Prospect Capital
Annual Report 2014

Plain-text annual report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (cid:3) (cid:3) (cid:3) (cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2014 (cid:1) (cid:1) (cid:1) (cid:1) 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 (State or other jurisdiction of incorporation or organization) 10 East 40th Street, 42nd Floor New York, New York (Address of principal executive offices) 43-2048643 (I.R.S. Employer Identification No.) 10016 (Zip Code) Securities registered pursuant to Section 12(b) of the Act: Registrant's telephone number, including area code: (212) 448-0702 Title of each class Common Stock, par value $0.001 per share 6.95% Senior Notes due 2022 Name of each exchange on which registered NASDAQ Global Select Market New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1) No (cid:3) Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1) No (cid:3) 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 (cid:3) No (cid:1) 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 (cid:1) No (cid:1) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. (cid:1) 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 (cid:3) Accelerated filer (cid:1) Non-accelerated filer (cid:1) Smaller reporting company (cid:1) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1) No (cid:3) The aggregate market value of the common equity held by non-affiliates of the Registrant as of December 31, 2013 was $3.337 billion (based on the closing price on that date of $11.22 on the NASDAQ Global Select Market). For the purposes of calculating this amount only, all executive officers and Directors are "affiliates" of the Registrant. (Do not check if a smaller reporting company) As of August 22, 2014 , there were 342,854,575 shares of the Registrant's common stock outstanding. Portions of the Registrant's definitive Proxy Statement relating to the 2014 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission, are incorporated by reference in Part III of this Annual Report on Form 10-K to the extent described therein. Documents Incorporated by Reference TABLE OF CONTENTS Business PART I Item 1. Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 2. Item 3. Item 4. Mine Safety Disclosures Properties Legal Proceedings PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Item 6. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementary Data Item 8. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures Item 9B. Other Information PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Item 13. Certain Relationships and Related Transactions, and Director Independence Item 14. Principal Accounting Fees and Services Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters PART IV Item 15. Exhibits, Financial Statement Schedules Signatures Page 1 24 50 50 50 50 51 55 56 95 96 197 197 199 199 199 199 199 199 199 236 PART I In this report, the terms "Prospect Capital Corporation," "we," "us" and "our" refer to Prospect Capital Corporation ("Prospect") and all entities included in our consolidated financial statements; "Prospect Capital Management" or the "Investment Adviser" refers to Prospect Capital Management LLC; "Prospect Administration" or the "Administrator" refers to Prospect Administration LLC. Our $150.0 million of 6.25% Convertible Senior Notes due 2015 are referred to as the 2015 Notes. Our $167.5 million of 5.50% Convertible Senior Notes due 2016 are referred to as the 2016 Notes. Our $130.0 million of 5.375% Convertible Senior Notes due 2017 are referred to as the 2017 Notes. Our $200.0 million of 5.75% Convertible Senior Notes due 2018 are referred to as the 2018 Notes. Our $200.0 million of 5.875% Convertible Senior Notes due 2019 are referred to as the 2019 Notes. Our $400.0 million of 4.75% Convertible Senior Notes due 2020 are referred to as the 2020 Notes, and collectively with the 2015 Notes, 2016 Notes, 2017 Notes, the 2018 Notes and the 2019 Notes, the Senior Convertible Notes. Our $100.0 million of 6.95% Senior Notes due 2022 are referred to as the 2022 Notes. Our $250.0 million of 5.875% Senior Notes due 2023 are referred to as the 2023 Notes. Our $300.0 million of 5.00% Senior Notes due 2019 are referred to as the 5.00% 2019 Notes, and collectively with the 2022 Notes and the 2023 Notes, the Senior Unsecured Notes. Any Prospect Capital InterNotes ® issued pursuant to our medium term notes program are referred to as the Prospect Capital InterNotes ® , and together with the Senior Convertible Notes and the Senior Unsecured Notes are referred to as Senior Notes. Item 1. Business General We are 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 "Internal Revenue Code" or the "Code"). We invest primarily in senior and subordinated debt and equity of 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 origination strategies in which we make investments: (1) lending in private equity sponsored transactions, (2) lending directly to companies not owned by private equity firms, (3) control investments in corporate operating companies, (4) control investments in financial companies, (5) investments in structured credit, (6) real estate investments, (7) investments in syndicated debt, (8) aircraft leasing and (9) online lending. We continue to evaluate other origination strategies in the ordinary course of business with no specific tops-down allocation to any single origination strategy. Lending in Private Equity Sponsored Transactions – We make loans to companies which are controlled by leading private equity firms. This debt can take the form of first lien, second lien, unitranche or unsecured loans. In making these investments, we look for a diversified customer base, recurring demand for the product or service, barriers to entry, strong historical cash flow and experienced management teams. These loans typically have significant equity subordinate to our loan position. Historically, this strategy has comprised approximately 50%-60% of our business, but more recently it is less than 50% of our business. Lending Directly to Companies – We provide debt financing to companies owned by non-private equity firms, the company founder, a management team or a family. Here, in addition to the strengths we look for in a sponsored transaction, we also look for the alignment with the management team with significant invested capital. This strategy often has less competition than the private equity sponsor strategy because such company financing needs are not easily addressed by banks and often require more diligence preparation. Direct lending can result in higher returns and lower leverage than sponsor transactions and may include warrants or equity to us. Historically, this strategy has comprised approximately 5%-15% of our business, but more recently it is less than 5% of our business. Control Investments in Corporate Operating Companies – This strategy involves acquiring controlling stakes in non-financial operating companies. Our investments in these companies are generally structured as a combination of yield-producing debt and equity. We provide certainty of closure to our counterparties, give the seller personal liquidity and generally look for management to continue on in their current roles. This strategy has comprised approximately 10%-15% of our business. Control Investments in Financial Companies – This strategy involves acquiring controlling stakes in financial companies, including consumer direct lending, sub-prime auto lending and other strategies. Our investments in these companies are generally structured as a combination of yield-producing debt and equity. These investments are often structured in a tax-efficient RIC-compliant partnership, enhancing returns. This strategy has comprised approximately 5%-15% of our business. 1 Investments in Structured Credit – We make investments in collateralized loan obligations (“CLOs”), generally taking a significant position in the subordinated interests (equity) of the CLOs. The CLOs include a diversified portfolio of broadly syndicated loans and do not have direct exposure to real estate, mortgages, sub-prime debt, or consumer based debt. The CLOs in which we invest are managed by top-tier collateral managers that have been thoroughly diligenced prior to investment. This strategy has comprised approximately 10%-20% of our business. Real Estate Investments – We make investments in real estate through our three wholly-owned tax-efficient real estate investment trusts ("REITs"), American Property REIT Corp., National Property REIT Corp. and United Property REIT Corp. (collectively, "our REITs"). Our real estate investments are in various classes of fully developed and occupied real estate properties that generate current yields. We seek to identify properties that have historically high occupancy and steady cash flow generation. Our REITs partner with established property managers with experience in managing the property type to manage such properties after acquisition. This is a more recent investment strategy that has comprised approximately 5%-10% of our business. Investments in Syndicated Debt – On an opportunistic basis, we make investments in loans and high yield bonds that have been sold to a syndicate of buyers. Here we look for investments with attractive risk-adjusted returns after we have completed a fundamental credit analysis. These investments are purchased with a long term, buy-and-hold outlook and we look to provide significant structuring input by providing anchoring orders. This strategy has comprised approximately 5%-10% of our business. Aircraft Leasing – We invest debt as well as equity in aircraft assets subject to commercial leases to credit-worthy airlines across the globe. These investments present attractive return opportunities due to cash flow consistency from long-lived assets coupled with hard asset collateral. We seek to deliver risk-adjusted returns with strong downside protection by analyzing relative value characteristics across the spectrum of aircraft types of all vintages. Our target portfolio includes both in-production and out-of-production jet and turboprop aircraft and engines, operated by airlines across the globe. This strategy comprised approximately 1.5% of our business in the fiscal year ended June 30, 2014. Online Lending – We make investments in loans originated by certain consumer loan and small and medium sized business (“SME”) originators. We purchase each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers and SMEs. The loans are typically serviced by the originators of the loans. This strategy comprised approximately 1% of our business in the fiscal year ended June 30, 2014. Typically, we concentrate on making investments in companies with annual revenues of less than $750 million and enterprise values of less than $1 billion. Our typical investment involves a secured loan of less than $250 million. We also acquire controlling interests in companies in conjunction with making secured debt investments in such companies. In most cases, companies in which we invest are privately held at the time we invest in them. We refer to these companies as "target" or "middle market" companies and these investments as "middle market investments." We seek to maximize total returns to our investors, including both current yield and equity upside, by applying rigorous credit analysis and asset- based and cash-flow based lending techniques to make and monitor our investments. We are constantly pursuing multiple investment opportunities, including purchases of portfolios from private and public companies, as well as originations and secondary purchases of particular securities. We also regularly evaluate control investment opportunities in a range of industries, and some of these investments could be material to us. There can be no assurance that we will successfully consummate any investment opportunity we are currently pursuing. If any of these opportunities are consummated, there can be no assurance that investors will share our view of valuation or that any assets acquired will not be subject to future write downs, each of which could have an adverse effect on our stock price. We have been organized as a closed-end investment company since April 13, 2004 and have filed an election to be treated as a business development company under the 1940 Act. We are a non-diversified company within the meaning of the 1940 Act. Our headquarters are located at 10 East 40th Street, 42nd Floor, New York, NY 10016, and our telephone number is (212) 448-0702. Our investment adviser is Prospect Capital Management LLC. Our Investment Objective and Policies Our investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. We focus on making investments in private companies. We are a non-diversified company within the meaning of the 1940 Act. 2 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. Our investments have generally ranged between $5 million and $250 million each, although the investment size may be more or less than this range. Our investment sizes are expected to grow as our capital base expands. We also acquire controlling interests in companies in conjunction with making secured debt investments in such companies. These may be in several industries, including industrial, service, real estate and financial businesses. We seek to maximize returns and minimize risk for our investors by applying rigorous analysis to make and monitor our investments. While the structure of our investments varies, we can invest in senior secured debt, senior unsecured debt, subordinated secured debt, subordinated unsecured debt, convertible debt, convertible preferred equity, preferred equity, common equity, warrants and other instruments, many of which generate current yield. While our primary focus is to seek current income through investment in the debt and/or dividend-paying equity securities of eligible privately-held, thinly-traded or distressed companies and long-term capital appreciation by acquiring accompanying warrants, options or other equity securities of such companies, we may invest up to 30% of the portfolio in opportunistic investments in order to seek enhanced returns for stockholders. Such investments may include investments in the debt and equity instruments of broadly-traded public companies. We expect that these public companies generally will have debt securities that are non-investment grade. Such investments may also include purchases (either in the primary or secondary markets) of the equity and junior debt tranches of a type of such pools known as CLOs. Structurally, CLOs are entities that are formed to hold a portfolio of senior secured loans made to companies whose debt is rated below investment grade or, in limited circumstances, unrated. The senior secured loans within a CLO are limited to senior secured loans which meet specified credit and diversity criteria and are subject to concentration limitations in order to create an investment portfolio that is diverse by senior secured loan, borrower, and industry, with limitations on non-U.S. borrowers. Within this 30% basket, we have and may make additional investments in debt and equity securities of financial companies and companies located outside of the United States. Our investments may include other equity investments, such as warrants, options to buy a minority interest in a portfolio company, or contractual payment rights or rights to receive a proportional interest in the operating cash flow or net income of such company. When determined by the Investment Adviser to be in our best interest, we may acquire a controlling interest in a portfolio company. Any warrants we receive with our debt securities may require only a nominal cost to exercise, and thus, as a portfolio company appreciates in value, we may achieve additional investment return from this equity interest. We have structured, and will continue to structure, some warrants to include provisions protecting our rights as a minority-interest or, if applicable, controlling-interest holder, as well as puts, or rights to sell such securities back to the company, upon the occurrence of specified events. In many cases, we obtain registration rights in connection with these equity interests, which may include demand and "piggyback" registration rights. We plan to hold many of our debt investments to maturity or repayment, but will sell a debt investment earlier if a liquidity event takes place, such as the sale or recapitalization of a portfolio company, or if we determine a sale of such debt investment to be in our best interest. We have qualified and elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we generally do not have to pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To continue to qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to qualify for RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our "investment company taxable income," which is generally our ordinary income plus the excess of our realized net short-term capital gains over our realized net long-term capital losses. For a discussion of the risks inherent in our portfolio investments, see "Risk Factors – Risks Relating to Our Investments." Industry Sectors Our portfolio is invested across 30 industry categories. Excluding our CLO investments, which do not have industry concentrations, no individual industry comprises more than 9.8% of the portfolio on either a cost or fair value basis. 3 Ongoing Relationships with Portfolio Companies Monitoring Prospect Capital Management monitors our portfolio companies on an ongoing basis. Prospect Capital Management will continue to monitor the financial trends of each portfolio company to determine if it is meeting its business plan and to assess the appropriate course of action for each company. Prospect Capital Management employs several methods of evaluating and monitoring the performance and value of our investments, which may include, but are not limited to, the following: • Assessment of success in adhering to the portfolio company's business plan and compliance with covenants; • Regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor to discuss financial position, requirements and accomplishments; • Comparisons to other portfolio companies in the industry, if any; • Attendance at and participation in board meetings of the portfolio company; and • Review of monthly and quarterly financial statements and financial projections for the portfolio company. 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 United States generally accepted accounting principles 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 conduct independent valuations and make their own independent assessments; 3. The Audit Committee of our Board of Directors reviews and discusses the preliminary valuation of the Investment Adviser and that of the independent valuation firms; and 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. 4 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 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 M&A 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 fair value pricing 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 ASC 820 Level 3 securities and are valued using a discounted cash flow model. The valuations have been accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view. For each CLO security, the most appropriate valuation approach has been chosen from alternative approaches to ensure the most accurate valuation for such security. To value a CLO, both the assets and the liabilities of the CLO capital structure are modeled. We use a waterfall engine to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, distribute the cash flows to the liability structure based on the payment priorities, and discount them back using current market discount rates. The main risk factors are: default risk, interest rate risk, downgrade risk, and credit spread risk. For a discussion of the risks inherent in determining the value of securities for which readily available market values do not exist, see "Risk Factors – Risks Relating to Our Business – Most of our portfolio investments are recorded at fair value as determined in good faith under the direction of our Board of Directors and, as a result, there is uncertainty as to the value of our portfolio investments." Valuation of Other Financial Assets and Financial Liabilities The Fair Value Option within ASC 825, Financial Instruments , specifically ASC 825-10-25, permits an entity to elect fair value as the initial and subsequent measurement attribute for eligible assets and liabilities for which the assets and liabilities are measured using another measurement attribute. For our non-investment assets and liabilities, we have elected not to value them at fair value as would be permitted by ASC 825-10-25. 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 will vary according to the particular needs of each portfolio company. Examples of such activities include advice on marketing, operations, fulfillment and overall strategy, capital budgeting, managing relationships with financing sources, recruiting management personnel, evaluating acquisition and divestiture opportunities, participating in board and management meetings, consulting with and advising officers of portfolio companies, and providing other organizational and financial guidance. Prospect Administration, through a managerial assistance agreement executed with each portfolio company to which we provide managerial assistance, provides such managerial assistance on our behalf. In doing so, Prospect Administration utilizes personnel of our Investment Adviser, Prospect Capital Management. We, on behalf of Prospect Administration, invoice portfolio companies receiving and paying for managerial assistance, and we remit to Prospect Administration its allocated cost of providing such services, including the allocated cost of Prospect Capital Management personnel it utilizes for that purpose. Our payments to Prospect Administration are periodically reviewed by our Board of Directors. 5 Investment Adviser Prospect Capital Management manages our investments as the Investment Adviser. Prospect Capital Management is a Delaware limited liability corporation that has been registered as an investment adviser under the Investment Advisers Act of 1940 (the "Advisers Act") since March 31, 2004. Prospect Capital Management is led by John F. Barry III and M. Grier Eliasek, two senior executives with significant investment advisory and business experience. Both Messrs. Barry and Eliasek spend a significant amount of their time in their roles at Prospect Capital Management working on our behalf. The principal executive offices of Prospect Capital Management are 10 East 40th Street, 42nd Floor, New York, NY 10016. We depend on the due diligence, skill and network of business contacts of the senior management of the Investment Adviser. We also depend, to a significant extent, on the Investment Adviser's investment professionals and the information and deal flow generated by those investment professionals in the course of their investment and portfolio management activities. The Investment Adviser's senior management team evaluates, negotiates, structures, closes, monitors and services our investments. Our future success depends to a significant extent on the continued service of the senior management team, particularly John F. Barry III and M. Grier Eliasek. The departure of any of the senior managers of the Investment Adviser could have a materially adverse effect on our ability to achieve our investment objective. In addition, we can offer no assurance that Prospect Capital Management will remain the Investment Adviser or that we will continue to have access to its investment professionals or its information and deal flow. Under the Investment Advisory Agreement (as defined below), we pay Prospect Capital Management investment advisory fees, which consist of an annual base management fee based on our gross assets as well as a two-part incentive fee based on our performance. Mr. Barry currently controls Prospect Capital Management. Investment Advisory Agreement Terms We have entered into an investment advisory and management agreement (the "Investment Advisory Agreement") with Prospect Capital Management, under which the Investment Adviser, subject to the overall supervision of our Board of Directors, manages our day-to-day operations and provides us with investment advisory services. 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. Prospect Capital Management'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 gross assets (including amounts borrowed). 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. Base management fees for any partial month or quarter are appropriately prorated. 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 appreciation or depreciation. 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). 6 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 with 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 with 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 out of our participation in the debt, equity, and other financial instruments issued by that company. Aggregate realized capital gains, if any, equals 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 of. 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. Examples of Quarterly Incentive Fee Calculation Example 1: Income Incentive Fee* *The hypothetical amount of pre-incentive fee net investment income shown is based on a percentage of total net assets. Alternative 1 Assumptions • Investment income (including interest, dividends, fees, etc.) = 1.25% • Hurdle rate(1) = 1.75% • Base management fee(2) = 0.50% • Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.20% • Pre-incentive fee net investment income (investment income – (base management fee + other expenses)) = 0.55% Pre-incentive net investment income does not exceed hurdle rate, therefore there is no income incentive fee. 7 Alternative 2 Assumptions • Investment income (including interest, dividends, fees, etc.) = 2.70% • Hurdle rate(1) = 1.75% • Base management fee(2) = 0.50% • Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.20% • Pre-incentive fee net investment income (investment income – (base management fee + other expenses)) = 2.00% Pre-incentive net investment income exceeds hurdle rate, therefore there is an income incentive fee payable by us to the Investment Adviser. The Income Incentive Fee would be calculated as follows: = 100% × "Catch Up" + the greater of 0% AND (20% × (pre-incentive fee net investment income – 2.1875%) = (100% × (2.00% - 1.75%)) + 0% = 100% × 0.25% + 0% = 0.25% Alternative 3 Assumptions • Investment income (including interest, dividends, fees, etc.) = 3.00% • Hurdle rate(1) = 1.75% • Base management fee(2) = 0.50% • Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.20% • Pre-incentive fee net investment income (investment income – (base management fee + other expenses)) = 2.30% Pre-incentive net investment income exceeds hurdle rate, therefore there is an income incentive fee payable by us to the Investment Adviser. The Income Incentive Fee would be calculated as follows: = 100% × "Catch Up" + the greater of 0% AND (20% × (pre-incentive fee net investment income – 2.1875%) = (100% × (2.1875% – 1.75%)) + the greater of 0% AND (20% × (2.30% – 2.1875%)) = (100% × 0.4375%) + (20% × 0.1125%) = 0.4375% + 0.0225% = 0.46% (1) Represents 7% annualized hurdle rate. (2) Represents 2% annualized base management fee. (3) Excludes organizational and offering expenses. 8 Example 2: Capital Gains Incentive Fee Alternative 1 Assumptions • Year 1: $20 million investment made • Year 2: Fair market value ("FMV") of investment determined to be $22 million • Year 3: FMV of investment determined to be $17 million • Year 4: Investment sold for $21 million The impact, if any, on the capital gains portion of the incentive fee would be: • Year 1: No impact • Year 2: No impact • Year 3: Decrease base amount on which the second part of the incentive fee is calculated by $3 million (unrealized capital depreciation) • Year 4: Increase base amount on which the second part of the incentive fee is calculated by $4 million ($1 million of realized capital gain and $3 million reversal in unrealized capital depreciation) Alternative 2 Assumptions • Year 1: $20 million investment made • Year 2: FMV of investment determined to be $17 million • Year 3: FMV of investment determined to be $17 million • Year 4: FMV of investment determined to be $21 million • Year 5: FMV of investment determined to be $18 million • Year 6: Investment sold for $15 million The impact, if any, on the capital gains portion of the incentive fee would be: • Year 1: No impact • Year 2: Decrease base amount on which the second part of the incentive fee is calculated by $3 million (unrealized capital depreciation) • Year 3: No impact • Year 4: Increase base amount on which the second part of the incentive fee is calculated by $3 million ( reversal in unrealized capital depreciation) • Year 5: Decrease base amount on which the second part of the incentive fee is calculated by $2 million (unrealized capital depreciation) • Year 6: Decrease base amount on which the second part of the incentive fee is calculated by $3 million ($5 million of realized capital loss offset by a $2 million reversal in unrealized capital depreciation) 9 Alternative 3 Assumptions • Year 1: $20 million investment made in company A ("Investment A") and $20 million investment made in company B ("Investment B") • Year 2: FMV of Investment A is determined to be $21 million and Investment B is sold for $18 million • Year 3: Investment A is sold for $23 million The impact, if any, on the capital gains portion of the incentive fee would be: • Year 1: No impact • Year 2: Decrease base amount on which the second part of the incentive fee is calculated by $2 million (realized capital loss on Investment B) • Year 3: Increase base amount on which the second part of the incentive fee is calculated by $3 million (realized capital gain on Investment A) Alternative 4 Assumptions • Year 1: $20 million investment made in company A ("Investment A") and $20 million investment made in company B ("Investment B") • Year 2: FMV of Investment A is determined to be $21 million and FMV of Investment B is determined to be $17 million • Year 3: FMV of Investment A is determined to be $18 million and FMV of Investment B is determined to be $18 million • Year 4: FMV of Investment A is determined to be $19 million and FMV of Investment B is determined to be $21 million • Year 5: Investment A is sold for $17 million and Investment B is sold for $23 million The impact, if any, on the capital gains portion of the incentive fee would be: • Year 1: No impact • Year 2: Decrease base amount on which the second part of the incentive fee is calculated by $3 million (unrealized capital depreciation on Investment B) • Year 3: Decrease base amount on which the second part of the incentive fee is calculated by $1 million ($2 million in unrealized capital depreciation on Investment A and $1 million recovery in unrealized capital depreciation on Investment B) • Year 4: Increase base amount on which the second part of the incentive fee is calculated by $3 million ($1 million recovery in unrealized capital depreciation on Investment A and $2 million recovery in unrealized capital depreciation on Investment B) • Year 5: Increase base amount on which the second part of the incentive fee is calculated by $1 million ($3 million realized capital gain on Investment B offset by $3 million realized capital loss on Investment A plus a $1 million reversal in unrealized capital depreciation on Investment A from Year 4) 10 Duration and Termination The Investment Advisory Agreement was originally approved by our Board of Directors on June 23, 2004 and was recently re-approved by the Board of Directors on May 5, 2014 for an additional one-year term expiring June 22, 2015. Unless terminated earlier as described below, it will remain in effect from year to year thereafter if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons. The Investment Advisory Agreement will automatically terminate in the event of its assignment. The Investment Advisory Agreement may be terminated by either party without penalty upon not more than 60 days' written notice to the other. See "Risk Factors – Risks Relating to Our Business – We are dependent upon Prospect Capital Management's key management personnel for our future success." Indemnification The Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, Prospect Capital Management and its officers, managers, 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 Capital Management's services under the Investment Advisory Agreement or otherwise as the Investment Adviser. 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 Brian H. Oswald, 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 Securities and Exchange Commission (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 "Ongoing Relationships with Portfolio Companies – Managerial Assistance"). The Administration Agreement may be terminated by either party without penalty upon 60 days' written notice to the other party. Prospect Administration is a subsidiary of the Investment Adviser. During the years ended June 30, 2014, 2013 and 2012, Prospect Administration received payments of $7.6 million, $1.4 million and $1.1 million directly from our controlled portfolio companies for legal, tax and portfolio level accounting services. 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. We reimbursed Prospect Administration $14.4 million , $8.7 million and $6.8 million for the years ended June 30, 2014 , 2013 and 2012 , respectively, for services it provided to us at cost. Payment of Our Expenses All investment professionals of the Investment Adviser and its respective staff, when and to the extent engaged in providing investment advisory and management services, and the compensation and routine overhead expenses of such personnel allocable to such services, will be provided and paid for by the Investment Adviser. We bear all other costs and expenses of our operations and transactions, including those relating to: organization and offering; calculation of our net asset value (including the cost and expenses of any independent valuation firm); expenses incurred by Prospect Capital Management payable to third parties, including agents, consultants or other advisers (such as independent valuation firms, accountants and legal counsel), in monitoring our financial and legal affairs and in monitoring our investments and performing due diligence on our prospective portfolio companies; interest payable on debt, if any, and dividends payable on preferred stock, if any, incurred to finance our investments; offerings of our debt, our preferred shares, our common stock and other securities; investment advisory fees; fees payable to third parties, including agents, consultants or other advisors, relating to, or associated with, evaluating and making investments; transfer agent 11 and custodial fees; registration fees; listing fees; taxes; independent directors' fees and expenses; costs of preparing and filing reports or other documents with the SEC; the costs of any reports, proxy statements or other notices to stockholders, including printing costs; our allocable portion of the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums; direct costs and expenses of administration, including auditor and legal costs; and all other expenses incurred by us, by the Investment Adviser or by Prospect Administration in connection with administering our business, such as our allocable portion of overhead under the Administration Agreement, including rent and our allocable portion of the costs of our Chief Financial Officer and Chief Compliance Officer and their respective staffs under the sub-administration agreement, as further described below. License Agreement We entered into a license agreement with Prospect Capital Management pursuant to which Prospect Capital Management agreed to grant us a non-exclusive, royalty free license to use the name "Prospect Capital." Under this agreement, we have a right to use the Prospect Capital name, for so long as Prospect Capital Management or one of its affiliates remains the Investment Adviser. Other than with respect to this limited license, we have no legal right to the Prospect Capital name. This license agreement will remain in effect for so long as the Investment Advisory Agreement with the Investment Adviser is in effect. Determination of Net Asset Value The net asset value per share of our outstanding shares of common stock will be determined quarterly by dividing the value of total assets minus liabilities by the total number of shares outstanding. In calculating the value of our total assets, we will value investments for which market quotations are readily available at such market quotations. Short-term investments which mature in 60 days or less, such as U.S. Treasury bills, are valued at amortized cost, which approximates market value. The amortized cost method involves recording a security at its cost (i.e., principal amount plus any premium and less any discount) on the date of purchase and thereafter amortizing/accreting that difference between the principal amount due at maturity and cost assuming a constant yield to maturity as determined at the time of purchase. Short-term securities which mature in more than 60 days are valued at current market quotations by an independent pricing service or at the mean between the bid and ask prices obtained from at least two brokers or dealers (if available, or otherwise by a principal market maker or a primary market dealer). Investments in money market mutual funds are valued at their net asset value as of the close of business on the day of valuation. Most of the investments in our portfolio do not have market quotations which are readily available, meaning the investments do not have actively traded markets. Debt and equity securities for which market quotations are not readily available are valued with the assistance of an independent valuation service using a documented valuation policy and a valuation process that is consistently applied under the direction of our Board of Directors. For a discussion of the risks inherent in determining the value of securities for which readily available market values do not exist, see "Risk Factors – Risks Relating to Our Business – Most of our portfolio investments are recorded at fair value as determined in good faith under the direction of our Board of Directors and, as a result, there is uncertainty as to the value of our portfolio investments." The factors that may be taken into account in valuing such investments include, as relevant, the portfolio company's ability to make payments, its estimated earnings and projected discounted cash flows, the nature and realizable value of any collateral, the financial environment in which the portfolio company operates, comparisons to securities of similar publicly traded companies, changes in interest rates for similar debt instruments and other relevant factors. Due to the inherent uncertainty of determining the fair value of investments that do not have readily available market quotations, the fair value of these investments may differ significantly from the values that would have been used had such market quotations existed for such investments, and any such differences could be material. As part of the fair valuation process, the independent valuation firms engaged by the Board of Directors perform a review of each debt and equity investment requiring fair valuation and provide a range of values for each investment, which, along with management's valuation recommendations, is reviewed by our Audit Committee. Management and the independent valuation firms may adjust their preliminary evaluations to reflect comments provided by our Audit Committee. The Audit Committee reviews the final valuation reports and management's valuation recommendations and makes a recommendation to the Board of Directors based on its analysis of the methodologies employed and the various weights that should be accorded to each portion of the valuation as well as factors that the independent valuation firms and management may not have included in their evaluation processes. The Board of Directors then evaluates the Audit Committee recommendations and undertakes a similar analysis to determine the fair value of each investment in the portfolio in good faith. 12 Determination of fair values involves subjective judgments and estimates not susceptible to substantiation by auditing procedures. Accordingly, under current accounting standards, the notes to our financial statements will refer to the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements. Dividend Reinvestment Plan We have adopted a dividend reinvestment plan that provides for reinvestment of our distributions on behalf of our stockholders, unless a stockholder elects to receive cash as provided below. As a result, when our Board of Directors authorizes, and we declare, a cash dividend, then our stockholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. No action is required on the part of a registered stockholder to have their cash dividend reinvested in shares of our common stock. A registered stockholder may elect to receive an entire dividend in cash by notifying the plan administrator and our transfer agent and registrar, in writing so that such notice is received by the plan administrator no later than the record date for dividends to stockholders. The plan administrator sets up an account for shares acquired through the plan for each stockholder who has not elected to receive dividends in cash and hold such shares in non-certificated form. Upon request by a stockholder participating in the plan, the plan administrator will, instead of crediting shares to the participant's account, issue a certificate registered in the participant's name for the number of whole shares of our common stock and a check for any fractional share. Such request by a stockholder must be received three days prior to the dividend payable date in order for that dividend to be paid in cash. If such request is received less than three days prior to the dividend payable date, then the dividends are reinvested and shares are repurchased for the stockholder's account; however, future dividends are paid out in cash on all balances. Those stockholders whose shares are held by a broker or other financial intermediary may receive dividends in cash by notifying their broker or other financial intermediary of their election. We primarily use newly-issued shares to implement the plan, whether our shares are trading at a premium or at a discount to net asset value. However, we reserve the right to purchase shares in the open market in connection with the implementation of the plan. The number of shares to be issued to a stockholder is determined by dividing the total dollar amount of the dividend payable to such stockholder by the market price per share of our common stock at the close of regular trading on the NASDAQ Global Select Market on the last business day before the payment date for such dividend. Market price per share on that date will be the closing price for such shares on the NASDAQ Global Select Market or, if no sale is reported for such day, at the average of their reported bid and asked prices. The number of shares of our common stock to be outstanding after giving effect to payment of the dividend cannot be established until the value per share at which additional shares will be issued has been determined and elections of our stockholders have been tabulated. Stockholders who do not elect to receive dividends in shares of common stock may experience accretion to the net asset value of their shares if our shares are trading at a premium at the time we issue new shares under the plan and dilution if our shares are trading at a discount. The level of accretion or discount would depend on various factors, including the proportion of our stockholders who participate in the plan, the level of premium or discount at which our shares are trading and the amount of the dividend payable to a stockholder. There are no brokerage charges or other charges to stockholders who participate in the plan. The plan administrator's fees under the plan are paid by us. If a participant elects by written notice to the plan administrator to have the plan administrator sell part or all of the shares held by the plan administrator in the participant's account and remit the proceeds to the participant, the plan administrator is authorized to deduct a $15 transaction fee plus a $0.10 per share brokerage commissions from the proceeds. Stockholders who receive dividends in the form of stock are subject to the same U.S. federal, state and local tax consequences as are stockholders who elect to receive their dividends in cash. A stockholder's basis for determining gain or loss upon the sale of stock received in a dividend from us will be equal to the total dollar amount of the dividend payable to the stockholder. Any stock received in a dividend will have a new holding period for tax purposes commencing on the day following the day on which the shares are credited to the U.S. Stockholder's account (as defined below). Participants may terminate their accounts under the plan by notifying the plan administrator via its website at www.amstock.com or by filling out the transaction request form located at the bottom of their statement and sending it to the plan administrator at American Stock Transfer & Trust Company, P.O. Box 922, Wall Street Station, New York, NY 10269-0560 or by calling the plan administrator's Interactive Voice Response System at (888) 888-0313. The plan may be terminated by us upon notice in writing mailed to each participant at least 30 days prior to any payable date for the payment of any dividend by us. All correspondence concerning the plan should be directed to the plan administrator by mail at American Stock Transfer & Trust Company, 59 Maiden Lane, New York, NY 10007 or by telephone at (718) 921-8200. 