would materially increase the CLO’s financing costs. Since most of the collateral positions within the CLOs have LIBOR floors, there may not be corresponding increases in investment income (if LIBOR increases but stays below the LIBOR floor rate of such investments) resulting in materially smaller distribution payments to the residual interest investors.

We hold more than a 10% interest in certain foreign corporations that are treated as controlled foreign corporations (“CFC”) for U.S. federal income tax purposes (including our residual interest tranche investments in CLOs). Therefore, we are treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporations in an amount equal to our pro rata share of the corporation’s income for that tax year (including both ordinary earnings and capital gains). We are required to include such deemed distributions from a CFC in our taxable income and we are required to distribute at least 90% of such income to maintain our RIC status, regardless of whether or not the CFC makes an actual distribution during such year.

If we acquire shares in “passive foreign investment companies” (“PFICs”) (including residual interest tranche investments in CLOs that are PFICs), we may be subject to federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend to our stockholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions, but such elections (if available) will generally require us to recognize our share of the PFICs income for each year regardless of whether we receive any distributions from such PFICs. We must nonetheless distribute such income to maintain its status as a RIC.

Legislation enacted in 2010 imposes a withholding tax of 30% on payments of U.S. source interest and dividends paid after December 31, 2013, or gross proceeds from the disposition of an instrument that produces U.S. source interest or dividends paid after December 31, 2016, to certain non-U.S. entities, including certain non-U.S. financial institutions and investment funds, unless such non-U.S. entity complies with certain reporting requirements regarding its United States account holders and its United States owners. Most CLOs in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO in which we invest fails to properly comply with these reporting requirements, it could reduce the amounts available to distribute to residual interest and junior debt holders in such CLO vehicle, which could materially and adversely affect our operating results and cash flows.

If we are required to include amounts in income prior to receiving distributions representing such income, we may have to sell some of our investments at times and/or at prices management would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level income tax.

The significant unobservable input used to value our investments based on the yield analysis and discounted cash flow analysis is the market yield (or applicable discount rate) used to discount the estimated future cash flows expected to be received from the underlying investment, which includes both future principal and interest/dividend payments. Increases or decreases in the market yield (or applicable discount rate) would result in a decrease or increase, respectively, in the fair value measurement. Management and the independent valuation firms consider the following factors when selecting market yields or discount rates: risk of default, rating of the investment and comparable company investments, and call provisions.

The significant unobservable inputs used to value our investments based on the EV analysis may include market multiples of specified financial measures such as EBITDA, net income, or book value of identified guideline public companies, implied valuation multiples from precedent M&A transactions, and/or discount rates applied in a discounted cash flow analysis. The independent valuation firm identifies a population of publicly traded companies with similar operations and key attributes to that of the portfolio company. Using valuation and operating metrics of these guideline public companies and/or as implied by relevant precedent transactions, a range of multiples of the latest twelve months EBITDA, or other measure such as net income or book value, is typically calculated. The independent valuation firm utilizes the determined multiples to estimate the portfolio company’s EV generally based on the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Increases or decreases in the multiple may result in an increase or decrease, respectively, in EV which may increase or decrease the fair value measurement of the debt of controlled companies and/or equity investment, as applicable. In certain instances, a discounted cash flow analysis may be considered in estimating EV, in which case, discount rates based on a weighted average cost of capital and application of the capital asset pricing model may be utilized.

The significant unobservable input used to value our private REIT investments based on the net asset value analysis is the capitalization rate applied to the earnings measure of the underlying property.

Changes in market yields, discount rates, capitalization rates or EBITDA multiples, each in isolation, may change the fair value measurement of certain of our investments. Generally, an increase in market yields, discount rates or capitalization rates, or a decrease in EBITDA (or other) multiples may result in a decrease in the fair value measurement of certain of our investments.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the currently assigned valuations.

During the nine months ended March 31, 2017, the valuation methodology for Arctic Energy Services, LLC (“Arctic Energy”) changed to remove the discounted cash flow analysis and add the liquidation analysis. As a result of the company’s performance and current market conditions, the fair value of our investment in Arctic Energy decreased to $15,258 as of March 31, 2017, a discount of $45,618 from its amortized cost, compared to the $22,536 unrealized depreciation recorded at June 30, 2016.

During the nine months ended March 31, 2017, the valuation methodology for Ark-La-Tex Wireline Services, LLC (“Ark-La-Tex”) changed to remove the enterprise value waterfall approach. In addition, on March 14, 2017, assets previously held by Ark-La-Tex were assigned to Wolf Energy Services Company, LLC, (“Wolf Energy Services”) a wholly-owned subsidiary of Wolf Energy Holdings, in exchange for a reduction of Ark-La-Tex’s debt by $22,145, eliminating Senior Secured Term Loan A in full. As a result of this change, and in recognition of recent company performance, the fair value of our investment in Ark-La-Tex decreased to $1,450 as of March 31, 2017, a discount of $19,997 from its amortized cost, compared to the $32,548 unrealized depreciation recorded at June 30, 2016.

During the nine months ended March 31, 2017, the valuation methodology for CP Energy Services Inc. (“CP Energy”) changed to remove the discounted cash flow analysis. As a result of the company’s performance and current market conditions, the fair value of our investment in CP Energy decreased to $71,205 as of March 31, 2017, a discount of $42,295 from its amortized cost, compared to the $37,498 unrealized depreciation recorded at June 30, 2016.

During the nine months ended March 31, 2017, the valuation methodology for Nixon, Inc. (“Nixon”) changed to remove the discounted cash flow yield analysis approach and adding the liquidation analysis. As a result of the company’s performance the fair value of our investment in Nixon decreased to $1,552 as of March 31, 2017, a discount of $12,645 from its amortized cost, compared to the $2,421 unrealized depreciation recorded at June 30, 2016.

During the nine months ended March 31, 2017, the valuation methodology for Pacific World Corporation (“Pacific World”) changed to incorporate an enterprise value waterfall approach. As a result of this change as well as the impairment of Term Loan B, the fair value of our investment in Pacific World decreased to $177,436 as of March 31, 2017, a discount of $30,789 from its amortized cost, compared to the $20,797 unrealized depreciation recorded at June 30, 2016.

During the nine months ended March 31, 2017, the valuation methodology for USES Corp. (“USES”) changed to remove the discounted cash flow yield analysis approach. As a result of the company’s performance the fair value of our investment in USES decreased to $23,458 as of March 31, 2017, a discount of $39,768 from its amortized cost, compared to the $21,440 unrealized depreciation recorded at June 30, 2016.

During the nine months ended March 31, 2017, we provided $75,591 of debt and $25,200 of equity financing to NPRC for the acquisition of real estate properties and $11,028 of equity financing to NPRC to fund capital expenditures for existing properties. In addition, during the nine months ended March 31, 2017, we received partial repayments of $27,204 of our loans previously outstanding and $30,797 as a return of capital on our equity investment.

During the nine months ended March 31, 2017, we provided $100,429 and $23,077 of debt and equity financing, respectively, to NPRC and its wholly-owned subsidiaries to support the online consumer lending initiative. In addition, during the nine months ended March 31, 2017, we received partial repayments of $78,628 of our loans previously outstanding with NPRC and its wholly-owned subsidiaries and $5,372 as a return of capital on our equity investment in NPRC.

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 24 to 84 months. As of March 31, 2017, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 119,859 individual loans and had an aggregate fair value of $774,990. The average outstanding individual loan balance is approximately $7 and the loans mature on dates ranging from April 1, 2017 to March 22, 2024 with a weighted-average outstanding term of 32 months as of March 31, 2017. Fixed interest rates range from 4.0% to 36.0% with a weighted-average current interest rate of 24.1%. As of March 31, 2017, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $383,387.

As of March 31, 2017, based on outstanding principal balance, 6.0% of the portfolio was invested in super prime loans (borrowers with a Fair Isaac Corporation (“FICO”) score, of 720 or greater), 16.8% of the portfolio in prime loans (borrowers with a FICO score of 660 to 719) and 77.2% of the portfolio in near prime loans (borrowers with a FICO score of 580 to 659).



Loan Type	Outstanding Principal Balance		Fair Value		Weighted Average Interest Rate*
Super Prime	$	48,184	$	47,576	11.8%
Prime	135,885		131,058		15.6%
Near Prime	625,694		596,356		26.9%

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

As of March 31, 2017, our investment in NPRC and its wholly-owned subsidiaries had an amortized cost of $820,702 and a fair value of $959,617, including our investment in online consumer lending as discussed above. The fair value of $576,230 related to NPRC’s real estate portfolio was comprised of thirty-eight multi-families properties, twelve self-storage units, 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, 2017.



No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
1	Filet of Chicken	Forest Park, GA	10/24/2012	$	7,400	$	—
2	5100 Live Oaks Blvd, LLC	Tampa, FL	1/17/2013	63,400		46,700
3	Lofton Place, LLC	Tampa, FL	4/30/2013	26,000		20,363
4	Arlington Park Marietta, LLC	Marietta, GA	5/8/2013	14,850		9,650
5	NPRC Carroll Resort, LLC	Pembroke Pines, FL	6/24/2013	225,000		179,706
6	Cordova Regency, LLC	Pensacola, FL	11/15/2013	13,750		11,375
7	Crestview at Oakleigh, LLC	Pensacola, FL	11/15/2013	17,500		13,845
8	Inverness Lakes, LLC	Mobile, AL	11/15/2013	29,600		24,700
9	Kings Mill Pensacola, LLC	Pensacola, FL	11/15/2013	20,750		17,550
10	Plantations at Pine Lake, LLC	Tallahassee, FL	11/15/2013	18,000		14,092
11	Verandas at Rocky Ridge, LLC	Birmingham, AL	11/15/2013	15,600		10,205
12	Matthews Reserve II, LLC	Matthews, NC	11/19/2013	22,063		19,941
13	City West Apartments II, LLC	Orlando, FL	11/19/2013	23,562		23,308
14	Vinings Corner II, LLC	Smyrna, GA	11/19/2013	35,691		32,964
15	Uptown Park Apartments II, LLC	Altamonte Springs, FL	11/19/2013	36,590		29,816
16	Mission Gate II, LLC	Plano, TX	11/19/2013	47,621		41,658
17	St. Marin Apartments II, LLC	Coppell, TX	11/19/2013	73,078		62,468
18	Atlanta Eastwood Village LLC	Stockbridge, GA	12/12/2013	25,957		22,991
19	Atlanta Monterey Village LLC	Jonesboro, GA	12/12/2013	11,501		11,186
20	Atlanta Hidden Creek LLC	Morrow, GA	12/12/2013	5,098		4,789
21	Atlanta Meadow Springs LLC	College Park, GA	12/12/2013	13,116		13,170
22	Atlanta Meadow View LLC	College Park, GA	12/12/2013	14,354		13,225
23	Atlanta Peachtree Landing LLC	Fairburn, GA	12/12/2013	17,224		15,665



No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
24	APH Carroll Bartram Park, LLC	Jacksonville, FL	12/31/2013	38,000		27,754
25	Plantations at Hillcrest, LLC	Mobile, AL	1/17/2014	6,930		4,810
26	Crestview at Cordova, LLC	Pensacola, FL	1/17/2014	8,500		8,001
27	APH Carroll Atlantic Beach, LLC	Atlantic Beach, FL	1/31/2014	13,025		8,663
28	Taco Bell, OK	Yukon, OK	6/4/2014	1,719		—
29	Taco Bell, MO	Marshall, MO	6/4/2014	1,405		—
30	23 Mile Road Self Storage, LLC	Chesterfield, MI	8/19/2014	5,804		4,350
31	36th Street Self Storage, LLC	Wyoming, MI	8/19/2014	4,800		3,600
32	Ball Avenue Self Storage, LLC	Grand Rapids, MI	8/19/2014	7,281		5,460
33	Ford Road Self Storage, LLC	Westland, MI	8/29/2014	4,642		3,480
34	Ann Arbor Kalamazoo Self Storage, LLC	Ann Arbor, MI	8/29/2014	4,458		3,345
35	Ann Arbor Kalamazoo Self Storage, LLC	Ann Arbor, MI	8/29/2014	8,927		6,695
36	Ann Arbor Kalamazoo Self Storage, LLC	Kalamazoo, MI	8/29/2014	2,363		1,775
37	Canterbury Green Apartments Holdings LLC	Fort Wayne, IN	9/29/2014	85,500		74,198
38	Abbie Lakes OH Partners, LLC	Canal Winchester, OH	9/30/2014	12,600		13,055
39	Kengary Way OH Partners, LLC	Reynoldsburg, OH	9/30/2014	11,500		13,502
40	Lakeview Trail OH Partners, LLC	Canal Winchester, OH	9/30/2014	26,500		23,256
41	Lakepoint OH Partners, LLC	Pickerington, OH	9/30/2014	11,000		14,480
42	Sunbury OH Partners, LLC	Columbus, OH	9/30/2014	13,000		14,115
43	Heatherbridge OH Partners, LLC	Blacklick, OH	9/30/2014	18,416		18,328
44	Jefferson Chase OH Partners, LLC	Blacklick, OH	9/30/2014	13,551		17,200
45	Goldenstrand OH Partners, LLC	Hilliard, OH	10/29/2014	7,810		9,600
46	Jolly Road Self Storage, LLC	Okemos, MI	1/16/2015	7,492		5,620
47	Eaton Rapids Road Self Storage, LLC	Lansing West, MI	1/16/2015	1,741		1,305
48	Haggerty Road Self Storage, LLC	Novi, MI	1/16/2015	6,700		5,025
49	Waldon Road Self Storage, LLC	Lake Orion, MI	1/16/2015	6,965		5,225
50	Tyler Road Self Storage, LLC	Ypsilanti, MI	1/16/2015	3,507		2,630
51	SSIL I, LLC	Aurora, IL	11/5/2015	34,500		26,450
52	Vesper Tuscaloosa, LLC	Tuscaloosa, AL	9/28/2016	54,500		41,250
53	Vesper Iowa City, LLC	Iowa City, IA	9/28/2016	32,750		24,825
54	Vesper Corpus Christi, LLC	Corpus Christi, TX	9/28/2016	14,250		10,800
55	Vesper Campus Quarters, LLC	Corpus Christi, TX	9/28/2016	18,350		14,175
56	Vesper College Station, LLC	College Station, TX	9/28/2016	41,500		32,058
57	Vesper Kennesaw, LLC	Kennesaw, GA	9/28/2016	57,900		44,727
58	Vesper Statesboro, LLC	Statesboro, GA	9/28/2016	7,500		5,292
59	Vesper Manhattan KS, LLC	Manhattan, KS	9/28/2016	23,250		15,921
60	JSIP Union Place, LLC	Franklin, MA	12/7/2016	64,750		51,800
61	9220 Old Lantern Way, LLC	Laurel, MD	1/30/2017	187,250		153,580
				$	1,648,341	$	1,355,717

On August 12, 2015, we sold 780 of our small business whole loans (with a cost of $30,968) purchased from OnDeck to Jefferies Asset Funding LLC for proceeds of $26,619, net of related transaction expenses, and a trust certificate representing a 41.54% interest in the MarketPlace Loan Trust, Series 2015-OD2. We realized a loss of $775 on the sale.

On September 30, 2015, we restructured our investment in Arctic Energy. Concurrent with the restructuring, we exchanged $31,640 senior secured loan and $20,230 subordinated loan for Class D and Class E equity in Arctic Energy.

On October 30, 2015, we restructured our investment in CP Energy Services. Concurrent with the restructuring, we exchanged our $86,965 senior secured loan and $15,924 subordinated loan for Series B Redeemable Preferred Stock in CP Energy.

On October 30, 2015, we restructured our investment in Freedom Marine Solutions, LLC (“Freedom Marine”). Concurrent

with the restructuring, we exchanged our $32,500 senior secured loans for additional membership interest in Freedom Marine.

On November 16, 2015 and November 25, 2015, we sold our $14,755 debt investment in American Gilsonite Company. We realized a loss of $4,127 on the sale.

On January 21, 2016, we sold 100% of our CIFC Funding 2011-I, Ltd. Class E and Class D notes with a cost basis of $29,004.

We realized a gain of $3,911 on the sale.

On February 3, 2016, lenders foreclosed on Targus Group International, Inc., and our $21,613 first lien term loan was extinguished and exchanged for 1,262,737 common units representing 12.63% equity ownership in Targus Cayman HoldCo Limited, the parent company of Targus. On February 17, 2016, we provided additional debt financing to support the recapitalization of Targus. As part of the recapitalization, we invested an additional $1,263 in a new senior secured Term Loan A notes and were allocated $3,788 in new senior secured Term Loan B notes. During the same period, Targus was written-down for tax purposes and a realized loss of $14,194 was realized for the amount that the amortized cost exceeded the fair value.

During the three months ended March 31, 2016, we sold our $10,100 debt investment in ICON Health and Fitness, Inc. We realized a loss of $1,053 on the sale.

On March 22, 2016 and March 24, 2016, United Sporting Company, Inc. partially repaid the $17,391 loan receivable to us.

During the three months ended March 31, 2016, NCT was written-off for tax purposes and a loss of $187 was realized.

On July 1, 2016, BNN Holdings Corp. was sold. The sale provided net proceeds for our minority position of $2,365, resulting in a realized gain of $137. During the three months ended December 31, 2016 we received remaining escrow proceeds, realizing an additional gain of $50.

On August 17, 2016, we made a $5,000 investment in BCD Acquisition, Inc. (“Big Tex”). On August 18, 2016, we sold our $5,000 investment in Big Tex and realized a gain of $138 on the sale.

On August 19, 2016, we sold our investment in Nathan’s Famous, Inc. for net proceeds of $3,240 and realized a gain of $240 on the sale.

On September 27, 2016, we received additional bankruptcy proceeds for our previously impaired investment in New Century Transportation, Inc., and recorded a realized gain of $936, offsetting the previously recognized loss.

On October 18, 2016, we received additional proceeds of $434 related to the May 31, 2016 sale of Harbortouch Payments, LLC. We realized a gain for the same amount.

On December 27, 2016, we exercised our warrants in R-V Industries, Inc. (“R-V”) to purchase additional common stock in R-V. As a result, we realized a gain of $172 on this transaction.

On March 14, 2017, assets previously held by Ark-La-Tex were assigned to Wolf Energy Services, a new wholly-owned subsidiary of Wolf Energy Holdings, in exchange for a full reduction of Ark-La-Tex’s Senior Secured Term Loan A and a partial reduction of the Senior Secured Term Loan B cost basis, in total equal to $22,145. The cost basis of the transferred assets is equal to the appraised fair value of assets at the time of transfer.

As of March 31, 2017, $3,722,306 of our loans, at fair value, bear interest at floating rates and have LIBOR floors ranging from 0.3% to 4.0%. As of March 31, 2017, $494,169 of our loans, at fair value, bear interest at fixed rates ranging from 5.0% to 20.0%. As of June 30, 2016, $3,737,046 of our loans, at fair value, bore interest at floating rates and have LIBOR floors ranging from 0.3% to 4.0%. As of June 30, 2016, $495,912 of our loans, at fair value, bore interest at fixed rates ranging from 5.0% to 22.0%.

At March 31, 2017, nine loan investments were on non-accrual status: Ark-La-Tex, Edmentum Ultimate Holdings, LLC Unsecured Junior PIK Note, Gulf Coast Machine & Supply Company (“Gulf Coast”), Nixon, Spartan Energy Services, Inc. (“Spartan”), Targus, USES, Venio LLC (“Venio”) and Wolf Energy, LLC (“Wolf Energy). At June 30, 2016, seven loan investments were on

non-accrual status: Ark-La-Tex, Gulf Coast, Spartan, Targus, USES, Venio and Wolf Energy. Cost balances of these loans amounted to $209,478 and $189,121 as of March 31, 2017 and June 30, 2016, respectively. The fair value of these loans amounted to $85,920 and $90,540 as of March 31, 2017 and June 30, 2016, respectively. The fair values of these investments represent approximately 1.4% and 1.4% of our total assets at fair value as of March 31, 2017 and June 30, 2016, respectively.

Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 4.00%. As of March 31, 2017 and June 30, 2016, we had $26,863 and $40,560, 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, 2017 and June 30, 2016.

During the nine months ended March 31, 2016, we sold $74,377 of the outstanding principal balance of the senior secured Term Loan A investments in certain portfolio companies. There was no gain or loss realized on the sale. No such investments were sold for the nine months ended March 31, 2017. We serve as an agent for these loans and collect a servicing fee from the counterparties on behalf of the Investment Adviser. We receive a credit for these payments as a reduction of base management fee payable by us to the Investment Adviser. See Note 13 for further discussion.

Unconsolidated Significant Subsidiaries

Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our unconsolidated controlled portfolio companies are considered “significant subsidiaries”, if any. In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the investment test, the asset test and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements of an unconsolidated subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%, and summarized financial information in a quarterly report if either the investment or income test exceeds 20% pursuant to Rule 10-01(b) of Regulation S-X.

Income, consisting of interest, dividends, fees, other investment income and gains or losses, which can fluctuate upon repayment or sale of an investment or the marking to fair value an investment in any given period can be highly concentrated among several investments. After performing the income analysis for the nine months ended March 31, 2017, as currently promulgated by the SEC, we determined that one of our controlled investments individually generated more than 20% of our income during the nine months ended March 31, 2017.

The following tables show summarized financial information for NPRC and its subsidiaries, which met the 20% income test for the nine months ended March 31, 2017:



	March 31, 2017		June 30, 2016
Balance Sheet Data
Cash and cash equivalents	$	113,961	$	74,691
Real estate, net	1,506,592		1,100,548
Unsecured consumer loans at fair value	774,990		674,423
Other assets	37,414		31,575
Mortgages payable	1,345,024		962,784
Revolving credit facilities and other secured financing	464,657		364,030
Notes payable, due to Prospect or Affiliate	575,186		561,282
Other liabilities	37,283		32,118
Total equity	10,807		(38,977		)



	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016⁽¹⁾			2017			2016⁽¹⁾
Summary of Operations
Total revenue	$	125,667		$	74,527		$	320,773		$	225,986
Total expenses	79,449			60,367			236,973			188,652
Operating income	46,218			14,160			83,800			37,334
Depreciation and amortization	21,380			12,969			55,650			40,925
Fair value adjustment	(26,640		)	(20,848		)	(73,553		)	(38,583		)
Net loss	$	(1,802	)	$	(19,657	)	$	(45,403	)	$	(42,174	)

(1) In connection with the merger of APRC and UPRC with and into NPRC, prior periods are retroactively adjusted to present comparative information.

The SEC has requested comments on the proper mechanics of how the calculations related to Rules 3-09 and 4-08(g) of Regulation S-X should be completed. There is currently diversity in practice for the calculations. We expect that the SEC will clarify the calculation methods in the future.

Note 4. Revolving Credit Facility

On August 29, 2014, we renegotiated our previous credit facility and closed an expanded five and a half year revolving credit facility (the “2014 Facility” or the “Revolving Credit Facility”). The lenders have extended commitments of $885,000 under the 2014 Facility as of March 31, 2017. The 2014 Facility includes an accordion feature which allows commitments to be increased up to $1,500,000 in the aggregate. The revolving period of the 2014 Facility extends through March 2019, with an additional one year amortization period (with distributions allowed) after the completion of the revolving period. During such one year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the one year amortization period, the remaining balance will become due, if required by the lenders.

The 2014 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 2014 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 2014 Facility. The 2014 Facility also requires the maintenance of a minimum liquidity requirement. As of March 31, 2017, we were in compliance with the applicable covenants.

Interest on borrowings under the 2014 Facility is one-month LIBOR plus 225 basis points. Additionally, the lenders charge a fee on the unused portion of the 2014 Facility equal to either 50 basis points if at least 35% of the credit facility is drawn or 100 basis points otherwise. The 2014 Facility requires us to pledge assets as collateral in order to borrow under the credit facility.

As of March 31, 2017 and June 30, 2016, we had $668,589 and $538,456, respectively, available to us for borrowing under the Revolving Credit Facility, of which nothing was outstanding at either date. 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 $885,000. As of March 31, 2017, the investments, including cash and money market funds, used as collateral for the Revolving Credit Facility had an aggregate fair value of $1,530,920, which represents 24.9% of our total investments, including cash and money market funds. 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. 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 $12,405 of fees, of which $3,539 were carried over for continuing participants from the previous facility, all of which are being amortized over the term of the facility in accordance with ASC 470-50. $5,463 remains to be amortized and is reflected as deferred financing costs on the Consolidated Statements of Assets and Liabilities as of March 31, 2017.

During the three months ended March 31, 2017 and March 31, 2016, we recorded $3,218 and $3,046, 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, 2017 and March 31, 2016, we recorded $9,247 and $10,291, respectively, of interest costs, unused fees and amortization of financing costs on the Revolving Credit Facility as interest expense.

Note 5. Convertible Notes

On December 21, 2010, we issued $150,000 aggregate principal amount of convertible notes that matured on December 15, 2015 (the “2015 Notes”). The 2015 Notes bore interest at a rate of 6.25% per year, payable semi-annually on June 15 and December 15 of each year, beginning June 15, 2011. Total proceeds from the issuance of the 2015 Notes, net of underwriting discounts and offering costs, were $145,200. On December 15, 2015, we repaid the outstanding principal amount of the 2015 Notes, plus interest. No gain or loss was realized on the transaction.

On February 18, 2011, we issued $172,500 aggregate principal amount of convertible notes that mature on August 15, 2016 (the “2016 Notes”), unless previously converted or repurchased in accordance with their terms. The 2016 Notes bore interest at a rate of 5.50% per year, payable semi-annually on February 15 and August 15 of each year, beginning August 15, 2011. Total proceeds from the issuance of the 2016 Notes, net of underwriting discounts and offering costs, were $167,325. Between January 30, 2012 and February 2, 2012, we repurchased $5,000 aggregate principal amount of the 2016 Notes at a price of 97.5, including commissions. The transactions resulted in our recognizing $10 of loss in the year ended June 30, 2012. On August 15, 2016, we repaid the outstanding principal amount of the 2016 Notes, plus interest. No gain or loss was realized on the transaction.

On December 21, 2012, we issued $200,000 aggregate principal amount of convertible notes that mature on January 15, 2019 (the “2019 Notes”), unless previously converted or repurchased in accordance with their terms. The 2019 Notes bear interest at a rate of 5.875% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2013. Total proceeds from the issuance of the 2019 Notes, net of underwriting discounts and offering costs, were $193,600.

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

Certain key terms related to the convertible features for the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes (collectively, the “Convertible Notes”) are listed below.



	2017 Notes		2018 Notes		2019 Notes		2020 Notes
Initial conversion rate(1)	85.8442		82.3451		79.7766		80.6647
Initial conversion price	$	11.65	$	12.14	$	12.54	$	12.40
Conversion rate at March 31, 2017(1)(2)	87.7516		84.1497		79.8360		80.6670
Conversion price at March 31, 2017(2)(3)	$	11.40	$	11.88	$	12.53	$	12.40
Last conversion price calculation date	4/16/2016		8/14/2016		12/21/2016		4/11/2016
Dividend threshold amount (per share)(4)	$	0.101500	$	0.101600	$	0.110025	$	0.110525


(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 below the minimum dividend threshold amount for further conversion rate adjustments for all bonds.

Upon conversion, unless a holder converts after a record date for an interest payment but prior to the corresponding interest payment date, 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.

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 incurred $29,116 of fees which are being amortized over the terms of the notes, of which $10,718 remains to be amortized and is included as a reduction within Convertible Notes on the Consolidated Statement of Assets and Liabilities as of March 31, 2017.

During the three months ended March 31, 2017 and March 31, 2016, we recorded $13,484 and $16,039, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense. During the nine months ended March 31, 2017 and March 31, 2016, we recorded $41,674 and $52,957, respectively, of interest costs and amortization of financing costs on the Convertible Notes as interest expense.

Note 6. Public Notes

On March 15, 2013, we issued $250,000 aggregate principal amount of unsecured notes that mature on March 15, 2023 (the “2023 Notes”). The 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 2023 Notes, net of underwriting discounts and offering costs, were $243,641.

On April 7, 2014, we issued $300,000 aggregate principal amount of unsecured notes that mature on July 15, 2019 (the “5.00% 2019 Notes”). Included in the issuance is $45,000 of Prospect Capital InterNotes® that were exchanged for the 5.00% 2019 Notes. The 5.00% 2019 Notes bear interest at a rate of 5.00% per year, payable semi-annually on January 15 and July 15 of each year, beginning July 15, 2014. Total proceeds from the issuance of the 5.00% 2019 Notes, net of underwriting discounts and offering costs, were $295,998.

On 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 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 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 program with FBR Capital Markets & Co. through which we could sell, by means of at-the-market offerings, from time to time, up to $100,000 in aggregate principal amount of our existing 2024 Notes. As of March 31, 2017, we issued $199,281 in aggregate principal amount of our 2024 Notes for net proceeds of $193,253 after commissions and offering costs.

The 2023 Notes, the 5.00% 2019 Notes, and the 2024 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 2023 Notes, the 5.00% 2019 Notes, and the 2024 Notes, we incurred $13,613 of fees which are being amortized over the term of the notes, of which $9,521 remains to be amortized and is included as a reduction within Public Notes on the Consolidated Statement of Assets and Liabilities as of March 31, 2017.

During the three months ended March 31, 2017 and March 31, 2016, we recorded $11,026 and $10,352, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense. During the nine months ended March 31, 2017 and March 31, 2016, we recorded $32,864 and $26,513, respectively, of interest costs and amortization of financing costs on the Public Notes as interest expense.

Note 7. Prospect Capital InterNotes®

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

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, 2017, we issued $109,221 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $107,860. The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2017.



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
5	$	109,221	4.75%–5.50%	5.15	%	July 15, 2021 – March 15, 2022

During the nine months ended March 31, 2016, we issued $74,862 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $73,738. These notes were issued with stated interest rates ranging from 4.63% to 6.00% with a weighted average interest rate of 5.10%. These notes mature between July 15, 2020 and December 15, 2025.

The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2016.



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
5	$	37,930	4.63%–5.50%	4.93	%	July 15, 2020 – March 15, 2021
6.5	35,155		5.10%–5.25%	5.25	%	January 15, 2022 – May 15, 2022
7	990		5.63%–5.75%	5.65	%	November 15, 2022 – December 15, 2022
10	787		5.88%–6.00%	5.89	%	November 15, 2025 – December 15, 2025
	$	74,862

During the nine months ended March 31, 2017, we repaid $6,460 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the nine months ended March 31, 2017 was $205. The following table summarizes the Prospect Capital InterNotes® outstanding as of March 31, 2017.



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
3.5	3,109		4.00%	4.00	%	April 15, 2017
4	45,690		3.75%–4.00%	3.92	%	November 15, 2017 – May 15, 2018
5	368,009		4.25%–5.50%	5.01	%	July 15, 2018 – March 15, 2022
5.2	4,440		4.63%	4.63	%	August 15, 2020 – September 15, 2020
5.3	2,686		4.63%	4.63	%	September 15, 2020
5.4	5,000		4.75%	4.75	%	August 15, 2019
5.5	109,243		4.25%–5.00%	4.65	%	February 15, 2019 – November 15, 2020
6	2,182		3.38%	3.38	%	April 15, 2021 – May 15, 2021
6.5	40,702		5.10%–5.50%	5.24	%	February 15, 2020 – May 15, 2022
7	191,515		4.00%–6.55%	5.13	%	June 15, 2019 – December 15, 2022
7.5	1,996		5.75%	5.75	%	February 15, 2021
10	37,509		4.13%–7.00%	6.14	%	March 15, 2022 – December 15, 2025
12	2,978		6.00%	6.00	%	November 15, 2025 – December 15, 2025
15	17,300		5.25%–6.00%	5.36	%	May 15, 2028 – November 15, 2028
18	21,770		4.13%–6.25%	5.53	%	December 15, 2030 – August 15, 2031
20	4,292		5.63%–6.00%	5.89	%	November 15, 2032 – October 15, 2033
25	34,494		6.25%–6.50%	6.39	%	August 15, 2038 – May 15, 2039
30	112,944		5.50%–6.75%	6.24	%	November 15, 2042 – October 15, 2043
	$	1,005,859

During the nine months ended March 31, 2016, we repaid $3,769 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the nine months ended March 31, 2016 was $95.

The following table summarizes the Prospect Capital InterNotes® outstanding as of June 30, 2016.



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
3	$	5,710	4.00%	4.00	%	October 15, 2016
3.5	3,109		4.00%	4.00	%	April 15, 2017
4	45,690		3.75%–4.00%	3.92	%	November 15, 2017 – May 15, 2018
5	259,191		4.25%–5.75%	4.95	%	July 15, 2018 – June 15, 2021
5.2	4,440		4.63%	4.63	%	August 15, 2020 – September 15, 2020
5.3	2,686		4.63%	4.63	%	September 15, 2020
5.4	5,000		4.75%	4.75	%	August 15, 2019
5.5	109,808		4.25%–5.00%	4.65	%	February 15, 2019 – November 15, 2020
6	2,197		3.38%	3.38	%	April 15, 2021 – May 15, 2021
6.5	40,867		5.10%–5.50%	5.24	%	February 15, 2020 – May 15, 2022
7	192,076		4.00%–6.55%	5.13	%	June 15, 2019 – December 15, 2022
7.5	1,996		5.75%	5.75	%	February 15, 2021
10	37,533		3.62%–7.00%	6.11	%	March 15, 2022 – December 15, 2025
12	2,978		6.00%	6.00	%	November 15, 2025 – December 15, 2025
15	17,325		5.25%–6.00%	5.36	%	May 15, 2028 – November 15, 2028
18	22,303		4.13%–6.25%	5.53	%	December 15, 2030 – August 15, 2031
20	4,462		5.63%–6.00%	5.89	%	November 15, 2032 – October 15, 2033
25	35,110		6.25%–6.50%	6.39	%	August 15, 2038 – May 15, 2039
30	116,327		5.50%–6.75%	6.23	%	November 15, 2042 – October 15, 2043
	$	908,808

In connection with the issuance of Prospect Capital InterNotes®, we incurred $24,084 of fees which are being amortized over the term of the notes, of which $14,514 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, 2017.

During the three months ended March 31, 2017 and March 31, 2016, we recorded $13,736 and $12,282, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense. During the nine months ended March 31, 2017 and March 31, 2016, we recorded $40,196 and $36,120, respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes® as interest expense.

Note 8. Fair Value and Maturity of Debt Outstanding

The following table shows our outstanding debt as of March 31, 2017.



	Principal Outstanding		Unamortized Discount & Debt Issuance Costs		Net Carrying Value				Fair Value (1)				Effective Interest Rate
Revolving Credit Facility (2)	$	—	$	5,463	$	—	(3	)	$	—			1ML+2.25%		(6	)

2017 Notes	129,500		365		129,135				131,220		(4	)	5.91	%	(7	)
2018 Notes	200,000		1,239		198,761				205,514		(4	)	6.42	%	(7	)
2019 Notes	200,000		2,128		197,872				205,734		(4	)	6.51	%	(7	)
2020 Notes	392,000		6,986		385,014				387,100		(4	)	5.38	%	(7	)
Convertible Notes	921,500				910,782				929,568

5.00% 2019 Notes	300,000		1,901		298,099				310,023		(4	)	5.29	%	(7	)
2023 Notes	250,000		4,236		245,764				259,450		(4	)	6.22	%	(7	)
2024 Notes	199,281		5,342		193,939				206,455		(4	)	6.72	%	(7	)
Public Notes	749,281				737,802				775,928

Prospect Capital InterNotes®	1,005,859		14,514		991,345				1,015,593		(5	)	5.62	%	(8	)
Total	$	2,676,640			$	2,639,929			$	2,721,089


(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, 2017.


(2)	The maximum draw amount of the Revolving Credit facility as of March 31, 2017 is $885,000.


(3)	Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility. See Note 2 for accounting policy details.


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


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


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


(7)	The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs. For the 2024 Notes, the rate presented is a combined effective interest rate of the 2024 Notes and 2024 Notes Follow-on Program.


(8)	For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate.

The following table shows our outstanding debt as of June 30, 2016.



	Principal Outstanding		Unamortized Discount & Debt Issuance Costs		Net Carrying Value				Fair Value (1)				Effective Interest Rate
Revolving Credit Facility (2)	$	—	$	7,525	$	—	(3	)	$	—			1ML+2.25%		(6	)

2016 Notes	167,500		141		167,359				167,081		(4	)	6.18	%	(7	)
2017 Notes	129,500		852		128,648				130,762		(4	)	5.91	%	(7	)
2018 Notes	200,000		2,162		197,838				204,000		(4	)	6.42	%	(7	)
2019 Notes	200,000		2,952		197,048				202,000		(4	)	6.51	%	(7	)
2020 Notes	392,000		8,532		383,468				376,881		(4	)	5.38	%	(7	)
Convertible Notes	1,089,000				1,074,361				1,080,724

2023 Notes	250,000		4,670		245,330				252,355		(4	)	6.22	%	(7	)
5.00% 2019 Notes	300,000		2,476		297,524				302,442		(4	)	5.29	%	(7	)
2024 Notes	161,380		4,866		156,514				159,250		(4	)	6.52	%	(7	)
Public Notes	711,380				699,368				714,047

Prospect Capital InterNotes®	908,808		15,598		893,210				894,840		(5	)	5.51	%	(8	)
Total	$	2,709,188			$	2,666,939			$	2,689,611


(1)	As permitted by ASC 825-10-25, we have not elected to value our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® at fair value. The fair value of these debt obligations are categorized as Level 2 under ASC 820 as of June 30, 2016.


(2)	The maximum draw amount of the Revolving Credit facility as of June 30, 2016 is $885,000.


(3)	Net Carrying Value excludes deferred financing costs associated with the Revolving Credit Facility. See Note 2 for accounting policy details.


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


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


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


(7)	The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs. For the 2024 Notes, the rate presented is a combined effective interest rate of the 2024 Notes and 2024 Notes Follow-on Program.


(8)	For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate.

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of March 31, 2017.



	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	—	$	—	$	—	$	—	$	—
Convertible Notes	921,500		329,500		200,000		392,000		—
Public Notes	749,281		—		300,000		—		449,281
Prospect Capital InterNotes®	1,005,859		40,040		276,241		451,879		237,699
Total Contractual Obligations	$	2,676,640	$	369,540	$	776,241	$	843,879	$	686,980

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of June 30, 2016.



	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	—	$	—	$	—	$	—	$	—
Convertible Notes	1,089,000		167,500		529,500		392,000		—
Public Notes	711,380		—		—		300,000		411,380
Prospect Capital InterNotes®	908,808		8,819		257,198		360,599		282,192
Total Contractual Obligations	$	2,709,188	$	176,319	$	786,698	$	1,052,599	$	693,572

Note 9. Stock Repurchase Program, Equity Offerings, Offering Expenses, and Distributions

On August 24, 2011, our Board of Directors approved a share repurchase plan (the “Repurchase Program”) under which we may repurchase up to $100,000 of our common stock at prices below our net asset value per share. Prior to any repurchase, we are required to notify shareholders of our intention to purchase our common stock. Our last notice was delivered with our annual proxy mailing on September 21, 2016 and our most recent notice was delivered with a shareholder letter mailing on April 14, 2017. This notice extends for six months after the date that notice is delivered.

We did not repurchase any shares of our common stock for the nine months ended March 31, 2017. During the nine months ended March 31, 2016, we repurchased 4,708,750 shares of our common stock pursuant to the Repurchase Program. Our NAV per share was increased by approximately $0.02 for the nine months ended March 31, 2016 as a result of the share repurchases.

There were no repurchases made for the three months ended March 31, 2017 under our Repurchase Program. The following table summarizes our share repurchases under our Repurchase Program for the nine months ended March 31, 2016.



Repurchases of Common Stock	Nine Months Ended March 31, 2016
Dollar amount repurchased	$	34,140
Shares Repurchased	4,708,750
Weighted average price per share	$	7.25
Weighted average discount to June 30, 2015 Net Asset Value	30		%

As of March 31, 2017, the approximate dollar value of shares that may yet be purchased under the plan is $65,860.

Excluding dividend reinvestments, during the nine months ended March 31, 2017 and March 31, 2016, we did not issue any shares of our common stock.

On November 3, 2016, our Registration Statement on Form N-2 was declared effective by the SEC. Under this Shelf Registration Statement, we can issue up to $4,945,873 of additional debt and equity securities in the public market as of March 31, 2017.

During the nine months ended March 31, 2017 and March 31, 2016, we distributed approximately $268,989 and $266,920, respectively, to our stockholders. The following table summarizes our distributions declared and payable for the nine months ended March 31, 2016 and March 31, 2017.



Declaration Date	Record Date	Payment Date	Amount Per Share		Amount Distributed (in thousands)
5/6/2015	7/31/2015	8/20/2015	$	0.083330	$	29,909
5/6/2015	8/31/2015	9/17/2015	0.083330		29,605
8/24/2015	9/30/2015	10/22/2015	0.083330		29,601
8/24/2015	10/30/2015	11/19/2015	0.083330		29,600
11/4/2015	11/30/2015	12/24/2015	0.083330		29,611
11/4/2015	12/31/2015	1/21/2016	0.083330		29,616
11/4/2015	1/29/2016	2/18/2016	0.083330		29,641
2/9/2016	2/29/2016	3/24/2016	0.083330		29,663
2/9/2016	3/31/2016	4/21/2016	0.083330		29,674
Total declared and payable for the nine months ended March 31, 2016					$	266,920

5/9/2016	7/29/2016	8/18/2016	$	0.083330	$	29,783
5/9/2016	8/31/2016	9/22/2016	0.083330		29,809
8/25/2016	9/30/2016	10/20/2016	0.083330		29,837
8/25/2016	10/31/2016	11/17/2016	0.083330		29,863
11/8/2016	11/30/2016	12/22/2016	0.083330		29,890
11/8/2016	12/30/2016	1/19/2017	0.083330		29,915
11/8/2016	1/31/2017	2/16/2017	0.083330		29,940
2/7/2017	2/28/2017	3/23/2017	0.083330		29,963
2/7/2017	3/31/2017	4/20/2017	0.083330		29,989
Total declared and payable for the nine months ended March 31, 2017					$	268,989

Dividends and distributions to common stockholders are recorded on the ex-dividend date. As such, the table above includes distributions with record dates during nine months ended March 31, 2017 and March 31, 2016. It does not include distributions previously declared to stockholders of record on any future dates, as those amounts are not yet determinable. The following dividends were previously declared and will be recorded and payable subsequent to March 31, 2017:


•	$0.08333 per share for April 2017 to holders of record on April 28, 2017 with a payment date of May 18, 2017.

During the nine months ended March 31, 2017 and March 31, 2016, we issued 2,778,472 and 1,731,768 shares of our common stock, respectively, in connection with the dividend reinvestment plan.

On February 9, 2016, we amended our dividend reinvestment plan that already provides for reinvestment of our dividends or distributions on behalf of our stockholders, unless a stockholder elects to receive cash, to add the ability of stockholders to purchase additional shares by making optional cash investments. Under the revised dividend reinvestment and direct stock repurchase plan, stockholders may elect to purchase additional shares through our transfer agent in the open market or in negotiated transactions.

During the nine months ended March 31, 2017, Prospect officers purchased 2,072,495 shares of our stock, or 0.6% of total outstanding shares as of March 31, 2017, both through the open market transactions and shares issued in connection with our dividend reinvestment plan.

As of March 31, 2017, we have reserved 75,782,455 shares of our common stock for issuance upon conversion of the Convertible Notes (see Note 5).

Note 10. Other Income

Other income consists of structuring fees, overriding royalty interests, revenue receipts related to net profit interests, deal deposits, administrative agent fees, and other miscellaneous and sundry cash receipts. The following table shows income from such sources during the three and nine months ended March 31, 2017 and March 31, 2016.



	Three Months Ended March 31,				Nine Months Ended March 31,
	2017		2016		2017		2016
Structuring and amendment fees (refer to Note 3)	$	6,841	$	213	$	17,114	$	10,967
Royalty and Net Revenue interests	1,476		1,732		3,979		5,471
Administrative agent fees	187		255		519		637
Total Other Income	$	8,504	$	2,200	$	21,612	$	17,075

Note 11. Net Increase in Net Assets per Share

The following information sets forth the computation of net increase in net assets resulting from operations per share during the three and nine months ended March 31, 2017 and March 31, 2016.



	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Net increase in net assets resulting from operations	$	19,492	$	75,508	$	201,738	$	8,205
Weighted average common shares outstanding	359,402,527		355,779,088		358,468,092		355,994,927
Net increase in net assets resulting from operations per share	$	0.05	$	0.21	$	0.56	$	0.02

Note 12. Income Taxes

While our fiscal year end for financial reporting purposes is June 30 of each year, our tax year end is August 31 of each year. The information presented in this footnote is based on our tax year end for each period presented, unless otherwise specified. The tax return for the tax year ended August 31, 2016 has not been filed. Taxable income and all amounts related to taxable income for the tax year ended August 31, 2016 are estimates and will not be fully determined until our tax return is filed.

For income tax purposes, dividends paid and distributions made to shareholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of dividends paid to shareholders during the tax years ended August 31, 2016, 2015 and 2014 were as follows:



	Tax Year Ended August 31,
	2016		2015		2014
Ordinary income	$	355,985	$	413,640	$	413,051
Capital gain	—		—		—
Return of capital	—		—		—
Total dividends paid to shareholders	$	355,985	$	413,640	$	413,051

We generate certain types of income that may be exempt from U.S. withholding tax when distributed to non-U.S. shareholders. Under IRC Section 871(k), a RIC is permitted to designate distributions of qualified interest income and short-term capital gains as exempt from U.S. withholding tax when paid to non-U.S. shareholders with proper documentation. For the 2017 calendar year, 61.90% of our distributions as of March 31, 2017 qualified as interest related dividends which are exempt from U.S. withholding tax applicable to non U.S. shareholders.

For the tax year ending August 31, 2017, the tax character of dividends paid to shareholders through March 31, 2017 is expected to be ordinary income. Because of the difference between our fiscal and tax year ends, the final determination of the tax character of dividends will not be made until we file our tax return for the tax year ending August 31, 2017.

Taxable income generally differs from net increase in net assets resulting from operations for financial reporting purposes due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or

losses, as unrealized gains or losses are generally not included in taxable income until they are realized. The following reconciles the net increase in net assets resulting from operations to taxable income for the tax years ended August 31, 2016, 2015 and 2014:



	Tax Year Ended August 31,
	2016			2015			2014
Net increase in net assets resulting from operations	$	262,832		$	360,572		$	317,671
Net realized loss on investments	22,666			164,230			28,244
Net unrealized (gains) losses on investments	73,181			(157,745		)	24,638
Other temporary book-to-tax differences	(51,181		)	98,289			(9,122		)
Permanent differences	2,489			2,436			(4,317		)
Taxable income before deductions for distributions	$	309,987		$	467,782		$	357,114

Capital losses in excess of capital gains earned in a tax year may generally be carried forward and used to offset capital gains, subject to certain limitations. The Regulated Investment Company Modernization Act (the “RIC Modernization Act”) was enacted on December 22, 2010. Under the RIC Modernization Act, capital losses incurred by taxpayers in taxable years beginning after the date of enactment will be allowed to be carried forward indefinitely and are allowed to retain their character as either short-term or long-term losses. As such, the capital loss carryforwards generated by us after the August 31, 2011 tax year will not be subject to expiration. Any losses incurred in post-enactment tax years will be required to be utilized prior to the losses incurred in pre-enactment tax years. As of August 31, 2016, we had capital loss carryforwards of approximately $314,625 available for use in later tax years. Of the amount available as of August 31, 2016, $32,612 and $46,156 will expire on August 31, 2017 and 2018, respectively, and $235,857 is not subject to expiration. The unused balance each year will be carried forward and utilized as gains are realized, subject to limitations. While our ability to utilize losses in the future depends upon a variety of factors that cannot be known in advance, some of the Company's capital loss carryforwards may become permanently unavailable due to limitations by the Code.

For the tax year ended August 31, 2016, we had cumulative taxable income in excess of cumulative distributions of $57,615 for which we elected a spillback dividend.

As of March 31, 2017, the cost basis of investments for tax purposes was $6,341,977 resulting in estimated gross unrealized gains and losses of $291,396 and $607,607, respectively. As of June 30, 2016, the cost basis of investments for tax purposes was $6,175,709 resulting in estimated gross unrealized gains and losses of $192,035 and $470,036, respectively. Due to the difference between our fiscal year end and tax year end, the cost basis of our investments for tax purposes as of March 31, 2017 and June 30, 2016 was calculated based on the book cost of investments as of March 31, 2017 and June 30, 2016, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2016 and 2015, respectively.

In general, we may make certain adjustments to the classification of net assets as a result of permanent book-to-tax differences, which may include merger-related items, differences in the book and tax basis of certain assets and liabilities, and nondeductible federal excise taxes, among other items. During the tax year ended August 31, 2016, we decreased overdistributed net investment income by $2,489, increased accumulated net realized loss on investments by $1,296 and decreased capital in excess of par value by $1,193. During the tax year ended August 31, 2015, we decreased overdistributed net investment income by $2,435, increased accumulated net realized loss on investments by $8,542 and increased capital in excess of par value by $6,107. Due to the difference between our fiscal and tax year end, the reclassifications for the taxable year ended August 31, 2016 is being recorded in the fiscal year ending June 30, 2017 and the reclassifications for the taxable year ended August 31, 2015 were recorded in the fiscal year ended June 30, 2016.

Note 13. Related Party Agreements and Transactions

Investment Advisory Agreement

We have entered into an investment advisory and management agreement with the Investment Adviser (the “Investment Advisory Agreement”) under which the Investment Adviser, subject to the overall supervision of our Board of Directors, manages the day-to-day operations of, and provides investment advisory services to, us. Under the terms of the Investment Advisory Agreement, the Investment Adviser: (i) determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes, (ii) identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and (iii) closes and monitors investments we make.

The Investment Adviser’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. For providing these services the Investment Adviser receives a fee from us, consisting of two components: a base management fee and an incentive fee. The base management fee is calculated

at an annual rate of 2.00% on our total assets. For services currently rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets at the end of the two most recently completed calendar quarters and appropriately adjusted for any share issuances or repurchases during the current calendar quarter.

The total gross base management fee incurred to the favor of the Investment Adviser was $30,829 and $31,442 during the three months ended March 31, 2017 and March 31, 2016, respectively. The total gross base management fee incurred to the favor of the Investment Adviser was $93,263 and $97,109 during the nine months ended March 31, 2017 and March 31, 2016, respectively.

The Investment Adviser has entered into a servicing agreement with certain institutions that purchased loans with us, where we serve as the agent and collect a servicing fee on behalf of the Investment Adviser. During the three months ended March 31, 2017 and March 31, 2016, we received payments of $280 and $465, respectively, from these institutions, on behalf of the Investment Adviser, for providing such services under the servicing agreement. We were given a credit for these payments, which reduced the base management fee payable to $30,549 and $30,977 for the three months ended March 31, 2017 and March 31, 2016, respectively. During the nine months ended March 31, 2017 and March 31, 2016, we received payments of $1,036 and $1,397, respectively, from these institutions, on behalf of the Investment Adviser, for providing such services under the servicing agreement. We were given a credit for these payments, which reduced the base management fee payable to $92,227 and $95,712 for the nine months ended March 31, 2017 and March 31, 2016, respectively.

The incentive fee has two parts. The first part, the income incentive fee, is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees and other fees that we receive from portfolio companies) accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement described below, and any interest expense and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with payment-in-kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital gains or losses. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a “hurdle rate” of 1.75% per quarter (7.00% annualized).

The net investment income used to calculate this part of the incentive fee is also included in the amount of the gross assets used to calculate the 2.00% base management fee. We pay the Investment Adviser an income incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:


•	No incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle rate;


•	100.00% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate); and


•	20.00% of the amount of our pre-incentive fee net investment income, if any, that exceeds 125.00% of the quarterly hurdle rate in any calendar quarter (8.75% annualized assuming a 7.00% annualized hurdle rate).

These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

The second part of the incentive fee, the capital gains incentive fee, is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.00% of our realized capital gains for the calendar year, if any, computed net of all realized capital losses and unrealized capital depreciation at the end of such year. In determining the capital gains incentive fee payable to the Investment Adviser, we calculate the aggregate realized capital gains, aggregate realized capital losses and aggregate unrealized capital depreciation, as applicable, with respect to each investment that has been in our portfolio. For the purpose of this calculation, an “investment” is defined as the total of all rights and claims which may be asserted against a portfolio company arising from our participation in the debt, equity, and other financial instruments issued by that company. Aggregate realized capital gains, if any, equal the sum of the differences between the aggregate net sales price of each investment and the aggregate cost basis of such investment when sold or otherwise disposed. Aggregate realized capital losses equal the sum of the amounts by which the aggregate net sales price of each investment is less than the aggregate cost basis of such investment when sold or otherwise disposed. Aggregate unrealized capital depreciation equals the sum of the differences, if negative, between the aggregate valuation of each investment and the aggregate cost basis of such investment as of the applicable calendar year-end. At the end of the applicable calendar year, the amount of capital gains that serves as the basis for our calculation of the capital gains incentive fee involves netting aggregate realized capital gains against aggregate realized capital losses on a since-inception basis and then reducing this amount by the aggregate unrealized capital depreciation. If this number is positive, then the capital gains incentive fee payable is equal to 20.00% of such amount, less the aggregate amount of any capital gains incentive fees paid since inception.