13 Stockholders who purchased their shares through or hold their shares in the name of a broker or financial institution should consult with a representative of their broker or financial institution with respect to their participation in our dividend reinvestment plan. Such holders of our stock may not be identified as our registered stockholders with the plan administrator and may not automatically have their cash dividend reinvested in shares of our common stock by the administrator. Material U.S. Federal Income Tax Considerations The following discussion is a general summary of the material U.S. federal income tax considerations applicable to us and to an investment in our shares. This summary does not purport to be a complete description of the income tax considerations applicable to us or our investors on such an investment. For example, we have not described tax consequences that we assume to be generally known by investors or certain considerations that may be relevant to certain types of holders subject to special treatment under U.S. federal income tax laws, including stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities, pension plans and trusts, financial institutions, U.S. Stockholders (as defined below) whose functional currency is not the U.S. dollar, persons who mark-to-market our shares and persons who hold our shares as part of a "straddle," "hedge" or "conversion" transaction. This summary assumes that investors hold our common stock as capital assets (within the meaning of the Code). The discussion is based upon the Code, Treasury regulations, and administrative and judicial interpretations, each as of the date of this report and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion. This summary does not discuss any aspects of U.S. estate or gift tax or foreign, state or local tax. It does not discuss the special treatment under U.S. federal income tax laws that could result if we invested in tax-exempt securities or certain other investment assets. A "U.S. Stockholder" is a beneficial owner of shares of our common stock that is for U.S. federal income tax purposes: • A citizen or individual resident of the United States; • A corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia; • An estate, the income of which is subject to U.S. federal income taxation regardless of its source; or • A trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person. A "Non-U.S. Stockholder" is a beneficial owner of shares of our common stock that is not a partnership and is not a U.S. Stockholder. If a partnership (including an entity treated as a partnership for U.S. federal income tax purposes) holds shares of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. A prospective stockholder that is a partner of a partnership holding shares of our common stock should consult its tax advisor with respect to the purchase, ownership and disposition of shares of our common stock. Tax matters are very complicated and the tax consequences to an investor of an investment in our shares will depend on the facts of his, her or its particular situation. We encourage investors to consult their own tax advisors regarding the specific consequences of such an investment, including tax reporting requirements, the applicability of U.S. federal, state, local and foreign tax laws, eligibility for the benefits of any applicable tax treaty and the effect of any possible changes in the tax laws. Election to be Taxed as a RIC As a business development company, we have elected and intend to continue to qualify to be treated as a RIC under Subchapter M of the Code. As a RIC, we generally are not subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute to our stockholders as dividends. To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to obtain RIC tax treatment, we must distribute to our stockholders, for each taxable year, at least 90% of our "investment company taxable income," which is generally our ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses (the "Annual Distribution Requirement"). 14 Taxation as a RIC In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things: • Qualify to be treated as a business development company or be registered as a management investment company under the 1940 Act at all times during each taxable year; • Derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to certain securities loans, gains from the sale or other disposition of stock or other securities or currencies or other income derived with respect to our business of investing in such stock, securities or currencies and net income derived from an interest in a "qualified publicly traded partnership" (as defined in the Code) (the "90% Income Test"); and • Diversify our holdings so that at the end of each quarter of the taxable year: ◦ At least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities of a "qualified publicly traded partnership"); and ◦ No more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, (i) of one issuer (ii) of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) of one or more "qualified publicly traded partnerships," (the "Diversification Tests"). To the extent that we invest in entities treated as partnerships for U.S. federal income tax purposes (other than a "qualified publicly traded partnership"), we generally must include the items of gross income derived by the partnerships for purposes of the 90% Income Test, and the income that is derived from a partnership (other than a "qualified publicly traded partnership") will be treated as qualifying income for purposes of the 90% Income Test only to the extent that such income is attributable to items of income of the partnership which would be qualifying income if realized by us directly. In addition, we generally must take into account our proportionate share of the assets held by partnerships (other than a "qualified publicly traded partnership") in which we are a partner for purposes of the Diversification Tests. If the partnership is a "qualified publicly traded partnership," the net income derived from such partnership will be qualifying income for purposes of the 90% Income Test, and interests in the partnership will be "securities" for purposes of the Diversification Tests. We monitor our investments in equity securities of entities that are treated as partnerships for U.S. federal income tax purposes to prevent our disqualification as a RIC. In order to meet the 90% Income Test, we may establish one or more special purpose corporations to hold assets from which we do not anticipate earning dividend, interest or other qualifying income under the 90% Income Test. Any such special purpose corporation would generally be subject to U.S. federal income tax, and could result in a reduced after-tax yield on the portion of our assets held by such corporation. Provided that we qualify as a RIC and satisfy the Annual Distribution Requirement, we will not be subject to U.S. federal income tax on the portion of our investment company taxable income and net capital gain (which we define as net long-term capital gains in excess of net short- term capital losses) we timely distribute to stockholders. We will be subject to U.S. federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to our stockholders. We will be subject to a 4% non-deductible U.S. federal excise tax on certain undistributed income of RICs unless we distribute in a timely manner an amount at least equal to the sum of (i) 98% of our ordinary income recognized during the calendar year, (ii) 98.2% of our capital gain net income, as defined by the Code, recognized for the one year period ending October 31 in that calendar year and (iii) any income recognized, but not distributed, in preceding years. We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold debt obligations that are treated under applicable tax rules as having original issue discount, we must include in income each year a portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. Because any original issue discount accrued will be included in our investment company taxable income for the year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount. Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant. As a RIC, we are not allowed to carry forward or carry back a net operating loss for purposes of computing our investment company taxable income in other taxable years. 15 Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain "asset coverage" tests are met. See "Regulation as a Business Development Company – Senior Securities." Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or to avoid the excise tax, we may make such dispositions at times that, from an investment standpoint, are not advantageous. On June 26, 2014, we received a private letter ruling from the Internal Revenue Service (the "IRS") permitting us to pay up to 80% of our required dividends in stock for the tax years ending August 31, 2014 and August 31, 2015. Any dividends paid in stock will be taxable to the shareholder as if the dividend had been paid in cash and we will receive a dividend paid deduction for such distribution. 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 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 distributees 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 reduced by an interest charge on 50% of such earnings and profits payable by us as an additional tax. 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. Certain of our investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things, (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions, (ii) convert lower taxed long-term capital gain and qualified dividend income into higher taxed short-term capital gain or ordinary income, (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited), (iv) cause us to recognize income or gain without a corresponding receipt of cash, (v) adversely affect the time as to when a purchase or sale of stock or securities is deemed to occur, (vi) adversely alter the characterization of certain complex financial transactions, and (vii) produce income that will not be qualifying income for purposes of the 90% Income Test. We will monitor our transactions and may make certain tax elections in order to mitigate the effect of these provisions. We may invest in preferred securities or other securities the U.S. federal income tax treatment of which may be unclear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the expected tax treatment, it could affect the timing or character of income recognized, requiring us to purchase or sell securities, or otherwise change our portfolio, in order to comply with the tax rules applicable to RICs under the Code. Taxation of U.S. Stockholders Distributions by us generally are taxable to U.S. Stockholders as ordinary income or capital gains. Distributions of our "investment company taxable income" (which is, generally, our ordinary income plus realized net short-term capital gains in excess of realized net long-term capital losses) will be taxable as ordinary income to U.S. Stockholders to the extent of our current or accumulated earnings and profits, whether paid in cash or reinvested in additional common stock. Provided that certain holding period and other requirements are met, such distributions (if designated by us) may qualify (i) for the dividends received deduction available to corporations, but only to the extent that our income consists of dividend income from U.S. corporations and (ii) in the case of individual shareholders, as qualified dividend income eligible to be taxed at long-term capital gain rates to the extent that we receive qualified dividend income (generally, dividend income from taxable domestic corporations and certain qualified foreign corporations). There can be no assurance as to what portion, if any, of our distributions will qualify for favorable treatment as qualified dividend income. Distributions of our net capital gain (which is generally our realized net long-term capital gains in excess of realized net short-term capital losses) properly designated by us as "capital gain dividends" will be taxable to a U.S. Stockholder as long-term capital gains, regardless of the U.S. Stockholder's holding period for its common stock and regardless of whether paid in cash or reinvested in additional common stock. Distributions in excess of our current and accumulated earnings and profits first will reduce a U.S. Stockholder's adjusted tax basis in such stockholder's common stock and, after the adjusted basis is reduced to zero, will constitute capital gains to such U.S. Stockholder. 16 Although we currently intend to distribute any long-term capital gains at least annually, we may in the future decide to retain some or all of our long-term capital gains, and designate the retained amount as a "deemed distribution." In that case, among other consequences, we will pay tax on the retained amount, each U.S. Stockholder will be required to include his, her or its proportionate share of the deemed distribution in income as if it had been actually distributed to the U.S. Stockholder, and the U.S. Stockholder will be entitled to claim a credit equal to its allocable share of the tax paid thereon by us. The amount of the deemed distribution net of such tax will be added to the U.S. Stockholder's tax basis for his, her or its common stock. Since we expect to pay tax on any retained capital gains at our regular corporate tax rate, and since that rate is in excess of the maximum rate currently payable by individuals on long-term capital gains, the amount of tax that individual stockholders will be treated as having paid and for which they will receive a credit will exceed the tax they owe on the retained net capital gain. Such excess generally may be claimed as a credit against the U.S. Stockholder's other U.S. federal income tax obligations or may be refunded to the extent it exceeds a stockholder's liability for U.S. federal income tax. A stockholder that is not subject to U.S. federal income tax or otherwise required to file a U.S. federal income tax return would be required to file a U.S. federal income tax return on the appropriate form in order to claim a refund for the taxes we paid. In order to utilize the deemed distribution approach, we must provide written notice to our stockholders prior to the expiration of 60 days after the close of the relevant taxable year. We cannot treat any of our investment company taxable income as a "deemed distribution." For purposes of determining (1) whether the Annual Distribution Requirement is satisfied for any year and (2) the amount of capital gain dividends paid for that year, we may, under certain circumstances, elect to treat a dividend that is paid during the following taxable year as if it had been paid during the taxable year in question. If we make such an election, the U.S. Stockholder will still be treated as receiving the dividend in the taxable year in which the distribution is made. However, any dividend declared by us in October, November or December of any calendar year, payable to stockholders of record on a specified date in any such month and actually paid during January of the following year, will be treated as if it had been received by our U.S. Stockholders on December 31 of the year in which the dividend was declared. If a U.S. Stockholder purchases shares of our common stock shortly before the record date of a distribution, the price of the shares will include the value of the distribution and the investor will be subject to tax on the distribution even though it represents a return of its investment. A U.S. Stockholder generally will recognize taxable gain or loss if such U.S. Stockholder sells or otherwise disposes of its shares of our common stock. Any gain or loss arising from such sale or taxable disposition generally will be treated as long-term capital gain or loss if the U.S. Stockholder has held his, her or its shares for more than one year. Otherwise, it would be classified as short-term capital gain or loss. However, any capital loss arising from the sale or taxable disposition of shares of our common stock held for six months or less will be treated as long-term capital loss to the extent of the amount of capital gain dividends received, or undistributed capital gain deemed received, with respect to such shares. In addition, all or a portion of any loss recognized upon a taxable disposition of shares of our common stock may be disallowed if other substantially identical shares are purchased (whether through reinvestment of distributions or otherwise) within 30 days before or after the disposition. Capital losses are deductible only to the extent of capital gains (subject to an exception for individuals under which a limited amount of capital losses may be offset against ordinary income). In general, individual U.S. Stockholders currently are subject to a preferential rate on their net capital gain, or the excess of realized net long- term capital gain over realized net short-term capital loss for a taxable year, including long-term capital gain derived from an investment in our shares. Such rate is lower than the maximum rate on ordinary income currently payable by individuals. Corporate U.S. Stockholders currently are subject to U.S. federal income tax on net capital gain at ordinary income rates. Certain U.S. Stockholders who are individuals, estates or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare tax on all or a portion of their "net investment income," which includes dividends received from us and capital gains from the sale or other disposition of our stock. We will make available to each of our U.S. Stockholders, as promptly as possible after the end of each calendar year, a notice detailing, on a per share basis, the amounts includible in such U.S. Stockholder's taxable income for such year as ordinary income and as long-term capital gain. In addition, the amount and the U.S. federal tax status of each year's distributions generally will be reported to the IRS. Distributions may also be subject to additional state, local and foreign taxes depending on a U.S. Stockholder's particular situation. 17 Payments of dividends, including deemed payments of constructive dividends, or the proceeds of the sale or other taxable disposition of our common stock generally are subject to information reporting unless the U.S. Stockholder is an exempt recipient. Such payments may also be subject to U.S. federal backup withholding at the applicable rate if the recipient of such payment fails to supply a taxpayer identification number and otherwise comply with the rules for establishing an exemption from backup withholding. Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules generally will be allowed as a refund or credit against the holder's U.S. federal income tax liability, provided that certain information is provided timely to the IRS. Taxation of Non-U.S. Stockholders Whether an investment in our common stock is appropriate for a Non-U.S. Stockholder will depend upon that person's particular circumstances. An investment in our common stock by a Non-U.S. Stockholder may have adverse tax consequences. Non-U.S. Stockholders should consult their tax advisers before investing in our common stock. Distributions of our "investment company taxable income" to Non-U.S. Stockholders that are not "effectively connected" with a U.S. trade or business conducted by the Non-U.S. Stockholder, will generally be subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate) to the extent of our current and accumulated earnings and profits. For our taxable years beginning before January 1, 2014 (and, if extended as has happened in the past, for taxable years covered by such extension), properly reported distributions to Non-U.S. Stockholders are generally exempt from U.S. federal withholding tax where they (i) are paid in respect of our "qualified net interest income" (generally, our U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we are at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii) are paid in respect of our "qualified short-term capital gains" (generally, the excess of our net short-term capital gain over our long-term capital loss for such taxable year). There can be no assurance as to whether this provision will be extended. In addition, depending on our circumstances, we may report all, some or none of our potentially eligible dividends as such qualified net interest income or as qualified short-term capital gains, and/or treat such dividends, in whole or in part, as ineligible for this exemption from withholding. In order to qualify for this exemption from withholding, a Non-U.S. Stockholder needs to comply with applicable certification requirements relating to its non-U.S. status (including, in general, furnishing an IRS Form W-8BEN or substitute form). In the case of shares held through an intermediary, the intermediary may withhold even if we report the payment as qualified net interest income or qualified short-term capital gain. Non-U.S. Stockholders should contact their intermediaries with respect to the application of these rules to their accounts. There can be no assurance as to what portion of our distributions will qualify for favorable treatment as qualified net interest income or qualified short-term capital gains. Actual or deemed distributions of our net capital gain to a Non-U.S. Stockholder, and gains recognized by a Non-U.S. Stockholder upon the sale of our common stock, that are not effectively connected with a U.S. trade or business conducted by the Non-U.S. Stockholder, will generally not be subject to U.S. federal withholding tax and generally will not be subject to U.S. federal income tax unless the Non-U.S. Stockholder is a nonresident alien individual and is physically present in the United States for 183 or more days during the taxable year and meets certain other requirements. Distributions of our "investment company taxable income" and net capital gain (including deemed distributions) to Non-U.S. Stockholders, and gains realized by Non-U.S. Stockholders upon the sale of our common stock that are effectively connected with a U.S. trade or business conducted by the Non-U.S. Stockholder, will be subject to U.S. federal income tax at the graduated rates applicable to U.S. citizens, residents and domestic corporations. In addition, if such Non-U.S. Stockholder is a foreign corporation, it may also be subject to a 30% (or lower applicable treaty rate) branch profits tax on its effectively connected earnings and profits for the taxable year, subject to adjustments, if its investment in our common stock is effectively connected with its conduct of a U.S. trade or business. If we distribute our net capital gain in the form of deemed rather than actual distributions (which we may do in the future), a Non-U.S. Stockholder will be entitled to a U.S. federal income tax credit or tax refund equal to the stockholder's allocable share of the tax we pay on the capital gains deemed to have been distributed. In order to obtain the refund, the Non-U.S. Stockholder must obtain a U.S. taxpayer identification number and file a U.S. federal income tax return even if the Non-U.S. Stockholder would not otherwise be required to obtain a U.S. taxpayer identification number or file a U.S. federal income tax return. In addition, after June 30, 2014, withholding at a rate of 30% will be required on dividends in respect of, and after December 31, 2016, withholding at a rate of 30% will be required on gross proceeds from the sale of, shares of our stock held by or through certain foreign financial institutions (including investment funds), unless such institution enters into an agreement with the Secretary of the Treasury to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution to the extent such interests or accounts are held by certain U.S. persons or by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments. Accordingly, the entity through which our shares are held will affect 18 the determination of whether such withholding is required. An intergovernmental agreement between the United States and an applicable foreign country, or future Treasury regulations or other guidance, may modify these requirements. Similarly, dividends in respect of, and gross proceeds from the sale of, our shares held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exemptions will be subject to withholding at a rate of 30%, unless such entity either (i) certifies to us that such entity does not have any "substantial United States owners" or (ii) provides certain information regarding the entity's "substantial United States owners," which we will in turn provide to the IRS. We will not pay any additional amounts to stockholders in respect of any amounts withheld. Non-U.S. Stockholders are encouraged to consult their tax advisors regarding the possible implications of the legislation on their investment in our shares. A Non-U.S. Stockholder generally will be required to comply with certain certification procedures to establish that such holder is not a U.S. person in order to avoid backup withholding with respect to payments of dividends, including deemed payments of constructive dividends, or the proceeds of a disposition of our common stock. In addition, we are required to annually report to the IRS and each Non-U.S. Stockholder the amount of any dividends or constructive dividends treated as paid to such Non-U.S. Stockholder, regardless of whether any tax was actually withheld. Copies of the information returns reporting such dividend or constructive dividend payments and the amount withheld may also be made available to the tax authorities in the country in which a Non-U.S. Stockholder resides under the provisions of an applicable income tax treaty. Backup withholding is not an additional tax, and any amounts withheld under the backup withholding rules generally will be allowed as a refund or credit against a Non-U.S. Stockholder's U.S. federal income tax liability, if any, provided that certain required information is provided timely to the IRS. Non-U.S. persons should consult their tax advisors with respect to the U.S. federal income tax and withholding tax, and state, local and foreign tax consequences of an investment in our common stock. Failure to Obtain RIC Tax Treatment If we were unable to obtain tax treatment as a RIC, we would be subject to tax on all of our taxable income at regular corporate rates. We would not be able to deduct distributions to stockholders, nor would they be required to be made. Distributions would generally be taxable to our stockholders as ordinary dividend income eligible for the reduced maximum rate applicable for qualified dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, corporate distributees would be eligible for the dividends-received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder's tax basis, and any remaining distributions would be treated as a capital gain. The discussion set forth herein does not constitute tax advice, and potential investors should consult their own tax advisors concerning the tax considerations relevant to their particular situation. Regulation as a Business Development Company General We are a closed-end, non-diversified investment company that has filed an election to be treated as a BDC under the 1940 Act and has elected to be treated as a RIC under Subchapter M of the Code. The 1940 Act contains prohibitions and restrictions relating to transactions between business development companies and their affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than "interested persons," as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a business development company unless approved by a majority of our outstanding voting securities. We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an "underwriter" as that term is defined in the Securities Act of 1933. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of our portfolio companies, except that we may enter into hedging transactions to manage the risks associated with interest rate and other market fluctuations. However, in connection with an investment or acquisition financing of a portfolio company, we may purchase or otherwise receive warrants to purchase the common stock of the portfolio company. Similarly, in connection with an acquisition, we may acquire rights to require the issuers of acquired securities or their affiliates to repurchase them under certain circumstances. We also do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act. Under these limits, except with respect to money market funds, we generally cannot acquire more than 3% of the voting stock of any regulated investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of more than one 19 investment company. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments subject our stockholders indirectly to additional expenses. None of these policies are fundamental and may be changed without stockholder approval. Qualifying Assets Under the 1940 Act, a business development company may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company's total assets. The principal categories of qualifying assets relevant to our business are the following: 1. Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An "eligible portfolio company" is defined in the 1940 Act and rules adopted pursuant thereto as any issuer which: a. is organized under the laws of, and has its principal place of business in, the United States; b. is not an investment company (other than a small business investment company wholly owned by the business development company) or a company that would be an investment company but for certain exclusions under the 1940 Act for certain financial companies such as banks, brokers, commercial finance companies, mortgage companies and insurance companies; and c. satisfies any of the following: i. does not have any class of securities with respect to which a broker or dealer may extend margin credit; ii. is controlled by a business development company or a group of companies including a business development company and the business development company has an affiliated person who is a director of the eligible portfolio company; iii. is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million; iv. does not have any class of securities listed on a national securities exchange; or v. has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million. 2. Securities in companies that were eligible portfolio companies when we made our initial investment if certain other requirements are satisfied. 3. Securities of any eligible portfolio company which we control. 4. Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing agreements. 5. Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company. 6. Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. 7. Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment. In addition, a business development company must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2), (3) or (4) above. 20 Managerial Assistance to Portfolio Companies In order to count portfolio securities as qualifying assets for the purpose of the 70% test, a business development company must either control the issuer of the securities or must offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the business development company purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such 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 will vary according to the particular needs of each portfolio company. Examples of such activities include advice on marketing, operations, fulfillment and overall strategy, capital budgeting, managing relationships with financing sources, recruiting management personnel, evaluating acquisition and divestiture opportunities, participating in board and management meetings, consulting with and advising officers of portfolio companies, and providing other organizational and financial guidance. We provide significant managerial assistance to all portfolio companies that we control, either by ourselves or in conjunction with others. Prospect Administration provides such managerial assistance on our behalf to portfolio companies, including controlled companies, when we are required to provide this assistance, utilizing personnel from Prospect Capital Management. Temporary Investments Pending investment in other types of "qualifying assets," as described above, our investments may consist of cash, cash equivalents, including money market funds, U.S. government securities or high quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. Typically, we will invest in money market funds, U.S. Treasury bills or in repurchase agreements that are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed- upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we would not meet the Diversification Tests in order to qualify as a RIC for U.S. federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. The Investment Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions. Senior Securities We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while any preferred stock or public debt securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios after giving effect to such distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. For a discussion of the risks associated with leverage, see "Risk Factors – Risks Relating to Our Securities." Code of Ethics We, Prospect Capital Management and Prospect Administration have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code's requirements. For information on how to obtain a copy of each code of ethics, see "Available Information." Compliance Policies and Procedures We and the Investment Adviser have adopted and implemented written policies and procedures reasonably designed to prevent violation of the U.S. federal securities laws and are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and to designate a Chief Compliance Officer to be responsible for administering the policies and procedures. Brian H. Oswald serves as our Chief Compliance Officer. 21 Proxy Voting Policies and Procedures We have delegated our proxy voting responsibility to Prospect Capital Management. The Proxy Voting Policies and Procedures of Prospect Capital Management are set forth below. The guidelines are reviewed periodically by Prospect Capital Management and our independent directors, and, accordingly, are subject to change. Introduction. As an investment adviser registered under the Advisers Act, Prospect Capital Management has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, Prospect Capital Management recognizes that it must vote client securities in a timely manner free of conflicts of interest and in the best interests of its clients. These policies and procedures for voting proxies for Prospect Capital Management's Investment Advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act. Proxy policies. These policies are designed to be responsive to the wide range of subjects that may be the subject of a proxy vote. These policies are not exhaustive due to the variety of proxy voting issues that Prospect Capital Management may be required to consider. In general, Prospect Capital Management will vote proxies in accordance with these guidelines unless: (1) Prospect Capital Management has determined to consider the matter on a case-by-case basis (as is stated in these guidelines), (2) the subject matter of the vote is not covered by these guidelines, (3) a material conflict of interest is present, or (4) Prospect Capital Management might find it necessary to vote contrary to its general guidelines to maximize stockholder value and vote in its clients' best interests. In such cases, a decision on how to vote will be made by the Proxy Voting Committee (as described below). In reviewing proxy issues, Prospect Capital Management will apply the following general policies: Elections of directors. In general, Prospect Capital Management will vote in favor of the management-proposed slate of directors. If there is a proxy fight for seats on the Board of Directors or Prospect Capital Management determines that there are other compelling reasons for withholding votes for directors, the Proxy Voting Committee will determine the appropriate vote on the matter. Prospect Capital Management believes that directors have a duty to respond to stockholder actions that have received significant stockholder support. Prospect Capital Management may withhold votes for directors that fail to act on key issues such as failure to implement proposals to declassify boards, failure to implement a majority vote requirement, failure to submit a rights plan to a stockholder vote and failure to act on tender offers where a majority of stockholders have tendered their shares. Finally, Prospect Capital Management may withhold votes for directors of non-U.S. issuers where there is insufficient information about the nominees disclosed in the proxy statement. Appointment of auditors. Prospect Capital Management believes that the company remains in the best position to choose the auditors and will generally support management's recommendation. Changes in capital structure. Changes in a company's charter, articles of incorporation or by-laws may be required by state or U.S. federal regulation. In general, Prospect Capital Management will cast its votes in accordance with the company's management on such proposal. However, the Proxy Voting Committee will review and analyze on a case-by-case basis any proposals regarding changes in corporate structure that are not required by state or U.S. federal regulation. Corporate restructurings, mergers and acquisitions. Prospect Capital Management believes proxy votes dealing with corporate reorganizations are an extension of the investment decision. Accordingly, the Proxy Voting Committee will analyze such proposals on a case-by- case basis. Proposals affecting the rights of stockholders. Prospect Capital Management will generally vote in favor of proposals that give stockholders a greater voice in the affairs of the company and oppose any measure that seeks to limit those rights. However, when analyzing such proposals, Prospect Capital Management will weigh the financial impact of the proposal against the impairment of the rights of stockholders. Corporate governance. Prospect Capital Management recognizes the importance of good corporate governance in ensuring that management and the Board of Directors fulfill their obligations to the stockholders. Prospect Capital Management favors proposals promoting transparency and accountability within a company. Anti-takeover measures. The Proxy Voting Committee will evaluate, on a case-by-case basis, proposals regarding anti-takeover measures to determine the measure's likely effect on stockholder value dilution. Stock splits. Prospect Capital Management will generally vote with the management of the company on stock split matters. Limited liability of directors. Prospect Capital Management will generally vote with management on matters that would affect the limited liability of directors. 22 Social and corporate responsibility. The Proxy Voting Committee may review and analyze on a case-by-case basis proposals relating to social, political and environmental issues to determine whether they will have a financial impact on stockholder value. Prospect Capital Management may abstain from voting on social proposals that do not have a readily determinable financial impact on stockholder value. Proxy voting procedures. Prospect Capital Management will generally vote proxies in accordance with these guidelines. In circumstances in which (1) Prospect Capital Management has determined to consider the matter on a case-by-case basis (as is stated in these guidelines), (2) the subject matter of the vote is not covered by these guidelines, (3) a material conflict of interest is present, or (4) Prospect Capital Management might find it necessary to vote contrary to its general guidelines to maximize stockholder value and vote in its clients' best interests, the Proxy Voting Committee will vote the proxy. Proxy voting committee. Prospect Capital Management has formed a proxy voting committee to establish general proxy policies and consider specific proxy voting matters as necessary. In addition, members of the committee may contact the management of the company and interested stockholder groups as necessary to discuss proxy issues. Members of the committee will include relevant senior personnel. The committee may also evaluate proxies where we face a potential conflict of interest (as discussed below). Finally, the committee monitors adherence to guidelines, and reviews the policies contained in this statement from time to time. Conflicts of interest. Prospect Capital Management recognizes that there may be a potential conflict of interest when it votes a proxy solicited by an issuer that is its advisory client or a client or customer of one of our affiliates or with whom it has another business or personal relationship that may affect how it votes on the issuer's proxy. Prospect Capital Management believes that adherence to these policies and procedures ensures that proxies are voted with only its clients' best interests in mind. To ensure that its votes are not the product of a conflict of interests, Prospect Capital Management requires that: (i) anyone involved in the decision making process (including members of the Proxy Voting Committee) disclose to the chairman of the Proxy Voting Committee any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how Prospect Capital Management intends to vote on a proposal in order to reduce any attempted influence from interested parties. Proxy voting. Each account's custodian will forward all relevant proxy materials to Prospect Capital Management, either electronically or in physical form to the address of record that Prospect Capital Management has provided to the custodian. Proxy recordkeeping. Prospect Capital Management must retain the following documents pertaining to proxy voting: • copies of its proxy voting policies and procedures; • copies of all proxy statements; • records of all votes cast by Prospect Capital Management; • • copies of all documents created by Prospect Capital Management that were material to making a decision how to vote proxies or that memorializes the basis for that decision; and copies of all written client requests for information with regard to how Prospect Capital Management voted proxies on behalf of the client as well as any written responses provided. All of the above-referenced records will be maintained and preserved for a period of not less than five years from the end of the fiscal year during which the last entry was made. The first two years of records must be maintained at our office. Proxy voting records. Clients may obtain information about how Prospect Capital Management voted proxies on their behalf by making a written request for proxy voting information to: Compliance Officer, Prospect Capital Management LLC, 10 East 40th Street, 42nd Floor, New York, NY 10016. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act of 2002 imposes a variety of regulatory requirements on publicly-held companies. In addition to our Chief Executive and Chief Financial Officers' required certifications as to the accuracy of our financial reporting, we are also required to disclose the effectiveness of our disclosure controls and procedures as well as report on our assessment of our internal controls over financial reporting, the latter of which must be audited by our independent registered public accounting firm. The Sarbanes-Oxley Act of 2002 also requires us to continually review our policies and procedures to ensure that we remain in compliance with all rules promulgated thereunder. 23 Available Information We file with or submit to the SEC annual, quarterly and current periodic reports, proxy statements and other information meeting the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This information is available free of charge by contacting us at (212) 448-0702 or on our website at www.prospectstreet.com . Information contained on our website is not incorporated into this Annual Report and you should not consider such information to be part of this Annual Report. You also may inspect and copy these reports, proxy statements and other information, as well as the Annual Report and related exhibits and schedules, at the Public Reference Room of the SEC at 100 F Street NE, Washington, D.C. 20549. Such information is also available from the EDGAR database on the SEC's website at http://www.sec.gov . You also can obtain copies of such information, after paying a duplicating fee, by sending a request by e- mail to publicinfo@sec.gov or by writing the SEC's Public Reference Branch, Office of Consumer Affairs and Information Services, Securities and Exchange Commission, Washington, D.C. 20549. You may obtain information on the operation of the SEC's Public Reference Room by calling the SEC at (202) 551-8090 or (800) SEC-0330. Item 1A. Risk Factors Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before you decide whether to make an investment in our securities. The risks set forth below are not the only risks we face. If any of the adverse events or conditions described below occurs, our business, financial condition and results of operations could be materially adversely affected. In such case, our NAV, and the trading price of our common stock could decline, or the value of our preferred stock, debt securities, and warrants, if any are outstanding, may decline, and you may lose all or part of your investment. Forward-Looking Statements Our annual report on Form l0-K for the year ended June 30, 2014 , any of our quarterly reports on Form 10-Q or current reports on Form 8-K, or any other oral or written statements made in press releases or otherwise by or on behalf of Prospect Capital Corporation may contain forward- looking statements within the meaning of the Section 21E of the Exchange Act, which involve certain risks and uncertainties. Forward-looking statements predict or describe our future operations, business plans, business and investment strategies and portfolio management and the performance of our investments and our investment management business. These forward-looking statements are identified by their use of such terms and phrases as "intends," "intend," "intended," "goal," "estimate," "estimates," "expects," "expect," "expected," "project," "projected," "projections," "plans," "seeks," "anticipates," "anticipated," "should," "could," "may," "will," "designed to," "foreseeable future," "believe," "believes," "scheduled" and similar expressions. Our actual results or outcomes may differ materially from those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was 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. Our actual results may differ significantly from any results expressed or implied by these forward-looking statements. Some, but not all, of the factors that might cause such a difference include, but are not limited to: • our future operating results; • our business prospects and the prospects of our portfolio companies; • the impact of investments that we expect to make; • our contractual arrangements and relationships with third parties; • the dependence of our future success on the general economy and its impact on the industries in which we invest; • the ability of our portfolio companies to achieve their objectives; • difficulty in obtaining financing or raising capital, especially in the current credit and equity environment; • the level and volatility of prevailing interest rates and credit spreads, magnified by the current turmoil in the credit markets; • adverse developments in the availability of desirable loan and investment opportunities whether they are due to competition, regulation or otherwise; • a compression of the yield on our investments and the cost of our liabilities, as well as the level of leverage available to us; 24 • our regulatory structure and tax treatment, including our ability to operate as a business development company and a regulated investment company; • the adequacy of our cash resources and working capital; • the timing of cash flows, if any, from the operations of our portfolio companies; • the ability of the Investment Adviser to locate suitable investments for us and to monitor and administer our investments; • authoritative generally accepted accounting principles or policy changes from such standard-setting bodies as the Financial Accounting Standards Board, the Securities and Exchange Commission, Internal Revenue Service, the NASDAQ Global Select Market, and other authorities that we are subject to, as well as their counterparts in any foreign jurisdictions where we might do business; and • the risk factors set forth below. Risks Relating to Our Business Capital markets could experience a period of disruption and instability. Such market conditions have historically and could again have a material and adverse effect on debt and equity capital markets in the United States and abroad, which could have a materially negative impact on our business and operations. Global capital markets have periodically experienced periods of instability as evidenced by the extended disruptions from 2007 to 2010 in liquidity in the debt capital markets, significant losses in the principal value of investments, the re-pricing of credit risk in the markets and the failure of certain major financial institutions. Such conditions may occur for a prolonged period of time. These market conditions have historically and could again have a material adverse effect on debt and equity capital markets in the United States and Europe, which could have a materially negative impact on our business, financial condition and results of operations. We and other companies in the financial services sector may have to access, if available, alternative markets for debt and equity capital. In such circumstances, equity capital may be difficult to raise because subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than net asset value without general approval by our stockholders, which we currently have, and approval of the specific issuance by our Board of Directors. In addition, our ability to incur indebtedness or issue preferred stock is limited by applicable regulations such that our asset coverage, as defined in the 1940 Act, must equal at least 200% immediately after each time we incur indebtedness or issue preferred stock. The debt capital that may be available, if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have a negative effect on our business, financial condition and results of operations. Market conditions may in the future make it difficult to extend the maturity of or refinance our existing indebtedness, including the final maturity of our credit facility in March 2015, and any failure to do so could have a material adverse effect on our business. The illiquidity of our investments may make it difficult for us to sell such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments. Given the extreme volatility and dislocation that the capital markets have historically experienced, many BDCs have faced, and may in the future face, a challenging environment in which to raise capital. We may in the future have difficulty accessing debt and equity capital, and a severe disruption in the global financial markets or deterioration in credit and financing conditions could have a material adverse effect on our business, financial condition and results of operations. In addition, significant changes in the capital markets, including the extreme volatility and disruption, have had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business, financial condition or results of operations. The Investment Adviser does not know how long the financial markets will continue to be affected by these events and cannot predict the effects of these or similar events in the future on the United States economy and securities markets or on our investments. The Investment Adviser monitors developments and seeks to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that it will be successful in doing so; and the Investment Adviser may not timely anticipate or manage existing, new or additional risks, contingencies or developments, including regulatory developments in the current or future market environment. We are required to record certain of our assets at fair value, as determined in good faith by our Board of Directors in accordance with our valuation policy. As a result, volatility in the capital markets may have a material adverse effect on our investment valuations and our net asset value, even if we plan to hold investments to maturity. 25 Uncertainty about the financial stability of the United States and of several countries in the European Union (EU) could have a significant adverse effect on our business, financial condition and results of operations. Due to federal budget deficit concerns, S&P downgraded the federal government's credit rating from AAA to AA+ for the first time in history on August 5, 2011. Further, Moody's and Fitch have warned that they may downgrade the federal government's credit rating. Further downgrades or warnings by S&P or other rating agencies, and the United States government's credit and deficit concerns in general, including issues around the federal debt ceiling, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms. In addition, a decreased credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our financial performance and the value of our common stock. In 2010, a financial crisis emerged in Europe, triggered by high budget deficits and rising direct and contingent sovereign debt in Greece, Ireland, Italy, Portugal and Spain, which created concerns about the debt crisis in Europe or any similar crisis could have a detrimental impact on the global economic recovery, sovereign and non-sovereign debt in these countries and the financial condition of European financial institutions. Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors. We cannot assure you that market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not impact the global economy, and we cannot assure you that assistance packages will be available, or if available, be sufficient to stabilize countries and markets in Europe or elsewhere affected by a financial crisis. To the extent uncertainty regarding any economic recovery in Europe negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected. On December 18, 2013, the Federal Reserve announced that it would scale back its bond-buying program, or quantitative easing, which was designed to stimulate the economy and expand the Federal Reserve's holdings of long-term securities until key economic indicators, such as the unemployment rate, show signs of improvement. The Federal Reserve signaled it would reduce its purchases of long-term Treasury bonds and would scale back on its purchases of mortgage-backed securities. It is unclear what effect, if any, the incremental reduction in the rate of the Federal Reserve's monthly purchases will have on the value of our investments. However, it is possible that absent continued quantitative easing by the Federal Reserve, these developments, along with the United States government's federal debt ceiling issues and the European sovereign debt crisis, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms. We may suffer credit losses. Investment in small and middle-market companies is highly speculative and involves a high degree of risk of credit loss. These risks are likely to increase during volatile economic periods. See "Risks Related to Our Investments." Our financial condition and results of operations will depend on our ability to manage our future growth effectively. Prospect Capital Management has been registered as an investment adviser since March 31, 2004, and we have been organized as a closed-end investment company since April 13, 2004. Our ability to achieve our investment objective depends on our ability to grow, which depends, in turn, on the Investment Adviser's ability to continue to identify, analyze, invest in and monitor companies that meet our investment criteria. Accomplishing this result on a cost-effective basis is largely a function of the Investment Adviser's structuring of investments, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms. As we continue to grow, Prospect Capital Management will need to continue to hire, train, supervise and manage new employees. Failure to manage our future growth effectively could have a materially adverse effect on our business, financial condition and results of operations. We are dependent upon Prospect Capital Management's key management personnel for our future success. We depend on the diligence, skill and network of business contacts of the senior management of the Investment Adviser. We also depend, to a significant extent, on the Investment Adviser's access to the investment professionals and the information and deal flow generated by these investment professionals in the course of their investment and portfolio management activities. The senior management team of the Investment Adviser evaluates, negotiates, structures, closes, monitors and services our investments. Our success depends to a significant extent on the continued service of the senior management team, particularly John F. Barry III and M. Grier Eliasek. The departure of any of the senior management team could have a materially adverse effect on our ability to achieve our investment objective. In addition, we can offer no assurance that Prospect Capital Management will remain the Investment Adviser or that we will continue to have access to its investment professionals or its information and deal flow. 26 We operate in a highly competitive market for investment opportunities. A number of entities compete with us to make the types of investments that we make in middle-market companies. We compete with other BDCs, public and private funds, commercial and investment banks, commercial financing companies, insurance companies, hedge funds, and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. Some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC and that the Code imposes on us as a RIC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to pursue attractive investment opportunities from time to time. We do not seek to compete primarily based on the interest rates we offer and we believe that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. Rather, we compete with our competitors based on our existing investment platform, seasoned investment professionals, experience and focus on middle-market companies, disciplined investment philosophy, extensive industry focus and flexible transaction structuring. We may lose investment opportunities if we do not match our competitors' pricing, terms and structure. If we match our competitors' pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss. As a result of operating in such a competitive environment, we may make investments that are on less favorable terms than what we may have originally anticipated, which may impact our return on these investments. We fund a portion of our investments with borrowed money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. Borrowings and other types of financing, also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with investing in our securities. Our lenders have fixed dollar claims on our assets that are superior to the claims of our common stockholders or any preferred stockholders. If the value of our assets increases, then leveraging would cause the net asset value to increase more sharply than it would have had we not leveraged. Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged. Similarly, any increase in our income in excess of consolidated interest payable on the borrowed funds would cause our net income to increase more than it would without the leverage, while any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make common stock dividend payments. Leverage is generally considered a speculative investment technique. Changes in interest rates may affect our cost of capital and net investment income. A portion of the debt investments we make bears interest at fixed rates and other debt investments bear interest at variable rates with floors and the value of these investments could be negatively affected by increases in market interest rates. In addition, as the interest rate on our revolving credit facility is at a variable rate based on an index, an increase in interest rates would make it more expensive to use debt to finance our investments. As a result, an increase in market interest rates could both reduce the value of our portfolio investments and increase our cost of capital, which could reduce our net investment income or net increase in net assets resulting from operations. We need to raise additional capital to grow because we must distribute most of our income. We need additional capital to fund growth in our investments. A reduction in the availability of new capital could limit our ability to grow. We must distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders to maintain our status as a regulated investment company, or RIC, for U.S. federal income tax purposes. As a result, such earnings are not available to fund investment originations. We have sought additional capital by borrowing from financial institutions and may issue debt securities or additional equity securities. If we fail to obtain funds from such sources or from other sources to fund our investments, we could be limited in our ability to grow, which may have an adverse effect on the value of our common stock. In addition, as a business development company, we generally may not borrow money or issue debt securities or issue preferred stock unless immediately thereafter our ratio of total assets to total borrowings and other senior securities is at least 200%. This may restrict our ability to obtain additional leverage in certain circumstances. 27 We may experience fluctuations in our quarterly results. We could experience fluctuations in our quarterly operating results due to a number of factors, including the level of structuring fees received, the interest or dividend rates payable on the debt or equity securities we hold, the default rate on debt securities, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets, and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods. Our most recent NAV was calculated on June 30, 2014 and our NAV when calculated effective September 30, 2014 and thereafter may be higher or lower. Our most recently estimated NAV per share is $10.56 determined by us as of June 30, 2014 . NAV per share as of September 30, 2014 may be higher or lower than $10.56 based on potential changes in valuations, issuances of securities, dividends paid and earnings for the quarter then ended. Our Board of Directors has not yet determined the fair value of portfolio investments at any date subsequent to June 30, 2014 . Our Board of Directors determines the fair value of our portfolio investments on a quarterly basis in connection with the preparation of quarterly financial statements and based on input from independent valuation firms, the Investment Adviser, the Administrator and the Audit Committee of our Board of Directors. The Investment Adviser's liability is limited under the Investment Advisory Agreement, and we are required to indemnify the Investment Adviser against certain liabilities, which may lead the Investment Adviser to act in a riskier manner on our behalf than it would when acting for its own account. The Investment Adviser has not assumed any responsibility to us other than to render the services described in the Investment Advisory Agreement, and it will not be responsible for any action of our Board of Directors in declining to follow the Investment Adviser's advice or recommendations. Pursuant to the Investment Advisory Agreement, the Investment Adviser and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it will not be liable to us for their acts under the Investment Advisory Agreement, absent willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties. We have agreed to indemnify, defend and protect the Investment Adviser and its members and their respective officers, managers, partners, agents, employees, controlling persons and members and any other person or entity affiliated with it with respect to all damages, liabilities, costs and expenses resulting from acts of the Investment Adviser not arising out of willful misfeasance, bad faith, gross negligence or reckless disregard in the performance of their duties under the Investment Advisory Agreement. These protections may lead the Investment Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. Potential conflicts of interest could impact our investment returns. Our executive officers and directors, and the executive officers of the Investment Adviser, may serve as officers, directors or principals of entities that operate in the same or related lines of business as we do or of investment funds managed by our affiliates. Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in our best interests or those of our stockholders. Nevertheless, it is possible that new investment opportunities that meet our investment objective may come to the attention of one of these entities in connection with another investment advisory client or program, and, if so, such opportunity might not be offered, or otherwise made available, to us. However, as an investment adviser, Prospect Capital Management has a fiduciary obligation to act in the best interests of its clients, including us. To that end, if Prospect Capital Management or its affiliates manage any additional investment vehicles or client accounts in the future, Prospect Capital Management will endeavor to allocate investment opportunities in a fair and equitable manner over time so as not to discriminate unfairly against any client. If Prospect Capital Management chooses to establish another investment fund in the future, when the investment professionals of Prospect Capital Management identify an investment, they will have to choose which investment fund should make the investment. In the course of our investing activities, under the Investment Advisory Agreement we pay base management and incentive fees to Prospect Capital Management and reimburse Prospect Capital Management for certain expenses it incurs. As a result of the Investment Advisory Agreement, there may be times when the senior management team of Prospect Capital Management has interests that differ from those of our stockholders, giving rise to a conflict. The Investment Adviser receives a quarterly income incentive fee based, in part, on our pre-incentive fee net investment income, if any, for the immediately preceding calendar quarter. This income incentive fee is subject to a fixed quarterly hurdle rate before providing an income incentive fee return to Prospect Capital Management. This fixed hurdle rate was determined when then current interest rates were relatively low on a historical basis. Thus, if interest rates rise, it would become easier for our investment income to exceed the hurdle rate and, as a result, more likely that Prospect Capital Management will receive an income incentive fee than 28 if interest rates on our investments remained constant or decreased. Subject to the receipt of any requisite stockholder approval under the 1940 Act, our Board of Directors may adjust the hurdle rate by amending the Investment Advisory Agreement. The income incentive fee payable by us is computed and paid on income that may include interest that has been accrued but not yet received in cash. If a portfolio company defaults on a loan that has a deferred interest feature, it is possible that interest accrued under such loan that has previously been included in the calculation of the income incentive fee will become uncollectible. If this happens, we will reverse the interest that was recorded but Prospect Capital Management is not required to reimburse us for any such income incentive fee payments that were received in the past but would reduce the current period incentive fee for the effects of the reversal, if any. If we do not have sufficient liquid assets to pay this incentive fee or distributions to stockholders on such accrued income, we may be required to liquidate assets in order to do so. This fee structure could give rise to a conflict of interest for Prospect Capital Management to the extent that it may encourage Prospect Capital Management to favor debt financings that provide for deferred interest, rather than current cash payments of interest. We have entered into a royalty-free license agreement with Prospect Capital Management. Under this agreement, Prospect Capital Management agrees to grant us a non-exclusive license to use the name "Prospect Capital." Under the license agreement, we have the right to use the "Prospect Capital" name for so long as Prospect Capital Management or one of its affiliates remains our investment adviser. In addition, we rent office space from Prospect Administration, an affiliate of Prospect Capital Management, and pay Prospect Administration our allocable portion of overhead and other expenses incurred by Prospect Administration in performing its obligations as Administrator under the Administration Agreement, including rent and our allocable portion of the costs of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. This may create conflicts of interest that our Board of Directors monitors. Our incentive fee could induce Prospect Capital Management to make speculative investments. The incentive fee payable by us to Prospect Capital Management may create an incentive for the Investment Adviser to make investments on our behalf that are more speculative or involve more risk than would be the case in the absence of such compensation arrangement. The way in which the incentive fee payable is determined (calculated as a percentage of the return on invested capital) may encourage the Investment Adviser to use leverage to increase the return on our investments. Increased use of leverage and this increased risk of replacement of that leverage at maturity would increase the likelihood of default, which would disfavor holders of our common stock. Similarly, because the Investment Adviser will receive an incentive fee based, in part, upon net capital gains realized on our investments, the Investment Adviser may invest more than would otherwise be appropriate in companies whose securities are likely to yield capital gains, as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns. The incentive fee payable by us to Prospect Capital Management could create an incentive for the Investment Adviser to invest on our behalf in instruments, such as zero coupon bonds, that have a deferred interest feature. Under these investments, we would accrue interest income over the life of the investment but would not receive payments in cash on the investment until the end of the term. Our net investment income used to calculate the income incentive fee, however, includes accrued interest. For example, accrued interest, if any, on our investments in zero coupon bonds will be included in the calculation of our incentive fee, even though we will not receive any cash interest payments in respect of payment on the bond until its maturity date. Thus, a portion of this incentive fee would be based on income that we may not have yet received in cash in the event of default may never receive. We may be obligated to pay our Investment Adviser incentive compensation even if we incur a loss. The Investment Adviser is entitled to incentive compensation for each fiscal quarter based, in part, on our pre-incentive fee net investment income if any, for the immediately preceding calendar quarter above a performance threshold for that quarter. Accordingly, since the performance threshold is based on a percentage of our net asset value, decreases in our net asset value make it easier to achieve the performance threshold. Our pre-incentive fee net investment income for incentive compensation purposes excludes realized and unrealized capital losses or depreciation that we may incur in the fiscal quarter, even if such capital losses or depreciation result in a net loss on our statement of operations for that quarter. Thus, we may be required to pay the Investment Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio or we incur a net loss for that quarter. The Investment Adviser and Administrator have the right to resign on 60 days' notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our business, financial condition and results of operations. The Investment Adviser and Administrator have the right, under the Investment Advisory Agreement and Administration Agreement, respectively, to resign at any time upon not less than 60 days' written notice, whether we have found a replacement 29 or not. If the Investment Adviser or Administrator resigns, we may not be able to find a replacement or hire internal management or administration with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our business, financial condition and results of operations as well as our ability to pay distributions are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of our internal management and investment activities or our internal administration activities, as applicable, is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Investment Adviser and its affiliates or the Administrator and its affiliates. Even if we are able to retain comparable management or administration, whether internal or external, the integration of such management or administration and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition and results of operations. Changes in the laws or regulations governing our business or the businesses of our portfolio companies and any failure by us or our portfolio companies to comply with these laws or regulations could negatively affect the profitability of our operations or the profitability of our portfolio companies. We are subject to changing rules and regulations of federal and state governments, as well as the stock exchange on which our common stock is listed. These entities, including the Public Company Accounting Oversight Board, the SEC and the NASDAQ Global Select Market, have issued a significant number of new and increasingly complex requirements and regulations over the course of the last several years and continue to develop additional regulations. In particular, changes in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository commercial lenders could significantly affect our operations and our cost of doing business. We are subject to federal, state and local laws and regulations and are subject to judicial and administrative decisions that affect our operations, including our loan originations, maximum interest rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures and other trade practices. If these laws, regulations or decisions change, or if we expand our business into jurisdictions that have adopted more stringent requirements than those in which we currently conduct business, we may have to incur significant expenses in order to comply, or we might have to restrict our operations. In addition, if we do not comply with applicable laws, regulations and decisions, we may lose licenses needed for the conduct of our business and be subject to civil fines and criminal penalties, any of which could have a material adverse effect upon our business, financial condition and results of operations. Foreign and domestic political risk may adversely affect our business. We are exposed to political risk to the extent that Prospect Capital Management, on its behalf and subject to its investment guidelines, transacts in securities in the U.S. and foreign markets. The governments in any of these jurisdictions could impose restrictions, regulations or other measures, which may have a material adverse impact on our strategy. Risks Relating to Our Operation as a Business Development Company If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy. As a BDC, we may not acquire any assets other than "qualifying assets" unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. We may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could be found to be in violation of the 1940 Act provisions applicable to BDCs, which would have a material adverse effect on our business, financial condition and results of operations. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses. If we fail to qualify as a RIC, we will have to pay corporate-level taxes on our income, and our income available for distribution would be reduced. To maintain our qualification for U.S. federal income tax purposes as a RIC under Subchapter M of the Code and obtain RIC tax treatment, we must meet certain source of income, annual distribution and asset diversification requirements. The source of income requirement is satisfied if we derive at least 90% of our annual gross income from interest, dividends, payments with respect to certain securities loans, gains from the sale or other disposition of securities or options thereon or foreign currencies, or other income derived with respect to our business of investing in such securities or currencies, and net income from interests in "qualified publicly traded partnerships," as defined in the Code. 30 The annual distribution requirement for a RIC is satisfied if we distribute at least 90% of our ordinary income and net short-term capital gains in excess of net long-term capital losses, if any, to our stockholders on an annual basis. Because we use debt financing, we are subject to certain asset coverage ratio requirements under the 1940 Act and financial covenants that could, under certain circumstances, restrict us from making distributions necessary to qualify for RIC tax treatment. If we are unable to obtain cash from other sources, we may fail to qualify for RIC tax treatment and, thus, may be subject to corporate-level income tax on all of our taxable income. To maintain our qualification as a RIC, we must also meet certain asset diversification requirements at the end of each quarter of our taxable year. Failure to meet these tests may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments are in private companies, any such dispositions could be made at disadvantageous prices and may result in substantial losses. If we fail to qualify as a RIC for any reason or become subject to corporate income tax, the resulting corporate taxes would substantially reduce our net assets, the amount of income available for distribution, and the actual amount of our distributions. Such a failure would have a materially adverse effect on us and our stockholders. For additional information regarding asset coverage ratio and RIC requirements, see "Business – Material U.S. Federal Income Tax Considerations" and "Business – Regulation as a Business Development Company." We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income. For U.S. federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as original issue discount or payment-in-kind interest, which represents contractual interest added to the loan balance and due at the end of the loan term. Such amounts could be significant relative to our overall investment activities. We also may be required to include in taxable income certain other amounts that we do not receive in cash. While we focus primarily on investments that will generate a current cash return, our investment portfolio currently includes, and we may continue to invest in, securities that do not pay some or all of their return in periodic current cash distributions. The income incentive fee payable by us is computed and paid on income that may include interest that has been accrued but not yet received in cash. If a portfolio company defaults on a loan that is structured to provide accrued interest, it is possible that accrued interest previously used in the calculation of the income incentive fee will become uncollectible. Since in some cases we may recognize taxable income before or without receiving cash representing such income, we may have difficulty distributing at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, as required to maintain RIC tax treatment. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to obtain cash from other sources, we may fail to qualify for RIC treatment and thus become subject to corporate-level income tax. See "Business – Material U.S. Federal Income Tax Considerations" and "Business – Regulation as a Business Development Company." Regulations governing our operation as a business development company affect our ability to raise, and the way in which we raise, additional capital. We have incurred indebtedness under our revolving credit facility and through the issuance of the Senior Notes and, in the future, may issue preferred stock or debt securities and/or borrow additional money from banks or other financial institutions, which we refer to collectively as "senior securities," up to the maximum amount permitted by the 1940 Act. Under the provisions of the 1940 Act, we are permitted, as a BDC, to incur indebtedness or issue senior securities only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after each issuance of senior securities. If the value of our assets declines, we may be unable to satisfy this test, which would prohibit us from paying dividends in cash or other property and could prohibit us from qualifying as a RIC. If we cannot satisfy this test, we may be required to sell a portion of our investments or sell additional shares of common stock at a time when such sales may be disadvantageous in order to repay a portion of our indebtedness or otherwise increase our net assets. In addition, issuance of additional common stock could dilute the percentage ownership of our current stockholders in us. As a BDC regulated under provisions of the 1940 Act, we are not generally able to issue and sell our common stock at a price below the current net asset value per share without stockholder approval. If our common stock trades at a discount to net asset value, this restriction could adversely affect our ability to raise capital. We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the current net asset value of our common stock in certain circumstances, including if (i)(1) the holders of a majority of our shares (or, if less, at least 67% of a quorum consisting of a majority of our shares) and a similar majority of the holders of our shares who are not affiliated persons of us approve the sale of 31 our common stock at a price that is less than the current net asset value, and (2) a majority of our Directors who have no financial interest in the transaction and a majority of our independent Directors (a) determine that such sale is in our and our stockholders' best interests and (b) in consultation with any underwriter or underwriters of the offering, make a good faith determination as of a time either immediately prior to the first solicitation by us or on our behalf of firm commitments to purchase such shares, or immediately prior to the issuance of such shares, that the price at which such shares are to be sold is not less than a price which closely approximates the market value of such shares, less any distributing commission or discount or if (ii) a majority of the number of the beneficial holders of our common stock entitled to vote at our annual meeting, without regard to whether a majority of such shares are voted in favor of the proposal, approve the sale of our common stock at a price that is less than the current net asset value per share. To generate cash for funding new investments, we pledged a substantial portion of our portfolio investments under our revolving credit facility. These assets are not available to secure other sources of funding or for securitization. Our ability to obtain additional secured or unsecured financing on attractive terms in the future is uncertain. Alternatively, we may securitize our future loans to generate cash for funding new investments. See "Securitization of our assets subjects us to various risks." Securitization of our assets subjects us to various risks. We may securitize assets to generate cash for funding new investments. We refer to the term securitize to describe a form of leverage under which a company such as us (sometimes referred to as an "originator" or "sponsor") transfers income producing assets to a single-purpose, bankruptcy-remote subsidiary (also referred to as a "special purpose entity" or "SPE"), which is established solely for the purpose of holding such assets and entering into a structured finance transaction. The SPE then issues notes secured by such assets. The special purpose entity may issue the notes in the capital markets either publicly or privately to a variety of investors, including banks, non-bank financial institutions and other investors. There may be a single class of notes or multiple classes of notes, the most senior of which carries less credit risk and the most junior of which may carry substantially the same credit risk as the equity of the SPE. An important aspect of most debt securitization transactions is that the sale and/or contribution of assets into the SPE be considered a true sale and/or contribution for accounting purposes and that a reviewing court would not consolidate the SPE with the operations of the originator in the event of the originator's bankruptcy based on equitable principles. Viewed as a whole, a debt securitization seeks to lower risk to the note purchasers by isolating the assets collateralizing the securitization in an SPE that is not subject to the credit and bankruptcy risks of the originator. As a result of this perceived reduction of risk, debt securitization transactions frequently achieve lower overall leverage costs for originators as compared to traditional secured lending transactions. In accordance with the above description, to securitize loans, we may create a wholly-owned subsidiary and contribute a pool of our assets to such subsidiary. The SPE may be funded with, among other things, whole loans or interests from other pools and such loans may or may not be rated. The SPE would then sell its notes to purchasers who we would expect to be willing to accept a lower interest rate and the absence of any recourse against us to invest in a pool of income producing assets to which none of our creditors would have access. We would retain all or a portion of the equity in the SPE. An inability to successfully securitize portions of our portfolio or otherwise leverage our portfolio through secured and unsecured borrowings could limit our ability to grow our business and fully execute our business strategy, and could decrease our earnings. However, the successful securitization of portions of our portfolio exposes us to a risk of loss for the equity we retain in the SPE and might expose us to greater risk on our remaining portfolio because the assets we retain may tend to be those that are riskier and more likely to generate losses. A successful securitization may also impose financial and operating covenants that restrict our business activities and may include limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code. The 1940 Act may also impose restrictions on the structure of any securitizations. Interests we hold in the SPE, if any, will be subordinated to the other interests issued by the SPE. As such, we will only receive cash distributions on such interests if the SPE has made all cash interest and other required payments on all other interests it has issued. In addition, our subordinated interests will likely be unsecured and rank behind all of the secured creditors, known or unknown, of the SPE, including the holders of the senior interests it has issued. Consequently, to the extent that the value of the SPEs portfolio of assets has been reduced as a result of conditions in the credit markets, or as a result of defaults, the value of the subordinated interests we retain would be reduced. Securitization imposes on us the same risks as borrowing except that our risk in a securitization is limited to the amount of subordinated interests we retain, whereas in a borrowing or debt issuance by us directly we would be at risk for the entire amount of the borrowing or debt issuance. If the SPE is not consolidated with us, our only interest will be the value of our retained subordinated interest and the income allocated to us, which may be more or less than the cash we receive from the SPE, and none of the SPEs liabilities will be reflected 32 as our liabilities. If the assets of the SPE are not consolidated with our assets and liabilities, then our interest in the SPE may be deemed not to be a qualifying asset for purposes of determining whether 70% of our assets are qualifying assets and the leverage incurred by such SPE may or may not be treated as borrowings by us for purposes of the requirement that we not issue senior securities in an amount in excess of our net assets. We may also engage in transactions utilizing SPEs and securitization techniques where the assets sold or contributed to the SPE remain on our balance sheet for accounting purposes. If, for example, we sell the assets to the SPE with recourse or provide a guarantee or other credit support to the SPE, its assets will remain on our balance sheet. Consolidation would also generally result if we, in consultation with the SEC, determine that consolidation would result in a more accurate reflection of our assets, liabilities and results of operations. In these structures, the risks will be essentially the same as in other securitization transactions but the assets will remain our assets for purposes of the limitations described above on investing in assets that are not qualifying assets and the leverage incurred by the SPE will be treated as borrowings incurred by us for purposes of our limitation on the issuance of senior securities. The Investment Adviser may have conflicts of interest with respect to potential securitizations in as much as securitizations that are not consolidated may reduce our assets for purposes of determining its investment advisory fee although in some circumstances the Investment Adviser may be paid certain fees for managing the assets of the SPE so as to reduce or eliminate any potential bias against securitizations. Our ability to invest in public companies may be limited in certain circumstances. As a BDC, we must not acquire any assets other than "qualifying assets" specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Subject to certain exceptions for follow-on investments and distressed companies, an investment in an issuer that has outstanding securities listed on a national securities exchange may be treated as qualifying assets only if such issuer has a market capitalization that is less than $250 million at the time of such investment. Risks Relating to Our Investments We may not realize gains or income from our investments. We seek to generate both current income and capital appreciation. However, the securities we invest in may not appreciate and, in fact, may decline in value, and the issuers of debt securities we invest in may default on interest and/or principal payments. Accordingly, we may not be able to realize gains from our investments, and any gains that we do realize may not be sufficient to offset any losses we experience. See "Business – Our Investment Objective and Policies." Most of our portfolio investments are recorded at fair value as determined in good faith under the direction of our Board of Directors and, as a result, there is uncertainty as to the value of our portfolio investments. A large percentage of our portfolio investments consist of securities of privately held companies. Hence, market quotations are generally not readily available for determining the fair values of such investments. The determination of fair value, and thus the amount of unrealized losses we may incur in any year, is to a degree subjective, and the Investment Adviser has a conflict of interest in making the determination. We value these securities quarterly at fair value as determined in good faith by our Board of Directors based on input from the Investment Adviser, our Administrator, a third party independent valuation firm and our Audit Committee. Our Board of Directors utilizes the services of an independent valuation firm to aid it in determining the fair value of any securities. The types of factors that may be considered in determining the fair values of our investments include the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings, the markets in which the portfolio company does business, comparison to publicly traded companies, discounted cash flow, current market interest rates and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, the valuations may fluctuate significantly over short periods of time due to changes in current market conditions. The determinations of fair value by our Board of Directors may differ materially from the values that would have been used if an active market and market quotations existed for these investments. Our net asset value could be adversely affected if the determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities. In addition, decreases in the market values or fair values of our investments are recorded as unrealized depreciation. Declines in prices and liquidity in the corporate debt markets experienced during a financial crisis will result in significant net unrealized depreciation in our portfolio. The effect of all of these factors on our portfolio will reduce our NAV by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses which could have a material adverse impact on our business, financial condition and results of operations. We have no policy regarding holding a 33 minimum level of liquid assets. As such, a high percentage of our portfolio generally is not liquid at any given point in time. See "The lack of liquidity may adversely affect our business." Price declines and illiquidity in the corporate debt markets have adversely affected, and may in the future adversely affect, the fair value of our portfolio investments, reducing our net asset value through increased net unrealized depreciation. As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith by or under the direction of our Board of Directors. As part of the valuation process, the types of factors that we may take into account in determining the fair value of our investments include, as relevant and among other factors: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company's ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables, our principal market (as the reporting entity) and enterprise values. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The effect of all of these factors on our portfolio can reduce our net asset value by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could have a material adverse impact on our business, financial condition and results of operations. Our investments in prospective portfolio companies may be risky and we could lose all or part of our investment. Some of our portfolio companies have relatively short or no operating histories. These companies are and will be subject to all of the business risk and uncertainties associated with any new business enterprise, including the risk that these companies may not reach their investment objective and the value of our investment in them may decline substantially or fall to zero. In addition, investment in the middle market companies that we are targeting involves a number of other significant risks, including: • These companies may have limited financial resources and may be unable to meet their obligations under their securities that we hold, which may be accompanied by a deterioration in the value of their securities or of any collateral with respect to any securities and a reduction in the likelihood of our realizing on any guarantees we may have obtained in connection with our investment. • They may have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns. • Because many of these companies are privately held companies, public information is generally not available about these companies. As a result, we will depend on the ability of the Investment Adviser to obtain adequate information to evaluate these companies in making investment decisions. If the Investment Adviser is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and we may lose money on our investments. • They are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a materially adverse impact on our portfolio company and, in turn, on us. • They may have less predictable operating results, may from time to time be parties to litigation, may be engaged in changing businesses with products subject to a risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. • They may have difficulty accessing the capital markets to meet future capital needs. • Changes in laws and regulations, as well as their interpretations, may adversely affect their business, financial structure or prospects. • Increased taxes, regulatory expense or the costs of changes to the way they conduct business due to the effects of climate change may adversely affect their business, financial structure or prospects. We acquire majority interests in operating companies engaged in a variety of industries. When we acquire these companies we generally seek to apply financial leverage to them in the form of debt. In most cases all or a portion of this debt is held by us, with the obligor being either the operating company itself, a holding company through which we own our majority interest or both. The level of debt leverage utilized by these companies makes them susceptible to the risks identified above. 34 In addition, our executive officers, directors and the Investment Adviser could, in the ordinary course of business, be named as defendants in litigation arising from proposed investments or from our investments in the portfolio companies. The lack of liquidity in our investments may adversely affect our business. We make investments in private companies. A portion of these investments may be subject to legal and other restrictions on resale, transfer, pledge or other disposition or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. In addition, we face other restrictions on our ability to liquidate an investment in a business entity to the extent that we or the Investment Adviser has or could be deemed to have material non-public information regarding such business entity. Economic recessions or downturns could impair our portfolio companies and harm our operating results. Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our loans or meet other obligations during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease, during these periods. Adverse economic conditions also may decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results. A portfolio company's failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize a portfolio company's ability to meet its obligations under the debt or equity securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial covenants, with a defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, even though we may have structured our interest as senior debt or preferred equity, depending on the facts and circumstances, including the extent to which we actually provided managerial assistance to that portfolio company, a bankruptcy court might re-characterize our debt or equity holding and subordinate all or a portion of our claim to those of other creditors. Investments in equity securities, many of which are illiquid with no readily available market, involve a substantial degree of risk. We may purchase common and other equity securities. Although common stock has historically generated higher average total returns than fixed income securities over the long-term, common stock has significantly more volatility in those returns and may significantly underperform relative to fixed income securities. The equity securities we acquire may fail to appreciate and may decline in value or become worthless and our ability to recover our investment will depend on our portfolio company's success. Investments in equity securities involve a number of significant risks, including: • Any equity investment we make in a portfolio company could be subject to further dilution as a result of the issuance of additional equity interests and to serious risks as a junior security that will be subordinate to all indebtedness (including trade creditors) or senior securities in the event that the issuer is unable to meet its obligations or becomes subject to a bankruptcy process. • To the extent that the portfolio company requires additional capital and is unable to obtain it, we may not recover our investment. • In some cases, equity securities in which we invest will not pay current dividends, and our ability to realize a return on our investment, as well as to recover our investment, will be dependent on the success of the portfolio company. Even if the portfolio company is successful, our ability to realize the value of our investment may be dependent on the occurrence of a liquidity event, such as a public offering or the sale of the portfolio company. It is likely to take a significant amount of time before a liquidity event occurs or we can otherwise sell our investment. In addition, the equity securities we receive or invest in may be subject to restrictions on resale during periods in which it could be advantageous to sell them. 35 There are special risks associated with investing in preferred securities, including: • Preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated period without any adverse consequences to the issuer. If we own a preferred security that is deferring its distributions, we may be required to report income for tax purposes before we receive such distributions. • Preferred securities are subordinated to debt in terms of priority to income and liquidation payments, and therefore will be subject to greater credit risk than debt. • Preferred securities may be substantially less liquid than many other securities, such as common stock or U.S. government securities. • Generally, preferred security holders have no voting rights with respect to the issuing company, subject to limited exceptions. Additionally, when we invest in first lien senior secured loans (including unitranche loans), second lien senior secured loans or unsecured debt, we may acquire warrants or other equity securities as well. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience. We may invest, to the extent permitted by law, in the equity securities of investment funds that are operating pursuant to certain exceptions to the 1940 Act and in advisers to similar investment funds and, to the extent we so invest, will bear our ratable share of any such company's expenses, including management and performance fees. We will also remain obligated to pay management and incentive fees to Prospect Capital Management with respect to the assets invested in the securities and instruments of such companies. With respect to each of these investments, each of our common stockholders will bear his or her share of the management and incentive fee of Prospect Capital Management as well as indirectly bearing the management and performance fees and other expenses of any such investment funds or advisers. There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims. If one of our portfolio companies were to go bankrupt, even though we may have structured our interest as senior debt, depending on the facts and circumstances, a bankruptcy court might recharacterize our debt holding as an equity investment and subordinate all or a portion of our claim to that of other creditors. In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower's business or exercise control over the borrower. For example, we could become subject to a lender's liability claim, if, among other things, we actually render significant managerial assistance. Our portfolio companies may incur debt or issue equity securities that rank equally with, or senior to, our investments in such companies. Our portfolio companies may have, or may be permitted to incur, other debt or issue other equity securities that rank equally with or senior to our investments. By their terms, such instruments may provide that the holders are entitled to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments would usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company typically are entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with our investments, we would have to share on an equal basis any distributions with other security holders in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. The rights we may have with respect to the collateral securing any junior priority loans we make to our portfolio companies may also be limited pursuant to the terms of one or more intercreditor agreements (including agreements governing ‘‘first out’’ and ‘‘last out’’ structures) that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that senior obligations are outstanding, we may forfeit certain rights with respect to the collateral to the holders of the senior obligations. These rights may include the right to commence enforcement proceedings against the collateral, the right to control the conduct of such enforcement proceedings, the right to approve amendments to collateral documents, the right to release liens on the collateral and the right to waive past defaults under collateral documents. We may not have the ability to control or direct such actions, even if as a result our rights as junior lenders are adversely affected. 36 This risk is characteristic of many of the majority-owned operating companies in our portfolio in that any debt to us from a holding company and the holding company's substantial equity investments in the related operating company are subordinated to any creditors of the operating company. When we are a debt or minority equity investor in a portfolio company, we are often not in a position to exert influence on the entity, and other debt holders, other equity holders and portfolio company management may make decisions that could decrease the value of our portfolio holdings. When we make debt or minority equity investments, we are subject to the risk that a portfolio company may make business decisions with which we disagree and the other equity holders and management of such company may take risks or otherwise act in ways that do not serve our interests. As a result, a portfolio company may make decisions that could decrease the value of our investment. In addition, when we hold a subordinate debt position, other more senior debt holders may make decisions that could decrease the value of our investment. Our portfolio companies may be highly leveraged. Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these companies and to us as an investor. These companies may be subject to restrictive financial and operating covenants and the leverage may impair these companies' ability to finance their future operations and capital needs. As a result, these companies' flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company's income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used. Our portfolio contains a limited number of portfolio companies, which subjects us to a greater risk of significant loss if any of these companies defaults on its obligations under any of its debt securities. A consequence of the limited number of investments in our portfolio is that the aggregate returns we realize may be significantly adversely affected if one or more of our significant portfolio company investments perform poorly or if we need to write down the value of any one significant investment. Beyond our income tax diversification requirements, we do not have fixed guidelines for diversification, and our portfolio could contain relatively few portfolio companies. Our failure to make follow-on investments in our existing portfolio companies could impair the value of our portfolio. Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as "follow-on" investments, in order to: (1) increase or maintain in whole or in part our equity ownership percentage; (2) exercise warrants, options or convertible securities that were acquired in the original or subsequent financing or (3) attempt to preserve or enhance the value of our investment. We may elect not to make follow-on investments, may be constrained in our ability to employ available funds, or otherwise may lack sufficient funds to make those investments. We have the discretion to make any follow-on investments, subject to the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities, or because we are inhibited by compliance with BDC requirements or the desire to maintain our tax status. We may be unable to invest the net proceeds raised from offerings and repayments from investments on acceptable terms, which would harm our financial condition and operating results. Until we identify new investment opportunities, we intend to either invest the net proceeds of future offerings and repayments from investments in interest-bearing deposits or other short-term instruments or use the net proceeds from such offerings to reduce then-outstanding obligations under our credit facility. We cannot assure you that we will be able to find enough appropriate investments that meet our investment criteria or that any investment we complete using the proceeds from an offering will produce a sufficient return. We may have limited access to information about privately-held companies in which we invest. We invest primarily in privately-held companies. Generally, little public information exists about these companies, and we are required to rely on the ability of the Investment Adviser's investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. These companies and their financial information are not subject to the Sarbanes-Oxley Act of 2002 and other rules that govern public companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose money on our investment. 37 We may not be able to fully realize the value of the collateral securing our debt investments. Although a substantial amount of our debt investments are protected by holding security interests in the assets of the portfolio companies, we may not be able to fully realize the value of the collateral securing our investments due to one or more of the following factors: • Our debt investments may be in the form of unsecured loans, therefore our liens on the collateral, if any, are subordinated to those of the senior secured debt of the portfolio companies, if any. As a result, we may not be able to control remedies with respect to the collateral. • The collateral may not be valuable enough to satisfy all of the obligations under our secured loan, particularly after giving effect to the repayment of secured debt of the portfolio company that ranks senior to our loan. • Bankruptcy laws may limit our ability to realize value from the collateral and may delay the realization process. • Our rights in the collateral may be adversely affected by the failure to perfect security interests in the collateral. • The need to obtain regulatory and contractual consents could impair or impede how effectively the collateral would be liquidated and could affect the value received. • Some or all of the collateral may be illiquid and may have no readily ascertainable market value. The liquidity and value of the collateral could be impaired as a result of changing economic conditions, competition, and other factors, including the availability of suitable buyers. Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments. Our investment strategy contemplates potential investments in securities of foreign companies, including those located in emerging market countries. Investing in foreign companies may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Such risks are more pronounced in emerging market countries. Although currently substantially all of our investments are, and we expect that most of our investments will be, U.S. dollar-denominated, investments that are denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. We may expose ourselves to risks if we engage in hedging transactions. We may employ hedging techniques to minimize certain investment risks, such as fluctuations in interest and currency exchange rates, but we can offer no assurance that such strategies will be effective. If we engage in hedging transactions, we may expose ourselves to risks associated with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio positions. Such hedging transactions may also limit the opportunity for gain if the values of the portfolio positions should increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated that we are not able to enter into a hedging transaction at an acceptable price. Furthermore, our ability to engage in hedging transactions may also be adversely affected by rules adopted by the U.S. Commodity Futures Trading Commission. The success of our hedging transactions depends on our ability to correctly predict movements, currencies and interest rates. Therefore, while we may enter into such transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. The degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Any such imperfect 38 correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies. We have no current intention of engaging in any of the hedging transaction described above, although it reserves the right to do so in the future. Our Board of Directors may change our operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse to us and could impair the value of our stockholders' investment. Our Board of Directors has the authority to modify or waive our current operating policies and our strategies without prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, financial condition, and value of our common stock. However, the effects might be adverse, which could negatively impact our ability to pay dividends and cause stockholders to lose all or part of their investment. Our investments in CLOs may be riskier and less transparent to us and our stockholders than direct investments in the underlying companies. We invest in CLOs. Generally, there may be less information available to us regarding the underlying debt investments held by CLOs than if we had invested directly in the debt of the underlying companies. As a result, our stockholders will not know the details of the underlying securities of the CLOs in which we will invest. Our CLO investments are subject to the risk of leverage associated with the debt issued by such CLOs and the repayment priority of senior debt holders in such CLOs. Our investments in portfolio companies may be risky, and we could lose all or part of our investment. CLOs typically will have no significant assets other than their underlying senior secured loans; payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans. CLOs typically will have no significant assets other than their underlying senior secured loans. Accordingly, payments on CLO investments are and will be payable solely from the cash flows from such senior secured loans, net of all management fees and other expenses. Payments to us as a holder of CLO junior securities are and will be made only after payments due on the senior secured notes, and, where appropriate, the junior secured notes, have been made in full. This means that relatively small numbers of defaults of senior secured loans may adversely impact our returns. Our CLO investments are exposed to leveraged credit risk. Generally, we are in a subordinated position with respect to realized losses on the senior secured loans underlying our investments in CLOs. The leveraged nature of CLOs, in particular, magnifies the adverse impact of senior secured loan defaults. CLO investments represent a leveraged investment with respect to the underlying senior secured loans. Therefore, changes in the market value of the CLO investments could be greater than the change in the market value of the underlying senior secured loans, which are subject to credit, liquidity and interest rate risk. There is the potential for interruption and deferral of cash flow from CLO investments. If certain minimum collateral value ratios and/or interest coverage ratios are not met by a CLO, primarily due to senior secured loan defaults, then cash flow that otherwise would have been available to pay distributions to us on our CLO investments may instead be used to redeem any senior notes or to purchase additional senior secured loans, until the ratios again exceed the minimum required levels or any senior notes are repaid in full. This could result in an elimination, reduction or deferral in the distribution and/or principal paid to the holders of the CLO investments, which would adversely impact our returns. Investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments. Our CLO investment strategy allows investments in foreign CLOs. Investing in foreign entities may expose us to additional risks not typically associated with investing in U.S. issuers. These risks include changes in exchange control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility. Further, we, and the CLOs in which we invest, may have difficulty enforcing creditor's rights in foreign jurisdictions. In addition, the underlying companies of the CLOs in which we invest may be foreign, which may create greater exposure for us to foreign economic developments. 39 The payment of underlying portfolio manager fees and other charges on CLO investments could adversely impact our returns. We may invest in CLO investments where the underlying portfolio securities may be subject to management, administration and incentive or performance fees, in addition to those payable by us. Payment of such additional fees could adversely impact the returns we achieve. The inability of a CLO collateral manager to reinvest the proceeds of the prepayment of senior secured loans may adversely affect us. There can be no assurance that for any CLO investment, in the event that any of the senior secured loans of a CLO underlying such investment are prepaid, the CLO collateral manager will be able to reinvest such proceeds in new senior secured loans with equivalent investment returns. If the CLO collateral manager cannot reinvest in new senior secured loans with equivalent investment returns, the interest proceeds available to pay interest on the rated liabilities and investments may be adversely affected. Our CLO investments are subject to prepayments and calls, increasing re-investment risk. 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. Prepayment rates are influenced by changes in interest rates and a variety of economic, geographic and other factors beyond our control and consequently cannot be predicted with certainty. In addition, for a CLO collateral manager there is often a strong incentive to refinance well performing portfolios once the senior tranches amortize. The yield to maturity of the investments will depend on the amount and timing of payments of principal on the loans and the price paid for the investments. Such yield may be adversely affected by a higher or lower than anticipated rate of prepayments of the debt. Furthermore, our CLO investments generally do not contain optional call provisions, other than a call at the option of the holders of the equity tranches for the senior notes and the junior secured notes to be paid in full after the expiration of an initial period in the deal (referred to as the "non-call period"). The exercise of the call option is by the relevant percentage (usually a majority) of the holders of the equity tranches and, therefore, where we do not hold the relevant percentage we will not be able to control the timing of the exercise of the call option. The equity tranches also generally have a call at any time based on certain tax event triggers. In any event, the call can only be exercised by the holders of equity tranches if they can demonstrate (in accordance with the detailed provisions in the transaction) that the senior notes and junior secured notes will be paid in full if the call is exercised. Early prepayments and/or the exercise of a call option otherwise than at our request may also give rise to increased re-investment risk with respect to certain investments, as we may realize excess cash earlier than expected. If we are unable to reinvest such cash in a new investment with an expected rate of return at least equal to that of the investment repaid, this may reduce our net income and, consequently, could have an adverse impact on our ability to pay dividends. We have limited control of the administration and amendment of senior secured loans owned by the CLOs in which we invest. We are not be able to directly enforce any rights and remedies in the event of a default of a senior secured loan held by a CLO vehicle. In addition, the terms and conditions of the senior secured loans underlying our CLO investments may be amended, modified or waived only by the agreement of the underlying lenders. Generally, any such agreement must include a majority or a super majority (measured by outstanding loans or commitments) or, in certain circumstances, a unanimous vote of the lenders. Consequently, the terms and conditions of the payment obligations arising from senior secured loans could be modified, amended or waived in a manner contrary to our preferences. We have limited control of the administration and amendment of any CLO in which we invest. The terms and conditions of target securities may be amended, modified or waived only by the agreement of the underlying security holders. Generally, any such agreement must include a majority or a super majority (measured by outstanding amounts) or, in certain circumstances, a unanimous vote of the security holders. Consequently, the terms and conditions of the payment obligation arising from the CLOs in which we invest be modified, amended or waived in a manner contrary to our preferences. Senior secured loans of CLOs may be sold and replaced resulting in a loss to us. The senior secured loans underlying our CLO investments may be sold and replacement collateral purchased within the parameters set out in the relevant CLO indenture between the CLO and the CLO trustee and those parameters may typically only be amended, modified or waived by the agreement of a majority of the holders of the senior notes and/or the junior secured notes and/or the equity tranche once the CLO has been established. If these transactions result in a net loss, the magnitude of the loss from the perspective of the equity tranche would be increased by the leveraged nature of the investment. 40 Our financial results may be affected adversely if one or more of our significant equity or junior debt investments in a CLO vehicle defaults on its payment obligations or fails to perform as we expect. We expect that a majority of our portfolio will consist of equity and junior debt investments in CLOs, which involve a number of significant risks. CLOs are typically highly levered up to approximately 10 times, and therefore the junior debt and equity tranches that we will invest in are subject to a higher risk of total loss. In particular, investors in CLOs indirectly bear risks of the underlying debt investments held by such CLOs. We will generally have the right to receive payments only from the CLOs, and will generally not have direct rights against the underlying borrowers or the entities that sponsored the CLOs. Although it is difficult to predict whether the prices of indices and securities underlying 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 investments we make in CLOs are thinly traded or have only a limited trading market. CLO investments are typically privately offered and sold, in the primary and secondary markets. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLOs carry additional risks, including, but not limited to: (i) the possibility that distributions from the underlying senior secured loans will not be adequate to make interest or other payments; (ii) the quality of the underlying senior secured loans may decline in value or default; and (iii) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO or unexpected investment results. Further, our investments in equity and junior debt tranches of CLOs are subordinate to the senior debt tranches thereof. Investments in structured vehicles, including equity and junior debt instruments issued by CLOs, involve risks, including credit risk and market risk. Changes in interest rates and credit quality may cause significant price fluctuations. Additionally, changes in the underlying senior secured loans held by a CLO may cause payments on the instruments we hold to be reduced, either temporarily or permanently. Structured investments, particularly the subordinated interests in which we invest, are less liquid than many other types of securities and may be more volatile than the senior secured loans underlying the CLOs in which we invest. Non-investment grade debt involves a greater risk of default and higher price volatility than investment grade debt. The senior secured loans underlying our CLO investments typically are BB or B rated (non-investment grade) and in limited circumstances, unrated, senior secured loans. Non-investment grade securities are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal when due and therefore involve a greater risk of default and higher price volatility than investment grade debt. We will have no influence on management of underlying investments managed by non-affiliated third party CLO collateral managers. 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. Similarly, we are not responsible for and have no influence over the day-to-day management, administration or any other aspect of the issuers of the individual securities. As a result, the values of the portfolios underlying our CLO investments could decrease as a result of decisions made by third party CLO collateral managers. The Volcker Rule may impact how we operate our business. Section 13 of the Bank Holding Company Act of 1956, as amended, often referred to as the "Volcker Rule," is expected to impose significant restrictions on banking entities' ability to sponsor or invest in hedge funds, private equity funds or commodity pools, collectively referred to as covered funds. Certain CLOs will be considered covered funds under the Volcker Rule and banking entities' investments in such CLOs may be considered ownership interests that are prohibited. The rules are highly complex, and many aspects of the implementation of the Volcker Rule remain unclear. We are in the process of assessing the impact of the Volcker Rule on our investments, CLOs and on our industry. The Volcker Rule may have a material adverse effect on our ability to invest in bank-sponsored CLOs in the future and therefore may adversely affect our share price. 41 Risks affecting investments in real estate. We make investments in commercial and multi-family residential real estate through our three wholly-owned real estate investment trusts ("REITs"), American Property REIT Corp., National Property REIT Corp. and United Property REIT Corp. (collectively, "our REITs"). A number of factors may prevent each of our REIT's properties and assets from generating sufficient net cash flow or may adversely affect their value, or both, resulting in less cash available for distribution, or a loss, to us. These factors include: • national economic conditions; • regional and local economic conditions (which may be adversely impacted by plant closings, business layoffs, industry slow-downs, weather conditions, natural disasters, and other factors); • local real estate conditions (such as over-supply of or insufficient demand for office space); • changing demographics; • perceptions by prospective tenants of the convenience, services, safety, and attractiveness of a property; • the ability of property managers to provide capable management and adequate maintenance; • the quality of a property's construction and design; • increases in costs of maintenance, insurance, and operations (including energy costs and real estate taxes); • changes in applicable laws or regulations (including tax laws, zoning laws, or building codes); • potential environmental and other legal liabilities; • the level of financing used by our REITs in respect of their properties, increases in interest rate levels on such financings and the risk that one of our REITs will default on such financings, each of which increases the risk of loss to us; • the availability and cost of refinancing; • the ability to find suitable tenants for a property and to replace any departing tenants with new tenants; • potential instability, default or bankruptcy of tenants in the properties owned by our REITs; • potential limited number of prospective buyers interested in purchasing a property that one of our REITs wishes to sell; and • the relative illiquidity of real estate investments in general, which may make it difficult to sell a property at an attractive price or within a reasonable time frame. Risks Relating to Our Securities Our credit ratings may not reflect all risks of an investment in our debt securities. Our credit ratings are an assessment by third parties of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of our debt securities. Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market for the publicly issued debt securities. Senior securities, including debt, expose us to additional risks, including the typical risks associated with leverage and could adversely affect our business, financial condition and results of operations. We currently use our revolving credit facility to leverage our portfolio and we expect in the future to borrow from and issue senior debt securities to banks and other lenders and may securitize certain of our portfolio investments. We also have the Senior Notes outstanding, which are a form of leverage and are senior in payment rights to our common stock. With certain limited exceptions, as a BDC, we are only allowed to borrow amounts or otherwise issue senior securities such that our asset coverage, as defined in the 1940 Act, is at least 200% after such borrowing or other issuance. The amount of leverage that we employ will depend on the Investment Adviser's and our Board of Directors' assessment of market conditions and other 42 factors at the time of any proposed borrowing. There is no assurance that a leveraging strategy will be successful. Leverage involves risks and special considerations for stockholders, any of which could adversely affect our business, financial condition and results of operations, including the following: • A likelihood of greater volatility in the net asset value and market price of our common stock; • Diminished operating flexibility as a result of asset coverage or investment portfolio composition requirements required by lenders or investors that are more stringent than those imposed by the 1940 Act; • The possibility that investments will have to be liquidated at less than full value or at inopportune times to comply with debt covenants or to pay interest or dividends on the leverage; • Increased operating expenses due to the cost of leverage, including issuance and servicing costs; • Convertible or exchangeable securities, such as the Senior Convertible Notes outstanding or those issued in the future may have rights, preferences and privileges more favorable than those of our common stock; • Subordination to lenders' superior claims on our assets as a result of which lenders will be able to receive proceeds available in the case of our liquidation before any proceeds will be distributed to our stockholders; • Making it more difficult for us to meet our payment and other obligations under the Senior Notes and our other outstanding debt; • The occurrence of an event of default if we fail to comply with the financial and/or other restrictive covenants contained in our debt agreements, including the credit agreement and each indenture governing the Senior Notes, which event of default could result in all or some of our debt becoming immediately due and payable; • Reduced availability of our cash flow to fund investments, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; • The risk of increased sensitivity to interest rate increases on our indebtedness with variable interest rates, including borrowings under our amended senior credit facility; and • Reduced flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and the general economy. For example, the amount we may borrow under our revolving credit facility is determined, in part, by the fair value of our investments. If the fair value of our investments declines, we may be forced to sell investments at a loss to maintain compliance with our borrowing limits. Other debt facilities we may enter into in the future may contain similar provisions. Any such forced sales would reduce our net asset value and also make it difficult for the net asset value to recover. The Investment Adviser and our Board of Directors in their best judgment nevertheless may determine to use leverage if they expect that the benefits to our stockholders of maintaining the leveraged position will outweigh the risks. In addition, our ability to meet our payment and other obligations of the Senior Notes and our credit facility depends on our ability to generate significant cash flow in the future. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. We cannot assure you that our business will generate cash flow from operations, or that future borrowings will be available to us under our existing credit facility or otherwise, in an amount sufficient to enable us to meet our payment obligations under the Senior Notes and our other debt and to fund other liquidity needs. If we are not able to generate sufficient cash flow to service our debt obligations, we may need to refinance or restructure our debt, including the Senior Notes, sell assets, reduce or delay capital investments, or seek to raise additional capital. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under the Senior Notes and our other debt. Illustration. The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of interest expense. The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below. The calculation assumes (i) $6.5 billion in total assets, (ii) an average cost of funds of 5.41%, (iii) $2.8 billion in debt outstanding and (iv) $3.7 billion of shareholders' equity. Assumed Return on Our Portfolio (net of expenses) Corresponding Return to Stockholder (10 )% (21.7 )% (5 )% (12.9 )% 0 % (4.1 )% 5 % 4.7 % 10 % 13.5 % 43 The assumed portfolio return is required by regulation of the SEC and is not a prediction of, and does not represent, our projected or actual performance. Actual returns may be greater or less than those appearing in the table. The Senior Convertible Notes and the Senior Unsecured Notes present other risks to holders of our common stock, including the possibility that such Notes could discourage an acquisition of us by a third party and accounting uncertainty. Certain provisions of the Senior Convertible Notes and the Senior Unsecured Notes could make it more difficult or more expensive for a third party to acquire us. Upon the occurrence of certain transactions constituting a fundamental change, holders of the Senior Convertible Notes and the Senior Unsecured Notes will have the right, at their option, to require us to repurchase all of their Senior Convertible Notes and the Senior Unsecured Notes or any portion of the principal amount of such Senior Convertible Notes and the Senior Unsecured Notes in integral multiples of $1,000, in the case of the Senior Convertible Notes, the 2023 Notes and the 5.00% 2019 Notes, and $25, in the case of the 2022 Notes. We may also be required to increase the conversion rate or provide for conversion into the acquirer's capital stock in the event of certain fundamental changes with respect to the Senior Convertible Notes. These provisions could discourage an acquisition of us by a third party. The accounting for convertible debt securities is subject to frequent scrutiny by the accounting regulatory bodies and is subject to change. We cannot predict if or when any such change could be made and any such change could have an adverse impact on our reported or future financial results. Any such impacts could adversely affect the market price of our common stock. We may in the future determine to fund a portion of our investments with preferred stock, which would magnify the potential for gain or loss and the risks of investing in us in the same way as our borrowings. Preferred stock, which is another form of leverage, has the same risks to our common stockholders as borrowings because the dividends on any preferred stock we issue must be cumulative. Payment of such dividends and repayment of the liquidation preference of such preferred stock must take preference over any dividends or other payments to our common stockholders, and preferred stockholders are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference. Holders of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain matters. Holders of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of the board of directors at all times and in the event dividends become two full years in arrears would have the right to elect a majority of the directors until such arrearage is completely eliminated. In addition, preferred stockholders have class voting rights on certain matters, including changes in fundamental investment restrictions and conversion to open-end status, and accordingly can veto any such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of our credit facilities, might impair our ability to maintain our qualification as a RIC for federal income tax purposes. While we would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements. In addition to regulatory restrictions that restrict our ability to raise capital, our credit facility contains various covenants which, if not complied with, could accelerate repayment under the facility, thereby materially and adversely affecting our liquidity, financial condition and results of operations. The agreement governing our credit facility requires us to comply with certain financial and operational covenants. These covenants include: • Restrictions on the level of indebtedness that we are permitted to incur in relation to the value of our assets; • Restrictions on our ability to incur liens; and • Maintenance of a minimum level of stockholders' equity. As of June 30, 2014 , we were in compliance with these covenants. However, our continued compliance with these covenants depends on many factors, some of which are beyond our control. Accordingly, there are no assurances that we will continue to comply with the covenants in our credit facility. Failure to comply with these covenants would result in a default under this facility which, if we were unable to obtain a waiver from the lenders thereunder, could result in an acceleration of repayments under the facility and thereby have a material adverse impact on our business, financial condition and results of operations. 44 Failure to extend our existing credit facility, the revolving period of which is currently scheduled to expire on March 27, 2015, could have a material adverse effect on our results of operations and financial position and our ability to pay expenses and make distributions. The revolving period for our credit facility with a syndicate of lenders is currently scheduled to terminate on March 27, 2015, with an additional two year amortization period (with distributions allowed) after the completion of the revolving period. During such two year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the two year amortization period, the remaining balance will become due if required by the lenders. If the credit facility is not renewed or extended by the participant banks by March 27, 2015, we will not be able to make further borrowings under the facility after such date and the outstanding principal balance on that date will be due and payable on March 27, 2017. As of June 30, 2014 , we had $92.0 million of outstanding borrowings under our credit facility. Interest on borrowings under the credit facility is one-month LIBOR plus 275 basis points with no minimum LIBOR floor. Additionally, the lenders charge a fee on the unused portion of the credit facility equal to either 50 basis points if at least half of the credit facility is drawn or 100 basis points otherwise. The credit facility requires us to pledge assets as collateral in order to borrow under the credit facility. If we are unable to extend our facility or find a new source of borrowing on acceptable terms, we will be required to pay down the amounts outstanding under the facility during the two-year term-out period through one or more of the following: (1) principal collections on our securities pledged under the facility, (2) at our option, interest collections on our securities pledged under the facility and cash collections on our securities not pledged under the facility, or (3) possible liquidation of some or all of our loans and other assets, any of which could have a material adverse effect on our results of operations and financial position and may force us to decrease or stop paying certain expenses and making distributions until the facility is repaid. In addition, our stock price could decline significantly, we would be restricted in our ability to acquire new investments and, in connection with our year-end audit, our independent registered accounting firm could raise an issue as to our ability to continue as a going concern. Failure to refinance our existing Senior Notes could have a material adverse effect on our results of operations and financial position. Our Senior Notes mature at various dates from December 15, 2015 to October 15, 2043 . If we are unable to refinance our Senior Notes or find a new source of borrowing on acceptable terms, we will be required to pay down the amounts outstanding at maturity under the facility during the two-year term-out period through one or more of the following: (1) borrowing additional funds under our then current credit facility, (2) issuance of additional common stock or (3) possible liquidation of some or all of our loans and other assets, any of which could have a material adverse effect on our results of operations and financial position. In addition, our stock price could decline significantly; we would be restricted in our ability to acquire new investments and, in connection with our year-end audit, our independent registered accounting firm could raise an issue as to our ability to continue as a going concern. The trading market or market value of our publicly issued debt securities may fluctuate. Our publicly issued debt securities may or may not have an established trading market. We cannot assure our noteholders that a trading market for our publicly issued debt securities will ever develop or be maintained if developed. In addition to our creditworthiness, many factors may materially adversely affect the trading market for, and market value of, our publicly issued debt securities. These factors include, but are not limited to, the following: • the time remaining to the maturity of these debt securities; • the outstanding principal amount of debt securities with terms identical to these debt securities; • the ratings assigned by national statistical ratings agencies; • the general economic environment; • the supply of debt securities trading in the secondary market, if any; • the redemption or repayment features, if any, of these debt securities; • the level, direction and volatility of market interest rates generally; and • market rates of interest higher or lower than rates borne by the debt securities. Our noteholders should also be aware that there may be a limited number of buyers when they decide to sell their debt securities. This too may materially adversely affect the market value of the debt securities or the trading market for the debt securities. 45 Terms relating to redemption may materially adversely affect our noteholders return on any debt securities that we may issue. If our noteholders' debt securities are redeemable at our option, we may choose to redeem their debt securities at times when prevailing interest rates are lower than the interest rate paid on their debt securities. In addition, if our noteholders' debt securities are subject to mandatory redemption, we may be required to redeem their debt securities also at times when prevailing interest rates are lower than the interest rate paid on their debt securities. In this circumstance, our noteholders may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as their debt securities being redeemed. Our shares of common stock have traded at a discount from net asset value and may do so again in the future, which could limit our ability to raise additional equity capital. Shares of closed-end investment companies frequently trade at a market price that is less than the net asset value that is attributable to those shares. This characteristic of closed-end investment companies is separate and distinct from the risk that our net asset value per share may decline. It is not possible to predict whether any shares of our common stock will trade at, above, or below net asset value. In the past, the stocks of BDCs as an industry, including at times shares of our common stock, traded below net asset value as a result of concerns over liquidity, leverage restrictions and distribution requirements. When our common stock is trading below its net asset value per share, we will generally not be able to issue additional shares of our common stock at its market price without first obtaining approval for such issuance from our stockholders and our independent directors. At our 2013 annual meeting of stockholders held on December 6, 2013 , our stockholders approved our ability, subject to the condition that the maximum number of shares salable below net asset value pursuant to this authority in any particular offering that could result in such dilution is limited to 25% of our then outstanding common stock immediately prior to each such offering, to sell shares of our common stock at any level of discount from net asset value per share during the 12 month period following December 6, 2013 . There is a risk that investors in our common stock may not receive dividends or that our dividends may not grow over time and investors in our debt securities may not receive all of the interest income to which they are entitled. We intend to make distributions on a quarterly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. If we declare a dividend and if more stockholders opt to receive cash distributions rather than participate in our dividend reinvestment plan, we may be forced to sell some of our investments in order to make cash dividend payments. In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions. Further, if we invest a greater amount of assets in equity securities that do not pay current dividends, it could reduce the amount available for distribution. The above-referenced restrictions on distributions may also inhibit our ability to make required interest payments to holders of our debt, which may cause a default under the terms of our debt agreements. Such a default could materially increase our cost of raising capital, as well as cause us to incur penalties under the terms of our debt agreements. Investing in our securities may involve a high degree of risk and is highly speculative. The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. Our investments in portfolio companies may be speculative and aggressive, and therefore, an investment in our shares may not be suitable for someone with low risk tolerance. Our stockholders will experience dilution in their ownership percentage if they opt out of our dividend reinvestment plan. All dividends declared in cash payable to stockholders that are participants in our dividend reinvestment plan are automatically reinvested in shares of our common stock. As a result, our stockholders that opt out of our dividend reinvestment plan will experience dilution in their ownership percentage of our common stock over time. Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock. Sales of substantial amounts of our common stock, or the availability of such common stock for sale (including as a result of the conversion of our Senior Convertible Notes into common stock), could adversely affect the prevailing market prices for our common stock. If this occurs and continues, it could impair our ability to raise additional capital through the sale of securities should we desire to do so. 46 If we sell shares of our common stock or securities to subscribe for or are convertible into shares of our common stock at a discount to our net asset value per share, stockholders who do not participate in such sale will experience immediate dilution in an amount that may be material. At our 2013 annual meeting of stockholders held on December 6, 2013 , our stockholders approved our ability, subject to the condition that the maximum number of shares salable below net asset value pursuant to this authority in any particular offering that could result in such dilution is limited to 25% of our then outstanding common stock immediately prior to each such offering, to sell shares of our common stock at any level of discount from net asset value per share during the 12 month period following December 6, 2013 . The issuance or sale by us of shares of our common stock or securities to subscribe for or are convertible into shares of our common stock at a discount to net asset value poses a risk of dilution to our stockholders. In particular, stockholders who do not purchase additional shares of common stock at or below the discounted price in proportion to their current ownership will experience an immediate decrease in net asset value per share (as well as in the aggregate net asset value of their shares of common stock if they do not participate at all). These stockholders will also experience a disproportionately greater decrease in their participation in our earnings and assets and their voting power than the increase we experience in our assets, potential earning power and voting interests from such issuance or sale. In addition, such sales may adversely affect the price at which our common stock trades. We have sold shares of our common stock at prices below net asset value per share in the past and may do so to the future. We have not sold any shares of our common stock at prices below net asset value per share since July 18, 2011. Our ability to enter into transactions with our affiliates is restricted. We are prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our independent directors. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is our affiliate for purposes of the 1940 Act and we are generally prohibited from buying or selling any security or other property from or to such affiliate, absent the prior approval of our independent directors. The 1940 Act also prohibits "joint" transactions with an affiliate, which could include investments in the same portfolio company (whether at the same or different times), without prior approval of our independent directors. Subject to certain limited exceptions, we are prohibited from buying or selling any security or other property from or to the Investment Adviser and its affiliates and persons with whom we are in a control relationship, or entering into joint transactions with any such person, absent the prior approval of the SEC. 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 Senior Secured Income Fund, Inc. and Pathway Energy Infrastructure Fund, Inc., subject to the conditions included therein. 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. The market price of our securities may fluctuate significantly. The market price and liquidity of the market for our securities may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include: • significant volatility in the market price and trading volume of securities of business development companies or other companies in the energy industry, which are not necessarily related to the operating performance of these companies; • price and volume fluctuations in the overall stock market from time to time; • changes in regulatory policies or tax guidelines, particularly with respect to RICs or business development companies; • loss of RIC qualification; • changes in earnings or variations in operating results; • changes in the value of our portfolio of investments; • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts; • departure of one or more of Prospect Capital Management's key personnel; 47 • operating performance of companies comparable to us; • short-selling pressure with respect to shares of our common stock or BDCs generally; • future sales of our securities convertible into or exchangeable or exercisable for our common stock or the conversion of such securities, including the Senior Convertible Notes; • uncertainty surrounding the strength of the U.S. economic recovery; • concerns regarding European sovereign debt; • changes in prevailing interest rates; • litigation matters; • general economic trends and other external factors; and • loss of a major funding source. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has, from time to time, been brought against that company. If our stock price fluctuates significantly, we may be the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management's attention and resources from our business. There is a risk that you may not receive distributions or that our distributions may not grow over time. We have made and intend to continue to make distributions on a monthly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results or maintain a tax status that will allow or require any specified level of cash distributions or year-to-year increases in cash distributions. In addition, due to the asset coverage test applicable to us as a business development company, we may be limited in our ability to make distributions. Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock. Our charter and bylaws and the Maryland General Corporation Law contain provisions that may have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for our stockholders or otherwise be in their best interest. These provisions may prevent stockholders from being able to sell shares of our common stock at a premium over the current of prevailing market prices. Our charter provides for the classification of our Board of Directors into three classes of directors, serving staggered three-year terms, which may render a change of control or removal of our incumbent management more difficult. Furthermore, any and all vacancies on our Board of Directors will be filled generally only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy will serve for the remainder of the full term until a successor is elected and qualifies. Our Board of Directors is authorized to create and issue new series of shares, to classify or reclassify any unissued shares of stock into one or more classes or series, including preferred stock and, without stockholder approval, to amend our charter to increase or decrease the number of shares of common stock that we have authority to issue, which could have the effect of diluting a stockholder's ownership interest. Prior to the issuance of shares of common stock of each class or series, including any reclassified series, our Board of Directors is required by our governing documents to set the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series of shares of stock. 48 Our charter and bylaws also provide that our Board of Directors has the exclusive power to adopt, alter or repeal any provision of our bylaws, and to make new bylaws. The Maryland General Corporation Law also contains certain provisions that may limit the ability of a third party to acquire control of us, such as: • The Maryland Business Combination Act, which, subject to certain limitations, prohibits certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns 10% or more of the voting power of the common stock or an affiliate thereof) for five years after the most recent date on which the stockholder becomes an interested stockholder and, thereafter, imposes special minimum price provisions and special stockholder voting requirements on these combinations. • The Maryland Control Share Acquisition Act, which provides that "control shares" of a Maryland corporation (defined as shares of common stock which, when aggregated with other shares of common stock controlled by the stockholder, entitles the stockholder to exercise one of three increasing ranges of voting power in electing directors, as described more fully below) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of "control shares") have no voting rights except to the extent approved by stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares of common stock. The provisions of the Maryland Business Combination Act will not apply, however, if our Board of Directors adopts a resolution that any business combination between us and any other person will be exempt from the provisions of the Maryland Business Combination Act. Our Board of Directors has adopted a resolution that any business combination between us and any other person is exempted from the provisions of the Maryland Business Combination Act, provided that the business combination is first approved by the Board of Directors, including a majority of the directors who are not interested persons as defined in the 1940 Act. There can be no assurance that this resolution will not be altered or repealed in whole or in part at any time. If the resolution is altered or repealed, the provisions of the Maryland Business Combination Act may discourage others from trying to acquire control of us. As permitted by Maryland law, our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of our common stock. Although our bylaws include such a provision, such a provision may also be amended or eliminated by our Board of Directors at any time in the future, provided that we will notify the Division of Investment Management at the SEC prior to amending or eliminating this provision. However, as noted above, the SEC has recently taken the position that the Maryland Control Share Acquisition Act is inconsistent with the 1940 Act and may not be invoked by a BDC. It is the view of the staff of the SEC that opting into the Maryland Control Share Acquisition Act would be acting in a manner inconsistent with section 18(i) of the 1940 Act. Your interest in us may be diluted if you do not fully exercise your subscription rights in any rights offering. In addition, if the subscription price is less than our net asset value per share, then you will experience an immediate dilution of the aggregate net asset value of your shares. In the event we issue subscription rights, stockholders who do not fully exercise their subscription rights should expect that they will, at the completion of a rights offering pursuant to this prospectus, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights. We cannot state precisely the amount of any such dilution in share ownership because we do not know at this time what proportion of the shares will be purchased as a result of such rights offering. In addition, if the subscription price is less than the net asset value per share of our common stock, then our stockholders would experience an immediate dilution of the aggregate net asset value of their shares as a result of the offering. The amount of any decrease in net asset value is not predictable because it is not known at this time what the subscription price and net asset value per share will be on the expiration date of a rights offering or what proportion of the shares will be purchased as a result of such rights offering. Such dilution could be substantial. We may in the future choose to pay dividends in our own stock, in which case our stockholders may be required to pay tax in excess of the cash they receive. We may distribute taxable dividends that are payable in part in our stock. The IRS has issued a private letter ruling on cash/stock dividends paid by us if certain requirements are satisfied, and the ruling permits us to declare such taxable cash/stock dividends, up to 80% in stock, with respect to our taxable years ending August 31, 2014 and August 31, 2015. Taxable stockholders receiving such dividends would be required to include the full amount of the dividend as ordinary income (or as long-term capital gain to the extent such distribution is properly designated as a capital gain dividend) to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. Stockholder (as defined in "Material U.S. Federal Income Tax Considerations") may be required to pay tax with respect to such dividends in excess of any cash received. If a U.S. Stockholder sells the stock it receives as a dividend in order to pay this tax, it may be subject to transaction fees (e.g. broker fees 49 or transfer agent fees) and the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of its stock at the time of the sale. Furthermore, with respect to Non-U.S. Stockholders (as defined in "Material U.S. Federal Income Tax Considerations"), we may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in stock. In addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our stock. It is unclear whether and to what extent we will be able to pay dividends in cash and our stock. Item 1B. Unresolved Staff Comments Not applicable. Item 2. Properties We do not own any real estate or other physical properties materially important to our operation. Our principal executive offices are located at 10 East 40th Street, New York, New York 10016, where we occupy our office space pursuant to our Administration Agreement with Prospect Administration. The office facilities, which are shared with the Investment Adviser and Administrator, consist of approximately 30,216 square feet, with various leases expiring up to and through 2023. We believe that our office facilities are suitable and adequate for our business as currently conducted. Item 3. Legal Proceedings 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 of these 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 such litigation as of June 30, 2014 . Item 4. Mine Safety Disclosures Not applicable. 50 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the NASDAQ Global Select Market under the symbol "PSEC." The following table sets forth, for the quarterly reporting periods indicated, the net asset value per share of our common stock and the high and low sales prices for our common stock, as reported on the NASDAQ Global Select Market. Our common stock historically has traded at prices both above and below its net asset value. There can be no assurance, however, that such premium or discount, as applicable, to net asset value will be maintained. See also ‘‘Item 1A. Risk Factors’’ in Part I of this report for additional information about the risks and uncertainties we face. Year Ended June 30, 2013 First quarter Second quarter Third quarter Fourth quarter June 30, 2014 First quarter Second quarter Third quarter Fourth quarter Net Asset Value Per Share(1) Sales Price High Low Premium (Discount) of High Sales Price to Net Asset Value Premium (Discount) of Low Sales Price to Net Asset Value $ $ 10.88 $ 10.81 10.71 10.72 10.72 $ 10.73 10.68 10.56 12.21 $ 11.98 11.49 11.11 11.61 $ 11.48 11.39 10.99 10.83 9.89 10.91 10.08 10.76 10.80 10.73 9.64 12.2 % 10.8 % 7.3 % 3.6 % 8.3 % 7.0 % 6.6 % 4.1 % (0.5 %) (8.5 %) 1.9 % (6.0 %) 0.4 % 0.7 % 0.5 % (8.7 %) (1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low sales prices. The net asset values shown are based on outstanding shares at the end of the relevant quarter. As of August 22, 2014 , there were 127 shareholders of record of our common stock. This figure does not include a substantially greater number of beneficial holders of our common stock, whose shares are held in the names of brokers, dealers and clearing agencies. Distribution Policy Through March 2010, we made quarterly distributions to our stockholders out of assets legally available for distribution. In June 2010, we changed our distribution policy from a quarterly payment to a monthly payment. To the extent prudent and practicable, we currently intend to continue making distributions on a monthly basis. Our ability to pay distributions could be affected by future business performance, liquidity, capital needs, alternative investment opportunities and loan covenants. Our distributions, if any, will be determined by our Board of Directors. Certain amounts of the monthly distributions may from time to time be paid out of our capital rather than from earnings for the quarter as a result of our deliberate planning or by accounting reclassifications. As a RIC, we generally are not subject to U.S. federal income tax on income and gains we distribute each taxable year to our stockholders, provided that in such taxable year, we distribute an amount equal to at least 90% of our investment company taxable income (as defined by the Code) to our stockholders. In addition, we will be subject to a 4% non-deductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner an amount at least equal to the sum of (i) 98% of our ordinary income recognized during the calendar year, (ii) 98.2% of our capital gain net income, as defined by the Code, recognized for the one year period ending October 31 in that calendar year and (iii) any income recognized, but not distributed, in preceding years. We had no excise tax liability for the calendar year ended December 31, 2013. Through June 30, 2014, we have an accrued prepaid excise tax balance of $2.2 million because we have made estimated excise tax payments in excess of our expected excise tax liability for the calendar year ending December 31, 2014. Tax characteristics of all distributions will be reported to stockholders, as appropriate, on Form 1099-DIV after the end of the calendar year. 51 In addition, although we currently intend to distribute realized net capital gains (which we define as net long-term capital gains in excess of short-term capital losses), if any, at least annually out of the assets legally available for such distributions, we may decide in the future to retain such capital gains for investment. In such event, the consequences of our retention of net capital gains are described under "Material U.S. Federal Income Tax Considerations." We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we may be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings. During the years ended June 30, 2014 and 2013 , we distributed approximately $403.2 million and $271.5 million , respectively, to our stockholders. The following table summarizes our distributions declared and payable for 2013 and 2014 : Declaration Date Record Date Payment Date Amount Per Share Amount Distributed (in thousands) 5/7/2012 5/7/2012 8/21/2012 8/21/2012 11/7/2012 12/7/2012 12/7/2012 2/7/2013 2/7/2013 2/7/2013 5/6/2013 5/6/2013 5/6/2013 5/6/2013 6/17/2013 6/17/2013 6/17/2013 6/17/2013 8/21/2013 8/21/2013 8/21/2013 11/4/2013 11/4/2013 11/4/2013 7/31/2012 8/31/2012 9/28/2012 10/31/2012 11/30/2012 12/31/2012 1/31/2013 2/28/2013 3/29/2013 4/30/2013 5/31/2013 6/28/2013 7/31/2013 8/30/2013 9/30/2013 10/31/2013 11/29/2013 12/31/2013 1/31/2014 2/28/2014 3/31/2014 4/30/2014 5/30/2014 6/30/2014 8/24/2012 $ 9/21/2012 10/24/2012 11/22/2012 12/20/2012 1/23/2013 2/20/2013 3/21/2013 4/18/2013 5/23/2013 6/20/2013 7/18/2013 0.101575 $ 0.101600 0.101625 0.101650 0.101675 0.110000 0.110025 0.110050 0.110075 0.110100 0.110125 0.110150 Total declared and payable for 2013 $ 8/22/2013 $ 9/19/2013 10/24/2013 11/21/2013 12/19/2013 1/23/2014 2/20/2014 3/20/2014 4/17/2014 5/22/2014 6/19/2014 7/24/2014 0.110175 $ 0.110200 0.110225 0.110250 0.110275 0.110300 0.110325 0.110350 0.110375 0.110400 0.110425 0.110450 Total declared and payable for 2014 $ 16,886 16,897 17,597 17,736 21,308 23,669 24,641 25,307 26,267 26,620 27,280 27,299 271,507 28,001 28,759 29,915 31,224 32,189 33,229 34,239 35,508 36,810 37,649 37,822 37,843 403,188 Dividends and distributions to common stockholders are recorded on the ex-dividend date. As such, the table above includes distributions with record dates during the years ended June 30, 2014 and 2013 . It does not include distributions previously declared to stockholders of record on any future dates, as those amounts are not yet determinable. 52 Dividend Reinvestment Plan We maintain an "opt out" dividend reinvestment plan for our common stockholders. As a result, if we declare a distribution (as discussed above), stockholders’ cash distributions will be automatically reinvested in additional shares of our common stock, unless they specifically opt out of the dividend reinvestment plan so as to receive cash distributions. Stockholders who receive distributions in the form of stock are subject to the same U.S. federal, state and local tax consequences as are stockholders who elect to receive their distributions in cash. Stockholders are advised to consult with their brokers or financial institutions, as appropriate, with respect to the administration of their dividends and related instructions. See also "Dividend Reinvestment Plan" in Part I of this report for additional information. We primarily use newly-issued shares to implement the plan, whether our shares are trading at a premium or at a discount to net asset value. However, we reserve the right to purchase shares in the open market in connection with the implementation of the plan. Our Board of Directors determines how the stock to be distributed as part of the plan is made available. During the years ended June 30, 2014 and 2013 , we distributed 1,408,070 and 1,450,578 shares of our common stock, respectively, in connection with the dividend reinvestment plan. All of the shares distributed were new issues. The following table summarizes the shares issued through the reinvestment of dividends in 2013 and 2014 : Record Date Payment Date Shares Issued Value of Shares (in thousands) 6/29/2012 7/31/2012 8/31/2012 9/28/2012 10/31/2012 11/30/2012 12/31/2012 1/31/2013 2/28/2013 3/29/2013 4/30/2013 5/31/2013 6/28/2013 7/31/2013 8/30/2013 9/30/2013 10/31/2013 11/29/2013 12/31/2013 1/31/2014 2/28/2014 3/31/2014 4/30/2014 5/30/2014 7/24/2012 8/24/2012 9/21/2012 10/24/2012 11/22/2012 12/20/2012 1/23/2013 2/20/2013 3/21/2013 4/18/2013 5/23/2013 6/20/2013 Total issued in 2013 7/18/2013 8/22/2013 9/19/2013 10/24/2013 11/21/2013 12/19/2013 1/23/2014 2/20/2014 3/20/2014 4/17/2014 5/22/2014 6/19/2014 Total issued in 2014 205,834 $ 75,543 74,494 83,200 84,904 100,552 160,182 160,941 132,237 138,087 117,497 117,107 1,450,578 $ 109,437 $ 113,610 132,597 135,212 206,586 106,620 109,087 88,112 93,735 86,333 114,111 112,630 1,408,070 $ % of Distribution 16.1 % 5.1 % 5.2 % 5.6 % 5.1 % 5.2 % 7.7 % 7.4 % 5.8 % 5.5 % 4.8 % 4.5 % 2,287 866 878 981 904 1,111 1,820 1,820 1,470 1,444 1,277 1,229 16,087 1,208 1,246 1,540 1,548 2,343 1,208 1,237 995 1,011 938 1,132 1,168 15,574 4.4 % 4.4 % 5.4 % 5.2 % 7.5 % 3.8 % 3.7 % 2.9 % 2.8 % 2.5 % 3.0 % 3.1 % Registered stockholders who opt out of the dividend reinvestment plan must notify the plan administrator prior to the payment date in order for that distribution to be paid in cash. As such, the table above includes distributions with payment dates during the years ended June 30, 2014 and 2013 . It does not include distributions previously declared and recorded as payable to stockholders on any future dates, as those amounts are not yet determinable. 53 Stock Performance Graph The following graph sets forth the cumulative total shareholder return to our shareholders during the five-year period ended June 30, 2014 , as well as the corresponding returns on an overall stock market index (S&P 500 Index) and our peer group index (S&P 500 Financials Select Sector Index). The graph is based on historical stock prices and measures total shareholder return, which takes into account both changes in stock price and dividends. The total return assumes that dividends were reinvested daily and is based on a $100 investment on June 30, 2009. The graph and other information furnished under this Part II, Item 5 of this annual report on Form 10-K shall not be deemed to be "soliciting material" or to be "filed" with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act. The stock price performance included in the above graph is not necessarily indicative of future stock performance. 