The total income incentive fee incurred was $18,270 and $21,906 during the three months ended March 31, 2017 and March 31, 2016, respectively. The fees incurred for the nine months ended March 31, 2017 and March 31, 2016 were $59,101 and $69,940, respectively. No capital gains incentive fee was incurred during the three or nine months ended March 31, 2017 and March 31, 2016.

Administration Agreement

We have also entered into an administration agreement (the “Administration Agreement”) with Prospect Administration under which Prospect Administration, among other things, provides (or arranges for the provision of) administrative services and facilities for us. For providing these services, we reimburse Prospect Administration for our allocable portion of overhead incurred by Prospect Administration in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of our Chief Financial Officer and Chief Compliance Officer and his staff, including the internal legal staff. Under this agreement, Prospect Administration furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Prospect Administration also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records that we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, Prospect Administration assists us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Under the Administration Agreement, Prospect Administration also provides on our behalf managerial assistance to those portfolio companies to which we are required to provide such assistance (see Managerial Assistance section below). The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party. Prospect Administration is a wholly-owned subsidiary of the Investment Adviser.

The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Prospect Administration and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of Prospect Administration’s services under the Administration Agreement or otherwise as administrator for us. Our payments to Prospect Administration are periodically reviewed by our Board of Directors.

The allocation of gross overhead expense from Prospect Administration was $7,970 and $5,700 for the three months ended March 31, 2017 and March 31, 2016, respectively. Prospect Administration received estimated payments of $4,389 and $2,764 directly from our portfolio companies and certain funds managed by the Investment Adviser for legal, tax and portfolio level accounting services during the three months ended March 31, 2017 and March 31, 2016, respectively. 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 these amounts. Net overhead during the three months ended March 31, 2017 and March 31, 2016 totaled $3,581 and $2,936, respectively.

The allocation of gross overhead expense from Prospect Administration was $17,283 and $14,948 for the nine months ended March 31, 2017 and March 31, 2016, respectively. Prospect Administration received estimated payments of $6,636 and $5,613 directly from our portfolio companies and certain funds managed by the Investment Adviser for legal, tax and portfolio level accounting services during the nine months ended March 31, 2017 and March 31, 2016, respectively. 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 these amounts. (See Managerial Assistance section below and Note 14 for further discussion.) Additionally, during the nine months ended March 31, 2017, other operating expenses in the amount of $876 incurred by us, which were attributable to CCPI, have been reimbursed by CCPI and are reflected as an offset to our overhead allocation. No such reimbursements or expenses occurred during the nine months ended March 31, 2016. During the nine months ended March 31, 2016, we renegotiated the managerial assistance agreement with First Tower LLC and reversed $1,200 of previously accrued managerial assistance at First Tower Delaware, $600 of which was expensed during the three months ended December 31, 2015, as the fee was paid by First Tower LLC, which decreased our overhead expense. During the nine months ended March 31, 2016, we also incurred $379 of overhead expense related to our consolidated entity SB Forging. Therefore, net overhead during the nine months ended March 31, 2017 and March 31, 2016 totaled $9,771 and $9,114, respectively.

Managerial Assistance

As a BDC, we are obligated under the 1940 Act to make available to certain of our portfolio companies significant managerial assistance. “Making available significant managerial assistance” refers to any arrangement whereby we provide significant guidance and counsel concerning the management, operations, or business objectives and policies of a portfolio company. We are also deemed to be providing managerial assistance to all portfolio companies that we control, either by ourselves or in conjunction with others. The nature and extent of significant managerial assistance provided by us to controlled and non-controlled portfolio companies will vary according to the particular needs of each portfolio company. Examples of such activities include (i) advice on recruiting, hiring, management and termination of employees, officers and directors, succession planning and other human resource matters; (ii) advice on capital raising, capital budgeting, and capital expenditures; (iii) advice on advertising, marketing, and sales; (iv) advice on fulfillment, operations, and execution; (v) advice on managing relationships with unions and other personnel organizations, financing sources, vendors, customers, lessors, lessees, lawyers, accountants, regulators and other important counterparties; (vi) evaluating acquisition and divestiture opportunities, plant expansions and closings, and market expansions; (vii) participating in audit committee, nominating committee, board and management meetings; (viii) consulting with and advising board members and officers of portfolio companies (on overall strategy and other matters); and (ix) providing other organizational, operational, managerial and financial guidance.

Prospect Administration, when performing a managerial assistance agreement executed with each portfolio company to which we provide managerial assistance, arranges for the provision of such managerial assistance on our behalf. When doing so, Prospect Administration utilizes personnel of our Investment Adviser. We, on behalf of Prospect Administration, invoice portfolio companies receiving and paying for managerial assistance, and we remit to Prospect Administration its cost of providing such services, including the charges deemed appropriate by our Investment Adviser for providing such managerial assistance. No income is recognized by Prospect.

During the three months ended March 31, 2017 and March 31, 2016, we received payments of $2,443 and $1,793, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration. During the nine months ended March 31, 2017 and March 31, 2016, we received payments of $5,340 and $4,413, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration. During the nine months ended March 31, 2016, we reversed $1,200 of managerial assistance expense related to our consolidated entity First Tower Delaware which was included within allocation from Prospect Administration on our Consolidated Statement of Operations for the nine months ended March 31, 2016. The $1,200 was subsequently paid to Prospect Administration by First Tower LLC, the operating company. See Note 14 for further discussion.

Co-Investments

On February 10, 2014, we received an exemptive order from the SEC (the “Order”) that gave us the ability to negotiate terms other than price and quantity of co-investment transactions with other funds managed by the Investment Adviser or certain affiliates, including Priority Income Fund, Inc. and Pathway Energy Infrastructure Fund, Inc., subject to the conditions included therein. Under the terms of the relief permitting us to co-invest with other funds managed by our Investment Adviser or its affiliates, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies. In certain situations where co-investment with one or more funds managed by the Investment Adviser or

its affiliates is not covered by the Order, such as when there is an opportunity to invest in different securities of the same issuer, the personnel of the Investment Adviser or its affiliates will need to decide which fund will proceed with the investment. Such personnel will make these determinations based on policies and procedures, which are designed to reasonably ensure that investment opportunities are allocated fairly and equitably among affiliated funds over time and in a manner that is consistent with applicable laws, rules and regulations. Moreover, except in certain circumstances, when relying on the Order, we will be unable to invest in any issuer in which one or more funds managed by the Investment Adviser or its affiliates has previously invested.

We reimburse CLO investment valuation service fees initially borne by Priority Income Fund, Inc. During the three months ended March 31, 2017 and March 31, 2016, we recognized expenses that were reimbursed for valuation services of $25 and $29, respectively. During the nine months ended March 31, 2017 and March 31, 2016, we recognized expenses that were reimbursed for valuation services of $77 and $86, respectively.

As of March 31, 2017, we had co-investments with Priority Income Fund, Inc. in the following CLO funds: Apidos CLO XXII, Babson CLO Ltd. 2014-III, Carlyle Global Market Strategies CLO 2016-3, Ltd., Cent CLO 21 Limited, CIFC Funding 2014-IV Investor, Ltd., CIFC Funding 2016-I, Ltd., Galaxy XVII CLO, Ltd., Halcyon Loan Advisors Funding 2014-2 Ltd., Halcyon Loan Advisors Funding 2015-3 Ltd., HarbourView CLO VII, Ltd., Jefferson Mill CLO Ltd., Mountain View CLO IX Ltd., Octagon Investment Partners XVIII, Ltd., Symphony CLO XIV Ltd., Voya IM CLO 2014-1 Ltd., Voya CLO 2016-3, Ltd. and Washington Mill CLO Ltd; however HarbourView CLO VII, Ltd. and Octagon Investment Partners XVIII, Ltd. are not considered co-investments pursuant to the Order as they were purchased on the secondary market.

Note 14. Transactions with Controlled Companies

The descriptions below detail the transactions which Prospect Capital Corporation (“Prospect”) has entered into with each of our controlled companies. Certain of the controlled entities discussed below were consolidated effective July 1, 2014 (see Note 1). As such, transactions with these Consolidated Holding Companies for the three and nine months ended March 31, 2017 and March 31, 2016 are presented on a consolidated basis.

Airmall Inc.

Prospect owned 100% of the equity of AMU Holdings Inc. (“AMU”), a Consolidated Holding Company. AMU owned 98% of Airmall Inc. (f/k/a Airmall USA Holdings, Inc.) (“Airmall”). Airmall is a developer and manager of airport retail operations.

On August 1, 2014, Prospect sold its investments in Airmall. On March 21, 2016, Prospect received $1,720 of the escrow proceeds which reduced the cost basis of the escrow receivable held on the balance sheet. On August 2, 2016, Prospect received the remaining escrow proceeds of $3,916, reducing the cost basis to zero.

American Property REIT Corp.

APH Property Holdings, LLC (“APH”) owned 100% of the common equity of American Property REIT Corp. (f/k/a American Property Holdings Corp.) (“APRC”). Effective May 23, 2016, in connection with the merger of APRC and United Property REIT Corp. (“UPRC”) with and into National Property REIT Corp. (f/k/a National Property Holdings Corp.) (“NPRC”), APH and UPH Property Holdings, LLC (“UPH”) merged with and into NPH Property Holdings, LLC (“NPH”). Prospect owns 100% of the equity of NPH, a Consolidated Holding Company, and NPH owns 100% of the common equity of NPRC.

APRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. APRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. APRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”).

On September 9, 2015, Prospect made a $799 investment in APRC used to purchase additional common equity of APRC through APH. The proceeds were utilized by APRC to purchase additional ownership interest in its twelve multi-family properties for $799. The minority interest holder also invested an additional $12 in the JVs. The proceeds were used by the JVs to fund $811 of capital expenditures.

On December 23, 2015, Prospect made a $1,469 investment in APRC used to purchase additional common equity of APRC through APH. The proceeds were utilized by APRC to purchase additional ownership interest in its eleven multi-family properties for $1,468 and pay $1 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $20 in the JVs. The proceeds were used by the JVs to fund $1,488 of capital expenditures.

On December 31, 2015, APRC made a partial repayment on the Senior Term Loan of $9,000 and declared a dividend of $11,016 that Prospect recorded as dividend income in connection with the sale of the Vista Palma Sola property.

On March 3, 2016, APRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $14,621.

On March 28, 2016, APRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $3,109.

On April 9, 2016, APRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $2,973.

Effective May 23, 2016, APRC and UPRC merged with and into NPRC, to consolidate all of our real estate holdings, with NPRC as the surviving entity. APRC and UPRC have been dissolved. No gain or loss was recognized upon the merger.

The following interest payments were accrued and paid from APRC to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	1,885
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	6,488
Nine Months Ended March 31, 2017	—

Included above, the following payment-in-kind interest from APRC was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	558
Nine Months Ended March 31, 2017	—

The following net revenue interest payments were paid from APRC to Prospect and recognized by Prospect as other income:



Three Months Ended March 31, 2016	$	228
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	702
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from APRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	148
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	443
Nine Months Ended March 31, 2017	—

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	86
March 31, 2017	—

The following payments were paid from APRC to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to APRC (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	390
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	612
Nine Months Ended March 31, 2017	—

Arctic Energy Services, LLC

Prospect owns 100% of the equity of Arctic Oilfield Equipment USA, Inc. (“Arctic Equipment”), a Consolidated Holding Company. Arctic Equipment owns 70% of the equity of Arctic Energy Services, LLC (“Arctic Energy”), with Ailport Holdings, LLC (“Ailport”) (100% owned and controlled by Arctic Energy management) owning the remaining 30% of the equity of Arctic Energy. Arctic Energy provides oilfield service personnel, well testing flowback equipment, frac support systems and other services to exploration and development companies in the Rocky Mountains.

On September 30, 2015, we restructured our investment in Arctic Energy. Concurrent with the restructuring, we exchanged our $31,640 senior secured loan and $20,230 subordinated loan for Class D and Class E equity in Arctic Energy.

During the three months ended December 31, 2016, Arctic Energy and CP Well Testing, LLC, a wholly owned subsidiary of CP Energy Services, Inc., entered into a loan agreement with each other. CP Well Testing, LLC provided a $1,200 senior secured loan to Arctic Energy, for the purpose of funding ongoing operations.

The following interest payments were accrued and paid from Arctic Energy to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	1,123
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from Arctic Energy to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	50
Nine Months Ended March 31, 2017	—

The following managerial assistance recognized had not yet been paid by Arctic Energy to Prospect and was included by Prospect within other receivables and due to Prospect Administration:



June 30, 2016	$	50
March 31, 2017	125

CCPI Inc.

Prospect owns 100% of the equity of CCPI Holdings Inc. (“CCPI Holdings”), a Consolidated Holding Company. CCPI Holdings owns 94.95% of the equity of CCPI Inc. (“CCPI”), with CCPI management owning the remaining 5.05% of the equity. CCPI owns 100% of each of CCPI Europe Ltd. and MEFEC B.V., and 45% of Gulf Temperature Sensors W.L.L.

During the three months ended September 30, 2015, CCPI repurchased 86 shares of its common stock from former CCPI executives. Additionally, certain CCPI executives exercised their option rights, purchasing 246 shares of CCPI common stock. These transactions increased the number of common shares outstanding by 160 shares and thus decreased Prospect’s ownership to 93.99%.

As of June 30, 2016, after the departure of a former CCPI executive, Prospect’s ownership of CCPI increased to 94.59%.

The following amounts were paid from CCPI to Prospect and recorded by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	113
Three Months Ended March 31, 2017	113
Nine Months Ended March 31, 2016	4,337
Nine Months Ended March 31, 2017	337

The following cash distributions were declared and paid from CCPI to Prospect and recognized as a return of capital by Prospect:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	1,918
Nine Months Ended March 31, 2017	—

During the three months ended September 30, 2016, Prospect reclassified $123 of return of capital received from CCPI in prior periods as dividend income.

The following dividends were declared and paid from CCPI to Prospect and recognized as dividend income by Prospect:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	3,195
Nine Months Ended March 31, 2017	123

All dividends were paid from earnings and profits of CCPI.

The following interest payments were accrued and paid from CCPI to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	751
Three Months Ended March 31, 2017	745
Nine Months Ended March 31, 2016	2,329
Nine Months Ended March 31, 2017	2,243

Included above, the following payment-in-kind interest from CCPI was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	161
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	475
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from CCPI to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	60
Three Months Ended March 31, 2017	60
Nine Months Ended March 31, 2016	180
Nine Months Ended March 31, 2017	180

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	60
March 31, 2017	60

The following payments were paid from CCPI to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to CCPI (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	96
Nine Months Ended March 31, 2017	—

The following amounts were due from CCPI to Prospect for reimbursement of expenses paid by Prospect on behalf of CCPI and were included by Prospect within other receivables:



June 30, 2016	$	2
March 31, 2017	2

CP Energy Services Inc.

Prospect owns 100% of the equity of CP Holdings of Delaware LLC (“CP Holdings”), a Consolidated Holding Company. CP Holdings owns 82.3% of the equity of CP Energy Services Inc. (“CP Energy”), and the remaining 17.7% of the equity is owned by CP Energy management. As of June 30, 2014, CP Energy owned directly or indirectly 100% of each of CP Well Testing Services, LLC (f/k/a CP Well Testing Holding Company LLC) (“CP Well Testing”); CP Well Testing, LLC (“CP Well”); Fluid Management Services, Inc. (f/k/a Fluid Management Holdings, Inc.) (“Fluid Management”); Fluid Management Services LLC (f/k/a Fluid Management Holdings LLC); Wright Transport, Inc. (f/k/a Wright Holdings, Inc.); Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; Artexoma Logistics, LLC; and Wright Trucking, Inc. Effective December 31, 2014, CP Energy underwent a corporate reorganization in order to consolidate certain of its wholly-owned subsidiaries. As of June 30, 2015, CP Energy owned directly or indirectly 100% of each of CP Well; Wright Foster Disposals, LLC; Foster Testing Co., Inc.; ProHaul Transports, LLC; and Wright Trucking, Inc. CP Energy provides oilfield flowback services and fluid hauling and disposal services through its subsidiaries.

On October 30, 2015, we restructured our investment in CP Energy. Concurrent with the restructuring, we exchanged our $86,965 senior secured loan and $15,924 subordinated loan for Series B Redeemable Preferred Stock in CP Energy.

During the three months ended December 31, 2016, Arctic Energy and CP Well entered into a loan agreement with each other. CP Well provided a $1,200 senior secured loan to Arctic Energy, for the purpose of funding ongoing operations.

The following interest payments were accrued and paid from CP Well to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	(390		)
Nine Months Ended March 31, 2017	—

As of September 30, 2015, due to a pending sale transaction, we reversed $4,616 of previously recognized payment-in-kind

interest from CP Well of which we do not expect to receive.

Included above, the following payment-in-kind interest from CP Well was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	(2,819		)
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from CP Energy to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	75
Three Months Ended March 31, 2017	75
Nine Months Ended March 31, 2016	225
Nine Months Ended March 31, 2017	225

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	75
March 31, 2017	75

The following payments were paid from CP Energy to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to CP Energy (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	15
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	15

Credit Central Loan Company, LLC

Prospect owns 100% of the equity of Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”), a Consolidated Holding Company. Credit Central Delaware owns 74.93% of the equity of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC) (“Credit Central”), with entities owned by Credit Central management owning the remaining 25.07% of the equity. Credit Central owns 100% of each of Credit Central, LLC; Credit Central South, LLC; Credit Central of Texas, LLC; and Credit Central of Tennessee, LLC. Credit Central is a branch-based provider of installment loans.

On September 28, 2016, Prospect performed a buyout of Credit Central management’s ownership stake, purchasing additional subordinated debt of $12,523 at a discount of $7,521. Prospect also purchased $2,098 of additional shares, increasing its ownership to 99.91%.

During the nine months ended March 31, 2017, $564 of the aforementioned original issue discount of $7,521 accreted.

The following amounts were paid from Credit Central to Prospect and recorded by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	323
Three Months Ended March 31, 2017	403
Nine Months Ended March 31, 2016	323
Nine Months Ended March 31, 2017	403

The following interest payments were accrued and paid from Credit Central to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	1,842
Three Months Ended March 31, 2017	2,605
Nine Months Ended March 31, 2016	5,556
Nine Months Ended March 31, 2017	7,329

Included above, the following payment-in-kind interest from Credit Central was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	323
Three Months Ended March 31, 2017	888
Nine Months Ended March 31, 2016	323
Nine Months Ended March 31, 2017	2,803

The following interest income recognized had not yet been paid by Credit Central to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	21
March 31, 2017	29

The following net revenue interest payments were paid from Credit Central to Prospect and recognized by Prospect as other income:



Three Months Ended March 31, 2016	$	614
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	1,852
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from Credit Central to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	175
Three Months Ended March 31, 2017	175
Nine Months Ended March 31, 2016	525
Nine Months Ended March 31, 2017	525

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	175
March 31, 2017	175

The following amounts were due to Credit Central from Prospect for reimbursement of expenses paid by Credit Central on behalf of Prospect and were included by Prospect within other liabilities:



June 30, 2016	$	3
March 31, 2017	—

Echelon Aviation LLC

Prospect owns 99.02% of the membership interests of Echelon Aviation LLC (“Echelon”). Echelon owns 60.7% of the equity of AerLift Leasing Limited (“AerLift”).

On March 28, 2016, Echelon made an optional partial prepayment of $2,954 of the Senior Secured Revolving Credit Facility outstanding.

During the three months ended March 31, 2016, Echelon issued 36,059 Class B shares to the company’s President, decreasing Prospect’s ownership to 98.97%.

On September 28, 2016, Echelon made an optional partial prepayment of $6,800 of the Senior Secured Revolving Credit Facility outstanding.

During the three months ended September 30, 2016, Echelon issued 36,275 Class B shares to the company’s President, decreasing Prospect’s ownership to 98.56%.

On December 9, 2016, Prospect made a follow-on $16,045 first lien senior secured debt and $2,830 equity investment in Echelon to support an asset acquisition, increasing Prospect’s ownership to 98.71%. Prospect also recognized $1,121 in structuring fee income as a result of the transaction.

The following dividends were declared and paid from Echelon to Prospect and recognized as dividend income by Prospect:



Three Months Ended March 31, 2016	$	7,250
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	7,250
Nine Months Ended March 31, 2017	200

All dividends were paid from earnings and profits of Echelon.

The following interest payments were accrued and paid from Echelon to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	1,440
Three Months Ended March 31, 2017	1,568
Nine Months Ended March 31, 2016	4,360
Nine Months Ended March 31, 2017	4,149

The following interest income recognized had not yet been paid by Echelon to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	2,335
March 31, 2017	1,045

The following managerial assistance payments were paid from Echelon to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	63
Three Months Ended March 31, 2017	63
Nine Months Ended March 31, 2016	188
Nine Months Ended March 31, 2017	188

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	63
March 31, 2017	63

The following payments were paid from Echelon to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Echelon (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	162
Nine Months Ended March 31, 2016	120
Nine Months Ended March 31, 2017	217

The following amounts were due from Echelon to Prospect for reimbursement of expenses paid by Prospect on behalf of Echelon and were included by Prospect within other receivables:



June 30, 2016	$	—
March 31, 2017	4

Edmentum Ultimate Holdings, LLC

Prospect owns 37.1% of the equity of Edmentum Ultimate Holdings, LLC (“Edmentum Holdings”). Edmentum Holdings owns 100% of the equity of Edmentum, Inc. (“Edmentum”). Edmentum is the largest all subscription based, software as a service provider of online curriculum and assessments to the U.S. education market. Edmentum provides high-value, comprehensive online solutions that support educators to successfully transition learners from one stage to the next.

During the six months ended June 30, 2016, Prospect funded an additional $6,424 in the second lien revolving credit facility.

During the three months ended March 31, 2017, Prospect funded an additional $4,896 in the second lien revolving credit facility.

The following amounts were paid from Edmentum to Prospect and recorded by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	4,897
Nine Months Ended March 31, 2017	6,424

The following interest payments were accrued and paid from Edmentum to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	843
Three Months Ended March 31, 2017	(342		)
Nine Months Ended March 31, 2016	2,728
Nine Months Ended March 31, 2017	1,487

Included above, the following payment-in-kind interest from Edmentum was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	833
Three Months Ended March 31, 2017	144
Nine Months Ended March 31, 2016	2,099
Nine Months Ended March 31, 2017	1,916

The following interest income recognized had not yet been paid by Edmentum to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	639
March 31, 2017	118

Energy Solutions Holdings Inc.

Prospect owns 100% of the equity of Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings Inc.) (“Energy Solutions”), a Consolidated Holding Company. Energy Solutions owns 100% of each of Change Clean Energy Company, LLC (f/k/a Change Clean Energy Holdings, LLC) (“Change Clean”); Freedom Marine Solutions, LLC (f/k/a Freedom Marine Services Holdings, LLC) (“Freedom Marine”); and Yatesville Coal Company, LLC (f/k/a Yatesville Coal Holdings, LLC) (“Yatesville”). Change Clean owns 100% of each of Change Clean Energy, LLC and Down East Power Company, LLC, and 50.1% of BioChips LLC. Freedom Marine owns 100% of each of Vessel Company, LLC (f/k/a Vessel Holdings, LLC) (“Vessel”); Vessel Company II, LLC (f/k/a Vessel Holdings II, LLC) (“Vessel II”); and Vessel Company III, LLC (f/k/a Vessel Holdings III, LLC) (“Vessel III”). Yatesville owns 100% of North Fork Collieries, LLC.

Energy Solutions owns interests in companies operating in the energy sector. These include companies operating offshore supply vessels, ownership of a non-operating biomass electrical generation plant and several coal mines. Energy Solutions subsidiaries formerly owned interests in gathering and processing business in east Texas.

Transactions between Prospect and Freedom Marine are separately discussed below under “Freedom Marine Solutions, LLC.”

On August 6, 2015, Prospect dissolved the following entities: Change Clean Energy Company, LLC, Change Clean Energy, LLC, Down East Power Company, LLC and BioChips LLC.

First Tower Finance Company LLC

Prospect owns 100% of the equity of First Tower Holdings of Delaware LLC (“First Tower Delaware”), a Consolidated Holding Company. First Tower Delaware owns 80.1% of First Tower Finance Company LLC (f/k/a First Tower Holdings LLC) (“First Tower Finance”). First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company.

During the three months ended December 31, 2015, Prospect made an additional $8,005 investment split evenly between equity and the second lien term loan to First Tower.

During the three months ended December 31, 2016, Prospect made an additional $8,005 equity investment to First Tower.

The following amounts were paid from First Tower to Prospect and recorded by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	952
Nine Months Ended March 31, 2016	679
Nine Months Ended March 31, 2017	1,889

The following interest payments were accrued and paid from First Tower to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	14,195
Three Months Ended March 31, 2017	11,036
Nine Months Ended March 31, 2016	42,499
Nine Months Ended March 31, 2017	39,936

Included above, the following payment-in-kind interest from First Tower was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	1,612
Nine Months Ended March 31, 2016	348
Nine Months Ended March 31, 2017	4,996

The following interest income recognized had not yet been paid by First Tower to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	156
March 31, 2017	122

During the year ended June 30, 2016, the managerial assistance agreement between First Tower Delaware and Prospect Administration was amended and $1,200 of managerial assistance expense was reversed at Prospect. First Tower replaced First Tower Delaware in the managerial assistance agreement with Prospect Administration as of December 14, 2015.

The following managerial assistance payments were accrued and paid from First Tower Delaware to Prospect Administration and recognized by Prospect as an expense:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	(1,200		)
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from First Tower Finance to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	600
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	1,800

The following managerial assistance payments received by Prospect have not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	600
March 31, 2017	600

The following amounts were due from First Tower to Prospect for reimbursement of expenses paid by Prospect on behalf of First Tower and were included by Prospect within other receivables:



June 30, 2016	$	2
March 31, 2017	2

Freedom Marine Solutions, LLC

As discussed above, Prospect owns 100% of the equity of Energy Solutions, a Consolidated Holding Company. Energy Solutions owns 100% of Freedom Marine. Freedom Marine owns 100% of each of Vessel, Vessel II, and Vessel III.

On October 30, 2015, we restructured our investment in Freedom Marine. Concurrent with the restructuring, we exchanged our $32,500 senior secured loans for additional membership interest in Freedom Marine.

On January 7, 2016 and April 11, 2016, Prospect purchased an additional $400 and $600, respectively, in membership interests in Freedom Marine to support its ongoing operations and liquidity needs.

During the three months ended September 30, 2016, Prospect purchased an additional $601 in membership interests in Freedom Marine to support its ongoing operations and liquidity needs.

During the three months ended March 31, 2017, Prospect purchased an additional $400 in membership interests in Freedom Marine to support its ongoing operations and liquidity needs.

The following interest payments were accrued and paid from Vessel to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	159
Nine Months Ended March 31, 2017	—

The following interest payments were accrued and paid from Vessel II to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	427
Nine Months Ended March 31, 2017	—

The following interest payments were accrued and paid from Vessel III to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	526
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from Freedom Marine to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	75
Nine Months Ended March 31, 2017	—

The following managerial assistance recognized had not yet been paid by Freedom Marine to Prospect and was included by Prospect within other receivables and due to Prospect Administration:



June 30, 2016	$	225
March 31, 2017	450

The following payments were paid from Freedom Marine to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Freedom Marine (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	65
Nine Months Ended March 31, 2017	—

Gulf Coast Machine & Supply Company

Prospect owns 100% of the preferred equity of Gulf Coast Machine & Supply Company (“Gulf Coast”). Gulf Coast is a provider of value-added forging solutions to energy and industrial end markets.

During the year ended June 30, 2016, Prospect made an additional $9,500 investment in the first lien term loan to Gulf Coast to fund capital improvements to key forging equipment and other liquidity needs.

During the nine months ended March 31, 2017, Prospect made additional investments of $8,000 in the first lien term loan to Gulf Coast to fund capital improvements to key forging equipment and other liquidity needs.

The following amounts were paid from Gulf Coast to Prospect and recorded by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	75
Nine Months Ended March 31, 2017	3,022

The following payments were paid from Gulf Coast to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Gulf Coast (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	503

Harbortouch Payments, LLC

Prospect owned 100% of the equity of Harbortouch Holdings of Delaware Inc. (“Harbortouch Delaware”), a Consolidated Holding Company. Harbortouch Delaware owned 100% of the Class C voting units of Harbortouch Payments, LLC (“Harbortouch”), which provide for a 53.5% residual profits allocation. Harbortouch management owns 100% of the Class B and D voting units of Harbortouch, which provide for a 46.5% residual profits allocation. Harbortouch owns 100% of Credit Card Processing USA, LLC. Harbortouch is a provider of transaction processing services and point-of sale equipment used by merchants across the United States.

On May 31, 2016, we sold our investment in Harbortouch for total consideration of $328,032, including fees and escrowed amounts. Prior to the sale, $154,382 of Senior Secured Term Loan B loan outstanding was converted to preferred equity. We received a repayment of $146,989 loans receivable to us and $157,639 of proceeds related to the equity investment. We recorded a realized loss of $5,419 related to the sale. We also received a $5,145 prepayment premium for early repayment of the outstanding loans, which was recorded as interest income in the year ended June 30, 2016 and a $12,909 advisory fee for the transaction, which was recorded as other income in the year ended June 30, 2016. In addition, there is $5,350 being held in escrow which will be recognized as additional realized gain if and when it is received. Concurrent with the sale, we made a $27,500 second lien secured investment in Harbortouch.

In addition to the repayments noted above, the following amounts were paid from Harbortouch to Prospect and recorded by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	1,410
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	3,991
Nine Months Ended March 31, 2017	—

The following cash distributions were declared and paid from Harbortouch to Prospect and recognized as a return of capital by Prospect:



Three Months Ended March 31, 2016	$	14
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	37
Nine Months Ended March 31, 2017	—

The following interest payments were accrued and paid from Harbortouch to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	7,612
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	23,129
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from Harbortouch to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	125
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	375
Nine Months Ended March 31, 2017	—

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	83
March 31, 2017	—

MITY, Inc.

Prospect owns 100% of the equity of MITY Holdings of Delaware Inc. (“MITY Delaware”), a Consolidated Holding Company. MITY Delaware holds 94.99% of the equity of MITY, Inc. (f/k/a MITY Enterprises, Inc.) (“MITY”), with management of MITY owning the remaining 5.01% of the equity of MITY. MITY owns 100% of each of MITY-Lite, Inc. (“MITY-Lite”); Broda USA, Inc. (f/k/a Broda Enterprises USA, Inc.) (“Broda USA”); and Broda Enterprises ULC (“Broda Canada”). MITY is a designer, manufacturer and seller of multipurpose room furniture and specialty healthcare seating products.

During the three months ended March 31, 2016, Prospect’s ownership in MITY increased to 95.83% resulting from a stock repurchase of a key executive’s shares.

During the three months ended December 31, 2016, Prospect formed a separate legal entity, MITY FSC, Inc., (“MITY FSC”) in which Prospect owns 96.88% of the equity, and MITY-Lite management owns the remaining portion. MITY FSC does not have material operations. This entity earns commission payments from MITY-Lite based on its sales to foreign customers, and distribute it to its shareholders based on pro-rata ownership. During the three months ended December 31, 2016, we received $406 of such commission, which we recognized as other income.

On January 17, 2017, Prospect invested an additional $8,000 of Senior Secured Term Loan A and $8,000 of Senior Secured Term Loan B debt investments in MITY to fund an acquisition. Prospect recognized structuring fee income of $480 from this additional investment.

The following dividends were declared and paid from MITY to Prospect and recognized by Prospect as divided income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	710
Nine Months Ended March 31, 2017	468

All dividends were paid from earnings and profits of MITY.

The following interest payments were accrued and paid from MITY to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	1,293
Three Months Ended March 31, 2017	1,772
Nine Months Ended March 31, 2016	3,904
Nine Months Ended March 31, 2017	4,385

Included above, the following payment-in-kind interest from MITY was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	140
Nine Months Ended March 31, 2017	—

The following interest income recognized had not yet been paid by MITY to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	440
March 31, 2017	21

The following interest payments were accrued and paid from Broda Canada to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	136
Three Months Ended March 31, 2017	139
Nine Months Ended March 31, 2016	421
Nine Months Ended March 31, 2017	425

The following interest income recognized had not yet been paid by Broda Canada to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	48
March 31, 2017	—

During the nine months March 31, 2016, there was favorable fluctuation in the foreign currency exchange rate and Prospect recognized $7 of realized gain related to its investment in Broda Canada. During the nine months ended March 31, 2017, there was a favorable fluctuation in the foreign currency exchange rate and Prospect recognized $12 of realized gain related to its investment in Broda Canada.

The following managerial assistance payments were paid from MITY to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	75
Three Months Ended March 31, 2017	75
Nine Months Ended March 31, 2016	225
Nine Months Ended March 31, 2017	225

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	—
March 31, 2017	75

The following managerial assistance recognized had not yet been paid by MITY to Prospect and was included by Prospect within other receivables and due to Prospect Administration:



June 30, 2016	$	75
March 31, 2017	—

The following payments were paid from MITY to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to MITY (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	62
Nine Months Ended March 31, 2016	59
Nine Months Ended March 31, 2017	62

The following amounts were due from MITY to Prospect for reimbursement of expenses paid by Prospect on behalf of MITY and were included within other receivables:



June 30, 2016	$	—
March 31, 2017	6

National Property REIT Corp.

Prospect owns 100% of the equity of NPH, a Consolidated Holding Company. NPH owns 100% of the common equity of NPRC. Effective May 23, 2016, in connection with the merger of APRC and United Property REIT Corp. UPRC with and into NPRC, APH and UPH merged with and into NPH.

NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, NPRC issued 125 shares of Series A Cumulative Non-Voting Preferred Stock to 125 accredited investors. The preferred stockholders are entitled to receive cumulative dividends semi-annually at an annual rate of 12.5% and do not have the ability to participate in the management or operation of NPRC.

NPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”). Additionally, through its wholly-owned subsidiaries, NPRC invests in online consumer loans.

On September 9, 2015, Prospect made a $159 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family property for $159. The minority interest holder also invested an additional $4 in the JVs. The proceeds were used by the JVs to fund $163 of capital expenditures.

On November 5, 2015 Prospect made a $9,017 investment in NPRC used to purchase additional common equity in NPRC through NPH. The proceeds were utilized by NPRC to purchase an 80.0% ownership interest in SSIL I, LLC for $9,017. The JV was purchased for $34,500 which included debt financing and minority interest of $26,450 and $2,254, respectively. The remaining proceeds were used to pay $180 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,243 of escrows and reserves, $1,243 of third party expenses, $42 of legal services provided by attorneys at Prospect Administration, and $513 of capital expenditures.

On November 12, 2015, NPRC used supplemental debt proceeds obtained by their JVs to make a partial repayment on the Senior Term Loan of $22,098.

On November 19, 2015, Prospect made a $695 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family properties for $690 and pay $5 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $76 in the JVs. The proceeds were used by the JVs to fund $766 of capital expenditures.

On November 25, 2015, Prospect made a $323 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family properties for $321 and pay $2 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $19 in the JVs. The proceeds were used by the JVs to fund $340 of capital expenditures.

On December 23, 2015, Prospect made a $499 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in its multi-family property for $499. The minority interest holder also invested an additional $12 in the JVs. The proceeds were used by the JVs to fund $511 of capital expenditures.

On December 30, 2015, NPRC used supplemental debt proceeds obtained by its’ JVs to make a partial repayment on the Senior Term Loan of $9,821.

On January 20, 2016, NPRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $6,774.

On February 10, 2016, Prospect made a $354 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest Carroll Management Group, LLC for $352. The minority interest holder also invested an additional $22 in the JVs. The proceeds were used by the JVs to fund $376 of capital expenditures.

On February 24, 2016, NPRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $24,579.

On April 19, 2016, Prospect made a $1,404 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in NPH McDowell, LLC for $1,402 and pay $2 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $155 in the JVs. The proceeds were used by the JVs to fund $1,557 of capital expenditures.

On July 22, 2016 Prospect made a $2,700 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in twelve multi-family properties for $2,698 and pay $2 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $49 in the JVs. The proceeds were used by the JVs to fund $2,747 of capital expenditures.

On August 4, 2016, Prospect made a $393 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in four multi-family properties for $392 and pay $1 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $21 in the JVs. The proceeds were used by the JVs to fund $413 of capital expenditures.

On September 1, 2016, we made an investment into American Consumer Lending Limited (“ACLL”), a wholly-owned subsidiary of NPRC, under the ACLL credit agreement, for senior secured term loans, Term Loan C, with the same terms as the existing ACL Loan Holdings, Inc. (“ACLLH”) Term Loan C due to us.

On September 28, 2016 Prospect made a $46,381 investment in NPRC, of which $35,295 was a Senior Term Loan and $11,086 was used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase a 64.2%

ownership interest in Vesper Portfolio JV, LLC for $46,324 and to pay $57 for tax and legal services provided by professionals at Prospect Administration. The JV was purchased for $250,000 which included debt financing and minority interest of $192,382 and $25,817, respectively. The remaining proceeds were used to pay $1,060 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $2,131 of third party expenses, $4,911 of pre-funded capex, and $5,310 of prepaid assets, with $1,111 retained by the JV for working capital.

On October 21, 2016 Prospect made a $514 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in four multi-family properties for $512 and pay $2 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $33 in the JVs. The proceeds were used by the JVs to fund $545 of capital expenditures.

On November 17, 2016, NPRC used sale and supplemental loan proceeds to make a partial repayment on the Senior Term Loan of $19,149 and a return of capital on Prospects’ equity investment in NPRC of $9,204.

On November 23, 2016, Prospect made a $2,860 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in seven multi-family properties for $2,859 and pay $1 of legal services provided by attorneys at Prospect Administration. The minority interest holder also invested an additional $231 in the JVs. The proceeds were used by the JVs to fund $3,090 of capital expenditures.

On December 7, 2016 Prospect made a $13,046 investment in NPRC, of which $9,653 was a Senior Term Loan and $3,393 was used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase an 85% ownership interest in JSIP Union Place, LLC for $13,026 and to pay $20 of legal services provided by attorneys at Prospect Administration. The JV was purchased for $64,750 which included debt financing and minority interest of $51,800 and $2,299, respectively. The remaining proceeds were used to pay $261 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,078 of third party expenses, $5 of pre-funded capital expenditures, and $458 of prepaid assets, with $573 retained by the JV for working capital.

On January 30, 2017 Prospect made a $41,365 investment in NPRC, of which $30,644 was a Senior Term Loan and $10,721 was used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase a 92.5% ownership interest in 9220 Old Lantern Way LLC for $41,333 and to pay $32 of legal services provided by attorneys at Prospect Administration. The JV was purchased for $187,250 which included debt financing and minority interest of $153,580 and $3,351, respectively. The remaining proceeds were used to pay $827 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $4,415 of third party expenses, $1,857 of pre-funded capital expenditures, and $3,540 of prepaid assets, with $375 retained by the JV for working capital.

On February 27, 2017 NPRC used sale and supplemental loan proceeds to make a partial repayment on the Senior Term Loan of $18,000 and a return of capital on Prospects’ equity investment in NPRC of $11,648. In connection to the partial repayment of the Senior Term Loan, NPRC paid a prepayment premium of $180 to Prospect (which was recognized by Prospect as interest income).

On March 7, 2017, Prospect made a $289 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in SSIL I, LLC for $288. The minority interest holder also invested an additional $72 in the JV. The proceeds were used by the JV to fund $360 of capital expenditures.

On March 16, 2017, Prospect made a $4,273 investment in NPRC used to purchase additional common equity of NPRC through NPH. The proceeds were utilized by NPRC to purchase additional ownership interest in eight multi-family properties for $4,272 and pay $1 of legal services provided by attorneys at Prospect Administration. The proceeds were used by the JV to fund $4,272 of capital expenditures.

The following interest payments were accrued and paid by NPRC to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	14,177
Three Months Ended March 31, 2017	14,188
Nine Months Ended March 31, 2016	27,586
Nine Months Ended March 31, 2017	46,971

Included above, the following payment-in-kind interest from NPRC was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	703
Nine Months Ended March 31, 2017	—

The following interest income recognized had not yet been paid by NPRC to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	174
March 31, 2017	154

The following interest payments were accrued and paid by ACLLH to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	1,320
Three Months Ended March 31, 2017	3,941
Nine Months Ended March 31, 2016	17,774
Nine Months Ended March 31, 2017	12,363

The following interest income recognized had not yet been paid by ACLLH to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	44
March 31, 2017	44

The following interest payments were accrued and paid by ACLL to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	1,877
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	3,477

The following interest income recognized had not yet been paid by ACLL to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	—
March 31, 2017	21

The following prepayment penalty payments were paid from NPRC to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	180
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	2,177

The following net revenue interest payments were paid from NPRC to Prospect and recognized by Prospect as other income:



Three Months Ended March 31, 2016	$	601
Three Months Ended March 31, 2017	1,476
Nine Months Ended March 31, 2016	2,031
Nine Months Ended March 31, 2017	3,965

The following structuring fees were paid from NPRC to Prospect and recognized by Prospect as other income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	827
Nine Months Ended March 31, 2016	180
Nine Months Ended March 31, 2017	2,147

The following structuring fees were paid from ACLLH to Prospect and recognized by Prospect as other income:



Three Months Ended March 31, 2016	$	26
Three Months Ended March 31, 2017	171
Nine Months Ended March 31, 2016	1,683
Nine Months Ended March 31, 2017	1,506

The following managerial assistance payments were paid from NPRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	128
Three Months Ended March 31, 2017	325
Nine Months Ended March 31, 2016	383
Nine Months Ended March 31, 2017	975

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	210
March 31, 2017	325

The following payments were paid from NPRC to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to NPRC (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	780
Three Months Ended March 31, 2017	3,620
Nine Months Ended March 31, 2016	1,808
Nine Months Ended March 31, 2017	5,056

The following amounts were due from NPRC to Prospect for reimbursement of expenses paid by Prospect on behalf of NPRC and included by Prospect within other receivables:



June 30, 2016	$	—
March 31, 2017	1

The following amounts were due from ACLLH to Prospect for reimbursement of expenses paid by Prospect on behalf of ACLLH and included by Prospect within other receivables:



June 30, 2016	$	—
March 31, 2017	2

Nationwide Acceptance LLC

Prospect owns 100% of the membership interests of Nationwide Acceptance Holdings LLC (“Nationwide Holdings”), a Consolidated Holding Company. Nationwide Holdings owns 93.79% of the equity of Nationwide Loan Company LLC (f/k/a Nationwide Acceptance LLC) (“Nationwide”), with members of Nationwide management owning the remaining 6.21% of the equity.

During the three months ended December 31, 2015, Prospect made additional investments totaling $1,876 in the senior subordinated term loan to Nationwide.

On March 31, 2016, Prospect made an additional equity investment totaling $1,407, and Prospect’s ownership in Nationwide did not change.

On August 31, 2016, Prospect made an additional $124 investment in the senior subordinated term loan to Nationwide. Prospect also made an additional equity investment totaling $92, increasing Prospect’s ownership in Nationwide to 94.48%.

The following dividends were declared and paid from Nationwide to Prospect and recognized as dividend income by Prospect:



Three Months Ended March 31, 2016	$	963
Three Months Ended March 31, 2017	730
Nine Months Ended March 31, 2016	2,651
Nine Months Ended March 31, 2017	3,310

All dividends were paid from earnings and profits of Nationwide.

The following amounts were paid from Nationwide to Prospect and recognized by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	300
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	300
Nine Months Ended March 31, 2017	—

The following interest payments were accrued and paid from Nationwide to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	852
Three Months Ended March 31, 2017	841
Nine Months Ended March 31, 2016	2,368
Nine Months Ended March 31, 2017	2,556

Included above, the following payment-in-kind interest from Nationwide was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	300
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	300
Nine Months Ended March 31, 2017	—

The following interest income recognized had not yet been paid by Nationwide to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	9
March 31, 2017	9

The following managerial assistance payments were paid from Nationwide to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	100
Three Months Ended March 31, 2017	100
Nine Months Ended March 31, 2016	300
Nine Months Ended March 31, 2017	300

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	100
March 31, 2017	100

The following amounts were due to Nationwide from Prospect for reimbursement of expenses paid by Nationwide on behalf of Prospect and were included by Prospect within other liabilities:



June 30, 2016	$	4
March 31, 2017	—

NMMB, Inc.

Prospect owns 100% of the equity of NMMB Holdings, Inc. (“NMMB Holdings”), a Consolidated Holding Company. NMMB Holdings owns 96.33% of the fully-diluted equity of NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) (“NMMB”), with NMMB management owning the remaining 3.67% of the 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 following interest payments were accrued and paid from NMMB to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	131
Three Months Ended March 31, 2017	130
Nine Months Ended March 31, 2016	397
Nine Months Ended March 31, 2017	396

The following interest income recognized had not yet been paid by NMMB to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	1
March 31, 2017	1

The following interest payments were accrued and paid from Armed Forces to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	248
Three Months Ended March 31, 2017	245
Nine Months Ended March 31, 2016	749
Nine Months Ended March 31, 2017	746

The following interest income recognized had not yet been paid by Armed Forces to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	3
March 31, 2017	3

The following managerial assistance payments were paid from NMMB to Prospect and subsequently remitted to Prospect

Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	38
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	113

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	—
March 31, 2017	38

The following managerial assistance recognized had not yet been paid by NMMB to Prospect and was included by Prospect within other receivables and due to Prospect Administration:



June 30, 2016	$	1,100
March 31, 2017	1,288

The following amounts were due from NMMB to Prospect for reimbursement of expenses paid by Prospect on behalf of NMMB and were included by Prospect within other receivables:



June 30, 2016	$	2
March 31, 2017	—

R-V Industries, Inc.

Prospect owns 88.27% of the fully-diluted equity of R-V Industries, Inc. (“R-V”), with R-V management owning the remaining 11.73% of the equity. As of June 30, 2011, Prospect’s equity investment cost basis was $1,682 and $5,087 for warrants and common stock, respectively.

On December 24, 2016, Prospect exercised its warrant to purchase 200,000 common shares of R-V. Prospect recorded a realized gain of $172 from this redemption. Prospect’s ownership remains unchanged at 88.27%.

During the three months ended December 31, 2016, Prospect provided certain financial advisory services to R-V related to a possible transaction. Prospect recognized $124 in advisory fee income resulting from these services.

The following amounts were paid from R-V to Prospect and recorded by Prospect as repayment of loan receivable:



Three Months Ended March 31, 2016	$	614
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	614
Nine Months Ended March 31, 2017	—

The following dividends were declared and paid from R-V to Prospect and recognized as dividend income by Prospect:



Three Months Ended March 31, 2016	$	75
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	224
Nine Months Ended March 31, 2017	149

All dividends were paid from earnings and profits of R-V.

During the three months ended March 31, 2017, cash distributions of $76 that were declared and paid from R-V to Prospect were recognized as a return of capital by Prospect.

The following interest payments were accrued and paid from R-V to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	730
Three Months Ended March 31, 2017	718
Nine Months Ended March 31, 2016	2,192
Nine Months Ended March 31, 2017	2,149

The following managerial assistance payments were paid from R-V to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	45
Three Months Ended March 31, 2017	45
Nine Months Ended March 31, 2016	135
Nine Months Ended March 31, 2017	120

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	45
March 31, 2017	45

The following payments were paid from R-V to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to R-V (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	17
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	17

The following amounts were due to R-V from Prospect for reimbursement of expenses paid by R-V on behalf of Prospect and were included by Prospect within other liabilities:



June 30, 2016	$	1
March 31, 2017	—

SB Forging Company, Inc.

As of June 30, 2014, Prospect owned 79.53% of the fully-diluted common, 85.76% of the Series A Preferred and 100% of the Series B Preferred equity of ARRM Services, Inc. (f/k/a ARRM Holdings, Inc.) (“ARRM”). ARRM owned 100% of the equity of Ajax Rolled Ring & Machine, LLC (f/k/a Ajax Rolled Ring & Machine, Inc.) (“Ajax”). Ajax forges large seamless steel rings on two forging mills in the company’s York, South Carolina facility. The rings are used in a range of industrial applications, including in construction equipment and power turbines. Ajax also provides machining and other ancillary services.

On October 10, 2014, ARRM sold Ajax to a third party and repaid the $19,337 loan receivable to Prospect. Prospect recorded a realized loss of $21,001 related to the sale. Concurrent with the sale, Prospect’s ownership increased to 100% of the outstanding equity of ARRM Services, Inc. which was renamed SB Forging Company, Inc. (“SB Forging”). As such, Prospect began consolidating SB Forging on October 11, 2014. As a result, any transactions between SB Forging and Prospect are eliminated in consolidation. In addition, there is $3,000 being held in escrow of which $802 was received on May 6, 2015 for which Prospect realized a gain of the same amount. Prospect received $2,000 of structuring fees from Ajax related to the sale of the operating company which was recognized as other income during the year ended June 30, 2015.

On May 31, 2016, $1,750 of the escrow proceeds were received. Prospect realized a gain of the same amount.

During the three months ended March 31, 2017, Prospect incurred $53 of additional overhead expense related to SB Forging ,which will be given to us as a credit for services payable to Prospect Administration in the June 2017 quarter.

The following payments were paid from SB Forging to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to SB Forging (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	53
Nine Months Ended March 31, 2016	—
Nine Months Ended March 31, 2017	598

United Property REIT Corp.

UPH owned 100% of the common equity of UPRC. Effective May 23, 2016, in connection with the merger of UPRC and APRC with and into NPRC, UPH and APH merged with and into NPH. Prospect owns 100% of the equity of NPH, a Consolidated Holding Company, and NPH owns 100% of the common equity of NPRC.

UPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. UPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. UPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (the “JV”).

On July 9, 2015, Prospect made a $2,044 investment in UPRC, of which $1,738 was a Senior Term Loan and $306 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in Canterbury Green Apartment Holdings, LLC for $2042, and pay $2 of legal services provided by attorneys at Prospect Administration. The proceeds were used by the JV to fund $2,167 of capital expenditures and pay $40 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income).

On November 25, 2015, Prospect made a $3,433 investment in UPRC, of which $2,746 was a Senior Term Loan and $687 was used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in Columbus OH Apartment Holdco, LLC for $3,274, and pay $2 of legal services provided by attorneys at Prospect Administration with $158 retained by UPRC for working capital. The proceeds were used by the JV to fund $3,209 of capital expenditures and pay $65 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income).

On March 9, 2016, Prospect made a $777 investment in UPRC used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in South Atlanta Portfolio Holding Company, LLC for $775, and pay $2 of legal services provided by attorneys at Prospect. The minority interest holder also invested an additional $62 in the JVs. The proceeds were used by the JV to fund $836 of capital expenditures.

On March 9, 2016, Prospect made a $1,277 investment in UPRC used to purchase additional common equity of UPRC through UPH. The proceeds were utilized by UPRC to purchase additional ownership interest in Canterbury Green Apartments Holdings, LLC for $1,277. The minority interest holder also invested an additional $104 in the JVs. The proceeds were used by the JV to fund $1,381 of capital expenditures.

On April 6, 2016, UPRC used supplemental proceeds to make a partial repayment on the Senior Term Loan of $7,567.

The following interest payments were accrued and paid by UPRC to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	1,954
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	5,774
Nine Months Ended March 31, 2017	—

The following net revenue interest payments were paid from UPRC to Prospect and recognized by Prospect as other income:



Three Months Ended March 31, 2016	$	289
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	883
Nine Months Ended March 31, 2017	—

The following managerial assistance payments were paid from UPRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	50
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	150
Nine Months Ended March 31, 2017	—

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	29
March 31, 2017	—

The following payments were paid from UPRC to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to UPRC (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	300
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	518
Nine Months Ended March 31, 2017	—

USES Corp.

On June 15, 2016, we provided additional $1,300 debt financing to USES Corp. (“USES”) and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 99,900 shares of its common stock. On June 29, 2016, we provided additional $2,200 debt financing to USES and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 169,062 shares of its common stock. As a result of such debt financing and recapitalization, as of June 29, 2016, we held 268,962 shares of USES common stock representing a 99.96% common equity ownership interest in USES. As such, USES became a controlled company on June 30, 2016.