54 Item 6. Selected Financial Data The following selected financial data should be read in conjunction with "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" and consolidated financial statements and notes thereto contained in "Item 8. Financial Statements and Supplementary Data" of this report. All amounts are in thousands except per share data and number of portfolio companies at year end. Summary of Operations Total investment income Total operating expenses Net investment income Net realized and unrealized (losses) gains Net increase in net assets resulting from operations Per Share Data Net investment income(1) Net increase in net assets resulting from operations(1) Dividends to shareholders Net asset value at end of year Balance Sheet Data Total assets Total debt outstanding Net assets 2014 2013 2012 2011 2010 Year Ended June 30, $ 712,291 355,068 357,223 (38,203 ) $ 576,336 251,412 324,924 (104,068 ) $ 320,910 134,226 186,684 4,220 $ 169,476 75,255 94,221 24,017 $ 114,559 47,369 67,190 (47,565 ) 319,020 220,856 190,904 118,238 19,625 $ 1.19 $ 1.57 $ 1.63 $ 1.10 $ 1.13 1.06 (1.32 ) 10.56 1.07 (1.28 ) 10.72 1.67 (1.22 ) 10.83 1.38 (1.21 ) 10.36 0.33 (1.33 ) 10.30 $ 6,477,269 2,773,051 3,618,182 $ 4,448,217 1,683,002 2,656,494 $ 2,255,254 664,138 1,511,974 $ 1,549,317 406,700 1,114,357 $ 832,695 100,300 711,424 Other Data Investment purchases for the year(2) $ 2,952,456 Investment sales and repayments for the year $ 787,069 Number of portfolio companies at year end 143 Total return based on market value(3) 10.9 % Total return based on net asset value(3) 11.0 % Weighted average yield on debt portfolio at year end(4) 12.1 % $ 3,103,217 $ 931,534 124 6.2 % 10.9 % $ 1,120,659 $ 500,952 85 27.2 % 18.0 % $ 953,337 $ 285,562 72 17.2 % 12.5 % $ 364,788 $ 136,221 58 17.7 % (6.8 %) 13.6 % 13.9 % 12.8 % 16.2 % (1) Per share data is based on the weighted average number of common shares outstanding for the period presented (except for dividends to shareholders which is based on actual rate per share). (2) Investment purchases for the year ended June 30, 2010 includes $207,126 of portfolio investments acquired from Patriot Capital Funding, Inc. (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. (4) Excludes equity investments and non-performing loans. 55 Item 7. 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 financial statements and related notes and other financial information appearing elsewhere in this annual report. In addition to historical information, the following discussion and other parts of this annual report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed in Item 1A "Risk Factors" and "Forward-Looking Statements" appearing elsewhere herein. Overview We are 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 "Internal Revenue Code" or the "Code"). We invest primarily in senior and subordinated debt and equity of 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 origination strategies in which we make investments: (1) lending in private equity sponsored transactions, (2) lending directly to companies not owned by private equity firms, (3) control investments in corporate operating companies, (4) control investments in financial companies, (5) investments in structured credit, (6) real estate investments, (7) investments in syndicated debt, (8) aircraft leasing and (9) online lending. We continue to evaluate other origination strategies in the ordinary course of business with no specific tops-down allocation to any single origination strategy. Lending in Private Equity Sponsored Transactions – We make loans to companies which are controlled by leading private equity firms. This debt can take the form of first lien, second lien, unitranche or unsecured loans. In making these investments, we look for a diversified customer base, recurring demand for the product or service, barriers to entry, strong historical cash flow and experienced management teams. These loans typically have significant equity subordinate to our loan position. Historically, this strategy has comprised approximately 50%-60% of our business, but more recently it is less than 50% of our business. Lending Directly to Companies – We provide debt financing to companies owned by non-private equity firms, the company founder, a management team or a family. Here, in addition to the strengths we look for in a sponsored transaction, we also look for the alignment with the management team with significant invested capital. This strategy often has less competition than the private equity sponsor strategy because such company financing needs are not easily addressed by banks and often require more diligence preparation. Direct lending can result in higher returns and lower leverage than sponsor transactions and may include warrants or equity to us. Historically, this strategy has comprised approximately 5%-15% of our business, but more recently it is less than 5% of our business. Control Investments in Corporate Operating Companies – This strategy involves acquiring controlling stakes in non-financial operating companies. Our investments in these companies are generally structured as a combination of yield-producing debt and equity. We provide certainty of closure to our counterparties, give the seller personal liquidity and generally look for management to continue on in their current roles. This strategy has comprised approximately 10%-15% of our business. Control Investments in Financial Companies – This strategy involves acquiring controlling stakes in financial companies, including consumer direct lending, sub-prime auto lending and other strategies. Our investments in these companies are generally structured as a combination of yield-producing debt and equity. These investments are often structured in a tax-efficient RIC-compliant partnership, enhancing returns. This strategy has comprised approximately 5%-15% of our business. Investments in Structured Credit – We make investments in collateralized loan obligations (“CLOs”), generally taking a significant position in the subordinated interests (equity) of the CLOs. The CLOs include a diversified portfolio of broadly syndicated loans and do not have direct exposure to real estate, mortgages, sub-prime debt, or consumer based debt. The CLOs in which we invest are managed by top-tier collateral managers that have been thoroughly diligenced prior to investment. This strategy has comprised approximately 10%-20% of our business. 56 Real Estate Investments – We make investments in real estate through our three wholly-owned tax-efficient real estate investment trusts ("REITs"), American Property REIT Corp., National Property REIT Corp. and United Property REIT Corp. (collectively, "our REITs"). Our real estate investments are in various classes of fully developed and occupied real estate properties that generate current yields. We seek to identify properties that have historically high occupancy and steady cash flow generation. Our REITs partner with established property managers with experience in managing the property type to manage such properties after acquisition. This is a more recent investment strategy that has comprised approximately 5%-10% of our business. Investments in Syndicated Debt – On an opportunistic basis, we make investments in loans and high yield bonds that have been sold to a syndicate of buyers. Here we look for investments with attractive risk-adjusted returns after we have completed a fundamental credit analysis. These investments are purchased with a long term, buy-and-hold outlook and we look to provide significant structuring input by providing anchoring orders. This strategy has comprised approximately 5%-10% of our business. Aircraft Leasing – We invest debt as well as equity in aircraft assets subject to commercial leases to credit-worthy airlines across the globe. These investments present attractive return opportunities due to cash flow consistency from long-lived assets coupled with hard asset collateral. We seek to deliver risk-adjusted returns with strong downside protection by analyzing relative value characteristics across the spectrum of aircraft types of all vintages. Our target portfolio includes both in-production and out-of-production jet and turboprop aircraft and engines, operated by airlines across the globe. This strategy comprised approximately 1.5% of our business in the fiscal year ended June 30, 2014. Online Lending – We make investments in loans originated by certain consumer loan and small and medium sized business (“SME”) originators. We purchase each loan in its entirety (i.e., a “whole loan”). The borrowers are consumers and SMEs. The loans are typically serviced by the originators of the loans. This strategy comprised approximately 1% of our business in the fiscal year ended June 30, 2014. 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. We hold many of our control investments in a two-tier structure consisting of a holding company and one or more related operating companies. 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 in the holding company, generally as equity, its equity investment in the operating company and along with any debt from us directly to the operating company structure represents our total exposure for the investment. As of June 30, 2014 , as shown in our Consolidated Schedule of Investments, the cost basis and fair value of our investment in controlled companies is $1,719,242 and $1,640,454 , respectively. This structure gives rise to several of the risks described in our public documents and highlighted above in Part I, Item 1A of this report. Effective for periods commencing on and after July 1, 2014, we will consolidate all wholly-owned and substantially wholly-owned holding companies formed by us for the purpose of holding our controlled investments in operating companies. We do not anticipate any significant effects 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. We seek to be a long-term investor with our portfolio companies. The aggregate fair value of our portfolio investments was $6,253,739 and $4,172,852 as of June 30, 2014 and 2013 , respectively. During the year ended June 30, 2014 , our net cost of investments increased by $2,115,744 , or 49.7% , as a result of forty-seven new investments, four revolver advances and several follow-on investments of $2,937,311 , payment-in-kind interest of $15,145 , structuring fees of $45,087 and net amortization of discounts and premiums of $46,297 , while we received full repayments on twenty-one investments, sold eight investments, and received several partial prepayments and amortization payments totaling $787,069 . Compared to the end of last fiscal year (ended June 30, 2013 ), net assets increased by $961,688 , or 36.2% , during the year ended June 30, 2014 , from $2,656,494 to $3,618,182 . This increase resulted from the issuance of new shares of our common stock (less offering costs) in the amount of $1,030,282 , dividend reinvestments of $15,574 , and $319,020 from operations. These increases, in turn, were offset by $403,188 in dividend distributions to our stockholders. The $319,020 from operations is net of the following: net investment income of $357,223 , net realized loss on investments of $3,346 , and net change in unrealized depreciation on investments of $34,857 . 57 Fourth Quarter Highlights Investment Transactions During the three months ended June 30, 2014 , we acquired $386,642 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $55,360 , and recorded PIK interest of $2,102 , resulting in gross investment originations of $444,104 . During the three months ended June 30, 2014 , we received full repayments on five investments, and received several partial prepayments and amortization payments totaling $169,617 . The more significant of these transactions are discussed in "Portfolio Investment Activity." SEC Matter On May 6, 2014, we announced in our filing on Form 10-Q for the quarter ended March 31, 2014 that the SEC Staff had asserted certain of our wholly-owned holding companies were investment companies, such companies were required to be consolidated in our historical financial results and financial position, and restatement of such financial statements was needed. At that time, we disclosed that we disagreed with the views of the SEC Staff and wished to appeal the conclusion through the Office of the Chief Accountant. On June 10, 2014, based on those discussions with the Office of the Chief Accountant, we concluded the following: • Our historical non-consolidation of wholly-owned and substantially wholly-owned holding companies did not require restatement of our prior period financial statements. • Upon our adoption of ASU 2013-08 for the fiscal year ended June 30, 2015, we will begin consolidating on a prospective basis certain of our wholly-owned and substantially wholly-owned holding companies formed by us in order to facilitate our investment strategy. While we were in discussions with the SEC, we elected to suspend our debt and equity raising activities for the remainder of the quarter and continuing through the filing of this Form 10-K. This curtailment of capital raising activities suppressed our levels of origination and growth in the fourth quarter of the fiscal year ended June 30, 2014. This reduction in originations suppressed our level of structuring fees recognized and reduced our earnings for the quarter. Originations were $1,343,356 in the quarter ended March 31, 2014 versus $444,104 in the quarter ended June 30, 2014 . As a result, structuring fees fell from $24,659 in the quarter ended March 31, 2014 to $5,026 in the quarter ended June 30, 2014 . Equity Issuance During the three months ended June 30, 2014 , we sold 7,711,389 shares of our common stock at an average price of $10.91 per share, and raised $84,145 of gross proceeds, under our at-the-market offering program (the "ATM Program"). Net proceeds were $83,308 after commissions to the broker-dealer on shares sold and offering costs. On April 17, 2014 , May 22, 2014 and June 19, 2014 , we issued 86,333 , 114,111 and 112,630 shares of our common stock in connection with the dividend reinvestment plan, respectively. Dividend On May 6, 2014, we announced the declaration of monthly dividends in the following amounts and with the following dates: • $0.110550 per share for October 2014 to holders of record on October 31, 2014 with a payment date of November 20, 2014; • $0.110575 per share for November 2014 to holders of record on November 28, 2014 with a payment date of December 18, 2014; and • $0.110600 per share for December 2014 to holders of record on December 31, 2014 with a payment date of January 22, 2015. Revolving Credit Facility On May 9, 2014 and May 29, 2014 , we increased total commitments to our Revolving Credit Facility by $45,000 and $20,000 , respectively. The lenders have extended total commitments of $857,500 as of June 30, 2014 , which was increased to $877,500 in July 2014 (see "Recent Developments"). 58 Debt Issuance On April 7, 2014, we issued $300,000 aggregate principal amount of senior 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 $250,775. On April 11, 2014, we issued $400,000 aggregate principal amount of senior 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. During the three months ended June 30, 2014 , we issued $66,554 aggregate principal amount of our Prospect Capital InterNotes® for net proceeds of $65,251 . These notes were issued with stated interest rates ranging from 3.75% to 6.25% with a weighted average interest rate of 5.03% . These notes mature between April 15, 2018 and May 15, 2039 . Tenor at Origination (in years) 4 5 7 10 25 $ $ Principal Amount Interest Rate Range 3.75% 4.25%–4.75% 5.25% 5.75% 6.25% 8,759 21,950 15,182 10,159 10,504 66,554 Weighted Average Interest Rate 3.75 % 4.48 % 5.25 % 5.75 % 6.25 % Investment Holdings Maturity Date Range April 15, 2018 – May 15, 2018 April 15, 2019 – May 15, 2019 April 15, 2021 – May 15, 2021 April 15, 2024 – May 15, 2024 April 15, 2039 – May 15, 2039 As of June 30, 2014 , we continue to pursue our investment strategy. At June 30, 2014 , approximately $6,253,739 , or 172.8% , of our net assets are invested in 143 long-term portfolio investments and CLOs. During the year ended June 30, 2014 , we originated $2,952,456 of new investments, primarily composed of $1,585,869 of debt and equity financing to non-controlled investments, $913,094 of debt and equity financing to controlled investments, and $453,493 of subordinated notes in CLOs. Our origination efforts are focused primarily on debt and equity financing to controlled investments and secured lending to non-control investments, to reduce the risk in the portfolio, investing primarily in first lien loans, and subordinated notes in CLOs, though we also continue to close select junior debt and equity investments. Our annualized current yield was 13.6% and 12.1% as of June 30, 2013 and June 30, 2014 , respectively, across all performing interest bearing investments. The decrease in our current yield is primarily the result of originations at lower rates than our average existing portfolio yield. 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. 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. 59 As of June 30, 2014 , we own controlling interests in AMU Holdings Inc.; APH Property Holdings, LLC; Arctic Oilfield Equipment USA, Inc.; ARRM Services, Inc. (f/k/a ARRM Holdings Inc.); AWC, LLC; BXC Company, Inc. (f/k/a BXC Holding Company); CCPI Holdings Inc.; CP Holdings of Delaware LLC; Credit Central Holdings of Delaware, LLC; Echelon Aviation LLC; Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings, Inc.); First Tower Holdings of Delaware LLC; Gulf Coast Machine & Supply Company; Harbortouch Holdings of Delaware Inc.; The Healing Staff, Inc.; Manx Energy, Inc.; MITY Holdings of Delaware Inc.; Nationwide Acceptance Holdings LLC; NMMB Holdings, Inc.; NPH Property Holdings, LLC; R-V Industries, Inc.; STI Holding, Inc.; UPH Property Holdings, LLC; Valley Electric Holdings I, Inc.; and Wolf Energy Holdings Inc. We also own an affiliated interest in BNN Holdings Corp. (f/k/a Biotronic NeuroNetwork). The following shows the composition of our investment portfolio by level of control as of June 30, 2014 and June 30, 2013 : Level of Control Cost Portfolio Fair Value June 30, 2014 % of % of Portfolio June 30, 2013 % of Cost Portfolio Fair Value Control Investments Affiliate Investments Non-Control/Non-Affiliate Investments Total Investments $ 1,719,242 31,829 4,620,451 27.0 % $ 1,640,454 32,121 0.5 % 4,581,164 26.2 % $ 0.5 % 73.3 % 830,151 49,189 3,376,438 19.5 % $ 1.2 % 811,634 42,443 3,318,775 79.5 % $ 6,371,522 100.0 % $ 6,253,739 100.0 % $ 4,255,778 100.0 % $ 4,172,852 100.0 % 79.3 % 72.5 % % of Portfolio 19.5 % 1.0 % The following shows the composition of our investment portfolio by type of investment as of June 30, 2014 and June 30, 2013 : Type of Investment Cost Portfolio Fair Value June 30, 2014 % of June 30, 2013 % of Cost Portfolio Fair Value % of Portfolio Revolving Line of Credit $ Senior Secured Debt Subordinated Secured Debt Subordinated Unsecured Debt Small Business Whole Loans CLO Debt CLO Residual Interest Preferred Stock Common Stock Membership Interest Net Profits Interest Net Revenue Interest Escrow Receivable Warrants Total Investments 0.1 % 0.1 % $ 2,786 56.2 % 3,514,198 20.0 % 1,200,221 85,531 1.3 % 4,252 33,199 0.4 % 16.4 % 1,093,985 10,696 1.3 % 80,153 217,763 213 — 1,589 9,153 2.9 % 1.3 % —% —% —% % of Portfolio —% $ 56.2 % 19.2 % 1.4 % 0.1 % 0.5 % 17.5 % 0.2 % 1.3 % 3.5 % —% —% —% 0.1 % 9,238 2,262,327 1,062,386 88,470 — 27,667 660,619 25,016 34,629 83,265 — — — 2,161 3,445 3,578,339 1,272,275 85,531 4,637 28,118 1,044,656 80,096 84,768 187,384 — — — 2,273 0.2 % $ 53.1 % 25.0 % 2.1 % —% 0.7 % 15.5 % 0.6 % 0.8 % 1.9 % —% —% —% 8,729 2,207,091 1,024,901 88,827 — 28,589 658,086 14,742 47,083 61,903 520 20,439 4,662 7,280 0.2 % 52.8 % 24.6 % 2.1 % —% 0.7 % 15.8 % 0.4 % 1.1 % 1.5 % —% 0.5 % 0.1 % 0.2 % $ 6,371,522 100.0 % $ 6,253,739 100.0 % $ 4,255,778 100.0 % $ 4,172,852 100.0 % 0.1 % —% 60 The following shows our investments in interest bearing securities by type of investment as of June 30, 2014 and June 30, 2013 : Type of Investment Cost Portfolio Fair Value June 30, 2014 % of % of Portfolio June 30, 2013 % of Cost Portfolio Fair Value First Lien Second Lien Unsecured Small Business Whole Loans CLO Debt CLO Residual Interest Total Debt Investments $ 3,581,784 1,272,275 85,531 4,637 28,118 1,044,656 59.5 % $ 3,516,984 21.1 % 1,200,221 85,531 1.4 % 4,252 0.5 % 33,199 17.4 % 1,093,985 0.1 % 59.3 % $ 2,271,565 20.2 % 1,062,386 1.4 % 88,470 0.1 % — 0.6 % 27,667 18.4 % 660,619 2.2 % 55.3 % $ 2,215,820 1,024,901 25.8 % 88,827 — 28,589 658,086 16.0 % 0.7 % —% 16.4 % $ 6,017,001 100.0 % $ 5,934,172 100.0 % $ 4,110,707 100.0 % $ 4,016,223 100.0 % % of Portfolio 55.2 % 25.5 % 2.2 % —% 0.7 % The following shows the composition of our investment portfolio by geographic location as of June 30, 2014 and June 30, 2013 : Geographic Location Cost Portfolio Fair Value June 30, 2014 % of % of Portfolio June 30, 2013 % of Cost Portfolio Fair Value Canada Cayman Islands France Ireland Midwest US Northeast US Puerto Rico Southeast US Southwest US Western US Total Investments $ 15,000 1,072,774 10,170 — 787,482 1,224,403 41,307 1,491,554 759,630 969,202 —% 15,000 0.2 % $ 16.8 % 1,127,184 10,339 0.2 % — 753,543 12.4 % 19.2 % 1,181,533 0.7 % 36,452 23.4 % 1,461,516 737,271 11.9 % 930,901 0.2 % $ 18.0 % 0.2 % —% 12.0 % 18.9 % 0.6 % 23.4 % 11.8 % 14.9 % 165,000 688,286 — 14,927 565,239 522,759 41,352 1,124,119 459,944 674,152 3.9 % $ 16.2 % —% 0.4 % 13.3 % 12.2 % 1.0 % 26.4 % 10.8 % 165,000 686,675 — 15,000 531,934 536,300 41,352 1,098,996 445,411 652,184 15.6 % $ 6,371,522 100.0 % $ 6,253,739 100.0 % $ 4,255,778 100.0 % $ 4,172,852 100.0 % 15.2 % 15.8 % % of Portfolio 4.0 % 16.5 % —% 0.4 % 12.7 % 12.8 % 1.0 % 26.3 % 10.7 % 61 The following shows the composition of our investment portfolio by industry as of June 30, 2014 and June 30, 2013 : Industry Cost Portfolio Fair Value June 30, 2014 % of % of Portfolio June 30, 2013 % of Cost Portfolio Fair Value % of Portfolio Aerospace & Defense Auto Finance Automobile Biotechnology Business Services Chemicals Commercial Services Construction & Engineering Consumer Finance Consumer Services Contracting Diversified / Conglomerate Service Diversified Financial Services(1) Durable Consumer Products Ecological Electronics Energy Food Products Healthcare Hotels, Restaurants & Leisure Machinery Manufacturing Media Metal Services & Minerals Oil & Gas Production Personal & Nondurable Consumer Products Pharmaceuticals Property Management Real Estate Retail Software & Computer Services Telecommunication Services Textiles, Apparel & Luxury Goods Transportation Subtotal CLO Investments(1) Total Investments $ 102,803 11,139 22,296 — 598,940 19,648 301,610 56,860 425,497 502,862 3,831 — 42,574 377,205 — — 77,379 173,375 329,408 132,193 396 204,394 362,738 48,402 283,490 10,604 78,069 57,500 353,506 14,231 240,469 79,630 275,023 112,676 $ 5,298,748 1,072,774 —% —% —% —% 5.9 % 0.2 % 7.9 % 0.1 % 9.4 % 4.7 % 0.9 % 0.4 % 0.3 % 0.7 % 6.7 % 2.7 % 1.2 % 1.6 % $ 102,967 11,139 22,452 — 611,286 19,713 301,610 33,556 434,348 504,647 — — 42,189 375,329 — — 67,637 174,603 326,142 132,401 621 171,577 344,278 51,977 248,494 11,034 73,690 45,284 355,236 14,625 241,260 79,654 259,690 1.8 % 69,116 83.2 % $ 5,126,555 1,127,184 16.8 % 5.7 % 1.2 % 3.2 % 4.4 % 5.2 % 5.5 % 3.8 % 0.2 % 0.9 % 0.2 % 0.8 % 2.1 % 1.2 % 4.3 % —% 1.6 % $ 56 0.2 % 10,914 0.4 % 12,300 —% — 9.8 % 180,793 0.3 % 28,364 4.8 % 247,073 0.5 % 53,615 6.9 % 413,332 8.1 % 311,982 —% 3,831 —% — 0.7 % 57,419 6.0 % 359,403 —% 141 —% — 1.1 % 63,895 2.8 % 177,423 5.2 % 273,438 2.1 % 35,125 —% 396 2.7 % 163,431 5.5 % 171,290 0.8 % 98,662 4.0 % 75,126 0.2 % 59,822 1.2 % — 0.7 % 51,170 5.7 % 152,540 0.2 % 14,190 3.9 % 307,734 1.3 % — 4.2 % 116,260 1.1 % 127,767 82.0 % $ 3,567,492 18.0 % 688,286 —% —% —% —% 0.3 % 1.3 % 0.3 % 9.7 % 7.3 % 0.7 % 8.5 % 0.1 % 5.8 % 4.2 % 1.3 % 4.2 % 1.5 % —% $ — 10,417 12,500 14 179,544 28,648 247,073 53,615 406,964 314,033 — 143 55,759 349,654 335 149 56,321 177,428 273,838 35,361 790 167,584 161,325 102,832 24,420 60,183 — 54,648 152,540 14,569 309,308 — 108,708 127,474 3.0 % 83.8 % $ 3,486,177 686,675 16.2 % 3.8 % 1.4 % 4.0 % 0.3 % 6.4 % 0.8 % 1.2 % 7.2 % 1.8 % 3.6 % 2.3 % 2.8 % —% —% —% —% 0.2 % 0.3 % —% 4.3 % 0.7 % 5.9 % 1.3 % 9.8 % 7.5 % —% —% 1.3 % 8.4 % —% —% 1.3 % 4.3 % 6.6 % 0.8 % —% 4.0 % 3.9 % 2.5 % 0.6 % 1.4 % —% 1.3 % 3.7 % 0.3 % 7.4 % —% 2.6 % 3.1 % 83.5 % 16.5 % $ 6,371,522 100.0 % $ 6,253,739 100.0 % $ 4,255,778 100.0 % $ 4,172,852 100.0 % (1) Although designated as Diversified Financial Services within our Schedules of Investments in Item 8 of this report, our CLO investments do not have industry concentrations and as such have been separated in the table above. 62 Portfolio Investment Activity During the year ended June 30, 2014 , we acquired $2,082,327 of new investments, completed follow-on investments in existing portfolio companies totaling approximately $840,134 , funded $14,850 of revolver advances, and recorded PIK interest of $15,145 , resulting in gross investment originations of $2,952,456 . The more significant of these transactions are briefly described below. On July 12, 2013, we provided $11,000 of secured second lien financing to Water PIK, Inc., a leader in developing innovative personal and oral healthcare products. The second lien term loan bears interest in cash at the greater of 9.75% or Libor plus 8.75% and has a final maturity of January 8, 2021. On July 23, 2013, we made a $2,000 investment in Carolina Beverage Group, LLC (“Carolina Beverage”), a contract beverage manufacturer. The senior secured note bears interest in cash at 10.5% and has a final maturity of July 23, 2018. On July 26, 2013, we made a $2,000 follow-on senior secured debt investment in Spartan Energy Services, Inc. (“Spartan”) to finance the formation of the Well Testing division. The first lien note bears interest in cash at the greater of 10.5% or Libor plus 9.0% and has a final maturity of December 28, 2017. On July 26, 2013, we made a $20,000 follow-on secured second lien investment in Royal Adhesives & Sealants, LLC (“Royal”) to facilitate an acquisition. The second lien term loan bears interest in cash at the greater of 9.75% or Libor plus 8.5% and has a final maturity of January 31, 2019. On July 31, 2013, we made a $5,100 follow-on investment in Coverall North America, Inc. to fund a dividend recapitalization. The first lien note bears interest in cash at the greater of 11.5% or Libor plus 8.5% and has a final maturity of December 17, 2017. On August 2, 2013, we made an investment of $44,100 to purchase 90% of the subordinated notes in CIFC Funding 2013-III, Ltd. On August 2, 2013, we provided $81,273 of debt and $12,741 of equity financing to support the recapitalization of CP Holdings, an energy services company based in western Oklahoma. Through the recapitalization, we acquired a controlling interest in CP Holdings for $73,009 in cash and 1,918,342 unregistered shares of our common stock. After the financing, we received repayment of the $18,991 loan previously outstanding. The $58,773 first lien note issued to CP Energy Services Inc. bears interest in cash at the greater of 9.0% or Libor plus 7.0% and interest payment in kind of 9.0% and has a final maturity of August 2, 2018. The $22,500 first lien note issued to CP Well Testing Holding Company LLC bears interest in cash at the greater of 11.0% or Libor plus 9.0% and has a final maturity of August 2, 2018. On August 9, 2013, we provided $80,000 in senior secured loans and a senior secured revolving loan facility, of which $70,000 was funded at closing, for the recapitalization of Matrixx Initiatives, Inc., owner of Zicam, a developer and marketer of OTC cold remedy products under the Zicam brand. The $35,000 Term Loan A note bears interest in cash at the greater of 7.5% or Libor plus 6.0% and has a final maturity of August 9, 2018. The $35,000 Term Loan B note bears interest in cash at the greater of 12.5% or Libor plus 11.0% and has a final maturity of August 9, 2018. The $10,000 senior secured revolver, which was unfunded at closing, bears interest in cash at the greater of 10.0% or Libor plus 8.5% and has a final maturity of February 9, 2014. On August 15, 2013, we made a $14,000 follow-on investment in Totes Isotoner Corporation ("Totes") to fund a dividend to shareholders. The second lien term loan bears interest in cash at the greater of 10.75% or Libor plus 9.25% and has a final maturity of January 8, 2018. On August 30, 2013, we made a $16,000 follow-on investment in System One Holdings, LLC to support an acquisition. The first lien note bears interest in cash at the greater of 11.0% or Libor plus 9.5% and has a final maturity of December 31, 2018. On September 5, 2013, we provided a $50,382 senior secured term loan to United Bank Card, Inc. (d/b/a Harbortouch), a payments processor. The first lien term loan bears interest in cash at the greater of 11.5% or Libor plus 9.5% and has a final maturity of September 5, 2018. On September 10, 2013, we made a $12,500 first lien secured investment in Photonis Technologies SAS (“Photonis”), a world leader in the development, manufacture and sale of electro-optic components for the detection and intensification of very faint light sources. The first lien term loan bears interest in cash at the greater of 8.5% or Libor plus 7.5% and has a final maturity of September 18, 2019. 63 On September 11, 2013, we provided a $75,000 senior secured term loan to support the recapitalization of American Broadband Holding Company and Cameron Holdings of NC, Inc., a provider of voice, video, and high-speed internet services. The first lien Term Loan B bears interest in cash at the greater of 11.0% or Libor plus 9.75% and has a final maturity of September 30, 2018. On September 13, 2013, we made an investment of $36,515 to purchase 83.56% of the subordinated notes in Apidos CLO XV. On September 19, 2013, we provided $41,042 of debt and $6,943 of equity financing to support the recapitalization of Mity, a designer, manufacturer and seller of multipurpose room furniture and specialty healthcare seating products. The $22,792 first lien note issued to Mity bears interest in cash at the greater of 9.0% or Libor plus 7.0% and interest payment in kind of 9.0% and has a final maturity of September 19, 2019. The $18,250 first lien note issued to MITY Enterprises, Inc. bears interest in cash at the greater of 10.0% or Libor plus 7.0% and has a final maturity of March 19, 2019. On September 25, 2013, we made a $12,000 subordinated secured second lien investment in NCP Finance Limited Partnership, a lender to short term loan providers in the alternative financial services industry. The subordinated secured term loan bears interest in cash at the greater of 11.0% or Libor plus 9.75% and has a final maturity of September 30, 2018. On September 30, 2013, we made an investment of $20,945 to purchase 51.02% of the subordinated notes in Galaxy XVI CLO, Ltd. On September 30, 2013, we made an $18,818 follow-on investment in JHH Holdings, Inc. to finance an acquisition. The second lien term loan bears interest in cash at the greater of 11.25% or Libor plus 10.0% and interest payment in kind of 0.5% and has a final maturity of March 30, 2019. On October 1, 2013, we made a $2,600 follow-on investment in AIRMALL to support liquidity needs. The subordinated secured note bears interest in cash at 12.0% and interest payment in kind of 6.0% and has a final maturity of December 31, 2015. On October 11, 2013, we made a $5,846 follow-on investment in CP Holdings to fund flowback equipment purchases. We invested $746 of equity and $5,100 of debt in CP Holdings. The first lien note issued to CP Energy Services Inc. bears interest in cash at the greater of 9.0% or Libor plus 7.0% and interest payment in kind of 9.0% and has a final maturity of August 2, 2018. On October 11, 2013, we provided $25,000 in preferred equity for the recapitalization of Ajax. After the financing, we received repayment of the $20,008 loan previously outstanding. On October 11, 2013, we made a secured debt investment of $2,000 in Digital Insight, a provider of digital banking software to financial institutions in the U.S. which allows financial institutions to offer a comprehensive, user friendly platform of products and services through the online and mobile channels. On October 16, 2013, we made a secured debt investment of $7,000 in Renaissance Learning, Inc. (“Renaissance”), a provider of technology based school improvement and student assessment programs. On October 22, 2013, we made an investment of $40,791 to purchase 85.05% of the subordinated notes in CIFC Funding 2013-IV, Ltd. On October 29, 2013, we made a $2,000 follow-on investment in APH to support the peer-to-peer lending initiative. We invested $300 of equity and $1,700 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. This investment was subsequently contributed to NPH. On October 29, 2013, we made a secured debt investment of $2,500 in Omnitracs, Inc. (“Omnitracs”), one of the world’s largest providers of satellite and terrestrial-based connectivity and position location solutions to transportation and logistics companies. On October 30, 2013, we made a secured debt investment of $6,000 in The Petroleum Place, Inc. (“P2”), a provider of enterprise resource planning software focused on the oil & gas industry. 64 On November 1, 2013, we made a $9,869 follow-on investment in APH to acquire Bexley Apartment Houses, a multi-family residential property located in Marietta, Georgia. We invested $1,669 of equity and $8,200 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. This investment was subsequently contributed to NPH. On November 5, 2013, we made a $2,000 follow-on investment in APH to support the peer-to-peer lending initiative. We invested $300 of equity and $1,700 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. This investment was subsequently contributed to NPH. On November 8, 2013, we provided $25,950 in preferred equity for the recapitalization of Gulf Coast, a provider of value-added forging solutions to energy and industrial end markets. Through the recapitalization, we acquired a controlling interest in Gulf Coast. After the financing, we received partial repayment of the loan previously outstanding, leaving a balance of $15,000. The senior secured term loan bears interest in cash at the greater of 10.5% or Libor plus 8.5% and has a final maturity of October 12, 2017. On November 14, 2013, we made an investment of $26,064 to purchase 61.30% of the subordinated notes in Sudbury Mill CLO Ltd. On November 15, 2013, we made a $45,900 follow-on investment in APH to acquire the Gulf Coast Portfolio, a portfolio of six multi- family residential properties located in Alabama and Florida. We invested $7,400 of equity and $38,500 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. On November 19, 2013, we made a $66,188 follow-on investment in APH to acquire the Oxford Portfolio, a portfolio of six multi-family residential properties located in Georgia, Florida, North Carolina and Texas. We invested $11,188 of equity and $55,000 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. This investment was subsequently contributed to NPH. On November 20, 2013, we made a secured debt investment of $1,000 in Chromaflo Technologies (“Chromaflo”), a producer of colorants and related specialty chemical products based in Ohio. On November 25, 2013, we restructured our investment in Freedom Marine Holdings, LLC (“Freedom Marine”), a subsidiary of Energy Solutions. The subordinated secured loan to Jettco Marine Services, LLC (“Jettco”), a subsidiary of Freedom Marine, was replaced with a senior secured note to Vessel Holdings II, LLC, a new subsidiary of Freedom Marine. The $13,000 first lien note issued to Vessel Holdings II, LLC bears interest in cash at 13.0% and has a final maturity of November 25, 2018. On November 25, 2013, we made a $2,000 follow-on investment in APH to support the peer-to-peer lending initiative. We invested $300 of equity and $1,700 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. This investment was subsequently contributed to NPH. On November 25, 2013, we made a $5,000 follow-on investment in AIRMALL to support liquidity needs. The subordinated secured note bears interest in cash at 12.0% and interest payment in kind of 6.0% and has a final maturity of December 31, 2015. On November 29, 2013, we made a $1,000 follow-on senior secured debt investment in Gulf Coast to fund working capital needs. The senior secured term loan bears interest in cash at the greater of 10.5% or Libor plus 8.5% and has a final maturity of October 12, 2017. On December 3, 2013, we made a $16,000 senior secured investment in Vessel Holdings III, LLC, a new subsidiary of Freedom Marine, a subsidiary of Energy Solutions. The first lien note bears interest in cash at 13.0% and has a final maturity of December 3, 2018. On December 4, 2013, we made a $5,000 follow-on investment in APH to support the peer-to-peer lending initiative. We invested $750 of equity and $4,250 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. This investment was subsequently contributed to NPH. 65 On December 12, 2013, we made a $22,507 follow-on investment in APH to acquire the Stonemark Portfolio, a portfolio of six multi-family residential properties located in Atlanta, Georgia. We invested $3,707 of equity and $18,800 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. This investment was subsequently contributed to UPH. On December 13, 2013, we provided $8,086 in preferred equity for the recapitalization of NMMB. After the restructuring, we received full repayment of $2,800 of the subordinated term loan and partial repayment of $5,286 of the senior term loan previously outstanding. On December 13, 2013, we purchased an additional $5,000 investment in Therakos, Inc., a developer of technologies for extracorporeal photopheresis treatments. The second lien term loan bears interest in cash at the greater of 11.25% or Libor plus 10.0% and has a final maturity of June 27, 2018. On December 16, 2013, we made a $1,500 follow-on senior secured debt investment in Gulf Coast to fund working capital needs. The senior secured term loan bears interest in cash at the greater of 10.5% or Libor plus 8.5% and has a final maturity of October 12, 2017. On December 18, 2013, we made a $5,000 follow-on investment in Spartan to fund capital expenditures across all divisions. The first lien note bears interest in cash at the greater of 10.5% or Libor plus 9.0% and has a final maturity of December 28, 2017. On December 18, 2013, we made an investment of $39,876 to purchase 90% of the subordinated notes in Cent CLO 20 Limited. On December 20, 2013, we made a secured debt investment of $9,000 in Harley Marine Services, Inc., a provider of marine transportation services. The second lien term loan bears interest in cash at the greater of 10.5% or Libor plus 9.25% and has a final maturity of December 20, 2019. On December 23, 2013, we provided $102,400 of senior secured financing, of which $87,400 was funded at closing, for the recapitalization of PrimeSport, Inc., a global live entertainment and event management company. The $43,700 Term Loan A note bears interest in cash at the greater of 7.5% or Libor plus 6.5% and has a final maturity of December 23, 2019. The $43,700 Term Loan B note bears interest in cash at the greater of 11.5% or Libor plus 10.5% and interest payment in kind of 1.0% and has a final maturity of December 23, 2019. The $15,000 senior secured revolver, which was unfunded at closing, bears interest in cash at the greater of 10.0% or Libor plus 9.5% and has a final maturity of June 23, 2014. On December 26, 2013, we made a $13,641 follow-on investment in CP Holdings to fund the acquisition of additional equipment. We invested $1,741 of equity and $11,900 of debt in CP Holdings. The first lien note issued to CP Energy Services Inc. bears interest in cash at the greater of 9.0% or Libor plus 7.0% and interest payment in kind of 9.0% and has a final maturity of August 2, 2018. On December 30, 2013, we made a secured debt investment of $40,000 in Crosman Corporation, the world’s leading designer, manufacturer and marketer of airguns, airsoft guns and related category consumables. The second lien term loan originally bore interest in cash at the greater of 11.0% or Libor plus 9.5%. On June 30, 2014, we amended the terms of this investment to the greater of 12.0% or Libor plus 10.5%. The second lien term loan has a final maturity of December 30, 2019. On December 30, 2013, we made a $10,000 follow-on investment in First Tower to support seasonal demand. We invested $1,500 of equity and $8,500 of debt in First Tower. The first lien term loan bears interest in cash at the greater of 20.0% or Libor plus 18.5% and has a final maturity of June 30, 2022. On December 30, 2013, we made a $45,000 follow-on investment in Progrexion Holdings, Inc. ("Progrexion") to fund a dividend recapitalization. The senior secured first lien note bears interest in cash at the greater of 10.5% or Libor plus 8.5% and has a final maturity of September 14, 2017. On December 31, 2013, we made a $10,620 follow-on investment in NPH to acquire Indigo Apartments, a multi-family residential property located in Jacksonville, Florida. We invested $1,820 of equity and $8,800 of debt in NPH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. On January 8, 2014, we made a $161,500 follow-on investment in Broder Bros., Co. ("Broder") to support an acquisition. The senior secured term loan bears interest in cash at the greater of 10.25% or Libor plus 9.0% and has a final maturity of April 8, 2019. 