On February 22, 2017, Prospect provided additional $1,500 debt financing to USES and its subsidiaries in the form of additional Term Loan A debt.

The following managerial assistance recognized had not yet been paid by USES to Prospect and was included by Prospect within other receivables and due to Prospect Administration:



June 30, 2016	$	—
March 31, 2017	250

Valley Electric Company, Inc.

Prospect owns 100% of the common stock of Valley Electric Holdings I, Inc. (“Valley Holdings I”), a Consolidated Holding Company. Valley Holdings I owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”), a Consolidated Holding Company. Valley Holdings II owns 94.99% of Valley Electric Company, Inc. (“Valley Electric”), with Valley Electric management owning the remaining 5.01% of the equity. Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. (“Valley”), a leading provider of specialty electrical services in the state of Washington and among the top 50 electrical contractors in the United States.

The following interest payments were accrued and paid from Valley Electric to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	1,076
Three Months Ended March 31, 2017	1,137
Nine Months Ended March 31, 2016	3,160
Nine Months Ended March 31, 2017	3,356

Included above, the following payment-in-kind interest from Valley Electric was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	350
Three Months Ended March 31, 2017	522
Nine Months Ended March 31, 2016	1,307
Nine Months Ended March 31, 2017	1,288

The following interest income recognized had not yet been paid by Valley Electric to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	12
March 31, 2017	13

The following interest payments were accrued and paid from Valley to Prospect and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	277
Three Months Ended March 31, 2017	274
Nine Months Ended March 31, 2016	835
Nine Months Ended March 31, 2017	834

Included above, the following payment-in-kind interest from Valley was capitalized and recognized by Prospect as interest income:



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	90
Nine Months Ended March 31, 2017	—

The following interest income recognized had not yet been paid by Valley to Prospect and was included by Prospect within interest receivable:



June 30, 2016	$	3
March 31, 2017	3

The following managerial assistance payments were paid from Valley to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	75
Three Months Ended March 31, 2017	75
Nine Months Ended March 31, 2016	225
Nine Months Ended March 31, 2017	225

The following managerial assistance payments received by Prospect had not yet been remitted to Prospect Administration and were included by Prospect within due to Prospect Administration:



June 30, 2016	$	75
March 31, 2017	75

The following payments were paid from Valley Electric to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Valley Electric (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable by Prospect to Prospect Administration):



Three Months Ended March 31, 2016	$	—
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	9
Nine Months Ended March 31, 2017	—

The following amounts were due from Valley to Prospect for reimbursement of expenses paid by Prospect on behalf of Valley and were included by Prospect within other receivables:



June 30, 2016	$	—
March 31, 2017	1

Wolf Energy, LLC

Prospect owns 100% of the equity of Wolf Energy Holdings Inc. (“Wolf Energy Holdings”), a Consolidated Holding Company. Wolf Energy Holdings owns 100% of each of Appalachian Energy LLC (f/k/a Appalachian Energy Holdings, LLC) (“AEH”); Coalbed, LLC (“Coalbed”); and Wolf Energy, LLC (“Wolf Energy”). AEH owns 100% of C&S Operating, LLC.

Wolf Energy Holdings is a holding company formed to hold 100% of the outstanding membership interests of each of AEH and Coalbed. The membership interests and associated operating company debt of AEH and Coalbed, which were previously owned by Manx Energy, Inc. (“Manx”), were assigned to Wolf Energy Holdings effective June 30, 2012. The purpose of assignment was to remove those activities from Manx deemed non-core by the Manx convertible debt investors who were not interested in funding those operations. On June 30, 2012, AEH and Coalbed loans with a cost basis of $7,991 were assigned by Prospect to Wolf Energy Holdings from Manx.

On March 14, 2017, $22,145 of assets previously held by Ark-La-Tex Wireline Services, LLC (“Ark-La-Tex”) were assigned to Wolf Energy Services Company, LLC, (“Wolf Energy Services”) a wholly-owned subsidiary of Wolf Energy Holdings. During the three months ended March 31, 2017, Wolf Energy Services received $2,768 from the partial sale of these transferred assets.

The following managerial assistance payments were paid from Wolf Energy to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect):



Three Months Ended March 31, 2016	$	110
Three Months Ended March 31, 2017	—
Nine Months Ended March 31, 2016	110
Nine Months Ended March 31, 2017	28

The following managerial assistance recognized had not yet been paid by Wolf Energy to Prospect and was included by Prospect within other receivables and due to Prospect Administration:



June 30, 2016	$	14
March 31, 2017	14

Note 15. Litigation

From time to time, we may become involved in various investigations, claims and legal proceedings that arise in the ordinary course of our business. These matters may relate to intellectual property, employment, tax, regulation, contract or other matters. The resolution of such matters as may arise will be subject to various uncertainties and, even if such claims are without merit, could result in the expenditure of significant financial and managerial resources. We are not aware of any material legal proceedings as of March 31, 2017. Our Investment Adviser and Administrator were named as defendants in a lawsuit filed on April 21, 2016 by a purported shareholder of Prospect in the United States District Court for the Southern District of New York under the caption Paskowitz v. Prospect Capital Management and Prospect Administration. The complaint alleged that the defendants received purportedly excessive management and administrative services fees from us in violation of Section 36(b) of the 1940 Act. The plaintiff sought to recover on behalf of us damages in an amount not specified in the complaint. On June 30, 2016, the Investment Adviser and the Administrator filed a motion to dismiss the complaint in its entirety. On January 24, 2017, the court granted the motion to dismiss, finding that the shareholder’s complaint failed to state a cause of action and entering judgment dismissing the action. On February 21, 2017, the shareholder filed a notice of appeal to the United States Court of Appeals for the Second Circuit of the district court’s judgment dismissing the action.

Note 16. Financial Highlights

The following is a schedule of financial highlights for the three and nine months ended March 31, 2017 and March 31, 2016:



	Three Months Ended March 31,							Nine Months Ended March 31,
	2017			2016				2017				2016
Per Share Data
Net asset value at beginning of period	$	9.62		$	9.65			$	9.62			$	10.31
Net investment income(1)	0.20			0.25				0.66				0.79
Net realized and change in unrealized losses(1)	(0.15		)	(0.04		)		(0.10		)		(0.77		)
Net increase from operations	0.05			0.21				0.56				0.02
Distributions of net investment income	(0.25		)	(0.25		)		(0.75		)		(0.75		)
Common stock transactions(2)	0.01			—			(4)	—			(4)	0.03
Net asset value at end of period	$	9.43		$	9.61			$	9.43			$	9.61

Per share market value at end of period	$	9.04		$	7.27			$	9.04			$	7.27
Total return based on market value(3)	11.30		%	8.25		%		26.27		%		9.62		%
Total return based on net asset value(3)	0.77		%	3.50		%		7.07		%		3.58		%
Shares of common stock outstanding at end of period	359,885,703			356,113,777				359,885,703				356,113,777
Weighted average shares of common stock outstanding	359,402,527			355,779,088				358,468,092				355,994,927

Ratios/Supplemental Data
Net assets at end of period	$	3,392,168		$	3,422,416			$	3,392,168			$	3,422,416
Portfolio turnover rate	5.06		%	0.38		%		17.72		%		10.86		%
Annualized ratio of operating expenses to average net assets	11.45		%	11.89		%		11.58		%		12.01		%
Annualized ratio of net investment income to average net assets	8.54		%	10.23		%		9.19		%		10.53		%

100

The following is a schedule of financial highlights for each of the five years ended in the period ended June 30, 2016:



	Year Ended June 30,
	2016			2015			2014			2013			2012
Per Share Data
Net asset value at beginning of year	$	10.31		$	10.56		$	10.72		$	10.83		$	10.36
Net investment income(1)	1.04			1.03			1.19			1.57			1.63
Net realized and change in unrealized (losses) gains(1)	(0.75		)	(0.05		)	(0.13		)	(0.50		)	0.04
Net increase from operations	0.29			0.98			1.06			1.07			1.67
Distributions of net investment income	(1.00		)	(1.19		)	(1.32		)	(1.28		)	(1.22		)
Common stock transactions(2)	0.02			(0.04		)	0.10			0.10			0.02
Net asset value at end of year	$	9.62		$	10.31		$	10.56		$	10.72		$	10.83

Per share market value at end of year	$	7.82		$	7.37		$	10.63		$	10.80		$	11.39
Total return based on market value(3)	21.84		%	(20.84		%)	10.88		%	6.24		%	27.21		%
Total return based on net asset value(3)	7.15		%	11.47		%	10.97		%	10.91		%	18.03		%
Shares of common stock outstanding at end of year	357,107,231			359,090,759			342,626,637			247,836,965			139,633,870
Weighted average shares of common stock outstanding	356,134,297			353,648,522			300,283,941			207,069,971			114,394,554

Ratios/Supplemental Data
Net assets at end of year	$	3,435,917		$	3,703,049		$	3,618,182		$	2,656,494		$	1,511,974
Portfolio turnover rate	15.98		%	21.89		%	15.21		%	29.24		%	29.06		%
Annualized ratio of operating expenses to average net assets	11.95		%	11.66		%	11.11		%	11.50		%	10.73		%
Annualized ratio of net investment income to average net assets	10.54		%	9.87		%	11.18		%	14.86		%	14.92		%


(1)	Per share data amount is based on the weighted average number of common shares outstanding for the year/period presented (except for dividends to shareholders which is based on actual rate per share).


(2)	Common stock transactions include the effect of our issuance of common stock in public offerings (net of underwriting and offering costs), shares issued in connection with our dividend reinvestment plan, shares issued to acquire investments and shares repurchased below net asset value pursuant to our Repurchase Program.

(3)

Total return based on market value is based on the change in market price per share between the opening and ending market prices per share in each period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in each period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. For periods less than a year, the return is not annualized.


(4)	Amount is less than $0.01.

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Note 17. Selected Quarterly Financial Data (Unaudited)

The following table sets forth selected financial data for each quarter within the three years ending June 30, 2017.



	Investment Income				Net Investment Income				Net Realized and Unrealized Gains (Losses)						Net Increase (Decrease) in Net Assets from Operations
Quarter Ended	Total		Per Share(1)		Total		Per Share(1)		Total			Per Share(1)			Total			Per Share(1)
September 30, 2014	$	202,021	$	0.59	$	94,463	$	0.28	$	(10,355	)	$	(0.04	)	$	84,108		$	0.24
December 31, 2014	198,883		0.56		91,325		0.26		(5,355		)	(0.02		)	85,970			0.24
March 31, 2015	191,350		0.53		87,441		0.24		(5,949		)	(0.01		)	81,492			0.23
June 30, 2015	198,830		0.55		89,518		0.25		5,251			0.01			94,769			0.26

September 30, 2015	$	200,251	$	0.56	$	91,242	$	0.26	$	(63,425	)	$	(0.18	)	$	27,817		$	0.08
December 31, 2015	209,191		0.59		100,893		0.28		(196,013		)	(0.55		)	(95,120		)	(0.27		)
March 31, 2016	189,493		0.53		87,626		0.25		(12,118		)	(0.03		)	75,508			0.21
June 30, 2016	193,038		0.54		91,367		0.26		3,790			0.01			95,157			0.27

September 30, 2016	$	179,832	$	0.50	$	78,919	$	0.22	$	2,447		$	0.01		$	81,366		$	0.23
December 31, 2016	183,480		0.51		84,405		0.24		16,475			0.04			100,880			0.28
March 31, 2017	171,032		0.48		73,080		0.20		(53,588		)	(0.15		)	19,492			0.05


(1)	Per share amounts are calculated using the weighted average number of common shares outstanding for the period presented. As such, the sum of the quarterly per share amounts above will not necessarily equal the per share amounts for the fiscal year.

Note 18. Subsequent Events

On April 6, 2017, we repurchased $114,581 aggregate principal amount of the 2018 Notes at a price of 103.5% of face value, including commissions. As a result of this transaction, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the 2018 Notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on extinguishment of debt we recorded in the three months ending June 30, 2017 was $4,720.

On April 6, 2017, we repurchased $78,766 aggregate principal amount of the 2017 Notes at a price of 102.0% of face value, including commissions. As a result of this transaction, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the 2017 Notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on extinguishment of debt we recorded in the three months ending June 30, 2017 was $1,797.

On April 6, 2017, we issued $225,000 aggregate principal amount of convertible notes that mature on July 15, 2022 (the “2022 Notes”), unless previously converted or repurchased in accordance with their terms. The 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 2022 Notes, net of underwriting discounts and estimated offering costs, were $217,750.

On April 7, 2017, we made an investment of $19,408 to purchase 50.48% of the subordinated notes in Carlyle Global Market Strategies CLO 2014-4, Ltd. in a co-investment transaction Pathway Energy Infrastructure Fund, Inc., a closed-end fund managed by an affiliate of Prospect Capital Management.

On April 11, 2017, we announced the then current conversion rate on the 2020 Notes as 80.6670 shares of common stock per

$1 principal amount of the 2020 Notes converted, which is equivalent to a conversion price of approximately $12.40.

On April 16, 2017, we announced the then current conversion rate on the 2017 Notes as 87.7516 shares of common stock per $1 principal amount of the 2017 Notes converted, which is equivalent to a conversion price of approximately $11.40.

On April 20, 2017, we made a $15,000 first lien senior secured investment to support a refinancing of RGIS Services, LLC, a provider of inventory, merchandising and staffing solutions.

On May 1, 2017, Broder Bros., Co. partially repaid the $6,910 Senior Secured Term Loan A and $4,607 Senior Secured Term Loan B receivable to us.

On May 2, 2017, Keystone Peer Review Organization Holdings, Inc. repaid the $45,000 loan receivable to us.

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On May 4, 2017, we provided $64,500 of senior secured financing, of which $62,500 was funded at closing, to support the acquisition of RME Group Holdings Company, a provider of client acquisition and lead generation services to professional service firms.

We have provided notice to call on May 11, 2017 with settlement on May 15, 2017, $20,657 of our Prospect Capital InterNotes® maturing on November 15, 2018.

During the period from April 1, 2017 through May 9, 2017 we issued $13,343 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $13,176.

On May 9, 2017, we announced the declaration of monthly dividends in the following amounts and with the following dates:


•	$0.08333 per share for May 2017 to holders of record on May 31, 2017 with a payment date of June 22, 2017.


•	$0.08333 per share for June 2017 to holders of record on June 30, 2017 with a payment date of July 20, 2017.


•	$0.08333 per share for July 2017 to holders of record on July 31, 2017 with a payment date of August 24, 2017.


•	$0.08333 per share for August 2017 to holders of record on August 31, 2017 with a payment date of September 21, 2017.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

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

Overview

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

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: AMU Holdings Inc.; APH Property Holdings, LLC (“APH”); Arctic Oilfield Equipment USA, Inc.; CCPI Holdings Inc.; CP Holdings of Delaware LLC (“CP Holdings”); Credit Central Holdings of Delaware, LLC; Energy Solutions Holdings Inc.; First Tower Holdings of Delaware LLC (“First Tower Delaware”); Harbortouch Holdings of Delaware Inc.; MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc. (“NMMB Holdings”); NPH Property Holdings, LLC (“NPH”); STI Holding, Inc.; UPH Property Holdings, LLC (“UPH”); Valley Electric Holdings I, Inc.; Valley Electric Holdings II, Inc.; and Wolf Energy Holdings Inc. (“Wolf Energy Holdings”). On October 10, 2014, concurrent with the sale of the operating company, our ownership increased to 100% of the outstanding equity of ARRM Services, Inc. which was renamed SB Forging Company, Inc. (“SB Forging”). As such, we began consolidating SB Forging on October 11, 2014. Effective May 23, 2016, in connection with the merger of American Property REIT Corp. (“APRC”) and United Property REIT Corp. (“UPRC”) with and into National Property REIT Corp. (“NPRC”), APH and UPH merged with and into NPH, and were dissolved. We collectively refer to these entities as the “Consolidated Holding Companies.”

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 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 nine strategies that guide our origination of investment opportunities: (1) lending to companies controlled by private equity sponsors, (2) lending to companies not controlled by private equity sponsors, (3) purchasing control equity and lending to operating companies, (4) purchasing control equity and lending to financial services companies, (5) investing in structured credit, (6) investing in real estate, (7) investing in syndicated debt, (8) investing in online loans and (9) aircraft leasing. 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 Controlled by Private Equity Sponsors - We make agented loans to companies which are controlled by private equity sponsors. 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. Historically, this strategy has comprised approximately 40%-60% of our portfolio.

Lending to Companies not Controlled by Private Equity Sponsors - We make loans to companies which 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 origination strategy may have less competition to provide debt financing than the private-equity-sponsor origination strategy because such company financing needs are not easily addressed by banks and often require more diligence preparation. This origination strategy can result in investments with higher returns or lower leverage than the private-equity-sponsor origination strategy. Historically, this strategy has comprised up to approximately 15% of our portfolio.

Purchasing Control Equity and Lending to Operating Companies - This strategy involves purchasing yield-producing debt and control equity in non-financial-services operating companies. We can provide enhanced certainty of closure and liquidity to sellers and we look for management to continue on in their current roles. This strategy has comprised approximately 5%-15% of our portfolio.

Purchasing Control Equity and Lending to Financial Services Companies - This strategy involves purchasing yield-producing debt and control equity investments in financial services companies, including consumer direct lending, sub-prime auto lending and other strategies. These investments are often structured in tax-efficient partnerships, enhancing returns. This strategy has comprised approximately 5%-15% of our portfolio.

Investing in Structured Credit - We make investments in CLOs, often taking a significant position in the subordinated interests (equity) of the CLOs. The underlying portfolio of each CLO 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 CLOs in which we invest are managed by established collateral management teams with many years of experience in the industry. This strategy has comprised approximately 10%-20% of our portfolio.

Investing in Real Estate - We make investments in real estate through our wholly-owned tax-efficient real estate investment trust (“REIT”) NPRC, the surviving entity of the May 23, 2016 merger with APRC and UPRC. Our real estate investments are in various classes of developed and occupied real estate properties that generate current yields, including multi-family properties, student housing, and self-storage. We seek 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. This investment strategy has comprised approximately 5%-10% of our business.

Investing in Syndicated Debt - On a primary or secondary basis, we purchase primarily senior and secured loans and high yield bonds that have been sold to a club or syndicate of buyers. 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. This strategy has comprised approximately 5%-10% of our portfolio.

Investing in Online Loans - We purchase loans originated by certain consumer loan and small-and-medium-sized business (“SME”) loan facilitators. We generally purchase each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers and SMEs. The loans are typically serviced by the facilitators of the loans. This investment strategy has comprised up to approximately 8% of our portfolio.

Aircraft Leasing - We invest in debt as well as equity in aircraft assets subject to commercial leases to airlines across the globe. These investments can present attractive return opportunities due to cash flow consistency from long-term leases coupled with hard asset residual value. We seek to deliver risk-adjusted returns with strong downside protection by analyzing relative value characteristics across a variety of aircraft types and vintages. This strategy historically has comprised less than 5% 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 CLOs are subordinated to senior loans and are generally unsecured. We invest in debt and equity positions of CLOs 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 CLO investments are derived from portfolios of corporate debt securities which are generally risk rated from BB to B.

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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, 2017, as shown in our Consolidated Schedule of Investments, the cost basis and fair value of our investments in controlled companies was $1,939,427 and $1,892,719, 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.

Third Quarter Highlights

Investment Transactions

We seek to be a long-term investor with our portfolio companies. During the three months ended March 31, 2017, we acquired $250,841 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $183,515, funded $10,121 of revolver advances, and recorded paid in kind (“PIK”) interest of $5,130, resulting in gross investment originations of $449,607. During the three months ended March 31, 2017, we received full repayments on five investments and received several partial prepayments and amortization payments totaling $302,513.

Debt Issuances and Redemptions

During the three months ended March 31, 2017, we issued $44,490 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $43,934. These notes were issued with a stated and weighted average interest rate of 5.00%. These notes mature between January 15, 2022 and March 15, 2022.

During the three months ended March 31, 2017, we repaid $730 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the three months ended March 31, 2017 was $20.

Equity Issuances

On January 19, 2017, February 16, 2017, and March 23, 2017, we issued 295,904, 274,043, and 315,476 shares of our common stock in connection with the dividend reinvestment plan, respectively.

Investment Holdings

As of March 31, 2017, we continue to pursue our investment strategy. At March 31, 2017, approximately $6,024,766, or 177.6%, of our net assets are invested in 125 long-term portfolio investments and CLOs.

During the nine months ended March 31, 2017, we originated $1,266,294 of new investments, primarily composed of $845,694 of debt and equity financing to non-controlled portfolio investments, $311,924 of debt and equity financing to controlled investments, and $108,676 of subordinated notes in CLOs. 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. Our annualized current yield was 12.3% and 13.2% as of March 31, 2017 and June 30, 2016, respectively, across all performing interest bearing investments. The decline is primarily due to a decrease in cash-on-cash yields in our CLO investment portfolio. Monetization of equity positions that we hold and loans on non-accrual status are not included in this yield calculation. In many of our portfolio companies we hold equity positions, ranging from minority interests to majority stakes, which we expect over time to contribute to our investment returns. Some of these equity positions include features such as contractual minimum internal rates of returns, preferred distributions, flip structures and other features expected to generate additional investment returns, as well as contractual protections and preferences over junior equity, in addition to the yield and security offered by our cash flow and collateral debt protections.

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

As of March 31, 2017, we own controlling interests in the following portfolio companies: Arctic Energy Services, LLC (“Arctic Energy”); CCPI Inc. (“CCPI”); CP Energy Services Inc. (“CP Energy”); Credit Central Loan Company, LLC (“Credit Central”); Echelon Aviation LLC (“Echelon”); Edmentum Ultimate Holdings, LLC; First Tower Finance Company LLC (“First Tower Finance”); Freedom Marine Solutions, LLC (“Freedom Marine”); Gulf Coast Machine & Supply Company (“Gulf Coast”); MITY, Inc. (“MITY”); NPRC; Nationwide Loan Company LLC (f/k/a Nationwide Acceptance LLC) (“Nationwide”); NMMB, Inc. (“NMMB”); R-V Industries, Inc. (“R-V”); USES Corp. (“USES”); Valley Electric Company, Inc. (“Valley Electric”); and Wolf Energy, LLC. We also own an affiliated interest in Targus International, LLC (“Targus”).

The following shows the composition of our investment portfolio by level of control as of March 31, 2017 and June 30, 2016:



	March 31, 2017								June 30, 2016
Level of Control	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Control Investments	$	1,939,427	31.0	%	$	1,892,719	31.4	%	$	1,768,220	29.0	%	$	1,752,449	29.7	%
Affiliate Investments	8,530		0.1	%	7,239		0.1	%	10,758		0.2	%	11,320		0.2	%
Non-Control/Non-Affiliate Investments	4,305,472		68.9	%	4,124,808		68.5	%	4,312,122		70.8	%	4,133,939		70.1	%
Total Investments	$	6,253,429	100.0%		$	6,024,766	100.0%		$	6,091,100	100.0%		$	5,897,708	100.0%

The following shows the composition of our investment portfolio by type of investment as of March 31, 2017 and June 30, 2016:



	March 31, 2017								June 30, 2016
Type of Investment	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Revolving Line of Credit	$	21,471	0.3	%	$	21,471	0.4	%	$	13,274	0.2	%	$	13,274	0.2	%
Senior Secured Debt	3,090,513		49.4	%	2,922,332		48.5	%	3,072,839		50.5	%	2,941,722		49.9	%
Subordinated Secured Debt	1,239,061		19.8	%	1,230,677		20.4	%	1,228,598		20.2	%	1,209,604		20.5	%
Subordinated Unsecured Debt	37,792		0.6	%	41,995		0.7	%	75,878		1.2	%	68,358		1.2	%
Small Business Loans	11,075		0.2	%	10,521		0.2	%	14,603		0.2	%	14,215		0.2	%
CLO Residual Interest	1,145,589		18.4	%	1,072,517		17.8	%	1,083,540		17.8	%	1,009,696		17.1	%
Preferred Stock	138,616		2.2	%	79,468		1.3	%	140,902		2.3	%	81,470		1.4	%
Common Stock	309,429		4.9	%	342,308		5.7	%	229,389		3.8	%	258,498		4.4	%
Membership Interest	259,883		4.2	%	207,740		3.4	%	226,479		3.7	%	221,949		3.8	%
Participating Interest(1)	—		—	%	93,528		1.6	%	—		—	%	70,590		1.2	%
Escrow Receivable	—		—	%	2,209		—	%	3,916		0.1	%	6,116		0.1	%
Warrants	—		—	%	—		—		1,682		—	%	2,216		—	%
Total Investments	$	6,253,429	100.0	%	$	6,024,766	100.0	%	$	6,091,100	100.0	%	$	5,897,708	100.0	%


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

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The following shows our investments in interest bearing securities by type of investment as of March 31, 2017 and June 30, 2016:



	March 31, 2017								June 30, 2016
Type of Investment	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
First Lien	$	3,107,088	56.0	%	$	2,938,907	55.5	%	$	3,079,689	56.1	%	$	2,948,572	56.1	%
Second Lien	1,243,957		22.4	%	1,235,573		23.3	%	1,235,022		22.5	%	1,216,028		23.1	%
Unsecured	37,792		0.7	%	41,995		0.8	%	75,878		1.4	%	68,358		1.3	%
Small Business Loans	11,075		0.2	%	10,521		0.2	%	14,603		0.3	%	14,215		0.3	%
CLO Residual Interest	1,145,589		20.7	%	1,072,517		20.2	%	1,083,540		19.7	%	1,009,696		19.2	%
Total Debt Investments	$	5,545,501	100.0	%	$	5,299,513	100.0	%	$	5,488,732	100.0	%	$	5,256,869	100.0	%

The following shows the composition of our investment portfolio by geographic location as of March 31, 2017 and June 30, 2016:



	March 31, 2017								June 30, 2016
Geographic Location	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Canada	$	9,822	0.2	%	$	10,000	0.2	%	$	15,000	0.2	%	$	8,081	0.1	%
Cayman Islands	1,145,589		18.3	%	1,072,517		17.8	%	1,083,540		17.8	%	1,009,696		17.1	%
France	9,796		0.2	%	9,186		0.2	%	9,756		0.2	%	9,015		0.2	%
Midwest US	618,987		9.9	%	673,949		11.2	%	804,515		13.2	%	849,029		14.4	%
Northeast US	903,619		14.4	%	930,623		15.4	%	838,331		13.8	%	824,408		13.9	%
Northwest US	40,511		0.6	%	40,226		0.7	%	41,317		0.7	%	40,122		0.7	%
Puerto Rico	82,114		1.3	%	82,114		1.4	%	40,516		0.7	%	40,516		0.7	%
Southeast US	1,378,758		22.1	%	1,416,998		23.5	%	1,498,976		24.6	%	1,531,944		26.0	%
Southwest US	487,956		7.8	%	368,362		6.0	%	586,701		9.6	%	486,695		8.3	%
Western US	1,576,277		25.2	%	1,420,791		23.6	%	1,172,448		19.2	%	1,098,202		18.6	%
Total Investments	$	6,253,429	100.0	%	$	6,024,766	100.0	%	$	6,091,100	100.0	%	$	5,897,708	100.0	%

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The following shows the composition of our investment portfolio by industry as of March 31, 2017 and June 30, 2016:



	March 31, 2017								June 30, 2016
Industry	Cost		% of Portfolio		Fair Value		% of Portfolio		Cost		% of Portfolio		Fair Value		% of Portfolio
Aerospace & Defense	$	69,837	1.1	%	$	78,775	1.3	%	$	57,762	0.9	%	$	60,821	1.0	%
Air Freight & Logistics	54,806		0.9	%	54,806		0.9	%	55,784		0.9	%	51,824		0.9	%
Auto Components	30,214		0.5	%	30,460		0.5	%	20,328		0.3	%	20,328		0.3	%
Capital Markets	14,790		0.2	%	15,000		0.2	%	—		—	%	—		—	%
Chemicals	20,217		0.3	%	19,832		0.3	%	22,453		0.4	%	20,563		0.3	%
Commercial Services & Supplies	362,723		5.8	%	336,010		5.7	%	479,034		7.9	%	461,089		7.9	%
Construction & Engineering	61,725		1.0	%	32,797		0.5	%	60,436		1.0	%	31,091		0.5	%
Consumer Finance	465,383		7.4	%	484,252		8.0	%	449,203		7.4	%	474,652		8.0	%
Distributors	140,847		2.3	%	132,644		2.2	%	190,835		3.1	%	186,606		3.2	%
Diversified Consumer Services	185,832		3.0	%	185,127		3.1	%	176,678		2.9	%	179,346		3.0	%
Diversified Telecommunication Services	4,395		0.1	%	4,395		—	%	4,392		0.1	%	4,392		0.1	%
Electronic Equipment, Instruments & Components	37,850		0.6	%	51,184		0.8	%	63,024		1.0	%	73,071		1.2	%
Energy Equipment & Services	355,144		5.7	%	151,078		2.5	%	353,398		5.8	%	178,506		3.0	%
Equity Real Estate Investment Trusts (REITs)	388,867		6.2	%	576,230		9.6	%	335,048		5.5	%	480,763		8.2	%
Food & Staples Retailing	—		—	%	—		—	%	17,876		0.3	%	18,000		0.3	%
Food Products	—		—	%	—		—	%	150,000		2.5	%	145,546		2.5	%
Health Care Providers & Services	417,579		6.8	%	417,078		7.0	%	304,908		5.0	%	305,503		5.2	%
Health Care Technology	—		—	%	—		—	%	2,228		—	%	2,842		—	%
Hotels, Restaurants & Leisure	127,774		2.0	%	115,325		1.9	%	142,813		2.3	%	142,954		2.4	%
Household Durables	146,641		2.3	%	146,756		2.4	%	106,831		1.8	%	107,394		1.8	%
Internet & Direct Marketing Retail	22,082		0.4	%	22,378		0.4	%	—		—	%	—		—	%
Internet Software & Services	220,073		3.5	%	219,788		3.6	%	46,253		0.8	%	45,058		0.8	%
IT Services	19,512		0.3	%	20,000		0.3	%	128,197		2.1	%	128,396		2.2	%
Leisure Products	145,599		2.3	%	145,724		2.4	%	144,065		2.4	%	143,043		2.4	%
Machinery	35,488		0.6	%	37,223		0.6	%	35,391		0.6	%	36,877		0.6	%
Marine (1)	8,910		0.1	%	8,813		0.1	%	8,886		0.1	%	8,886		0.2	%
Media	412,706		6.6	%	406,318		6.7	%	432,444		7.1	%	418,918		7.1	%
Metals & Mining	9,948		0.2	%	10,000		0.2	%	9,934		0.2	%	9,309		0.2	%
Online Lending	442,910		7.1	%	393,908		6.6	%	406,931		6.7	%	377,385		6.4	%
Paper & Forest Products	11,287		0.2	%	11,313		0.2	%	—		—	%	—		—	%
Personal Products	222,387		3.6	%	192,041		3.2	%	213,585		3.5	%	193,054		3.3	%
Pharmaceuticals	119,364		1.9	%	119,364		2.0	%	70,739		1.2	%	70,739		1.2	%
Professional Services	65,609		1.0	%	57,562		1.0	%	170,865		2.7	%	166,741		2.9	%
Real Estate Management & Development	—		—	%	—		—	%	3,916		0.1	%	3,900		0.1	%
Software	49,063		0.8	%	50,000		0.8	%	19,854		0.3	%	20,000		0.3	%
Specialty Retail	39,443		0.6	%	40,000		0.7	%	—		—	%	—		—	%
Textiles, Apparel & Luxury Goods	319,529		5.1	%	305,953		5.1	%	323,139		5.3	%	319,904		5.4	%
Tobacco	14,359		0.2	%	14,359		0.2	%	—		—	%	—		—	%
Trading Companies & Distributors	64,947		1.0	%	65,756		1.1	%	330		—	%	511		—	%
Subtotal	$	5,107,840	81.7	%	$	4,952,249	82.2	%	$	5,007,560	82.2	%	$	4,888,012	82.9	%
Structured Finance (2)	$	1,145,589	18.3	%	$	1,072,517	17.8	%	$	1,083,540	17.8	%	$	1,009,696	17.1	%
Total Investments	$	6,253,429	100.0	%	$	6,024,766	100.0	%	$	6,091,100	100.0	%	$	5,897,708	100.0	%

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(1)	Industry includes exposure to the energy markets through our investments in Harley Marine Services, Inc. Including this investment, our overall fair value exposure to the broader energy industry, including energy equipment and services as noted above, as of March 31, 2017 and June 30, 2016 is $159,891 and $187,392, respectively.


(2)	Our CLO investments do not have industry concentrations and as such have been separated in the table above.

Portfolio Investment Activity

During the nine months ended March 31, 2017, we acquired $649,564 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $586,783, funded $15,621 of revolver advances, and recorded PIK interest of $14,326, resulting in gross investment originations of $1,266,294. The more significant of these transactions are briefly described below.

On July 1, 2016, we made an investment of $7,320 to purchase 19.7% of the subordinated notes in Madison Park Funding IX, Ltd.

On July 22, 2016, we made a $32,500 Senior Secured Term Loan A and a $32,500 Senior Secured Term Loan B debt investment in Universal Turbine Parts, LLC, an independent supplier of aftermarket turboprop engines and parts. The $32,500 Term Loan A bears interest at the greater of 6.75% or LIBOR plus 5.75% and has a final maturity of July 22, 2021. The $32,500 Term Loan B bears interest at the greater of 12.75% or LIBOR plus 11.75% and has a final maturity of July 22, 2021.

On August 9, 2016, we made an investment of $29,634 to purchase 71.9% of the subordinated notes in Carlyle Global Market Strategies CLO 2016-3, Ltd. in a co-investment transaction with Priority Income Fund, Inc., a closed-end fund managed by an affiliate of Prospect Capital Management.

On August 17, 2016, we made a $5,000 investment in BCD Acquisition, Inc. (“Big Tex”). On August 18, 2016, we sold our $5,000 investment in Big Tex and realized a gain of $138 on the sale.

On September 6, 2016, we made an additional investment of $5,693 to purchase 18.0% of the subordinated notes in California Street CLO IX Ltd. (f/k/a Symphony CLO IX Ltd.).

On September 16, 2016, we made a $15,000 second lien secured investment in J.D. Power and Associates, a global market research company, in support of an acquisition of the company. The second lien term loan bears interest at the greater of 9.50% or LIBOR plus 8.50% and has a final maturity of September 7, 2024.

On September 28, 2016, we have made an additional $12,523 second lien debt and $2,098 equity investment in Credit Central. The note bears interest of 10.00% and interest payment in kind of 10.00%, and has a final maturity date of June 26, 2019.

On September 30, 2016, we made an investment of $26,414 to purchase 50.2% of the subordinated notes in Voya 2016-3, Ltd. in a co-investment transaction with Priority Income Fund, Inc., a closed-end fund managed by an affiliate of Prospect Capital Management.

On September 30, 2016, we made an additional $22,500 of Senior Secured Term Loan A and $22,500 of Senior Secured Term Loan B debt investment in Onyx Payments (“Onyx”) to fund a dividend recapitalization. The $22,500 Term Loan A bears interest at the greater of 6.00% or LIBOR plus 5.00% and has a final maturity of September 10, 2019. The $22,500 Term Loan B bears interest at the greater of 13.00% or LIBOR plus 12.00% and has a final maturity of September 10, 2019.

On September 30, 2016, we made a $10,000 follow-on first lien senior secured debt investment in Matrixx Initiatives, Inc. (“Matrixx”) to fund a dividend recapitalization. The $5,000 Term Loan A bears interest at the greater of 7.50% or LIBOR plus 6.50% and has a final maturity of February 24, 2020. The $5,000 Term Loan B bears interest at the greater of 12.50% or LIBOR plus 11.50% and has a final maturity of February 24, 2020.

On October 4, 2016, we made a $40,000 second lien senior secured investment to support the recapitalization of Outerwall Inc., an automated network of self-service coin counting machines. The second lien term loan bears interest at the greater of 9.75% or LIBOR plus 8.75% and has a final maturity of September 27, 2024.

On October 7, 2016, we made an $11,500 second lien senior secured debt investment in Dunn Paper, Inc., a leading specialty packaging supplier, in support of an acquisition of the company. The second lien term loan bears interest at the greater of 9.75% or LIBOR plus 8.75% and has a final maturity of August 26, 2023.

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On October 14, 2016, we provided $22,500 of second lien senior secured debt to support the refinancing of Vivid Seats LLC, a secondary marketplace for entertainment tickets. The second lien term loan bears interest at the greater of 10.75% or LIBOR plus 9.75% and has a final maturity of October 12, 2023.

On October 20, 2016, we made a $50,000 second lien senior secured debt investment in Rocket Software, Inc. (“Rocket”) to support an acquisition and dividend recapitalization. The second lien term loan bears interest at the greater of 10.50% or LIBOR plus 9.50% and has a final maturity of October 14, 2024.

On November 1, 2016, we made a $13,000 second lien secured investment to support an acquisition of K&N Parent, Inc., a leader in aftermarket automotive performance filtration products. The second lien term loan bears interest at the greater of 9.75% or LIBOR plus 8.75% and has a final maturity of October 20, 2024.

During the period from November 29, 2016 through December 7, 2016, we collectively made a $34,000 second lien secured investment to fund a recapitalization of Digital Room LLC, an online printing and design company. The second lien term loan bears interest at the greater of 11.00% or LIBOR plus 10.00% and has a final maturity of May 21, 2023.

On December 8, 2016, we made a $15,400 second lien secured investment in National Home Healthcare Corp., a provider of home health and hospice care services, to support an acquisition. The second lien term loan bears interest at the greater of 10.00% or LIBOR plus 9.00% and has a final maturity of December 8, 2022.

On December 9, 2016, we made a $42,000 follow-on first lien senior secured debt investment in Atlantis Health Care Group (Puerto Rico), Inc. to support a recapitalization. The senior secured term loan bears interest at the greater of 9.50% or LIBOR plus 8.00% and has a final maturity of February 21, 2020.

On December 9, 2016, we made a follow-on $16,044 first lien senior secured debt and $2,831 equity investment in Echelon to support an asset acquisition. The new senior secured term loan bears interest at the greater of 11.00% or LIBOR plus 9.00% and interest payment in kind of 1.0%, and has a final maturity of December 7, 2024.

On December 9, 2016, we made an investment of $29,951 to purchase 69.0% of the subordinated notes in CIFC 2016-I, Ltd. in a co-investment transaction with Priority Income Fund, Inc., a closed-end fund managed by an affiliate of Prospect Capital Management L.P.

On December 22, 2016, we made a $10,000 follow-on first lien senior secured debt investment in Inpatient Care Management Company, LLC. The senior secured term loan bears interest at the greater of 11.50% or LIBOR plus 10.50% and has a final maturity of June 8, 2021.

On December 28, 2016, we made a $45,000 second lien senior secured investment to fund a recapitalization of Keystone Peer Review Organization Holdings, Inc., a medical management services company. The second lien term loan bears interest at the greater of 10.00% or LIBOR plus 9.00% and has a final maturity of July 28, 2023.

On December 28, 2016, we made a $15,000 follow-on second lien senior secured debt investment in PGX Holdings, Inc. The second lien term loan bears interest at the greater of 10.00% or LIBOR plus 9.00% and has a final maturity of September 29, 2021.

On January 17, 2017, we invested an additional $8,000 of Senior Secured Term Loan A and $8,000 of Senior Secured Term Loan B debt investments in MITY to fund an acquisition. Term Loan A bears interest at the greater of 10.00% or LIBOR plus 7.00% and has a final maturity of January 30, 2020. Term Loan B bears interest at the greater of 10.00% or LIBOR plus 7.00% and interest payment in kind of 10.0% and has a final maturity of January 30, 2020.

On January 17, 2017, we made a $68,000 of Senior Secured Term Loan A and $68,000 of Senior Secured Term Loan B debt investments in Centerfield Media Holdings, LLC (“Centerfield”), a provider of customer acquisition and conversion services, to support an acquisition and refinancing of existing debt. Term Loan A bears interest at the greater of 8.00% or LIBOR plus 7.00% and has a final maturity of January 17, 2022. Term Loan B bears interest at the greater of 13.50% or LIBOR plus 12.50% and has a final maturity of January 17, 2022.

On January 31, 2017, we made a $20,000 of Senior Secured Term Loan A and $20,000 of Senior Secured Term Loan B debt investments in Traeger Pellet Grills LLC (“Traeger”), to fund a recapitalization of the company. Term Loan A bears interest at the greater of 6.50% or LIBOR plus 4.50% and has a final maturity of June 18, 2019. Term Loan B bears interest at the greater of 11.50% or LIBOR plus 9.50% and has a final maturity of June 18, 2019.

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On February 1, 2017, we made a $10,000 senior secured debt investment to support a recapitalization in CURO Financial Technologies Corp. The senior secured debt bears interest at 12.00% and has a final maturity of March 1, 2022. On March 17, 2017, CURO Group Holdings Corp (f/k/a Speedy Cash Holdings Corp.) repaid the $25,000 loan receivable to us.

On February 17, 2017, we made a $14,500 second lien secured investment in Turning Point Brands, Inc., a provider of other tobacco products. The second lien note bears interest at 11.00% and has a final maturity of August 17, 2022.

On February 24, 2017, we made an additional $33,000 of Senior Secured Term Loan A and $7,000 of Senior Secured Term Loan B debt investment in Matrixx to fund a dividend recapitalization. Term Loan A bears interest at the greater of 7.50% or LIBOR plus 6.50% and has a final maturity of February 24, 2020. Term Loan B bears interest at the greater of 12.50% or LIBOR plus 11.50% and has a final maturity of February 24, 2020.

On March 8, 2017, we made a $20,000 second lien secured investment in VC GB Holdings II Corp. to support a refinancing and acquisition for Generation Brands Holdings, Inc. (“Generation Brands”). The second lien note bears interest at the greater of 9.00% or LIBOR plus 8.00% and has a final maturity of February 28, 2025.

On March 16, 2017, we made a first lien senior secured investment of $38,000 to support the recapitalization of Memorial MRI & Diagnostic, L.L.C. (“Memorial MRI”), a provider of multi-modality diagnostic imaging and pain management services. The Term Loan bears interest at the greater of 9.50% or LIBOR plus 8.50% and has a final maturity of March 16, 2022.

On March 28, 2017, we made a $15,000 of Senior Secured Term Loan A and $15,000 of Senior Secured Term Loan B debt investment to support an acquisition of EZShield, Parent Inc., a provider of fraud and identify theft protection services. Term Loan A bears interest at the greater of 7.75% or LIBOR plus 6.75% and has a final maturity of February 26, 2021. Term Loan B bears interest at the greater of 12.75% or LIBOR plus 11.75% and has a final maturity of February 26, 2021.

During the nine months ended March 31, 2017, we made twelve follow-on investments in NPRC totaling $123,506 to support the online consumer lending initiative. We invested $23,077 of equity through NPH and $100,429 of debt directly to NPRC and its wholly-owned subsidiaries. We also provided $75,591 of debt and $25,200 of equity financing to NPRC, which was utilized for the acquisition of real estate properties. In addition, we provided $11,028 of equity investment which was used to fund capital expenditures for existing properties.

During the nine months ended March 31, 2017, we purchased $42,164 of small business whole loans from OnDeck.

During the nine months ended March 31, 2017, we received full repayments on sixteen investments, sold three investments, and received several partial prepayments and amortization payments totaling $1,061,839, which resulted in net realized gains totaling $810. The more significant of these transactions are briefly described below.

On July 1, 2016, BNN Holdings Corp. (“Biotronic”) was sold. The sale provided net proceeds for our minority position of $2,365, resulting in a realized gain of $137. During the three months ended December 31, 2016 we received remaining escrow proceeds, realizing an additional gain of $50.

On August 9, 2016, JHH Holdings, Inc. repaid the $35,507 loan receivable to us.

On August 19, 2016, we sold our investment in Nathan’s Famous, Inc. (“Nathan’s”) for net proceeds of $3,240 and realized a gain of $240 on the sale.

On September 28, 2016, Rocket repaid the $20,000 loan receivable to us.

On October 5, 2016, Focus Brands, Inc. repaid the $18,000 loan receivable to us.

On October 13, 2016, Harbortouch Payments LLC (“Harbortouch”) repaid the $27,711 loan receivable to us.

On October 14, 2016, Security Alarm Financing Enterprise, L.P. repaid the $25,000 loan receivable to us.

On October 14, 2016, Trinity Services Group, Inc. repaid the $134,576 loan receivable to us.

On October 31, 2016, System One Holdings, LLC repaid the $104,553 loan receivable to us.

On December 19, 2016, Empire Today, LLC repaid the $50,426 loan receivable to us.

On December 20, 2016, Onyx repaid the $70,130 Senior Secured Term Loan A and $81,889 Senior Secured Term Loan B receivable to us.

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On January 1, 2017, we restructured our investment in NPRC and exchanged $55,000 of Senior Secured Term Loan E for common stock.

On February 23, 2017, SESAC Holdco II LLC repaid the $10,000 loan receivable to us.

On February 28, 2017, Generation Brands repaid the $19,000 loan receivable to us.

On March 20, 2017, Arctic Glacier U.S.A., Inc. repaid the $150,000 loan receivable to us.

On March 31, 2017, ALG USA Holdings, LLC repaid the $11,771 loan receivable to us.

On March 14, 2017, assets previously held by Ark-La-Tex Wireline Services, LLC (“Ark-La-Tex”) were assigned to Wolf Energy Services, a new wholly-owned subsidiary of Wolf Energy Holdings, in exchange for a full reduction of Ark-La-Tex’s Senior Secured Term Loan A and a partial reduction of the Senior Secured Term Loan B cost basis, in total equal to $22,145. The cost basis of the transferred assets is equal to the appraised fair value of assets at the time of transfer.

During the nine months ended March 31, 2017, we received a partial repayment of $105,832 for the NPRC and its wholly-owned subsidiaries’ loan previously outstanding and $36,169 as a return of capital on the equity investment in NPRC.

The following table provides a summary of our investment activity for each quarter within the three years ending June 30, 2017:



Quarter Ended	Acquisitions(1)	Dispositions(2)
September 30, 2014	714,255	690,194
December 31, 2014	522,705	224,076
March 31, 2015	219,111	108,124
June 30, 2015	411,406	389,168
September 30, 2015	345,743	436,919
December 31, 2015	316,145	354,855
March 31, 2016	23,176	163,641
June 30, 2016	294,038	383,460
September 30, 2016	347,150	114,331
December 31, 2016	469,537	644,995
March 31, 2017	449,607	302,513


(1)	Includes investments in new portfolio companies, follow-on investments in existing portfolio companies, refinancings and PIK interest.


(2)	Includes sales, scheduled principal payments, prepayments, refinancings and realized losses.

Investment Valuation

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With respect to our online consumer and SME lending initiative, we invest primarily in marketplace loans through marketplace lending facilitators. 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 facilitators 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 facilitator's 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 facilitator, 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 analyses, applied to each investment, was a total valuation of $6,024,766.

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 market has experienced less volatility than others because we believe there are more buy and hold investors who own these less liquid 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. Several of our controlled companies discussed below experienced such decreases and we recorded corresponding fluctuations in valuations during the nine months ended March 31, 2017.

Arctic Energy Services, LLC

Prospect owns 100% of the equity of Arctic Oilfield Equipment USA, Inc. (“Arctic Equipment”), a Consolidated Holding Company. Arctic Equipment owns 70% of the equity of Arctic Energy, with Ailport Holdings, LLC (100% owned and controlled by Arctic Energy management) owning the remaining 30% of the equity of Arctic Energy. Arctic Energy provides oilfield service personnel, well testing flowback equipment, frac support systems and other services to exploration and development companies in the Rocky Mountains.

The Board of Directors decreased the fair value of our investment in Arctic Energy to $15,258 as of March 31, 2017, a discount of $45,618 to its amortized cost, compared to the discount of $22,536 to its amortized cost as of June 30, 2016. The decrease in fair value was driven primarily by the impact of current energy market conditions resulting in a continued decline in operating performance.

CP Energy Services Inc.

Prospect owns 100% of the equity of CP Holdings, a Consolidated Holding Company. CP Holdings owns 82.3% of the equity of CP Energy, and the remaining 17.7% of the equity is owned by CP Energy management. CP Energy provides oilfield flowback services and fluid hauling and disposal services through its subsidiaries

As a result of a continued decline in operating performance primarily driven by the impact of current energy market conditions, the Board of Directors decreased the fair value of our investment in CP Energy to $71,205 as of March 31, 2017, a discount of $42,295 from its amortized cost, compared to the discount of $37,498 to its amortized cost as of June 30, 2016.

Freedom Marine Solutions, LLC

Prospect owns 100% of the equity of Energy Solutions, a Consolidated Holding Company. Energy Solutions owns 100% of Freedom Marine. Freedom Marine owns 100% of each of Vessel Company, LLC, Vessel Company II, LLC, and Vessel Company III, LLC. Freedom Marine owns, manages, and operates offshore supply vessels to provide transportation and support services for the oil and gas exploration and production industries in the Gulf of Mexico.

The Board of Directors decreased the fair value of our investment in Freedom Marine to $23,994 as of March 31, 2017, a discount of $17,817 to its amortized cost, compared to a discount of $14,192 to its amortized cost as of June 30, 2016. The

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decline in fair value was driven by the continuing challenging environment for the oil and gas industry, which has decreased the utilization of their vessels.

Gulf Coast Machine & Supply Company

We own 100% of the preferred equity of Gulf Coast. Gulf Coast is a provider of value-added forging solutions to energy and industrial end markets.

On November 8, 2013, Gulf Coast issued $25,950 of convertible preferred stock to Prospect (representing 99.9% of the voting securities of Gulf Coast) in exchange for crediting the same amount to the first lien term loan previously outstanding, leaving a first lien loan balance of $15,000.

Due to the continued depressed energy markets coupled with lower steel prices and lower margins from increased competition in non-oil and gas forging markets, the Board of Directors decreased the fair value of our investment in Gulf Coast to $7,144 as of March 31, 2017, a discount of $58,209 to its amortized cost, compared to the discount of $53,063 to its amortized cost at June 30, 2016.

National Property REIT Corp.

NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. NPRC is held for purposes of investing, operating, financing, leasing, managing and selling a portfolio of real estate assets and engages in any and all other activities that may be necessary, incidental, or convenient to perform the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. 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. Effective May 23, 2016, APRC and UPRC merged with and into NPRC, to consolidate all of our real estate holdings, with NPRC as the surviving entity. As of March 31, 2017, we own 100% of the fully-diluted common equity of NPRC.