66 On January 17, 2014, we made a $6,565 follow-on investment in APH to acquire the Gulf Coast II Portfolio, a portfolio of two multi-family residential properties located in Alabama and Florida. We invested $1,065 of equity and $5,500 of debt in APH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. On January 31, 2014, we made a $4,805 follow-on investment in NPH to acquire Island Club, a multi-family residential property located in Jacksonville, Florida. We invested $805 of equity and $4,000 of debt in NPH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. On February 4, 2014, we made a secured debt investment of $25,000 in Ikaria, Inc., a biotherapeutics company focused on developing and commercializing innovative therapies designed to meet the unique and complex medical needs of critically ill patients. The second lien term loan bears interest in cash at the greater of 8.75% or Libor plus 7.75% and has a final maturity of February 12, 2022. On February 5, 2014, we made an investment of $32,383 to purchase 94.27% of the subordinated notes in ING IM CLO 2014-1, Ltd. On February 7, 2014, we made an investment of $23,111 to purchase 63.64% of the subordinated notes in Halcyon Loan Advisors Funding 2014-1 Ltd. On February 11, 2014, we made a $7,000 follow-on investment in InterDent, Inc. ("InterDent") to fund an acquisition. We invested an additional $3,500 in Term Loan A and $3,500 in Term Loan B. The Term Loan A note bears interest in cash at the greater of 7.25% or Libor plus 5.75% and has a final maturity of August 3, 2017. The Term Loan B note bears interest in cash at the greater of 12.25% or Libor plus 9.25% and has a final maturity of August 3, 2017. On February 11, 2014, we made a secured debt investment of $10,000 in TriMark USA, LLC, a foodservice equipment and supplies distributor and provider of custom kitchen design services. The second lien term loan bears interest in cash at the greater of 10.0% or Libor plus 9.0% and has a final maturity of August 11, 2019. On February 19, 2014, we provided $17,000 of secured floating rate financing to support the acquisition of Venio LLC (f/k/a LM Keane Acquisition Co.) by Lovell Minnick Partners. Keane provides unclaimed property services to many of the nation’s largest financial institutions including transfer agents, mutual funds, banks, brokerages and insurance companies. The second lien term loan bears interest in cash at the greater of 12.0% or Libor plus 9.5% and has a final maturity of February 19, 2020. On March 7, 2014, we provided $78,000 of senior secured floating rate debt to support the continued growth of Tolt Solutions, Inc. ("Tolt"), a retail-focused information technology services company, providing customized network architecture solutions, installation, deployment, maintenance, and customer support to retailers nationwide. The $39,000 Term Loan A note bears interest in cash at the greater of 7.0% or Libor plus 6.0% and has a final maturity of March 7, 2019. The $39,000 Term Loan B note bears interest in cash at the greater of 12.0% or Libor plus 11.0% and has a final maturity of March 7, 2019. On March 12, 2014, we made a secured debt investment of $10,000 in Tectum Holdings, Inc., a manufacturer of aftermarket accessories for the lite-truck market. The second lien term loan originally bore interest in cash at the greater of 10.25% or PRIME plus 7.0%. On April 1, 2014, the interest rate changed to the greater of 9.0% or Libor plus 8.0%. The second lien term loan has a final maturity of March 12, 2019. On March 18, 2014, we made a $28,250 follow-on investment in LaserShip, Inc., of which $22,250 was funded at closing, to finance an acquisition. The $22,250 Term Loan B note bears interest in cash at the greater of 10.25% or Libor plus 8.25% and has a final maturity of March 18, 2019. We also provided $6,000 of Delayed Draw Term Loan commitment to support future acquisitions. The Delayed Draw Term Loan, which was unfunded at closing, will bear interest in cash at 2.0% and have a final maturity of December 31, 2015. On March 25, 2014, we made a secured debt investment of $28,500 in Global Employment Solutions, Inc., a provider of contract and permanent placement staffing services, with a strategic focus on the information technology segment. The senior secured term loan bears interest in cash at the greater of 10.0% or Libor plus 9.0% and has a final maturity of March 25, 2019. On March 28, 2014, we provided $277,500 of secured floating rate debt to support the refinancing of Instant Web, LLC ("IWCO"), a provider of direct marketing solutions to direct marketers for acquisition and loyalty programs in the United States. The $132,500 Term Loan A note bears interest in cash at the greater of 5.5% or Libor plus 4.5% and has a final maturity of March 28, 2019. The $132,500 Term Loan B note bears interest in cash at the greater of 12.0% or Libor plus 11.0% and 67 has a final maturity of March 28, 2019. The $12,500 Term Loan C note bears interest in cash at the greater of 12.75% or Libor plus 11.75% and has a final maturity of March 28, 2019. On March 31, 2014, we made a secured debt investment of $60,000 in United States Environmental Services, LLC, a provider of industrial, environmental, and maritime services in the Gulf States region. The $24,000 Term Loan A note bears interest in cash at the greater of 6.5% or Libor plus 5.5% and has a final maturity of March 31, 2019. The $36,000 Term Loan B note bears interest in cash at the greater of 11.5% or Libor plus 10.5% and has a final maturity of March 31, 2019. On March 31, 2014, we provided $153,500 follow-on investment in Progrexion to fund a dividend recapitalization. The senior secured first lien note bears interest in cash at the greater of 10.5% or Libor plus 8.5% and has a final maturity of September 14, 2017. On March 31, 2014, we invested $246,250 in cash and 2,306,294 unregistered shares of our common stock to support the recapitalization of Harbortouch Payments, LLC (f/k/a United Bank Card, Inc. (d/b/a Harbortouch)), a provider of transaction processing services and point-of- sale equipment used by merchants across the United States. We invested $24,898 of equity and $123,000 of debt in Harbortouch Holdings of Delaware Inc., the newly-formed holding company, and $130,796 of debt in Harbortouch Payments, LLC, the operating company. Through the recapitalization, we acquired a controlling interest in Harbortouch Payments, LLC. After the recapitalization, we received repayment of the $23,894 loan previously outstanding. The $130,796 senior secured term loan issued to the operating company bears interest in cash at the greater of 9.0% or Libor plus 7.0% and has a final maturity of September 30, 2017. The $123,000 senior secured note issued to the holding company bears interest in cash at the greater of 10.0% or Libor plus 8.0% and interest payment in kind of 6.0% and has a final maturity of March 31, 2019. On March 31, 2014, we provided $78,521 of debt and $14,107 of equity financing to Echelon Aviation LLC (“Echelon”), a newly established portfolio company which provides liquidity alternatives on aviation assets. We are the controlling equity owner of Echelon. The senior term loan bears interest in cash at the greater of 11.75% or Libor plus 9.75% and interest payment in kind of 2.25% and has a final maturity of March 31, 2022. On April 8, 2014, we provided $59,000 of senior secured financing, of which $54,000 was funded at closing, to support the recapitalization of Ark-La-Tex Wireline Services, LLC and affiliates, a provider of cased hole wireline and related completion-stage services in connection with oil and gas production. The $27,000 Term Loan A note bears interest in cash at the greater of 6.5% or Libor plus 5.5% and has a final maturity of April 8, 2019. The $27,000 Term Loan B note bears interest in cash at the greater of 10.5% or Libor plus 9.5% and has a final maturity of April 8, 2019. We also provided $5,000 of Delayed Draw Term Loan commitment to support future acquisitions. The Delayed Draw Term Loan, which was unfunded at closing, will increase the existing Term Loan A and Term Loan B on a pro rata basis and bear the same terms and conditions as the initial loans. On April 8, 2014, we refinanced our existing subordinated loan to Pelican Products, Inc., making a new debt investment of $17,500. Concurrent with the refinancing, we received repayment of the $15,000 loan previously outstanding. The second lien term loan bears interest in cash at the greater of 9.25% or Libor plus 8.25% and has a final maturity of April 9, 2021. On April 11, 2014, we made an investment of $21,685 to purchase 52.87% of the subordinated notes in Washington Mill CLO Ltd. On April 14, 2014, we made an investment of $38,220 to purchase 78.37% of the subordinated notes in Halcyon Loan Advisors Funding 2014-2 Ltd. On April 21, 2014, we made an $18,250 follow-on investment in InterDent to fund an acquisition. We invested an additional $9,125 in Term Loan A and $9,125 in Term Loan B. The Term Loan A note bears interest in cash at the greater of 7.25% or Libor plus 5.75% and has a final maturity of August 3, 2017. The Term Loan B note bears interest in cash at the greater of 12.25% or Libor plus 9.25% and has a final maturity of August 3, 2017. On April 30, 2014, we provided $65,000 of senior secured financing, of which $50,000 was funded at closing, to support the recapitalization of Fleetwash, Inc., a national provider of mobile vehicle fleet and mobile facility cleaning services. The $25,000 Term Loan A note bears interest in cash at the greater of 6.5% or Libor plus 5.5% and has a final maturity of April 30, 2019. The $25,000 Term Loan B note bears interest in cash at the greater of 10.5% or Libor plus 9.5% and has a final maturity of April 30, 2019. We also provided $15,000 of Delayed Draw Term Loan commitment to support future acquisitions. The Delayed Draw Term Loan, which was unfunded at closing, will bear interest in cash at the greater of 9.5% or Libor plus 8.5% and have a final maturity of April 30, 2019. 68 On May 5, 2014, we invested $48,960 in cash and 1,102,313 unregistered shares of our common stock to support the recapitalization of Arctic Energy Services, LLC, an oil and gas service company based in Glenrock, Wyoming and doing business as Arctic Oilfield Services. Through the recapitalization, we acquired a controlling interest in Arctic Energy Services, LLC. We invested $9,006 of equity in Arctic Oilfield Equipment USA, Inc., the newly-formed holding company, and $51,870 of debt in Arctic Energy Services, LLC, the operating company. The $31,640 senior secured term loan bears interest in cash at the greater of 12.0% or Libor plus 9.0% and has a final maturity of May 5, 2019. The $20,230 senior subordinated term loan bears interest in cash at the greater of 14.0% or Libor plus 11.0% and has a final maturity of May 5, 2019. On May 6, 2014, we made an investment of $49,250 to purchase 67.47% of the subordinated notes in Symphony CLO XIV Ltd. On May 15, 2014, we made an investment of $46,360 to purchase 89.08% of the subordinated notes in Cent CLO 21 Limited. On May 30, 2014, we made an investment of $36,766 to purchase 79.10% of the subordinated notes in Galaxy XVII CLO, Ltd. On June 30, 2014, we made a $19,800 follow-on investment in Tolt to fund an acquisition. We invested an additional $9,900 in Term Loan A and $9,900 in Term Loan B. The Term Loan A note bears interest in cash at the greater of 7.0% or Libor plus 6.0% and has a final maturity of March 7, 2019. The Term Loan B note bears interest in cash at the greater of 12.0% or Libor plus 11.0% and has a final maturity of March 7, 2019. On June 30, 2014, we made a secured debt investment of $15,000, of which $12,000 was funded at closing, to support the recapitalization of Wheel Pros, LLC, a designer, marketer, and distributor of branded aftermarket wheels. The senior subordinated secured note bears interest in cash at the greater of 11.0% or Libor plus 7.0% and has a final maturity of June 29, 2020. We also provided $3,000 of Delayed Draw Term Loan commitment to support future acquisitions. The Delayed Draw Term Loan, which was unfunded at closing, bears interest in cash at the greater of 11.0% or Libor plus 7.0% and has a final maturity of December 30, 2015. In addition to the purchases noted above, during the year ended June 30, 2014 , we made 11 follow-on investments in NPH totaling $25,000 to support the peer-to-peer lending initiative. We invested $3,750 of equity and $21,250 of debt in NPH. The senior secured note bears interest in cash at the greater of 6.0% or Libor plus 4.0% and interest payment in kind of 5.5% and has a final maturity of April 1, 2019. During the year ended June 30, 2014 , we received full repayments on twenty-one investments, sold eight investments investments, received several partial prepayments and amortization payments totaling totaling $787,069 . The more significant of these transactions are briefly described below. On July 1, 2013, Pre-Paid Legal Services, Inc. repaid the $5,000 loan receivable to us. On July 9, 2013, Southern Management Corporation repaid the $17,565 loan receivable to us. On July 24, 2013, we sold our $2,000 investment in Carolina Beverage and realized a gain of $45 on the sale. On July 31, 2013, Royal repaid the $28,364 subordinated unsecured loan receivable to us. On July 31, 2013, Cargo Airport Services USA, LLC repaid the $43,399 loan receivable to us. On August 1, 2013, Medical Security Card Company, LLC repaid the $13,214 loan receivable to us. On September 11, 2013, Seaton Corp. repaid the $13,310 loan receivable to us. On September 30, 2013, we sold our investment in ADAPCO, Inc. for net proceeds of $553, recognizing a realized gain of $413 on the sale. On October 7, 2013, Evanta Ventures, Inc. repaid the $10,506 loan receivable to us. On October 15, 2013, we sold our $2,000 investment in Digital Insight and realized a gain of $20 on the sale. On October 17, 2013, $19,730 of the Apidos CLO VIII subordinated notes were called, and we realized a gain of $1,183 on this investment. On October 29, 2013, we sold our $2,500 investment in Omnitracs and realized a gain of $25 on the sale. 69 On October 31, 2013, we sold our $18,755 National Bankruptcy Services, LLC (“NBS”) loan receivable. The loan receivable was sold at a discount and we realized a loss of $7,853. On November 1, 2013, P2 repaid the $22,000 second lien term loan receivable to us. On November 4, 2013, we sold our $6,000 secured debt investment in P2 and realized a gain of $60 on the sale. On November 4, 2013, we sold our $7,000 investment in Renaissance and realized a gain of $140 on the sale. On November 4, 2013, we sold $2,000 of our $12,500 investment in Photonis and realized a gain of $49 on the sale. On November 19, 2013, United Bank Card, Inc. (d/b/a Harbortouch) made a partial repayment of $23,942. On November 22, 2013, we sold our $1,000 investment in Chromaflo and realized a gain of $10 on the sale. On November 25, 2013, EIG Investors Corp. repaid the $22,000 loan receivable to us. On December 4, 2013, we sold a $972 participation in our term loans in AIRMALL, equal to 2% of the outstanding principal amount of loans on that date. On December 18, 2013, Naylor, LLC repaid the $45,563 loan receivable to us. On December 30, 2013, Energy Solutions repaid the $4,250 junior secured note receivable to us. On March 20, 2014, New Star Metals, Inc. repaid the $50,534 loan receivable to us. On March 26, 2014, Material Handling Services, LLC repaid the $64,547 loan receivable to us. On March 31, 2014, we sold $10,000 of our $277,500 investment in IWCO. There was no gain or loss realized on the sale. On May 1, 2014, Totes repaid the $53,000 loan receivable to us. On May 9, 2014, Hoffmaster Group, Inc. repaid the $21,000 loan receivable to us. On June 2, 2014, Skillsoft Public Limited Company repaid the $15,000 loan receivable to us. On June 4, 2014, CRT MIDCO, LLC repaid $14,000 of the $61,504 loan receivable to us. In addition to the sales noted above, during the year ended June 30, 2014 , we sold $21,250 of our investment in ICON Health & Fitness, Inc. ("ICON") and realized losses of $1,669 on the sales. The following table provides a summary of our investment activity for each quarter within the three years ended June 30, 2014 : Quarter Ended September 30, 2011 December 31, 2011 March 31, 2012 June 30, 2012 September 30, 2012 December 31, 2012 March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013 March 31, 2014 June 30, 2014 $ Acquisitions(1) 222,575 $ 154,697 170,073 573,314 747,937 772,125 784,395 798,760 556,843 608,153 1,343,356 444,104 Dispositions(2) 46,055 120,206 188,399 146,292 158,123 349,269 102,527 321,615 164,167 255,238 198,047 169,617 (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 and refinancings. 70 During the three months ended June 30, 2014, we restructured our investment in several of our controlled portfolio companies to replace holding company debt with debt of the associated operating company. These transactions are briefly described below. $19,993 of debt that was previously held at AMU Holdings Inc. was assumed by Airmall Inc. $167,162 of debt that was previously held at APH Property Holdings, LLC was assumed by American Property REIT Corp. $8,216 of debt that was previously held at CCPI Holdings Inc. was assumed by CCPI Inc. and $2 of holding company equity was converted into additional debt investment in the operating company. $75,733 of debt that was previously held at CP Energy Services Inc. and $22,500 of debt that was previously held at CP Well Testing Holding Company LLC was assumed by CP Well Testing, LLC. $36,333 of debt that was previously held at Credit Central Holdings of Delaware, LLC was assumed by Credit Central Loan Company, LLC and the remaining $3,874 of holding company debt was converted into additional equity investment in the holding company. $251,246 of debt that was previously held at First Tower Holdings of Delaware LLC was assumed by First Tower, LLC and the remaining $23,712 of holding company debt was converted into additional equity investment in the holding company. $123,000 of debt that was previously held at Harbortouch Holdings of Delaware Inc. was assumed by Harbortouch Payments, LLC and $14,226 of holding company equity was converted into additional debt investment in the operating company. $15,769 of debt that was previously held at MITY Holdings of Delaware Inc. was assumed by MITY, Inc. and the remaining $7,200 of holding company debt was converted into additional equity investment in the holding company. $14,820 of debt that was previously held at Nationwide Acceptance Holdings LLC was assumed by Nationwide Acceptance LLC and the remaining $9,888 of holding company debt was converted into additional equity investment in the holding company. $104,460 of debt that was previously held at NPH Property Holdings, LLC was assumed by National Property REIT Corp. $19,027 of debt that was previously held at UPH Property Holdings, LLC was assumed by United Property REIT Corp. $20,471 of debt that was previously held at Valley Electric Holdings I, Inc. was assumed by Valley Electric Company, Inc. and the remaining $16,754 of holding company debt was converted into additional equity investment in the holding company. 71 Investment Valuation In determining the fair value of our portfolio investments at June 30, 2014 , the Audit Committee considered valuations from the independent valuation firms and from management having an aggregate range of $6,041,155 to $6,421,204, excluding money market investments. In determining the range of value for debt instruments except CLOs, management and the independent valuation firm generally estimate corporate and security credit ratings and identify 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 range of value. For non-traded equity investments, the enterprise value was determined by applying EBITDA multiples for similar guideline public companies and/or similar recent investment transactions. For stressed equity investments, a liquidation analysis was prepared. In determining the range of value for our investments in CLOs, management and the independent valuation firm used a discounted 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. For each CLO security, the most appropriate valuation approach was chosen from alternative approaches to ensure the most accurate valuation for such security. A waterfall engine is used to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, and distribute the cash flows to the liability structure based on the payment priorities, and discount them back using proper discount rates. 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 $6,253,739 , excluding money market investments. Our portfolio companies are generally lower middle market companies, outside of the financial sector, with less than $150,000 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. Transactions between our controlled investments and us have been detailed in Note 14 to the accompanying consolidated financial statements. Several control investments in our portfolio are under enhanced scrutiny by our senior management and our Board of Directors and are discussed below. AMU Holdings Inc. AIRMALL is a leading developer and manager of airport retail operations. AIRMALL has developed and presently manages all or substantially all of the retail operations and food and beverage concessions at Baltimore/Washington International Thurgood Marshall Airport (BWI), Boston Logan International Airport (BOS), Cleveland Hopkins International Airport (CLE) and Pittsburgh International Airport (PIT). AIRMALL does so pursuant to long-term, infrastructure-like contracts with the respective municipal agencies that own and operate the airports. On July 30, 2010, we invested $52,420 of combined debt and equity as follows: $30,000 senior term loan, $12,500 senior subordinated note and $9,920 preferred equity. During the six months ended December 31, 2013, we provided an additional $7,600 of subordinated secured financing to AIRMALL. On December 4, 2013, we sold a $972 participation in our term loans in AIRMALL, equal to 2% of the outstanding principal amount of loans on that date. As of June 30, 2014 , we own 98% of AIRMALL’s equity securities. AIRMALL’s financial performance has been consistent since the acquisition and we continue to monitor the medium to long-term growth prospects for the company. During the three months ended June 30, 2014, $19,993 of debt that was previously held at AMU Holdings Inc. was assumed by Airmall Inc. During the year ended June 30, 2014 , we received distributions of $12,000 from AIRMALL which were recorded as dividend income. No dividends were received from AIRMALL during the year ended June 30, 2013 . Primarily as a result of the distribution of earnings during the year ended June 30, 2014 , the Board of Directors decreased the fair value of our investment in AIRMALL to $45,284 as of June 30, 2014 , a discount of $12,216 from its amortized cost, compared to the $3,478 unrealized appreciation recorded at June 30, 2013. 72 APH Property Holdings, LLC APH is a holding company that owns 100% of the common stock of American Property REIT Corp. (“APRC”). APRC is a Maryland corporation and a qualified REIT for federal income tax purposes. APRC was formed to acquire, operate, finance, lease, manage and sell a portfolio of real estate assets. As of June 30, 2014 , we own 100% of the fully-diluted common equity of APH. During the year ended June 30, 2013, we provided $125,892 and $26,648 of debt and equity financing, respectively, to APH for the acquisition of various real estate properties. During the year ended June 30, 2014 , we provided $135,350 and $28,397 of debt and equity financing, respectively, to APH for the acquisition of certain properties. In December 2013, APRC, a wholly-owned subsidiary of APH, distributed its investments in fourteen properties: eight to National Property REIT Corp. (“NPRC”); and six to United Property REIT Corp. (“UPRC”), two newly formed REIT holding companies which are discussed below. The investments transferred consisted of $98,164 and $20,022 of debt and equity financing, respectively. The eight investments transferred to NPRC from APRC consisted of $79,309 and $16,315 of debt and equity financing, respectively. The six investments transferred to UPRC from APRC consisted of $18,855 and $3,707 of debt and equity financing, respectively. There was no gain or loss realized on these transactions. As of June 30, 2014 , APRC’s real estate portfolio was comprised of fourteen multi-family properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties: No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Property Name Abbington Pointe Amberly Place Lofton Place Vista at Palma Sola Arlington Park The Resort Cordova Regency Crestview at Oakleigh Inverness Lakes Kings Mill Apartments Plantations at Pine Lake Verandas at Rocky Ridge Crestview at Cordova Plantations at Hillcrest Taco Bell, OK City Marietta, GA Tampa, FL Tampa, FL Bradenton, FL Marietta, GA Pembroke Pines, FL Pensacola, FL Pensacola, FL Mobile, AL Pensacola, FL Tallahassee, FL Birmingham, AL Pensacola, FL Mobile, AL Yukon, OK Acquisition Date 12/28/2012 $ 1/17/2013 4/30/2013 4/30/2013 5/8/2013 6/24/2013 11/15/2013 11/15/2013 11/15/2013 11/15/2013 11/15/2013 11/15/2013 1/17/2014 1/17/2014 6/4/2014 $ Purchase Price 23,500 $ 63,400 26,000 27,000 14,850 225,000 13,750 17,500 29,600 20,750 18,000 15,600 8,500 6,930 1,719 512,099 $ Mortgage Outstanding 15,275 39,600 16,965 17,550 9,650 157,500 9,026 11,488 19,400 13,622 11,817 10,205 5,072 5,094 — 342,264 During the three months ended June 30, 2014, $167,162 of debt that was previously held at APH Property Holdings, LLC was assumed by American Property REIT Corp. The Board of Directors set the fair value of our investment in APH at $206,159 as of June 30, 2014 , a premium of $3,392 from its amortized cost, compared to being valued at cost at June 30, 2013. ARRM Holdings Inc. Ajax Rolled Ring & Machine, Inc. ("Ajax") forges large seamless steel rings on two forging mills in Ajax’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 April 4, 2008, we acquired a controlling equity interest in ARRM Holdings Inc. ("ARRM"), which owns 100% of Ajax, the operating company. We funded $22,000 of senior secured term debt, $11,500 of subordinated term debt and $6,300 of equity as of that closing. During the fiscal year ended June 30, 2010, we funded an additional $3,530 of secured subordinated debt to refinance a third-party revolver provider and provide working capital. Ajax repaid $3,461 of this secured subordinated debt during the quarter ended September 30, 2010. During the quarter ended December 31, 2012, we funded an additional $3,600 of unsecured debt to refinance first lien debt held by Wells Fargo. 73 On April 1, 2013, we refinanced our existing $38,472 senior loans to Ajax, increasing the size of our debt investment to $38,537. Concurrent with the refinancing, we received repayment of the $18,635 loans that were previously outstanding. On October 11, 2013, we provided $25,000 in preferred equity for the recapitalization of Ajax. After the financing, we received repayment of the $20,008 subordinated unsecured loan previously outstanding. As of June 30, 2014 , we control 79.53% of the fully-diluted common and preferred equity. Due to soft operating results, the Board of Directors decreased the fair value of our investment in ARRM to $25,536 as of June 30, 2014 , a discount of $21,014 from its amortized cost, compared to the $6,057 unrealized depreciation recorded at June 30, 2013. Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings, Inc.) Energy Solutions owns interests in companies operating in the energy sector. These include a company operating offshore supply vessels and ownership of a non-operating biomass plant and several coal mines. Energy Solutions subsidiaries formerly owned interests in a gas gathering and processing system in east Texas. In December 2011, we completed a reorganization of Gas Solutions Holdings, Inc. renaming the company Energy Solutions and transferring ownership of other operating companies owned by us and operating within the energy industry with the intent of strategically expanding Energy Solutions operations across energy sectors. As part of the reorganization, we transferred our equity interests in Change Clean Energy Holdings, Inc. (“CCEHI”), Change Clean Energy, Inc. (“CCEI”), Freedom Marine and Yatesville Coal Holdings, Inc. (“Yatesville”) to Energy Solutions. On December 28, 2011, we made a follow-on investment of $4,750 to support the acquisition of a new vessel by Vessel Holdings LLC, a subsidiary of Freedom Marine. On January 4, 2012, Energy Solutions sold its gas gathering and processing assets (“Gas Solutions”) for a sale price of $199,805, adjusted for the final working capital settlement, including a potential earnout of $28,000 that may be paid based on the future performance of Gas Solutions. Through June 30, 2014 , we have not accrued income for any portion of the $28,000 potential payment. After expenses, including structuring fees of $9,966 paid to us, Energy Solutions received $158,687 in cash. The sale of Gas Solutions by Energy Solutions resulted in significant earnings and profits, as defined by the Internal Revenue Code, at Energy Solutions for calendar year 2012. As a result, distributions from Energy Solutions to us were required to be recognized as dividend income, in accordance with ASC 946, as cash distributions were received from Energy Solutions, to the extent there are current year earnings and profits sufficient to support such recognition. During the year ended June 30, 2013 , we received distributions of $53,820 from Energy Solutions which were recorded as dividend income. No such dividends were received during the year ended June 30, 2014 . During the year ended June 30, 2014 , Energy Solutions repaid the remaining $8,500 of our subordinated secured debt to the company. In addition to the repayment of principal, we received $4,812 of make-whole fees for early repayment of the outstanding loan receivables, which was recorded as additional interest income during the year ended June 30, 2014 . On November 25, 2013, we provided $13,000 in senior secured debt financing for the recapitalization of our investment in Freedom Marine. The subordinated secured loan to Jettco was replaced with a senior secured note to Vessel Holdings II, LLC ("Vessel Holdings II"), a new subsidiary of Freedom Marine. On December 3, 2013, we made a $16,000 senior secured investment in Vessel Holdings III, LLC, another new subsidiary of Freedom Marine, to support the acquisition of two new vessels. We received $2,480 of structuring fees from Energy Solutions related to the transaction which was recognized as other income during the year ended June 30, 2014 . As of June 30, 2014, our loan to Vessel Holdings II, previously on non-accrual status, was accruing income due to improved operating results. In determining the value of Energy Solutions, we have utilized two valuation techniques to determine the value of the investment: a current value method for the cash balances of Energy Solutions and a liquidation analysis for our interests in CCEHI, CCEI, Freedom Marine and Yatesville. The Board of Directors set the fair value of our investment in Energy Solutions, including the underlying portfolio companies affected by the reorganization, at $32,004 as of June 30, 2014 , a discount of $9,742 from its amortized cost, compared to the $7,574 unrealized depreciation recorded at June 30, 2013. First Tower Holdings of Delaware, LLC First Tower is a multiline specialty finance company based in Flowood, Mississippi with over 170 branch offices. On June 15, 2012, we acquired 80.1% of First Tower, LLC businesses for $110,200 in cash and 14,518,207 unregistered shares of our common stock. Based on our share price of $11.06 at the time of issuance, we acquired our 80.1% interest in First Tower for approximately $270,771. As consideration for our investment, First Tower Delaware, which is 100% owned by us, recorded a secured revolving credit facility to us of $244,760 and equity of $43,193. First Tower Delaware owns 80.1% 74 of First Tower Holdings LLC, the holding company of First Tower. The assets of First Tower acquired include, among other things, the subsidiaries owned by First Tower, which hold finance receivables, leaseholds, and tangible property associated with First Tower’s businesses. As part of the transaction, we received $4,038 and $4,038 in structuring fee income from First Tower and First Tower Delaware, respectively. On October 18, 2012, we funded an additional $20,000 of senior secured debt to support seasonally high demand during the holiday season. On December 30, 2013, we funded an additional $10,000 to again support seasonal demand and received $8,000 of structuring fees related to the renegotiation and expansion of First Tower’s revolver with a third party which was recognized as other income. As of June 30, 2014, First Tower had total assets of approximately $597,995 including $385,875 of finance receivables net of unearned charges. As of June 30, 2014 , First Tower’s total debt outstanding to parties senior to us was $250,965. During the three months ended June 30, 2014, $251,246 of debt that was previously held at First Tower Holdings of Delaware LLC was assumed by First Tower, LLC and the remaining $23,712 of holding company debt was converted into additional equity investment. Due to improved operating results, the Board of Directors increased the fair value of our investment in First Tower to $326,785 as of June 30, 2014 , a premium of $7,134 from its amortized cost, compared to the $9,869 unrealized depreciation recorded at June 30, 2013. NPH Property Holdings, LLC NPH is a holding company that owns 100% of the common stock of National Property REIT Corp. (“NPRC”) and 100% of the membership units of NPH Property Holdings II, LLC (“NPH II”). NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. NPRC was formed to acquire, operate, finance, lease, manage and sell a portfolio of real estate assets. NPH II is a Delaware single member limited liability company structured to enable NPRC to invest in peer-to-peer consumer loans. As of June 30, 2014 , we own 100% of the fully-diluted common equity of NPH. The eight investments transferred to NPRC from APRC consisted of $79,309 and $16,315 of debt and equity financing, respectively. There was no gain or loss realized on these transactions. During the year ended June 30, 2014 , we provided $24,700 and $4,725 of debt and equity financing, respectively, to NPH for the acquisition of certain properties and to invest in peer-to-peer consumer loans. As of June 30, 2014 , NPRC’s real estate portfolio was comprised of nine multi-family properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties: No. 1 2 3 4 5 6 7 8 9 10 Property Name 146 Forest Parkway Bexley St. Marin Mission Gate Vinings Corner Central Park City West Matthews Reserve Indigo Island Club City Forest Park, GA Marietta, GA Coppell, TX Plano, TX Smyrna, GA Altamonte Springs, FL Orlando, FL Matthews, NC Jacksonville, FL Atlantic Beach, FL Acquisition Date 10/24/2012 $ 11/1/2013 11/19/2013 11/19/2013 11/19/2013 11/19/2013 11/19/2013 11/19/2013 12/31/2013 1/31/2014 $ Purchase Price 7,400 $ 30,600 73,078 47,621 35,691 36,590 23,562 22,063 38,000 13,025 327,630 $ Mortgage Outstanding — 22,497 53,863 36,148 26,640 27,471 18,533 17,571 28,500 9,118 240,341 During the three months ended June 30, 2014, $104,460 of debt that was previously held at NPH Property Holdings, LLC was assumed by National Property REIT Corp. The Board of Directors set the fair value of our investment in NPH at $124,511 as of June 30, 2014 , a discount of $2,088 from its amortized cost. 75 UPH Property Holdings, LLC UPH is a holding company that owns 100% of the common stock of United Property REIT Corp. (“UPRC”). UPRC is a Delaware limited liability company and a qualified REIT for federal income tax purposes. UPRC was formed to acquire, operate, finance, lease, manage and sell a portfolio of real estate assets. As of June 30, 2014 , we own 100% of the fully-diluted common equity of UPH. The six investments transferred to UPRC from APRC consisted of $18,855 and $3,707 of debt and equity financing, respectively. There was no gain or loss realized on these transactions. During the year ended June 30, 2014 , we provided $1,405 of equity financing to UPH for the acquisition of certain properties. As of June 30, 2014 , UPRC’s real estate portfolio was comprised of six multi-family properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties: No. 1 2 3 4 5 6 7 Property Name Eastwood Village Monterey Village Hidden Creek Meadow Springs Meadow View Peachtree Landing Taco Bell, MO City Stockbridge, GA Jonesboro, GA Morrow, GA College Park, GA College Park, GA Fairburn, GA Marshall, MO Acquisition Date 12/12/2013 $ 12/12/2013 12/12/2013 12/12/2013 12/12/2013 12/12/2013 6/4/2014 $ Purchase Price 25,957 $ 11,501 5,098 13,116 14,354 17,224 1,405 88,655 $ Mortgage Outstanding 19,785 9,193 3,619 10,180 11,141 13,575 — 67,493 During the three months ended June 30, 2014, $19,027 of debt that was previously held at UPH Property Holdings, LLC was assumed by United Property REIT Corp. The Board of Directors set the fair value of our investment in UPH at $24,566 as of June 30, 2014 , a premium of $426 from its amortized cost. Valley Electric Holdings I, Inc. Valley Electric 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 Electric was founded in 1982 by the Ward family, who held the company until the end of 2012. On December 31, 2012, Valley Electric Holdings II, Inc., a wholly-owned subsidiary of Valley Electric Holdings I, Inc., and management acquired 100% of the outstanding shares of Valley Electric Company of Mount Vernon, Inc. We funded the recapitalization of Valley Electric with $42,572 of debt and $9,526 of equity financing. Through the recapitalization, we acquired a controlling interest in Valley Electric for $7,449 in cash and 4,141,547 unregistered shares of our common stock. As of June 30, 2014 , we control 96.3% of the common equity. During the three months ended June 30, 2014, $20,471 of debt that was previously held at Valley Electric Holdings I, Inc. was assumed by Valley Electric Company, Inc. and the remaining $16,754 of holding company debt was converted into additional equity investment. Due to soft operating results, the Board of Directors decreased the fair value of our investment in Valley Electric to $33,556 as of June 30, 2014 , a discount of $23,304 from its amortized cost, compared to being valued at cost at June 30, 2013. 76 Wolf Energy Holdings Inc. Wolf is a holding company formed to hold 100% of the outstanding membership interests of each of Coalbed and AEH. The membership interests of Coalbed and AEH, which were previously owned by 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. In addition, effective June 29, 2012 C&J Cladding Holding Company, Inc. (“C&J Holdings”) merged with and into Wolf Energy Holdings, with Wolf Energy Holdings as the surviving entity. At the time of the merger, C&J Holdings held the remaining undistributed proceeds from the sale of its membership interests in C&J Cladding, LLC. The merger was effectuated in connection with the broader simplification of our energy investment holdings. On April 15, 2013, assets previously held by H&M Oil & Gas, LLC ("H&M") were assigned to Wolf Energy, LLC ("Wolf Energy") in exchange for a $66,000 term loan secured by the assets. Our cost basis in this loan of $44,632 was determined in accordance with ASC 310- 40, Troubled Debt Restructurings by Creditors , and is equal to the fair value of assets at the time of transfer and we recorded a realized loss of $19,647 in connection with the foreclosure on the assets. On May 17, 2013, Wolf Energy sold certain of the assets that had been previously held by H&M that were located in Martin County to Hibernia for $66,000. Proceeds from the sale were primarily used to repay the loan and net profits interest receivable due to us and we recognized as a realized gain of $11,826 partially offsetting the previously recorded loss. We received $3,960 of structuring and advisory fees from Wolf Energy during the year ended June 30, 2013 related to the sale and $991 under the net profits interest agreement which was recognized as other income during the fiscal year ended June 30, 2013. The Board of Directors set the fair value of our investment in Wolf Energy Holdings at $3,599 as of June 30, 2014 , a discount of $4,442 from its amortized cost, compared to the $3,091 unrealized depreciation recorded at June 30, 2013. Equity positions in the portfolio are susceptible to potentially significant changes in value, both increases as well as decreases, due to changes in operating results. Seven of our controlled companies, AIRMALL, Ajax, CP Energy, First Tower, Gulf Coast, Harbortouch and Valley Electric, experienced such volatility and experienced fluctuations in valuations during the year ended June 30, 2014. See above for discussion regarding the fluctations in AIRMALL, Ajax, First Tower, and Valley Electric. The value of Gulf Coast decreased to $14,459 as of June 30, 2014 , a discount of $28,991 to its amortized cost, compared to the $9,241 unrealized depreciation recorded at June 30, 2013 due to a decline in operating results. The value of Harbortouch increased to $291,314 as of June 30, 2014, a premium of $12,620 to its amortized cost. The value of CP Energy increased to $130,119 as of June 30, 2014, a premium of $16,618 to its amortized cost. Eight of the other controlled investments have been valued at discounts to the original investment. Nine of the other control investments are valued at the original investment amounts or higher. Overall, at June 30, 2014 , control investments are valued at $78,788 below their amortized cost. We hold one affiliate investment at June 30, 2014 . Our affiliate portfolio company did not experience a significant change in valuation during the year ended June 30, 2014. 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 premia 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 in valuation and are generally performing as expected or better than expected. Two of our Non-control/non-affiliate investments, Stryker Energy, LLC (“Stryker”) and Wind River Resources Corporation (“Wind River”), are valued at a discount to amortized cost due to a decline in the operating results of the operating companies from those originally underwritten. In June 2014, New Century Transportation, Inc. ("NCT") filed for bankruptcy. As we hold a second lien position and do not expect liquidation proceeds to exceed the first lien liability, we decreased the fair value of our debt investment to zero. Overall, at June 30, 2014 , other non-control/non-affiliate investments are valued at $52,073 above their amortized cost, excluding our investments in NCT, Stryker and Wind River, as the remaining companies are generally performing as or better than expected. 77 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 June 30, 2014 consists of: a Revolving Credit Facility availing us of the ability to borrow debt subject to borrowing base determinations; Senior Convertible Notes which we issued in December 2010, February 2011, April 2012, August 2012, December 2012 and April 2014; Senior Unsecured Notes which we issued in May 2012, March 2013 and April 2014; and Prospect Capital InterNotes® which we may issue from time to time. Our equity capital is comprised entirely of common equity. The following table shows the Revolving Credit Facility, Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes ® maximum draw amounts and outstanding borrowings as of June 30, 2014 and June 30, 2013 : June 30, 2014 June 30, 2013 Revolving Credit Facility Senior Convertible Notes Senior Unsecured Notes Prospect Capital InterNotes® Total Amount Outstanding Maximum Draw Amount Maximum Draw Amount $ 857,500 $ 1,247,500 647,881 785,670 3,538,551 $ $ 92,000 $ 1,247,500 647,881 785,670 2,773,051 $ Amount Outstanding 124,000 847,500 347,725 363,777 1,683,002 552,500 $ 847,500 347,725 363,777 2,111,502 $ The following table shows the contractual maturities of our Revolving Credit Facility, Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes ® as of June 30, 2014 : Revolving Credit Facility Senior Convertible Notes Senior Unsecured Notes Prospect Capital InterNotes® Total Contractual Obligations Payments Due by Period Total Less than 1 Year 1 – 3 Years 3 – 5 Years After 5 Years $ 92,000 $ 1,247,500 647,881 785,670 $ 2,773,051 $ — $ — — — — $ 92,000 $ 317,500 — 8,859 418,359 $ — $ — 400,000 530,000 647,881 — 261,456 515,355 791,456 $ 1,563,236 The following table shows the contractual maturities of our Revolving Credit Facility, Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes ® as of June 30, 2013 : Payments Due by Period Revolving Credit Facility Senior Convertible Notes Senior Unsecured Notes Prospect Capital InterNotes® Total Contractual Obligations $ 124,000 $ 847,500 347,725 363,777 $ 1,683,002 $ Total Less than 1 Year After 5 Years 1 – 3 Years 3 – 5 Years — $ — $ — — — — $ 150,000 — — 150,000 $ 124,000 $ 297,500 — — — 400,000 347,725 363,777 421,500 $ 1,111,502 We have and expect to continue to fund 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 June 30, 2014 , we can issue up to $3,691,792 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. Revolving Credit Facility On March 27, 2012, we closed on an expanded five-year $650,000 revolving credit facility with a syndicate of lenders through PCF (the “2012 Facility”). The lenders have extended commitments of $857,500 under the 2012 Facility as of June 30, 2014 , which was increased to $877,500 in July 2014 (see "Recent Developments"). The 2012 Facility includes an accordion feature 78 which allows commitments to be increased up to $1,000,000 in the aggregate. The revolving period of the 2012 Facility extends through March 2015, with an additional two year amortization period (with distributions allowed) after the completion of the revolving period. During such two year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the two year amortization period, the remaining balance will become due, if required by the lenders. The 2012 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 2012 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 2012 Facility. The 2012 Facility also requires the maintenance of a minimum liquidity requirement. As of June 30, 2014 , we were in compliance with the applicable covenants. Interest on borrowings under the 2012 Facility is one-month Libor plus 275 basis points with no minimum Libor floor. Additionally, the lenders charge a fee on the unused portion of the 2012 Facility equal to either 50 basis points, if at least half of the credit facility is drawn, or 100 basis points otherwise. The 2012 Facility requires us to pledge assets as collateral in order to borrow under the credit facility. As of June 30, 2014 and June 30, 2013 , we had $780,620 and $473,508 , respectively, available to us for borrowing under the 2012 Facility, of which the amount outstanding was $92,000 and $124,000 , respectively. As additional eligible investments are transferred to PCF and pledged under the 2012 Facility, PCF will generate additional availability up to the current commitment amount of $877,500 . At June 30, 2014 , the investments used as collateral for the 2012 Facility had an aggregate fair value of $1,535,476 , which represents 24.1% of our total investments 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 2012 Facility, we incurred $14,154 of fees, including $1,319 of fees carried over from the previous facility, which are being amortized over the term of the facility in accordance with ASC 470-50, Debt Modifications and Extinguishments , of which $4,883 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $12,216 , $9,082 and $14,883 , respectively, of interest costs, unused fees and amortization of financing costs on the 2012 Facility as interest expense. Senior Convertible Notes On December 21, 2010, we issued $150,000 aggregate principal amount of senior convertible notes that mature on December 15, 2015 (the “2015 Notes”), unless previously converted or repurchased in accordance with their terms. The 2015 Notes bear 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 February 18, 2011, we issued $172,500 aggregate principal amount of senior convertible notes that mature on August 15, 2016 (the “2016 Notes”), unless previously converted or repurchased in accordance with their terms. The 2016 Notes bear 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 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 April 16, 2012, we issued $130,000 aggregate principal amount of senior 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 August 14, 2012, we issued $200,000 aggregate principal amount of senior 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 December 21, 2012, we issued $200,000 aggregate principal amount of senior 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. 