Loan Type	Outstanding Principal Balance		Fair Value		Weighted Average Interest Rate*
Super Prime	$	48,184	$	47,576	11.8%
Prime	135,885		131,058		15.6%
Near Prime	625,694		596,356		26.9%

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

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No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
1	Filet of Chicken	Forest Park, GA	10/24/2012	$	7,400	$	—
2	5100 Live Oaks Blvd, LLC	Tampa, FL	1/17/2013	63,400		46,700
3	Lofton Place, LLC	Tampa, FL	4/30/2013	26,000		20,363
4	Arlington Park Marietta, LLC	Marietta, GA	5/8/2013	14,850		9,650
5	NPRC Carroll Resort, LLC	Pembroke Pines, FL	6/24/2013	225,000		179,706
6	Cordova Regency, LLC	Pensacola, FL	11/15/2013	13,750		11,375
7	Crestview at Oakleigh, LLC	Pensacola, FL	11/15/2013	17,500		13,845
8	Inverness Lakes, LLC	Mobile, AL	11/15/2013	29,600		24,700
9	Kings Mill Pensacola, LLC	Pensacola, FL	11/15/2013	20,750		17,550
10	Plantations at Pine Lake, LLC	Tallahassee, FL	11/15/2013	18,000		14,092
11	Verandas at Rocky Ridge, LLC	Birmingham, AL	11/15/2013	15,600		10,205
12	Matthews Reserve II, LLC	Matthews, NC	11/19/2013	22,063		19,941
13	City West Apartments II, LLC	Orlando, FL	11/19/2013	23,562		23,308
14	Vinings Corner II, LLC	Smyrna, GA	11/19/2013	35,691		32,964
15	Uptown Park Apartments II, LLC	Altamonte Springs, FL	11/19/2013	36,590		29,816
16	Mission Gate II, LLC	Plano, TX	11/19/2013	47,621		41,658
17	St. Marin Apartments II, LLC	Coppell, TX	11/19/2013	73,078		62,468
18	Atlanta Eastwood Village LLC	Stockbridge, GA	12/12/2013	25,957		22,991
19	Atlanta Monterey Village LLC	Jonesboro, GA	12/12/2013	11,501		11,186
20	Atlanta Hidden Creek LLC	Morrow, GA	12/12/2013	5,098		4,789
21	Atlanta Meadow Springs LLC	College Park, GA	12/12/2013	13,116		13,170
22	Atlanta Meadow View LLC	College Park, GA	12/12/2013	14,354		13,225
23	Atlanta Peachtree Landing LLC	Fairburn, GA	12/12/2013	17,224		15,665
24	APH Carroll Bartram Park, LLC	Jacksonville, FL	12/31/2013	38,000		27,754
25	Plantations at Hillcrest, LLC	Mobile, AL	1/17/2014	6,930		4,810
26	Crestview at Cordova, LLC	Pensacola, FL	1/17/2014	8,500		8,001
27	APH Carroll Atlantic Beach, LLC	Atlantic Beach, FL	1/31/2014	13,025		8,663
28	Taco Bell, OK	Yukon, OK	6/4/2014	1,719		—
29	Taco Bell, MO	Marshall, MO	6/4/2014	1,405		—
30	23 Mile Road Self Storage, LLC	Chesterfield, MI	8/19/2014	5,804		4,350
31	36th Street Self Storage, LLC	Wyoming, MI	8/19/2014	4,800		3,600
32	Ball Avenue Self Storage, LLC	Grand Rapids, MI	8/19/2014	7,281		5,460
33	Ford Road Self Storage, LLC	Westland, MI	8/29/2014	4,642		3,480
34	Ann Arbor Kalamazoo Self Storage, LLC	Ann Arbor, MI	8/29/2014	4,458		3,345
35	Ann Arbor Kalamazoo Self Storage, LLC	Ann Arbor, MI	8/29/2014	8,927		6,695
36	Ann Arbor Kalamazoo Self Storage, LLC	Kalamazoo, MI	8/29/2014	2,363		1,775
37	Canterbury Green Apartments Holdings LLC	Fort Wayne, IN	9/29/2014	85,500		74,198
38	Abbie Lakes OH Partners, LLC	Canal Winchester, OH	9/30/2014	12,600		13,055
39	Kengary Way OH Partners, LLC	Reynoldsburg, OH	9/30/2014	11,500		13,502

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No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
1	Filet of Chicken	Forest Park, GA	10/24/2012	$	7,400	$	—
40	Lakeview Trail OH Partners, LLC	Canal Winchester, OH	9/30/2014	26,500		23,256
41	Lakepoint OH Partners, LLC	Pickerington, OH	9/30/2014	11,000		14,480
42	Sunbury OH Partners, LLC	Columbus, OH	9/30/2014	13,000		14,115
43	Heatherbridge OH Partners, LLC	Blacklick, OH	9/30/2014	18,416		18,328
44	Jefferson Chase OH Partners, LLC	Blacklick, OH	9/30/2014	13,551		17,200
45	Goldenstrand OH Partners, LLC	Hilliard, OH	10/29/2014	7,810		9,600
46	Jolly Road Self Storage, LLC	Okemos, MI	1/16/2015	7,492		5,620
47	Eaton Rapids Road Self Storage, LLC	Lansing West, MI	1/16/2015	1,741		1,305
48	Haggerty Road Self Storage, LLC	Novi, MI	1/16/2015	6,700		5,025
49	Waldon Road Self Storage, LLC	Lake Orion, MI	1/16/2015	6,965		5,225
50	Tyler Road Self Storage, LLC	Ypsilanti, MI	1/16/2015	3,507		2,630
51	SSIL I, LLC	Aurora, IL	11/5/2015	34,500		26,450
52	Vesper Tuscaloosa, LLC	Tuscaloosa, AL	9/28/2016	54,500		41,250
53	Vesper Iowa City, LLC	Iowa City, IA	9/28/2016	32,750		24,825
54	Vesper Corpus Christi, LLC	Corpus Christi, TX	9/28/2016	14,250		10,800
55	Vesper Campus Quarters, LLC	Corpus Christi, TX	9/28/2016	18,350		14,175
56	Vesper College Station, LLC	College Station, TX	9/28/2016	41,500		32,058
57	Vesper Kennesaw, LLC	Kennesaw, GA	9/28/2016	57,900		44,727
58	Vesper Statesboro, LLC	Statesboro, GA	9/28/2016	7,500		5,292
59	Vesper Manhattan KS, LLC	Manhattan, KS	9/28/2016	23,250		15,921
60	JSIP Union Place, LLC	Franklin, MA	12/7/2016	64,750		51,800
61	9220 Old Lantern Way, LLC	Laurel, MD	1/30/2017	187,250		153,580
				$	1,648,341	$	1,355,717

The Board of Directors increased the fair value of our investment in NPRC to $959,617 as of March 31, 2017, a premium of $138,915 from its amortized cost, compared to the $116,557 unrealized appreciation, inclusive of APRC and UPRC, recorded at June 30, 2016. This increase is primarily due to improved operating performance at the property level.

NMMB, Inc.

Prospect owns 100% of the equity of NMMB Holdings, a Consolidated Holding Company. NMMB Holdings owns 96.33% of the fully-diluted equity of NMMB (f/k/a NMMB Acquisition, Inc.), with NMMB management owning the remaining 3.67% of the equity. NMMB owns 100% of Refuel Agency, Inc. (“Refuel Agency”). Refuel Agency owns 100% of Armed Forces Communications, Inc. NMMB is an advertising media buying business.

Due to reduced operating expenses resulting from a realignment of operations, new initiatives and improved focus on core business segments, the Board of Directors increased the fair value of our investment in NMMB to $17,145 as of March 31, 2017, a discount of $6,438 to its amortized cost, compared to the discount of $13,576 to its amortized cost at June 30, 2016.

USES Corp.

We own 99.96% of USES as of March 31, 2017. USES provides industrial and environmental services in the Gulf States region. The USES offers industrial services, such as tank and chemical cleaning, hydro blasting, waste management, vacuum, safety training, turnaround management, and oilfield response/remediation services.

On June 15, 2016, we provided additional $1,300 debt financing to USES and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 99,900 shares of its common stock. On June 29, 2016, we provided additional $2,200 debt financing to USES and its subsidiaries in the form of additional Term Loan A debt and, in connection with such Term Loan A debt financing, USES issued to us 169,062 shares of its common

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stock. As a result of such debt financing and recapitalization, as of June 29, 2016, we held 268,962 shares of USES common stock representing a 99.96% common equity ownership interest in USES.

Due to an industry-wide decline in emergency response activity as well as a decline in revenues from other service lines, the Board of Directors determined the fair value of our investment in USES to be $23,458 as of March 31, 2017, a discount of $39,768 from its amortized cost, compared to the $21,440 unrealized depreciation recorded at June 30, 2016.

Valley Electric Company, Inc.

We own 94.99% of Valley Electric as of March 31, 2017. Valley Electric owns 100% of the equity of VE Company, Inc., which owns 100% of the equity of Valley Electric Co. of Mt. Vernon, Inc. (“Valley”). Valley is a leading provider of specialty electrical services in the state of Washington and is among the top 50 electrical contractors in the U.S. The company, with its headquarters in Everett, Washington, offers a comprehensive array of contracting services, primarily for commercial, industrial, and transportation infrastructure applications, including new installation, engineering and design, design-build, traffic lighting and signalization, low to medium voltage power distribution, construction management, energy management and control systems, 24-hour electrical maintenance and testing, as well as special projects and tenant improvement services. Valley was founded in 1982 by the Ward family, who held the company until the end of 2012.

On December 31, 2012, we acquired 96.3% of the outstanding shares of Valley. On June 24, 2014, Prospect and management of Valley formed Valley Electric and contributed their shares of Valley stock to Valley Electric. Valley management made an additional equity investment in Valley Electric, reducing our ownership to 94.99%.

In early 2016, Valley’s project backlog and revenue steadily improved primarily due to a more robust construction market in the state of Washington and successful project execution.

Due to increased project margins partially offset by the softening of the energy markets, the Board of Directors determined the fair value of our investment in Valley Electric to be $32,797 as of March 31, 2017, a discount of $28,928 from its amortized cost, compared to the $29,345 unrealized depreciation recorded at June 30, 2016.

Our controlled investments, other than those discussed above, have seen steady or improved operating performance and are valued at $53,450 above cost. Overall, combined with those portfolio companies impacted by the energy markets and discussed above, our controlled investments at March 31, 2017 are valued at $46,708 below their amortized cost.

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. Many of the debt investments in this category have not experienced a significant change in value, as they were previously valued at or near par value. Non-control/non-affiliate investments did not experience significant changes and are generally performing as expected or better. However, as of March 31, 2017, three of our non-control/non-affiliate investments, Ark-La-Tex, Pacific World Corporation (“Pacific World”) and Spartan Energy Services, Inc. are valued at discounts to amortized cost of $19,997, $30,789 and $17,653, respectively. As of March 31, 2017, our CLO investment portfolio is valued at a $73,072 discount to amortized cost. Excluding these investments, non-control/non-affiliate investments at March 31, 2017 are valued $39,153 below their amortized cost.

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, 2017 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 2012, August 2012, December 2012 and April 2014; Public Notes which we issued in March 2013, April 2014, December 2015, and from time to time, through our 2024 Notes Follow-on Program; and Prospect Capital InterNotes® which we issue from time to time. Our equity capital is comprised entirely of common equity.

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The following table shows our outstanding debt as of March 31, 2017.



	Principal Outstanding		Unamortized Discount & Debt Issuance Costs		Net Carrying Value				Fair Value (1)				Effective Interest Rate
Revolving Credit Facility (2)	$	—	$	5,463	$	—	(3	)	$	—			1ML+2.25%		(6	)

2017 Notes	129,500		365		129,135				131,220		(4	)	5.91	%	(7	)
2018 Notes	200,000		1,239		198,761				205,514		(4	)	6.42	%	(7	)
2019 Notes	200,000		2,128		197,872				205,734		(4	)	6.51	%	(7	)
2020 Notes	392,000		6,986		385,014				387,100		(4	)	5.38	%	(7	)
Convertible Notes	921,500				910,782				929,568

5.00% 2019 Notes	300,000		1,901		298,099				310,023		(4	)	5.29	%	(7	)
2023 Notes	250,000		4,236		245,764				259,450		(4	)	6.22	%	(7	)
2024 Notes	199,281		5,342		193,939				206,455		(4	)	6.72	%	(7	)
Public Notes	749,281				737,802				775,928

Prospect Capital InterNotes®	1,005,859		14,514		991,345				1,015,593		(5	)	5.62	%	(8	)
Total	$	2,676,640			$	2,639,929			$	2,721,089


(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, 2017.


(2)	The maximum draw amount of the Revolving Credit facility as of March 31, 2017 is $885,000.


(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.


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


(7)	The effective interest rate is equal to the effect of the stated interest, the accretion of original issue discount and amortization of debt issuance costs. For the 2024 Notes, the rate presented is a combined effective interest rate of the 2024 Notes and 2024 Notes Follow-on Program.


(8)	For the Prospect Capital InterNotes®, the rate presented is the weighted average effective interest rate.

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of March 31, 2017.



	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	—	$	—	$	—	$	—	$	—
Convertible Notes	921,500		329,500		200,000		392,000		—
Public Notes	749,281		—		300,000		—		449,281
Prospect Capital InterNotes®	1,005,859		40,040		276,241		451,879		237,699
Total Contractual Obligations	$	2,676,640	$	369,540	$	776,241	$	843,879	$	686,980

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On April 6, 2017, we refinanced a majority of our debt with payments due in less than one year by issuing $225,000 aggregate principal amount of Convertible Notes due July 15, 2022 which bear interest at a rate of 4.95% per year, and repurchasing $78,766 aggregate principal amount of 2017 Notes which bear interest at a rate of 5.375% and $114,581 aggregate principal amount of 2018 Notes which bear interest at a rate of 5.75%.

The following table shows the contractual maturities of our Revolving Credit Facility, Convertible Notes, Public Notes and Prospect Capital InterNotes® as of June 30, 2016.



	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		After 5 Years
Revolving Credit Facility	$	—	$	—	$	—	$	—	$	—
Convertible Notes	1,089,000		167,500		529,500		392,000		—
Public Notes	711,380		—		—		300,000		411,380
Prospect Capital InterNotes®	908,808		8,819		257,198		360,599		282,192
Total Contractual Obligations	$	2,709,188	$	176,319	$	786,698	$	1,052,599	$	693,572

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 in an amount up to $5,000,000 less issuances to date. As of March 31, 2017, we can issue up to $4,945,873 of additional debt and equity securities in the public market under this shelf registration. 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 Unsecured Notes (as defined below) 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

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Convertible Notes

On April 16, 2012, we issued $130,000 aggregate principal amount of convertible notes that mature on October 15, 2017 (the “2017 Notes”), unless previously converted or repurchased in accordance with their terms. The 2017 Notes bear interest at a rate of 5.375% per year, payable semi-annually on April 15 and October 15 of each year, beginning October 15, 2012. Total proceeds from the issuance of the 2017 Notes, net of underwriting discounts and offering costs, were $126,035. On March 28, 2016, we repurchased $500 aggregate principal amount of the 2017 Notes at a price of 98.25, including commissions. The transaction resulted in our recognizing a $9 gain for the period ended March 31, 2016. On April 6, 2017, we repurchased $78,766 aggregate principal amount of the 2017 Notes at a price of 102.0% of face value, including commissions. As a result of this transaction, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the 2017 Notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on extinguishment of debt we recorded in the three months ending June 30, 2017 was $1,797.

On August 14, 2012, we issued $200,000 aggregate principal amount of convertible notes that mature on March 15, 2018 (the “2018 Notes”), unless previously converted or repurchased in accordance with their terms. The 2018 Notes bear interest at a rate of 5.75% per year, payable semi-annually on March 15 and September 15 of each year, beginning March 15, 2013. Total proceeds from the issuance of the 2018 Notes, net of underwriting discounts and offering costs, were $193,600. On April 6, 2017, we repurchased $114,581 aggregate principal amount of the 2018 Notes at a price of 103.5% of face value, including commissions. As a result of this transaction, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the 2018 Notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on extinguishment of debt we recorded in the three months ending June 30, 2017 was $4,720.

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Certain key terms related to the convertible features for the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes (collectively, the “Convertible Notes”) are listed below.



	2017 Notes		2018 Notes		2019 Notes		2020 Notes
Initial conversion rate(1)	85.8442		82.3451		79.7766		80.6647
Initial conversion price	$	11.65	$	12.14	$	12.54	$	12.40
Conversion rate at March 31, 2017(1)(2)	87.7516		84.1497		79.8360		80.6670
Conversion price at March 31, 2017(2)(3)	$	11.40	$	11.88	$	12.53	$	12.40
Last conversion price calculation date	4/16/2017		8/14/2016		12/21/2016		4/11/2017
Dividend threshold amount (per share)(4)	$	0.101500	$	0.101600	$	0.110025	$	0.110525


(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 below the minimum dividend threshold amount for further conversion rate adjustments for all bonds.

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Public Notes

On December 10, 2015, we issued $160,000 aggregate principal amount of unsecured notes that mature on June 15, 2024 (the “2024 Notes”). The 2024 Notes 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 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 program with FBR Capital Markets & Co. through which we could sell, by means of at-the-market offerings, from time to time, up to $100,000 in aggregate principal amount of our existing 2024 Notes (“2024 Notes Follow-on Program”). As of March 31, 2017, we issued $199,281 in aggregate principal amount of our 2024 Notes for net proceeds of $193,253 after commissions and offering costs.

Prospect Capital InterNotes®



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
5	$	109,221	4.75%–5.50%	5.15	%	July 15, 2021 – March 15, 2022

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The following table summarizes the Prospect Capital InterNotes® issued during the nine months ended March 31, 2016.



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
5	$	37,930	4.63%–5.50%	4.93	%	July 15, 2020 – March 15, 2021
6.5	35,155		5.10%–5.25%	5.25	%	January 15, 2022 – May 15, 2022
7	990		5.63%–5.75%	5.65	%	November 15, 2022 – December 15, 2022
10	787		5.88%–6.00%	5.89	%	November 15, 2025 – December 15, 2025
	$	74,862

During the nine months ended March 31, 2017, we repaid $6,460 aggregate principal amount of Prospect Capital InterNotes® at par in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. As a result of these transactions, we recorded a loss in the amount of the difference between the reacquisition price and the net carrying amount of the notes, net of the proportionate amount of unamortized debt issuance costs. The net loss on the extinguishment of Prospect Capital InterNotes® in the nine months ended March 31, 2017 was $205. The following table summarizes the Prospect Capital InterNotes® outstanding as of March 31, 2017.



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
3.5	3,109		4.00%	4.00	%	April 15, 2017
4	45,690		3.75%–4.00%	3.92	%	November 15, 2017 – May 15, 2018
5	368,009		4.25%–5.50%	5.01	%	July 15, 2018 – March 15, 2022
5.2	4,440		4.63%	4.63	%	August 15, 2020 – September 15, 2020
5.3	2,686		4.63%	4.63	%	September 15, 2020
5.4	5,000		4.75%	4.75	%	August 15, 2019
5.5	109,243		4.25%–5.00%	4.65	%	February 15, 2019 – November 15, 2020
6	2,182		3.38%	3.38	%	April 15, 2021 – May 15, 2021
6.5	40,702		5.10%–5.50%	5.24	%	February 15, 2020 – May 15, 2022
7	191,515		4.00%–6.55%	5.13	%	June 15, 2019 – December 15, 2022
7.5	1,996		5.75%	5.75	%	February 15, 2021
10	37,509		4.13%–7.00%	6.14	%	March 15, 2022 – December 15, 2025
12	2,978		6.00%	6.00	%	November 15, 2025 – December 15, 2025
15	17,300		5.25%–6.00%	5.36	%	May 15, 2028 – November 15, 2028
18	21,770		4.13%–6.25%	5.53	%	December 15, 2030 – August 15, 2031
20	4,292		5.63%–6.00%	5.89	%	November 15, 2032 – October 15, 2033
25	34,494		6.25%–6.50%	6.39	%	August 15, 2038 – May 15, 2039
30	112,944		5.50%–6.75%	6.24	%	November 15, 2042 – October 15, 2043
	$	1,005,859

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The following table summarizes the Prospect Capital InterNotes® outstanding as of June 30, 2016.



Tenor at Origination (in years)	Principal Amount		Interest Rate Range	Weighted Average Interest Rate		Maturity Date Range
3	$	5,710	4.00%	4.00	%	October 15, 2016
3.5	3,109		4.00%	4.00	%	April 15, 2017
4	45,690		3.75%–4.00%	3.92	%	November 15, 2017 – May 15, 2018
5	259,191		4.25%–5.75%	4.95	%	July 15, 2018 – June 15, 2021
5.2	4,440		4.63%	4.63	%	August 15, 2020 – September 15, 2020
5.3	2,686		4.63%	4.63	%	September 15, 2020
5.4	5,000		4.75%	4.75	%	August 15, 2019
5.5	109,808		4.25%–5.00%	4.65	%	February 15, 2019 – November 15, 2020
6	2,197		3.38%	3.38	%	April 15, 2021 – May 15, 2021
6.5	40,867		5.10%–5.50%	5.24	%	February 15, 2020 – May 15, 2022
7	192,076		4.00%–6.55%	5.13	%	June 15, 2019 – December 15, 2022
7.5	1,996		5.75%	5.75	%	February 15, 2021
10	37,533		3.62%–7.00%	6.11	%	March 15, 2022 – December 15, 2025
12	2,978		6.00%	6.00	%	November 15, 2025 – December 15, 2025
15	17,325		5.25%–6.00%	5.36	%	May 15, 2028 – November 15, 2028
18	22,303		4.13%–6.25%	5.53	%	December 15, 2030 – August 15, 2031
20	4,462		5.63%–6.00%	5.89	%	November 15, 2032 – October 15, 2033
25	35,110		6.25%–6.50%	6.39	%	August 15, 2038 – May 15, 2039
30	116,327		5.50%–6.75%	6.23	%	November 15, 2042 – October 15, 2043
	$	908,808

Net Asset Value

During the nine months ended March 31, 2017, our net asset value decreased by $43,749, or $0.19 per share. This decrease is primarily from unrealized losses on our investments of $35,271, or $0.10 per share, and dividends exceeding net investment income by $32,585, or $0.09 per share. Our net investment income decreased primarily from a decrease in interest income. Interest income decreased primarily due to reduced returns from our structured credit investments due to lower future expected cash flows, an additional $156,830 weighted average balance of loans on non-accrual status and a reduced interest earning asset base. Net investment income further decreased due to a decline in dividend income primarily from a non-recurring dividend received from APRC in the prior year period. These decreases were partially offset by lower management fees and other operating expenses. The following table shows the calculation of net asset value per share as of March 31, 2017 and June 30, 2016.



	March 31, 2017		June 30, 2016
Net assets	$	3,392,168	$	3,435,917
Shares of common stock issued and outstanding	359,885,703		357,107,231
Net asset value per share	$	9.43	$	9.62

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Results of Operations

Net increase in net assets from operations for the three months ended March 31, 2017 and March 31, 2016 was $19,492 and $75,508. The $56,016 decrease is primarily due to net unrealized losses of $53,746 recognized during the three months ended March 31, 2017 compared to $1,311 of net unrealized losses recognized during the three months ended March 31, 2016. This fluctuation is primarily a result of a decline in operating performance at our investments in USES, PrimeSport, Inc. and United Sporting Companies, Inc., and the reduced returns from our structured credit investments due to lower future expected cash flows. Additionally, investment income declined by $18,461 primarily due to a $17,281 decline in interest income from declining returns from CLOs, an additional $182,612 weighted average balance of loans on non-accrual status and a reduced interest rate after refinancing our investment in First Tower Finance. These changes were partially offset by a favorable $10,962 decrease in net realized losses due to a write-down of our investment in Targus and write-off of our remaining investment in Wind River Resources Corporation (“Wind River”) during the three months ended March 31, 2016. No such write off occurred during the three months ended March 31, 2017.

Net increase in net assets resulting from operations for the nine months ended March 31, 2017 and March 31, 2016 was $201,738 and $8,205, respectively. The $193,533 increase is primarily due to net unrealized losses of $35,271 recognized during the nine months ended March 31, 2017 compared to $253,233 of net unrealized losses recognized during the nine months ended March 31, 2016. This fluctuation is primarily due to decreases in market yields and the competitive environment faced by our energy-related companies during the nine months ended March 31, 2016. Additionally, net realized losses decreased by $19,047 due to a write-down of our investment in Targus and write-off of our remaining investment in Wind River during the nine months ended March 31, 2016, partially offset by a realized gain on the sales of our CLO debt investments of $3,911. No such write off nor sales occurred during the nine months ended March 31, 2017. The $237,009 favorable decrease in net change in realized and unrealized losses is partially offset by a $48,646 decrease in interest income driven by a decline in returns from CLOs, an additional $156,830 weighted average balance of loans on non-accrual status and a reduced interest earning asset base. Additionally, net change in realized and unrealized losses is partially offset by a $20,482 decline in dividend income primarily a non-recurring dividend received from APRC in the prior year period. (See “Net Realized Losses”, “Net Change in Unrealized Gains (Losses)” and “Investment Income” for further discussion.)

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.

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, which 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:

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	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
	2017			2016			2017			2016
Interest income	$	161,711		$	178,992		$	508,152		$	556,798
Dividend income	817			8,301			4,580			25,062
Other income	8,504			2,200			21,612			17,075
Total investment income	$	171,032		$	189,493		$	534,344		$	598,935

Average debt principal of performing investments	$	5,747,457		$	5,913,900		$	5,704,796		$	6,122,039
Weighted average interest rate earned on performing assets	11.25		%	11.97		%	11.70		%	11.91		%

Interest income decreased from $178,992 for the three months ended March 31, 2016 to $161,711 for the three months ended March 31, 2017. The $17,281 decrease is primarily due to reduced returns from our structured credit investments due to lower future expected cash flows, an additional $182,612 weighted average balance of loans on non-accrual status and a reduced interest rate on our investment in First Tower Finance. The weighted average interest rate on our performing assets, excluding the effect of non-accrual loans, decreased from 11.97% for the three months ended March 31, 2016 to 11.25% for the three months ended March 31, 2017. The decrease is primarily due to reduced returns from our structured credit investments due to lower future expected cash flows.

Interest income decreased from $556,798 for the nine months ended March 31, 2016 to $508,152 for the nine months ended March 31, 2017. The $48,646 decrease is primarily due to reduced returns from our structured credit investments due to lower future expected cash flows, an additional $156,830 weighted average balance of loans on non-accrual status and a reduced interest earning asset base. The weighted average interest rate on our performing assets, excluding the effect of non-accrual loans, decreased from 11.91% for the nine months ended March 31, 2016 to 11.70% for the nine months ended March 31, 2017. The decrease is primarily due to reduced returns from our structured credit investments due to lower future expected cash flows.

Investment income is also generated from dividends and other income which is less predictable than interest income. Dividend income decreased from $8,301 for the three months ended March 31, 2016 to $817 for the three months ended March 31, 2017. The $7,484 decrease in dividend income is primarily attributed to a $7,250 dividend received during the three months ended March 31, 2016 from our investment in Echelon. No such dividend was received from Echelon during the three months ended March 31, 2017. The level of dividends received from our investment in Nationwide decreased by $233 during the three months ended March 31, 2017 as compared to the same period in the prior year.

Dividend income decreased from $25,062 for the nine months ended March 31, 2016 to $4,580 for the nine months ended March 31, 2017. The $20,482 decrease in dividend income is primarily attributed to a $11,016 dividend received during the nine months ended March 31, 2016 from our investment in APRC resulting from the sale of APRC’s Vista Palma Sola property. No such dividend was received from was NPRC during the nine months ended March 31, 2017. Additionally, a $7,250 dividend received during the nine months ended March 31, 2016 from our investment in Echelon. No such dividend was received from Echelon during the nine months ended March 31, 2017. Additionally, the level of dividends received from our investment in CCPI and MITY decreased by $3,072 and $242, respectively, during the nine months ended March 31, 2017 as compared to the same period in the prior year. This decrease was partially offset by an increase of $659 in dividends received from Nationwide for the nine months ended March 31, 2017.

Other income has come primarily from structuring fees, which are generated from originations and will fluctuate as levels of originations and types of originations fluctuate. Income from other sources was $8,504 and $2,200 for the three months ended March 31, 2017 and March 31, 2016, respectively. Included within other income is $6,841 and $213 of structuring fees for the three months ended March 31, 2017 and March 31, 2016, respectively. The increase of structuring fees recognized during the three months ended March 31, 2017 resulted from an increase in new originations in Centerfield and Memorial MRI and follow-on investments in existing portfolio companies, primarily from our investments in MITY, Traeger and Matrixx.

Income from other sources was $21,612 and $17,075 for the nine months ended March 31, 2017 and March 31, 2016. Included within other income is $17,114 and $10,967 of structuring fees for the nine months ended March 31, 2017 and March 31, 2016. The increase in structuring fees resulted from an increase in new originations in Universal Turbine Parts, LLC, Centerfield and Memorial MRI and follow-on investments in our portfolio companies, primarily from our investments in Onyx, Atlantis Health Care Group (Puerto Rico), Inc., Echelon, NPRC, MITY, Traeger and Matrixx.

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Operating Expenses

Our primary operating expenses consist of investment advisory fees (base management and income incentive fees), borrowing costs, legal and professional fees and other operating and overhead-related 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. Operating expenses were $97,952 and $101,867 for the three months ended March 31, 2017 and March 31, 2016, respectively. Operating expenses were $297,940 and $319,174 for the nine months ended March 31, 2017 and March 31, 2016, respectively.

The net base management fee was $30,549 and $30,977 for the three months ended March 31, 2017 and March 31, 2016, respectively ($0.08 and $0.09 per weighted average share, respectively). Total gross base management fee was $30,829 and $31,442 for the three months ended March 31, 2017 and March 31, 2016, respectively. The $613 decrease in total gross base management fee is directly related a decrease in average total assets. The Investment Adviser has entered into a servicing agreement with certain institutions who purchased loans with us, where we serve as the agent and collect a servicing fee on behalf of the Investment Adviser. During the three months ended March 31, 2017 and March 31, 2016, we received payments of $280 and $465, respectively, from these institutions, on behalf of the Investment Adviser, for providing such services under the servicing agreement. We were given a credit for these payments, which reduced the base management fee payable to $30,549 and $30,977 for the three months ended March 31, 2017 and March 31, 2016, respectively.

The net base management fee was $92,227 and $95,712 for the nine months ended March 31, 2017 and March 31, 2016, respectively ($0.26 and $0.27 per weighted average share, respectively). Total gross base management fee was $93,263 and $97,109 for the nine months ended March 31, 2017 and March 31, 2016, respectively. The $3,846 decrease in total gross base management fee is directly related a decrease in average total assets. The Investment Adviser has entered into a servicing agreement with certain institutions, where we serve as the agent and collect a servicing fee on behalf of the Investment Adviser. We received payments of $1,036 and $1,397 from these institutions for the nine months ended March 31, 2017 and March 31, 2016, respectively, on behalf of the Investment Adviser, for providing such services under the servicing agreement. We were given a credit for these payments as a reduction of base management fee payable by us to the Investment Adviser resulting in net base management fees of $92,227 and $95,712 for the nine months ended March 31, 2017 and March 31, 2016.

For the three months ended March 31, 2017 and March 31, 2016, we incurred $18,270 and $21,906 of income incentive fees, respectively ($0.05 and $0.06 per weighted average share, respectively). This decrease was driven by a corresponding decrease in pre-incentive fee net investment income from $109,532 for the three months ended March 31, 2016 to $91,350 for the three months ended March 31, 2017, primarily due to a decrease in interest and dividend income from a reduced level of investments. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.

For the nine months ended March 31, 2017 and March 31, 2016, we incurred $59,101 and $69,940 of income incentive fees, respectively ($0.16 and $0.20 per weighted average share, respectively). This decrease was driven by a corresponding decrease in pre-incentive fee net investment income from $349,701 for the nine months ended March 31, 2016 to $295,505 for the nine months ended March 31, 2017, primarily due to decreases in dividend income, interest income due to repayments on investments and interest income due to increased default rates in the underlying collateral of our CLO investments. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement.

During the three months ended March 31, 2017 and March 31, 2016, we incurred $41,464 and $41,719, respectively, of interest 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, 2017 and March 31, 2016, we incurred $123,981 and $125,881, respectively, of 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.

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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,
	2017			2016			2017			2016
Interest on borrowings	$	35,972		$	36,268		$	107,141		$	110,515
Amortization of deferred financing costs	3,370			3,240			10,128			10,156
Accretion of discount on Public Notes	68			50			200			148
Facility commitment fees	2,054			2,161			6,512			5,062
Total interest and credit facility expenses	$	41,464		$	41,719		$	123,981		$	125,881

Average principal debt outstanding	$	2,715,550		$	2,725,717		$	2,677,152		$	2,842,070
Weighted average stated interest rate on borrowings(1)	5.30		%	5.32		%	5.34		%	5.18		%
Weighted average interest rate on borrowings(2)	6.11		%	6.12		%	6.17		%	5.91		%


(1)	Includes only the stated interest expense.


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

Interest expense is relatively stable for the three months ended March 31, 2017 as compared to the three months ended March 31, 2016. The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.32% for the three months ended March 31, 2016 to 5.30% for the three months ended March 31, 2017. This decrease is primarily due to issuances of shorter term debt at lower rates.

Interest expense is relatively stable for the nine months ended March 31, 2017 as compared to the nine months ended March 31, 2016. The weighted average stated interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) increased from 5.18% for the nine months ended March 31, 2016 to 5.34% for the nine months ended March 31, 2017. This increase is primarily due to issuances of the 2024 Notes and Prospect Capital InterNotes® at higher rates, partially offset by the repayment of the matured August 15, 2016 unsecured convertible notes.

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Total operating expenses, excluding investment advisory fees, interest and credit facility expenses, allocation of overhead from Prospect Administration (“Other Operating Expenses”) was $4,088 and $4,329 for the three months ended March 31, 2017 and March 31, 2016, respectively. The slight decrease of $241 during the three months ended March 31, 2017 is due to a decrease in audit, compliance and tax related fees and a reversal of excise tax previously accrued due to lower levels of taxable income offset by an increase in other general and administrative expenses. Other Operating Expenses were $12,860 and $18,527 for the nine months ended March 31, 2017 and March 31, 2016, respectively. The decrease of $5,667 during the nine months ended March 31, 2017 is primarily due other general and administrative expenses from tax services expenses in our controlled companies, an decrease in audit, compliance and tax related fees, and a reversal of excise tax previously accrued due to lower levels of taxable income.

Net Investment Income

Net investment income represents the difference between investment income and operating expenses. Net investment income was $73,080 and $87,626 and for three months ended March 31, 2017 and March 31, 2016, respectively. Net investment income for three months ended March 31, 2017 and March 31, 2016 was $0.20 and $0.25 per weighted average share, respectively. During the three months ended March 31, 2017, the decrease is primarily due to a $17,281 decrease in interest income, or $0.05 per weighted average share, driven primarily by reduced returns from our structured credit investments due to lower future expected cash flows, an additional $182,612 weighted average balance of loans on non-accrual status and a reduced interest rate after refinancing our investment in First Tower Finance.

Net investment income was $236,404 and $279,761 for the nine months ended March 31, 2017 and March 31, 2016, respectively. Net investment income for nine months ended March 31, 2017 and March 31, 2016 was $0.66 and $0.79 per weighted average share, respectively. The $43,357 decrease during the nine months ended March 31, 2017 is primarily the result of a $48,646 decrease in interest income driven primarily by a decline in interest income from reduced returns from our structured credit investments due to lower future expected cash flows, an additional $156,830 weighted average balance of loans on non-accrual status and a reduced interest earning asset base and a $20,482 decrease in dividend income related to APRC, Echelon, CCPI and Mity discussed above. These decreases were partially offset by a favorable $14,324 decrease in advisory fees.

Net Realized Gains (Losses)

During the three months ended March 31, 2017, we recognized a net realized gain of $178, as compared to the $10,784 of net realized loss recognized during three months ended March 31, 2016. The net realized gain during the three months ended March 31, 2017 was primarily due to an asset sale distribution from our previously held investment in Wind River of $929, partially offset by write-off of defaulted loans in our small business lending portfolio of $759. The net realized loss during the three months ended March 31, 2016 was primarily due to the $17,194 write-down of our investment in Targus and write-off of our remaining investment in Wind River, partially offset by realized gains from the sales of our CLO debt investments of $3,911.

During the nine months ended March 31, 2017, we recognized a net realized gain of $810, as compared to the $18,237 of net realized losses recognized during nine months ended March 31, 2016. The net realized gain during the nine months ended March 31, 2017 was primarily due to the receipt of bankruptcy proceeds from our investment in New Century Transportation, Inc. of $936, a working capital adjustment from our investment in Harbortouch of $432, the exercise of warrants in our investment in R-V for $171, an asset sale distribution from our previously held investment in Wind River of $929, as well as from the sales of our investments in Biotronic, Big Tex and Nathan’s for which we recognized total realized gains of $514. These gains were partially offset by the write-off of defaulted loans in our small business lending portfolio of $2,378. The net realized loss during the nine months ended March 31, 2016 was primarily due to the write-down of our investment in Targus and write-off of our remaining investment in Wind River discussed above, along with $5,062 of write-offs of our small business whole loan portfolio.

Net Change in Unrealized Gains (Losses)

Net change in unrealized loss of $53,746 for the three months ended March 31, 2017 was driven primarily by declining operating performance within certain investments and a decline in returns from CLOs. Write-downs in our investments in USES, PrimeSport, Inc. and United Sporting Companies, Inc. were due to declining operating performance and resulted in unrealized losses of $21,144, $9,645 and $8,203, respectively. The valuation of our portfolio was also negatively impacted by the decline in returns from CLOs, and we therefore recognized $15,252 in unrealized losses.

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For the three months ended March 31, 2016, the $1,311 net decrease in unrealized loss was driven primarily by increases in market yields and the competitive environment faced by our energy-related companies. Unrealized losses on our CLO debt and equity investments comprised $33,556 of the total net change in unrealized loss, and unrealized losses on our energy-related investments comprised $40,022 of the total net change in unrealized loss for the three months ended March 31, 2016. These unrealized losses were offset by $69,985 unrealized gains in our REITs portfolio due to improved operating performance at the property-level. The remaining $2,282 net decrease in unrealized loss is primarily the result of current market conditions and the results of operations of individual portfolio companies across various industries.

For the nine months ended March 31, 2017, the $35,271 net decrease in unrealized gains (losses) was the result of the competitive environment faced by our energy-related companies and declining operating performance within certain investments. There were unrealized losses on our Energy Equipment & Services investments of $29,174. Unrealized losses on our online lending portfolio of $19,290 were due to an increase in delinquent loans for the nine months ended March 31, 2017. Additionally, the value of our investment in USES decreased by $18,327 due to a decline in operating performance, and our investment in First Tower Finance declined in value by $14,353 due to increased regulatory scrutiny within the consumer finance industry. These unrealized losses were partially offset by unrealized appreciation on our REIT investment of $41,648 due to improved operating performance at the property-level. The remaining $4,223 decrease in net unrealized losses was due to operating declines across multiple investments and industries.

For the nine months ended March 31, 2016, the $253,233 net decrease in unrealized losses was driven primarily by increases in market yields and the competitive environment faced by our energy-related companies. Unrealized losses on our CLO debt and equity investments comprised $153,524 of total net change in unrealized losses, and unrealized losses on our Energy Equipment & Services investments comprised $77,618 of total net change in unrealized losses for the nine months ended March 31, 2016. During the nine months ended March 31, 2016, the valuation of our portfolio was also negatively impacted by increased regulatory scrutiny within the consumer finance industry and we recognized $26,762 in unrealized losses, primarily related to our investment in First Tower. Additionally, during the nine months ended March 31, 2016, we reduced the value of our investment in Harbortouch by $37,228 due to current market developments and our investment in Pacific World by $12,109 due to declining operating results. These unrealized losses were partially offset by $56,807 unrealized gains in our REITs portfolio due to improved operating performance at the property-level. The remaining unrealized losses was partially offset by unrealized gains due to operating improvements across multiple investments and industries.

Financial Condition, Liquidity and Capital Resources

For the nine months ended March 31, 2017 and March 31, 2016, our operating activities provided $74,744 and $643,137 of cash, respectively. There were no investing activities for the nine months ended March 31, 2017 and March 31, 2016. Financing activities used $280,738 and $583,951 of cash during the nine months ended March 31, 2017 and March 31, 2016, respectively, which included dividend payments of $245,255 and $255,063, respectively.

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

Our primary sources of funds have historically been issuances of debt and equity. More recently, we have and may continue to fund a portion of our cash needs through repayments and opportunistic sales of our existing investment portfolio. We may also securitize a portion of our investments in unsecured or senior secured loans or other assets. Our objective is to put in place such borrowings in order to enable us to expand our portfolio. During the nine months ended March 31, 2017, we borrowed $557,000 and made repayments totaling $557,000 under the Revolving Credit Facility. As of March 31, 2017, we had, net of unamortized discount and debt issuance costs, $910,782 outstanding on the Convertible Notes, $737,802 outstanding on the Public Notes and $991,345 outstanding on the Prospect Capital InterNotes®, and no outstanding balance on the Revolving Credit Facility. (See “Capitalization” above.)

Our shareholders’ equity accounts as of March 31, 2017 and June 30, 2016 reflect cumulative shares issued, net of shares repurchased, as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters, our dividend reinvestment plan and in connection with the acquisition of certain controlled portfolio companies. When our common stock is issued, the related offering expenses have been charged against paid-in capital in excess of par. All underwriting fees and offering expenses were borne by us.

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As part of our Repurchase Program, we delivered a notice with our annual proxy mailing on September 21, 2016 and our most recent notice was delivered with a shareholder letter mailing on April 14, 2017. This notice extends for six months after the date that notice is delivered. We did not repurchase any shares of our common stock for the nine months ended March 31, 2017. During the nine months ended March 31, 2016, we repurchased 4,708,750 shares of our common stock pursuant to our publicly announced Repurchase Program for $34,140, or approximately $7.25 weighted average price per share at approximately a 30% discount to net asset value as of June 30, 2015. Our NAV per share was increased by approximately $0.02 for the nine months ended March 31, 2016 as a result of the share repurchases.

Off-Balance Sheet Arrangements

As of March 31, 2017, we did not have any off-balance sheet liabilities or other contractual obligations that are reasonably likely to have a current or future material effect on our financial condition, other than those which originate from 1) the investment advisory and management agreement and the administration agreement and 2) the portfolio companies.

Recent Developments

On April 20, 2017, we made a $15,000 first lien senior secured investment to support a refinancing of RGIS Services, LLC, a provider of inventory, merchandising and staffing solutions.

On May 1, 2017, Broder Bros., Co. partially repaid the $6,910 Senior Secured Term Loan A and $4,607 Senior Secured Term Loan B receivable to us.

On May 2, 2017, Keystone Peer Review Organization Holdings, Inc. repaid the $45,000 loan receivable to us.

We have provided notice to call on May 11, 2017 with settlement on May 15, 2017, $20,657 of our Prospect Capital InterNotes® maturing on November 15, 2018.

During the period from April 1, 2017 through May 9, 2017 we issued $13,343 aggregate principal amount of Prospect Capital InterNotes® for net proceeds of $13,176.

On May 9, 2017, we announced the declaration of monthly dividends in the following amounts and with the following dates:


•	$0.08333 per share for May 2017 to holders of record on May 31, 2017 with a payment date of June 22, 2017.


•	$0.08333 per share for June 2017 to holders of record on June 30, 2017 with a payment date of July 20, 2017.


•	$0.08333 per share for July 2017 to holders of record on July 31, 2017 with a payment date of August 24, 2017.

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•	$0.08333 per share for August 2017 to holders of record on August 31, 2017 with a payment date of September 21, 2017.

Critical Accounting Policies and Estimates

Basis of Presentation and Consolidation

Reclassifications

Use of Estimates

Investment Classification

Investment Transactions

Foreign Currency

Foreign currency amounts are translated into US Dollars (USD) on the following basis:


i.	fair value of investment securities, other assets and liabilities—at the spot exchange rate on the last business day of the period; and


ii.	purchases and sales of investment securities, income and expenses—at the rates of exchange prevailing on the respective dates of such investment transactions, income or expenses.

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Investment Risks

Our investments are subject to a variety of risks. Those risks include the following:

Market Risk

Market risk represents the potential loss that can be caused by a change in the fair value of the financial instrument.

Credit Risk

Credit risk represents the risk that we would incur if the counterparties failed to perform pursuant to the terms of their agreements with us.

Liquidity Risk

Liquidity risk represents the possibility that we may not be able to rapidly adjust the size of our investment positions in times of high volatility and financial stress at a reasonable price.

Interest Rate Risk

Interest rate risk represents a change in interest rates, which could result in an adverse change in the fair value of an interest-bearing financial instrument.

Prepayment Risk

Structured Credit Related Risk

Online consumer and Small-and-Medium-Sized Business Lending Risk

Foreign Currency

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Investment Valuation

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

Level 1: Quoted prices in active markets for identical assets or liabilities, accessible by us at the measurement date.

Level 3: Unobservable inputs for the asset or liability.

Our Board of Directors has established procedures for the valuation of our investment portfolio. These procedures are detailed below.

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


1.	Each portfolio company or investment is reviewed by our investment professionals with independent valuation firms engaged by our Board of Directors.


2.	The independent valuation firms prepare independent valuations for each investment based on their own independent assessments and issue their report.


3.	The Audit Committee of our Board of Directors reviews and discusses with the independent valuation firms the valuation reports, and then makes a recommendation to the Board of Directors of the value for each investment.


4.	The Board of Directors discusses valuations and determines the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser, the respective independent valuation firm and the Audit Committee.

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Valuation of Other Financial Assets and Financial Liabilities

ASC 825, Financial Instruments, specifically ASC 825-10-25, permits an entity to choose, at specified election dates, to measure eligible items at fair value (the “Fair Value Option”). We have not elected the Fair Value Option to report selected financial assets and financial liabilities. See Note 8 in the accompanying Consolidated Financial Statements for further discussion of our financial liabilities that are measured using another measurement attribute.

Convertible Notes

Revenue Recognition

Realized gains or losses on the sale of investments are calculated using the specific identification method.

Dividend income is recorded on the ex-dividend date.

Federal and State Income Taxes

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in accordance with income tax regulations that may differ from GAAP. Book and tax basis differences relating to stockholder dividends and distributions and other permanent book and tax differences are reclassified to paid-in capital.

If we fail to satisfy the annual distribution requirement or otherwise fail to qualify as a RIC in any taxable year, we would be subject to tax on all of our taxable income at regular corporate income tax rates. We would not be able to deduct distributions to stockholders, nor would we be required to make distributions. Distributions would generally be taxable to our individual and other non-corporate taxable stockholders as ordinary dividend income eligible for the reduced maximum rate applicable to qualified dividend income to the extent of our current and accumulated earnings and profits, provided certain holding period and other requirements are met. Subject to certain limitations under the Code, corporate distributions would be eligible for the dividends-received deduction. To qualify again to be taxed as a RIC in a subsequent year, we would be required to distribute to our shareholders our accumulated earnings and profits attributable to non-RIC years. In addition, if we failed to qualify as a RIC for a period greater than two taxable years, then, in order to qualify as a RIC in a subsequent year, we would be required to elect to recognize and pay tax on any net built-in gain (the excess of aggregate gain, including items of income, over aggregate loss that would have been realized if we had been liquidated) or, alternatively, be subject to taxation on such built-in gain recognized for a period of ten years.

Dividends and Distributions

Financing Costs

We record origination expenses related to our Revolving Credit Facility, and Convertible Notes, Public Notes and Prospect Capital InterNotes® (collectively, our “Unsecured Notes”) as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method over the stated life of the obligation for our Revolving Credit Facility. The same methodology is used to approximate the effective yield method for our Prospect Capital InterNotes® and our 2024 Notes Follow-on Program. The effective interest method is used for our remaining Unsecured Notes over the respective expected life or maturity. In the event that we modify or extinguish our debt before maturity, we follow the guidance in ASC 470-50, Modification and Extinguishments (“ASC 470-50”). For modifications to or exchanges of our Revolving Credit Facility, any unamortized deferred costs relating to lenders who are not part of the new lending group are expensed. For extinguishments of our Unsecured Notes, any unamortized deferred costs are deducted from the carrying amount of the debt in determining the gain or loss from the extinguishment.

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We may record registration expenses related to shelf filings as prepaid expenses. These expenses consist principally of SEC registration fees, legal fees and accounting fees incurred. These prepaid expenses are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is completed. As of March 31, 2017 and June 30, 2016, there are no prepaid expenses related to registration expenses and all amounts incurred have been expensed.

Guarantees and Indemnification Agreements

Per Share Information

Recent Accounting Pronouncements

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in interest rates and equity price risk. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates impacting some of the loans in our portfolio which have floating interest rates. Additionally, because we fund a portion of our investments with borrowings, our net investment income is affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. See “Risk Factors - Risks Relating to Our Business - Changes in interest rates may affect our cost of capital and net investment income.”

Our debt investments may be based on floating rates or fixed rates. For our floating rate loans the rates are determined from the LIBOR, EURO Interbank Offer Rate, the Federal Funds Rate or the Prime Rate. The floating interest rate loans may be subject to a LIBOR floor. Our loans typically have durations of one to three months after which they reset to current market interest rates. As of March 31, 2017, 90.7% of the interest earning investments in our portfolio, at fair value, bore interest at floating rates.

We also have a revolving credit facility and certain Prospect Capital InterNotes® issuances that are based on floating LIBOR rates. Interest on borrowings under the revolving credit facility is one-month LIBOR plus 225 basis points with no minimum LIBOR floor and there is no outstanding balance as of March 31, 2017. Interest on five Prospect Capital InterNotes® is three-month LIBOR plus a range of 350 to 300 basis points with no minimum LIBOR floor. The Convertible Notes, Public Notes and remaining Prospect Capital InterNotes® bear interest at fixed rates.

The following table shows the approximate annual impact on net investment income of base rate changes in interest rates (considering interest rate flows for floating rate instruments, excluding our investments in CLO residual interests) to our loan portfolio and outstanding debt as of March 31, 2017, assuming no changes in our investment and borrowing structure:



(in thousands) Basis Point Change	Interest Income			Interest Expense			Net Investment Income			Net Investment Income (1)
Up 300 basis points	$	102,001		$	43		$	101,958		$	81,566
Up 200 basis points	64,589			29			64,560			51,648
Up 100 basis points	27,743			16			27,727			22,182
Down 100 basis points	(1,304		)	(17		)	(1,287		)	(1,030		)


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

As of March 31, 2017, one and three month LIBOR was 0.98% and 1.15%, respectively.

We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of higher interest rates with respect to our portfolio of investments. During the three months ended March 31, 2017, we did not engage in hedging activities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of March 31, 2017, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the 1934 Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

Changes in Internal Control Over Financial Reporting

139

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2017, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

140

PART II

Item 1. Legal Proceedings

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended June 30, 2016, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

141

Item 6. Exhibits, Financial Statement Schedules

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC (according to the number assigned to them in Item 601 of Regulation S-K):



Exhibit No.
3.1	Articles of Amendment and Restatement(1)
3.2	Amended and Restated Bylaws(2)
4.1	Four Hundred Fifty-Third Supplemental Indenture dated as of January 6, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(3)
4.2	Four Hundred Fifty-Fourth Supplemental Indenture dated as of January 12, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(4)
4.3	Four Hundred Fifty-Fifth Supplemental Indenture dated as of January 20, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(5)
4.4	Four Hundred Fifty-Sixth Supplemental Indenture dated as of January 26, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(6)
4.5	Four Hundred Fifty-Seventh Supplemental Indenture dated as of February 2, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(7)
4.6	Four Hundred Fifty-Eighth Supplemental Indenture dated as of February 9, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(8)
4.7	Four Hundred Fifty-Ninth Supplemental Indenture dated as of February 24, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(9)
4.8	Four Hundred Sixtieth Supplemental Indenture dated as of March 2, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(10)
4.9	Four Hundred Sixty-First Supplemental Indenture dated as of March 9, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(11)
4.10	Four Hundred Sixty-Second Supplemental Indenture dated as of March 16, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(12)
4.11	Four Hundred Sixty-Third Supplemental Indenture dated as of March 23, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(13)
4.12	Four Hundred Sixty-Fourth Supplemental Indenture dated as of March 30, 2017, to the U.S. Bank Indenture and Form of 5.000% Prospect Capital InterNote® due 2022(14)
11	Computation of Per Share Earnings (included in the notes to the financial statements contained in this report)
12	Computation of Ratios (included in the notes to the financial statements contained in this report)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended*
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended*
32.1	Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*
32.2	Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)*

________________________



*	Filed herewith.
(1)	Incorporated by reference to Exhibit 3.1 of the Registrant’s form 8-K, filed on May 9, 2014.
(2)	Incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K, filed on December 11, 2015.
(3)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 7 to the Registration Statement on Form N-2, filed on January 6, 2017.
(4)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 8 to the Registration Statement on Form N-2, filed on January 12, 2017.
(5)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 9 to the Registration Statement on Form N-2, filed on January 20, 2017.
(6)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 10 to the Registration Statement on Form N-2, filed on January 26, 2017.
(7)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 11 to the Registration Statement on Form N-2, filed on February 2, 2017.

142



(8)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 12 to the Registration Statement on Form N-2, filed on February 9, 2017.
(9)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 13 to the Registration Statement on Form N-2, filed on February 24, 2017.
(10)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 14 to the Registration Statement on Form N-2, filed on March 2, 2017.
(11)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 15 to the Registration Statement on Form N-2, filed on March 9, 2017.
(12)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 16 to the Registration Statement on Form N-2, filed on March 16, 2017.
(13)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 17 to the Registration Statement on Form N-2, filed on March 23, 2017.
(14)	Incorporated by reference from the Registrant's Post-Effective Amendment No. 18 to the Registration Statement on Form N-2, filed on March 30, 2017.

143

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on May 9, 2017.



PROSPECT CAPITAL CORPORATION

By:	/s/ JOHN F. BARRY III
	John F. Barry III
	Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



/s/ JOHN F. BARRY III		/s/ ANDREW C. COOPER
John F. Barry III		Andrew C. Cooper
Chairman of the Board, Chief Executive Officer and Director		Director
May 9, 2017		May 9, 2017

/s/ BRIAN H. OSWALD		/s/ WILLIAM J. GREMP
Brian H. Oswald		William J. Gremp
Chief Financial Officer		Director
May 9, 2017		May 9, 2017

/s/ M. GRIER ELIASEK		/s/ EUGENE S. STARK
M. Grier Eliasek		Eugene S. Stark
President, Chief Operating Officer and Director		Director
May 9, 2017		May 9, 2017

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