79 On April 11, 2014, we issued $400,000 aggregate principal amount of senior 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. Certain key terms related to the convertible features for the 2015 Notes, the 2016 Notes, the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes (collectively, the “Senior Convertible Notes”) are listed below. Initial conversion rate(1) Initial conversion price Conversion rate at June 30, 2014(1)(2) Conversion price at June 30, 2014(2)(3) Last conversion price calculation date Dividend threshold amount (per share)(4) $ 11.35 $ 85.8442 78.3699 88.0902 2015 Notes 2016 Notes 2017 Notes 2018 Notes 2019 Notes 2020 Notes 80.6647 12.40 80.6647 12.40 4/11/2014 $ 0.101125 $ 0.101150 $ 0.101500 $ 0.101600 $ 0.110025 $ 0.110525 8/14/2013 12/21/2013 12/21/2013 4/16/2014 2/18/2014 79.7766 82.3451 89.0157 86.9426 79.7865 79.3176 82.8631 12.54 $ 12.14 $ 12.76 $ 11.65 $ 12.53 $ 12.07 $ 11.50 $ 12.61 $ 11.23 $ $ (1) Conversion rates denominated in shares of common stock per $1 principal amount of the Senior 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 in effect at June 30, 2014 was calculated on the last anniversary of the issuance and will be adjusted again on the next anniversary, unless the exercise price shall have changed by more than 1% before the anniversary. (4) The conversion rate is increased if monthly cash dividends paid to common shares exceed the monthly dividend threshold amount, subject to adjustment. In no event will the total number of shares of common stock issuable upon conversion exceed 96.8992 per $1 principal amount of the 2015 Notes (the “conversion rate cap”), except that, to the extent we receive written guidance or a no-action letter from the staff of the Securities and Exchange Commission (the “Guidance”) permitting us to adjust the conversion rate in certain instances without regard to the conversion rate cap and to make the 2015 Notes convertible into certain reference property in accordance with certain reclassifications, business combinations, asset sales and corporate events by us without regard to the conversion rate cap, we will make such adjustments without regard to the conversion rate cap and will also, to the extent that we make any such adjustment without regard to the conversion rate cap pursuant to the Guidance, adjust the conversion rate cap accordingly. We will use our commercially reasonable efforts to obtain such Guidance as promptly as practicable. Prior to obtaining the Guidance, we will not engage in certain transactions that would result in an adjustment to the conversion rate increasing the conversion rate beyond what it would have been in the absence of such transaction unless we have engaged in a reverse stock split or share combination transaction such that in our reasonable best estimation, the conversion rate following the adjustment for such transaction will not be any closer to the conversion rate cap than it would have been in the absence of such transaction. 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 Senior Convertible Notes. No holder of Senior 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 Senior 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 Senior Convertible Notes upon a fundamental change at a price equal to 100% of the principal amount of the Senior 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 80 interest payments (without duplication of the foregoing amounts) on such Senior Convertible Notes through and including the maturity date. In connection with the issuance of the Senior Convertible Notes, we incurred $39,558 of fees which are being amortized over the terms of the notes, of which $27,824 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $58,042 , $45,880 and $22,197 , respectively, of interest costs and amortization of financing costs on the Senior Convertible Notes as interest expense. Senior Unsecured Notes On May 1, 2012, we issued $100,000 aggregate principal amount of senior unsecured notes that mature on November 15, 2022 (the “2022 Notes”). The 2022 Notes bear interest at a rate of 6.95% per year, payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning August 15, 2012. Total proceeds from the issuance of the 2022 Notes, net of underwriting discounts and offering costs, were $97,000. On March 15, 2013, we issued $250,000 aggregate principal amount of senior 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 $245,885. On April 7, 2014, we issued $300,000 aggregate principal amount of senior 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 $250,775. The 2022 Notes, the 2023 Notes and the 5.00% 2019 Notes (collectively, the “Senior Unsecured Notes”) are direct unsecured obligations and rank equally with all of our unsecured senior indebtedness from time to time outstanding. In connection with the issuance of the Senior Unsecured Notes, we incurred $11,358 of fees which are being amortized over the term of the notes, of which $10,297 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $25,988 , $11,672 and $1,178 , respectively, of interest costs and amortization of financing costs on the Senior Unsecured Notes as interest expense. 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 senior obligations and rank equally with all of our unsecured senior indebtedness 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. 81 During the year ended June 30, 2014 , we issued $473,762 aggregate principal amount of our Prospect Capital InterNotes ® for net proceeds of $465,314 . These notes were issued with stated interest rates ranging from 3.75% to 6.75% with a weighted average interest rate of 5.12% . These notes mature between October 15, 2016 and October 15, 2043 . Below is a summary of the Prospect Capital InterNotes® issued during the year ended June 30, 2014 : Tenor at Origination (in years) 3 3.5 4 5 5.5 6.5 7 7.5 10 12 15 18 20 25 30 $ $ Principal Amount Interest Rate Range Weighted Average Interest Rate 5,710 3,149 45,751 217,915 43,820 1,800 62,409 1,996 23,850 2,978 2,495 4,062 2,791 34,886 20,150 473,762 4.00% 4.00% 3.75%–4.00% 4.25%–5.00% 4.75%–5.00% 5.50% 5.25%–5.75% 5.75% 5.75%–6.50% 6.00% 6.00% 6.00%–6.25% 6.00% 6.25%–6.50% 6.50%–6.75% 4.00 % 4.00 % 3.92 % 4.91 % 4.77 % 5.50 % 5.44 % 5.75 % 5.91 % 6.00 % 6.00 % 6.21 % 6.00 % 6.39 % 6.60 % Maturity Date Range October 15, 2016 April 15, 2017 November 15, 2017 – May 15, 2018 July 15, 2018 – August 15, 2019 February 15, 2019 – August 15, 2019 February 15, 2020 July 15, 2020 – May 15, 2021 February 15, 2021 January 15, 2024 – May 15, 2024 November 15, 2025 – December 15, 2025 August 15, 2028 – November 15, 2028 July 15, 2031 – August 15, 2031 September 15, 2033 – October 15, 2033 August 15, 2038 – May 15, 2039 July 15, 2043 – October 15, 2043 During the year ended June 30, 2013 , we issued $343,139 aggregate principal amount of our Prospect Capital InterNotes ® for net proceeds of $334,244 . These notes were issued with stated interest rates ranging from 3.28% to 6.625% with a weighted average interest rate of 5.59% . These notes mature between July 15, 2019 and June 15, 2043 . Below is a summary of the Prospect Capital InterNotes® issued during the year ended June 30, 2013 : Tenor at Origination (in years) 7 10 15 18 20 30 $ $ Principal Amount Interest Rate Range 4.00%–6.45% 190,937 3.28%–3.78% 1,489 15,000 5.00% 22,157 4.125%–6.00% 3,106 5.625%–5.75% 110,450 5.50%–6.625% 343,139 Weighted Average Interest Rate 5.35 % 3.37 % 5.00 % 5.34 % 5.70 % 6.15 % 82 Maturity Date Range July 15, 2019 – June 15, 2020 March 15, 2023 – April 15, 2023 May 15, 2028 – June 15, 2028 December 15, 2030 – June 15, 2031 November 15, 2032 – December 15, 2032 November 15, 2042 – June 15, 2043 In connection with the issuance of the 5.00% 2019 Notes, $45,000 of previously-issued Prospect Capital InterNotes® were exchanged for the 5.00% 2019 Notes. During the year ended June 30, 2014 , we repaid $6,869 aggregate principal amount of our Prospect Capital InterNotes® in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. Below are the Prospect Capital InterNotes® outstanding as of June 30, 2014 : Tenor at Origination (in years) 3 3.5 4 5 5.5 6.5 7 7.5 10 12 15 18 20 25 30 $ $ Principal Amount Interest Rate Range 4.00% 5,710 4.00% 3,149 3.75%–4.00% 45,751 4.25%–5.00% 212,915 5.00% 3,820 5.50% 1,800 4.00%–6.55% 256,903 5.75% 1,996 3.23%–7.00% 41,952 6.00% 2,978 17,465 5.00%–6.00% 25,435 4.125%–6.25% 5,847 5.625%–6.00% 6.25%–6.50% 34,886 5.50%–6.75% 125,063 785,670 Weighted Average Interest Rate 4.00 % 4.00 % 3.92 % 4.92 % 5.00 % 5.50 % 5.39 % 5.75 % 6.18 % 6.00 % 5.14 % 5.49 % 5.85 % 6.39 % 6.22 % Below are the Prospect Capital InterNotes® outstanding as of June 30, 2013 : Maturity Date Range October 15, 2016 April 15, 2017 November 15, 2017 – May 15, 2018 July 15, 2018 – August 15, 2019 February 15, 2019 February 15, 2020 June 15, 2019 – May 15, 2021 February 15, 2021 March 15, 2022 – May 15, 2024 November 15, 2025 – December 15, 2025 May 15, 2028 – November 15, 2028 December 15, 2030 – August 15, 2031 November 15, 2032 – October 15, 2033 August 15, 2038 – May 15, 2039 November 15, 2042 – October 15, 2043 Tenor at Origination (in years) 7 10 15 18 20 30 $ $ Principal Amount Interest Rate Range 4.00%–6.55% 194,937 3.28%–7.00% 18,127 15,000 5.00% 22,157 4.125%–6.00% 3,106 5.625%–5.75% 110,450 5.50%–6.625% 363,777 Weighted Average Interest Rate 5.37 % 6.56 % 5.00 % 5.34 % 5.70 % 6.15 % Maturity Date Range June 15, 2019 – June 15, 2020 March 15, 2022 – April 15, 2023 May 15, 2028 – June 15, 2028 December 15, 2030 – June 15, 2031 November 15, 2032 – December 15, 2032 November 15, 2042 – June 15, 2043 In connection with the issuance of the Prospect Capital InterNotes ® , we incurred $20,235 of fees which are being amortized over the term of the notes, of which $18,889 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $33,857 , $9,707 and $276 , respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes ® as interest expense. Net Asset Value During the year ended June 30, 2014 , we issued $1,045,856 of additional equity, net of underwriting and offering costs, by issuing 94,789,672 shares of our common stock. The following table shows the calculation of net asset value per share as of June 30, 2014 and June 30, 2013 : Net assets Shares of common stock issued and outstanding Net asset value per share $ $ 3,618,182 $ 342,626,637 10.56 $ 2,656,494 247,836,965 10.72 June 30, 2014 June 30, 2013 83 Results of Operations Net increase in net assets resulting from operations for the years ended June 30, 2014 , 2013 and 2012 was $319,020 , $220,856 and $190,904 , respectively, representing $1.06 , $1.07 and $1.67 per weighted average share, respectively. During the year ended June 30, 2014 , the decrease is primarily due to a $32,300, or $0.38 per weighted average share, decline in net investment income primarily due to a decrease in dividend income from our investment in Energy Solutions, a decrease in the average rate of interest earned on investments, a decline in structuring fee income (during the quarter ended June 30, 2014) and an increase in interest expense due to additional debt financing. (See "Investment Income" for further discussion of dividend and structuring fee income.) The decline in net investment income is partially offset by a $65,865, or $0.37 per weighted average share, favorable decrease in our net realized losses and net change in unrealized depreciation on investments. (See "Net Realized Losses and Net Decrease in Net Assets from Changes in Unrealized Depreciation" 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 are typically not issuing securities rated investment grade, have limited resources, have limited operating history, have concentrated product lines or customers, 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, was $712,291 , $576,336 and $320,910 for the years ended June 30, 2014 , 2013 and 2012 , respectively. During the year ended June 30, 2014 , the increase in investment income is primarily the result of a larger income producing portfolio. During the year ended June 30, 2013 , the increase in investment income is primarily the result of a larger income producing portfolio, increased structuring, advisory and amendment fees from the deployment of additional capital in revenue-producing assets, make-whole fees from Energy Solutions for early repayment of our outstanding loan, and increased dividends received from Energy Solutions and R-V. The following table describes the various components of investment income and the related levels of debt investments: Interest income Dividend income Other income Total investment income 2014 613,741 26,837 71,713 712,291 $ $ $ Year Ended June 30, 2013 435,455 82,705 58,176 576,336 $ $ $ 2012 219,536 64,881 36,493 320,910 Average debt principal of performing investments $ 4,886,846 $ 2,878,421 $ 1,466,703 Weighted average interest rate earned on performing assets 12.56 % 15.13 % 14.97 % Average interest income producing assets have increased from $1,466,703 for the year ended June 30, 2012 to $2,878,421 for the year ended June 30, 2013 to $4,886,846 for the year ended June 30, 2014 . The average yield on interest bearing performing assets decreased from 15.1% for the year ended June 30, 2013 to 12.6% for the year ended June 30, 2014 . The decrease in annual returns during the comparable period is primarily due to a decline in prepayment penalty income driven by a $14,731 decrease in the make-whole fees we received from Energy Solutions. The decrease in our current yield is primarily due to originations at lower rates than our average existing portfolio yield. Excluding the adjustment for make-whole fees our annual return would have been 14.1% for the year ended June 30, 2013 . 84 Investment income is also generated from dividends and other income. Dividend income decreased from $82,705 for the year ended June 30, 2013 to $26,837 for the year ended June 30, 2014 . The decrease in dividend income is primarily attributed to a $53,820 decrease in the level of dividends received from our investment in Energy Solutions. The sale of Gas Solutions by Energy Solutions resulted in significant earnings and profits, as defined by the Internal Revenue Code, at Energy Solutions for calendar year 2012. As a result, distributions from Energy Solutions to us were recognized as dividend income, in accordance with ASC 946, Financial Services—Investment Companies , as cash distributions are received from Energy Solutions to the extent there are earnings and profits sufficient to support such recognition. As a result, we received dividends from Energy Solutions of $53,820 during the year ended June 30, 2013 . No such dividends were received during the year ended June 30, 2014 related to our investment in Energy Solutions. The decrease in dividend income is also attributed to a $23,361 decrease in the level of dividends received from our investment in R-V. We received dividends from R-V of $1,100 and $24,462 during the years ended June 30, 2014 and 2013 , respectively. The $24,462 of dividends received from R-V during the year ended June 30, 2013 include a $11,073 distribution as part of R-V’s recapitalization in November 2012 for which we provided an additional $9,500 of senior secured financing. The decrease in dividend income is further attributed to a $2,945 decrease in dividends received from our investment in American Gilsonite Company ("AGC"). We received dividends of $2,945 from AGC during the year ended June 30, 2013 . No such dividends were received during the year ended June 30, 2014 related to our investment in AGC. The decrease in dividend income was partially offset by dividends of $12,000, $4,841 and $5,000 received from our investments in AIRMALL, Credit Central and Nationwide, respectively, during the year ended June 30, 2014 . The dividends received from Credit Central and Nationwide include distributions as part of follow-on financings in March 2014 for which we provided an additional $6,500 of financing, as discussed above. No dividends were received from AIRMALL, Credit Central or Nationwide during the year ended June 30, 2013 . Dividend income increased from $64,881 for the year ended June 30, 2012 to $82,705 for the year ended June 30, 2013. This $17,824 increase in dividend income is primarily attributed to an increase in the level of dividends received from our investments in Energy Solutions and R-V due to increased profits generated by the portfolio companies. We received dividends from Energy Solutions of $53,820 and $47,850 during the years ended June 30, 2013 and June 30, 2012, respectively. The sale of Gas Solutions by Energy Solutions has resulted in significant earnings and profits, as defined by the Internal Revenue Code, at Energy Solutions for calendar year 2012. We received dividends from R-V of $24,462 and $283 during the years ended June 30, 2013 and June 30, 2012, respectively. The $24,462 of dividends received from R-V during the year ended June 30, 2013 include a $11,073 distribution as part of R-V’s recapitalization in November 2012 for which we provided an additional $9,500 of senior secured financing. The increases in dividend income from our investments in Energy Solutions and R-V were offset by a reduction in dividends received from NRG. We received dividends from NRG of $15,011 during the year ended June 30, 2012. There were no dividends from NRG received during the year ended June 30, 2013 as NRG has been sold. Other income has come primarily from structuring fees, overriding royalty interests, and settlement of net profits interests. Income from other sources increased from $58,176 for the year ended June 30, 2013 to $71,713 for the year ended June 30, 2014 . The increase is primarily due to a $4,998 increase in structuring fees, $5,825 of legal cost reimbursement from a litigation settlement which had been expensed in prior years, and a $1,771 increase in royalty interests from our controlled investments, particularly APH, Credit Central, First Tower, Nationwide, NPH and UPH. During the years ended June 30, 2014 and 2013 , we recognized structuring fees of $57,697 and $52,699, respectively, from new originations, restructurings and follow-on investments. Included within the $57,697 of structuring fees recognized during the year ended June 30, 2014 is an $8,000 fee from First Tower Delaware related to the renegotiation and expansion of First Tower’s third party revolver for which a fee was received in December 2013. The remaining $49,697 of structuring fees recognized during the year ended June 30, 2014 resulted from follow-on investments and new originations, primarily from our investments in Echelon, Harbortouch, IWCO and Matrixx. Income from other sources increased from $36,493 for the year ended June 30, 2012 to $58,176 for the year ended June 30, 2013. The increase is primarily due to $52,699 of structuring fees recognized during the year ended June 30, 2013 primarily from our investments in APH, Arctic Glacier, Broder, InterDent, Progrexion, Ryan, TransPlace, USC and Wolf, in comparison to $26,443 of structuring fees recognized during the year ended June 30, 2012. The increase in structuring fees is partially offset by a decrease in advisory fees recognized during the year ended June 30, 2013 from our investments in Energy Solutions and NRG. We received $8,783 of advisory fees from Energy Solutions and NRG during the year ended June 30, 2012. No such fee was received during the year ended June 30, 2013. The remaining increase is primarily due to $4,122 of royalty income recognized during the year ended June 30, 2013 primarily from First Tower and Wolf, in comparison to $224 of royalty income recognized during the year ended June 30, 2012. 85 While we were in discussions with the SEC regarding consolidation, we elected to suspend our debt and equity raising activities for the remainder of the quarter and continuing through the filing of this Form 10-K. This curtailment of capital raising activities suppressed our levels of origination and growth in the fourth quarter of the fiscal year ended June 30, 2014. While structuring fees increased from the fiscal year ended June 30, 2013 to the fiscal year ended June 30, 2014, the reduction in originations in the quarter ended June 30, 2014 suppressed our level of structuring fees recognized and reduced our earnings for the quarter. Originations were $1,343,356 in the quarter ended March 31, 2014 versus $444,104 in the quarter ended June 30, 2014 . As a result, structuring fees fell from $24,659 in the quarter ended March 31, 2014 to $5,026 in the quarter ended June 30, 2014 . 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 Prospect Capital Management (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 $355,068 , $251,412 and $134,226 for the years ended June 30, 2014 , 2013 and 2012 , respectively. The base management fee was $108,990 , $69,800 and $35,836 for the years ended June 30, 2014 , 2013 and 2012 , respectively. The increases are directly related to our growth in total assets. For the years ended June 30, 2014 , 2013 and 2012 , we incurred $89,306 , $81,231 and $46,671 of income incentive fees, respectively. These increases are driven by corresponding increases in pre-incentive fee net investment income from $233,355 for the year ended June 30, 2012 to $406,155 for the year ended June 30, 2013 to $446,529 for the year ended June 30, 2014 , primarily due to an increase in interest income from a larger asset base. No capital gains incentive fee has yet been incurred pursuant to the Investment Advisory Agreement. During the years ended June 30, 2014 , 2013 and 2012 , we incurred $130,103 , $76,341 and $38,534 , respectively, of expenses related to our Revolving Credit Facility, Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes® (collectively, our "Senior Notes"). These expenses are related directly to the leveraging capacity put into place for each of those periods and the levels of indebtedness actually undertaken in those periods. The table below describes the various expenses of our Senior Notes and the related indicators of leveraging capacity and indebtedness during these periods. Interest on borrowings Amortization of deferred financing costs Accretion of discount on Senior Unsecured Notes Facility commitment fees Total interest and credit facility expenses 2014 111,900 11,491 156 6,556 130,103 $ $ $ $ Year Ended June 30, 2013 62,657 8,232 50 5,402 76,341 $ $ 2012 27,346 8,511 — 2,677 38,534 Average principal debt outstanding Weighted average stated interest rate on borrowings(1) Weighted average interest rate on borrowings(2) Revolving Credit Facility amount at beginning of year $ 1,982,054 $ 1,066,368 $ 502,038 5.65 % 6.23 % 5.88 % 6.65 % 5.45 % 7.14 % $ 552,500 $ 492,500 $ 325,000 (1) Includes only the stated interest expense. (2) Includes the stated interest expense, amortization of deferred financing costs, accretion of discount on Senior Unsecured Notes and commitment fees on the undrawn portion of our Revolving Credit Facility. The increase in interest expense for the year ended June 30, 2014 is primarily due to the issuance of additional Prospect Capital InterNotes®, the 2019 Notes, the 5.00% 2019 Notes, the 2020 Notes, and the 2023 Notes for which we incurred an incremental $49,101 of collective interest expense, respectively. The weighted average interest rate on borrowings (excluding amortization, accretion and undrawn facility fees) decreased from 5.88% for the year ended June 30, 2013 to 5.65% for the year ended June 30, 2014 . This decrease is primarily due to issuances of debt at lower coupon rates. For example, the weighted average interest rate on our Prospect Capital InterNotes® decreased from 5.65% as of June 30, 2013 to 5.38% as of June 30, 2014 . 86 The allocation of overhead expense from Prospect Administration was $14,373 , $8,737 and $6,848 for the years ended June 30, 2014 , 2013 and 2012 , respectively. As our portfolio continues to grow, we expect Prospect Administration to continue to increase the size of its administrative and financial staff. During the years ended June 30, 2014, 2013 and 2012, Prospect Administration received payments of $7,582, $1,394, and $1,092 directly from our controlled portfolio companies for legal, tax and portfolio level accounting services. 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. Excise tax decreased from an expense of $6,500 for the year ended June 30, 2013 to a benefit of $4,200 for the year ended June 30, 2014 . As of June 30, 2013 , we accrued $5,000 as an estimate of the excise tax due for continuing to retain a portion of our annual taxable income for the calendar year ended December 31, 2013. We previously paid $4,500 for the undistributed ordinary income retained at December 31, 2012. During the year ended June 30, 2014 , we amended our excise tax returns resulting in the $4,200 reversal of previously recognized expense and we recorded a $2,200 prepaid asset for the amount our $4,500 excise tax payment exceeded the excise tax liability estimated through June 30, 2014 . There was no excise tax expense for the year ended June 30, 2012 . Total operating expenses, net of investment advisory fees, interest and credit facility expenses, allocation of overhead from Prospect Administration and excise tax (“Other Operating Expenses”) were $16,496 , $8,803 and $6,337 for the years ended June 30, 2014 , 2013 and 2012 , respectively. The increase of $7,693 during the year ended June 30, 2014 is primarily due to an increase in our investor relations expense which is included within other general and administrative expenses. Investor relations expense increased due to increased proxy costs incurred for our larger investor base. The increase of $2,466 during the year ended June 30, 2013 is primarily the result of a $1,000 insurance claim settlement for legal fees expensed in previous periods which reduced legal fees in the year ended June 30, 2012. Net Investment Income Net investment income was $357,223 , $324,924 and $186,684 for the years ended June 30, 2014 , 2013 and 2012 , respectively ( $1.19 , $1.57 and $1.63 per weighted average share, respectively). The $32,299 increase during the year ended June 30, 2014 is primarily the result of a $135,955 increase in investment income partially offset by a $103,656 increase in operating expenses. The $0.38 per weighted average share decrease in net investment income for the year ended June 30, 2014 is primarily due to a $0.31 per weighted average share decrease in dividend income primarily due to a decline in the level of dividends received from our investment in Energy Solutions. The $138,240 increase in net investment income during the year ended June 30, 2013 is primarily the result of a $255,426 increase in investment income partially offset by a $117,186 increase in operating expenses. The $0.06 per weighted average share decrease in net investment income for the year ended June 30, 2013 is primarily due to an increase in excise taxes and higher levels of cash awaiting deployment. (Refer to "Investment Income" and "Operating Expenses" above for further discussion.) Net Realized Gains (Losses) Net realized gains (losses) were $(3,346) , $(26,234) and $36,588 for the years ended June 30, 2014 , 2013 and 2012 , respectively. The net realized loss during the year ended June 30, 2014 was due primarily to realized losses of $7,853 and $1,669 related to the sale of our investments in NBS and ICON, respectively. These losses were partially offset by a distribution of $3,252 related to our investment in NRG for which we realized a gain of the same amount; a $1,183 gain realized when the subordinated notes from Apidos CLO VIII were called in October 2013; $954 gains received from the release of escrowed amounts due to us from several portfolio companies; and $762 gains realized on sales of other investments described above in "Portfolio Investment Activity." The net realized loss for the year ended June 30, 2013 was primarily due to the sale of New Meatco Provisions, LLC (realized loss of $10,814), the other-than-temporary impairment of ICS (realized loss of $12,117) and restructuring of the H&M debt in conjunction with the foreclosure on the assets of H&M (realized loss of $19,647). These losses were partially offset by net realized gains from the sale of our assets in Wolf Energy (realized gain of $11,826), assets formerly held by H&M, and distributions received from our escrow receivable account, primarily NRG (realized gains of $3,252). Net Decrease in Net Assets from Changes in Unrealized Depreciation Net decrease in net assets from changes in unrealized depreciation was $34,857 , $77,834 and $32,368 for the years ended June 30, 2014 , 2013 and 2012 , respectively. The variability in results is primarily due to the valuation of equity positions in our portfolio susceptible to significant changes in value, both increases as well as decreases, due to operating results. For the year ended June 30, 2014 , the $34,857 net change in unrealized deprecation was driven by significant write-down of our investment in NCT, which filed for bankruptcy in June 2014. As we hold a second lien position and do not expect liquidation proceeds to exceed the first lien liability, we decreased the fair value of our debt investment in NCT to zero. We also experienced significant write-downs in 87 our investments in AIRMALL, Ajax, Gulf Coast and Valley Electric. These instances of unrealized depreciation were partially offset by unrealized appreciation related to CP Well, First Tower, Harbortouch and our CLO equity investments. During the year ended June 30, 2014 , we partially sold our debt investment in ICON at a discount and realized a loss of $1,669, reducing the amount previously recorded as unrealized depreciation. Included within the change in net unrealized appreciation for the year ended June 30, 2014 is $1,669 of unrealized appreciation resulting from the partial sale of ICON recognized as a realized loss. For the year ended June 30, 2013 , the $77,834 decrease in net assets from the net change in unrealized depreciation was driven by a reduction in the fair value of our investments in Ajax, Boxercraft and First Tower because of changes in current market conditions; and Energy Solutions for which we received $19,543 of make-whole fees for early repayment of the outstanding loan and distributions of $53,820 during the year, which were recorded as interest and dividend income, respectively, reducing the amount previously recorded as unrealized appreciation. These instances of unrealized depreciation were partially offset by the elimination of the unrealized depreciation resulting from the H&M foreclosure mentioned above. Financial Condition, Liquidity and Capital Resources For the years ended June 30, 2014 , 2013 and 2012 , our operating activities used $1,725,387 , $1,786,208 and $229,415 of cash, respectively. There were no investing activities for the years ended June 30, 2014 , 2013 and 2012 . Financing activities provided $1,656,376 , $1,868,250 and $289,214 of cash during the years ended June 30, 2014 , 2013 and 2012 , respectively, which included dividend payments of $377,070 , $242,301 and $127,564 , 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 been issuances of debt and equity. We have and may continue to fund a portion of our cash needs through borrowings from banks, issuances of senior securities or secondary offerings. 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 year ended June 30, 2014 , we borrowed $1,078,500 and made repayments totaling $1,110,500 under our Revolving Credit Facility. As of June 30, 2014 , we had $92,000 outstanding on our Revolving Credit Facility, $1,247,500 outstanding on our Senior Convertible Notes, Senior Unsecured Notes with a carrying value of $647,881 and $785,670 outstanding on our Prospect Capital InterNotes ® . (See "Capitalization" above.) Undrawn committed revolvers to our portfolio companies incur commitment fees ranging from 0.00% to 2.00%. As of June 30, 2014 and June 30, 2013 , we have $143,597 and $202,518 of undrawn revolver commitments to our portfolio companies, respectively. Our Board of Directors, pursuant to the Maryland General Corporation Law, executed Articles of Amendment to increase the number of shares authorized for issuance from 500,000,000 to 1,000,000,000 in the aggregate. The amendment became effective May 6, 2014. On October 15, 2013, our Registration Statement on Form N-2 was declared effective by the SEC. Under this Shelf Registration Statement, we can issue up to $3,691,792 of additional debt and equity securities in the public market as of June 30, 2014 . We also continue to generate liquidity through public and private stock offerings. On May 8, 2013, we entered into an ATM Program with BB&T Capital Markets, BMO Capital Markets, and KeyBanc Capital Markets through which we could sell, by means of at-the-market offerings from time to time, up to 45,000,000 shares of our common stock. During the period from July 5, 2013 to August 21, 2013, we sold 9,818,907 shares of our common stock at an average price of $10.97 per share, and raised $107,725 of gross proceeds, under the ATM Program. Net proceeds were $106,654 after commissions to the broker-dealer on shares sold and offering costs. On August 22, 2013, we entered into an ATM Program with BMO Capital Markets, Goldman Sachs, KeyBanc Capital Markets, and RBC Capital Markets through which we could sell, by means of at-the-market offerings from time to time, up to 45,000,000 shares of our common stock. During the period from August 29, 2013 to November 4, 2013, we sold 24,127,242 shares of our common stock at an average price of $11.28 per share, and raised $272,114 of gross proceeds, under the ATM Program. Net proceeds were $268,997 after commissions to the broker- dealer on shares sold and offering costs. On November 5, 2013, we entered into an ATM Program with Barclays Capital, Goldman Sachs, KeyBanc Capital Markets, and RBC Capital Markets through which we could sell, by means of at-the-market offerings from time to time, up to 50,000,000 shares of our common stock. During the period from November 12, 2013 to February 5, 2014 , we sold 27,301,889 shares of our common stock at an average price of $11.25 per share, and raised $307,045 of gross proceeds, under the ATM Program. Net proceeds were $303,540 after commissions to the broker-dealer on shares sold and offering costs. 88 On February 4, 2014, we entered into an ATM Program with BMO Capital Markets, BNP Paribas, Goldman Sachs, KeyBanc Capital Markets, and UBS Investment Bank through which we could sell, by means of at-the-market offerings from time to time, up to 50,000,000 shares of our common stock. During the period from February 10, 2014 to April 9, 2014, we sold 21,592,715 shares of our common stock at an average price of $11.08 per share, and raised $239,305 of gross proceeds, under the ATM Program. Net proceeds were $236,904 after commissions to the broker-dealer on shares sold and offering costs. On April 9, 2014, we entered into an ATM Program with Barclays Capital through which we could sell, by means of at-the-market offerings from time to time, up to 20,000,000 shares of our common stock. During the period from April 15, 2014 to May 2, 2014, we sold 5,213,900 shares of our common stock at an average price of $10.93 per share, and raised $56,995 of gross proceeds, under the ATM Program. Net proceeds were $56,357 after commissions to the broker-dealer on shares sold and offering costs. There have been no issuances under the ATM Program subsequent to June 30, 2014 . Off-Balance Sheet Arrangements As of June 30, 2014 , 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 July 11, 2014, we increased total commitments to our Revolving Credit Facility by $10,000 to $867,500 in the aggregate. On July 22, 2014, Injured Workers Pharmacy, LLC repaid the $22,678 loan receivable to us. On July 23, 2014, Correctional Healthcare Holding Company, Inc. repaid the $27,100 loan receivable to us. On July 23, 2014, we increased total commitments to our Revolving Credit Facility by $10,000 to $877,500 in the aggregate. On July 24, 2014, we issued 98,503 shares of our common stock in connection with the dividend reinvestment plan. On July 28, 2014, Tectum Holdings, Inc. repaid the $10,000 loan receivable to us. On August 1, 2014, we sold our investments in AMU Holdings Inc. and Airmall Inc. for net proceeds of $51,379. In addition, there is $6,000 being held in escrow, of which 98% is due to Prospect, which will be recognized if and when received. On August 5, 2014, we made an investment of $39,105 to purchase 70.94% of the subordinated notes in CIFC Funding 2014-IV, Ltd. On August 13, 2014, we provided $210,000 of senior secured financing, of which $200,000 was funded at closing, to support the recapitalization of Trinity Services Group, Inc., a leading food services company in the H.I.G. Capital portfolio. On August 14, 2014, we announced the then current conversion rate on the 2018 Notes as 83.6661 shares of common stock per $1 principal amount of the 2018 Notes converted, which is equivalent to a conversion price of approximately $11.95. On August 21, 2014, we issued 129,435 shares of our common stock in connection with the dividend reinvestment plan. On August 22, 2014, Byrider Systems Acquisition Corp. repaid the $11,177 loan receivable to us. On August 22, 2014, Capstone Logistics, LLC repaid the $189,941 loan receivable to us. On August 22, 2014, TriMark USA, LLC repaid the $10,000 loan receivable to us. Critical Accounting Policies and Estimates Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) and pursuant to the requirements for reporting on Form 10-K, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6 and 12 of Regulation S-X. The financial results of our portfolio investments are not consolidated in the financial statements. 89 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 year ended June 30, 2014 . 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. Basis of Consolidation Under the 1940 Act, the regulations pursuant to Article 6 of Regulation S-X and ASC 946, 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 our accounts and the accounts of PCF and PSBL, our wholly-owned, closely-managed subsidiaries that are also investment companies. All intercompany balances and transactions have been eliminated in consolidation. On May 6, 2014, we announced in our filing on Form 10-Q for the quarter ended March 31, 2014 that the SEC Staff had asserted certain of our wholly-owned holding companies were investment companies, such companies were required to be consolidated in our historical financial results and financial position, and restatement of such financial statements was needed. At that time, we disclosed that we disagreed with the views of the SEC Staff and wished to appeal the conclusion through the Office of the Chief Accountant. On June 10, 2014, based on those discussions with the Office of the Chief Accountant, we concluded the following: • Our historical non-consolidation of wholly-owned and substantially wholly-owned holding companies did not require restatement of our prior period financial statements. • Upon our adoption of ASU 2013-08 for the fiscal year ended June 30, 2015, we will begin consolidating on a prospective basis certain of our wholly-owned and substantially wholly-owned holding companies formed by us in order to facilitate our investment strategy. The following companies will be consolidated: AMU Holdings Inc.; APH Property Holdings, LLC; 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; STI Holding, Inc.; UPH Property Holdings, LLC; Valley Electric Holdings I, Inc.; Valley Electric Holdings II, Inc.; and Wolf Energy Holdings Inc. Any operating companies owned by the holding companies will not be consolidated. We do not expect this consolidation to have any material effect on our financial position or results of operations. Cash and Cash Equivalents Cash and cash equivalents include funds deposited with financial institutions and short-term, highly-liquid investments in money market funds. Cash and cash equivalents are carried at cost which approximates fair value. 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 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. 90 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. 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. Specifically, we record all security transactions on a trade date basis. Amounts for investments recognized or derecognized but not yet settled are reported as receivables for investments sold and payables for investments purchased, respectively, in the Consolidated Statements of Assets and Liabilities. 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 the security less likely to be an income producing instrument. 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. 91 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 conduct independent valuations and make their own independent assessments; 3. The Audit Committee of our Board of Directors reviews and discusses the preliminary valuation of Prospect Capital Management LLC (the “Investment Adviser”) and that of the independent valuation firms; and 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. 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 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 M&A 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 fair value pricing 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 ASC 820 Level 3 securities and are valued using a discounted cash flow model. The valuations have been accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view. For each CLO security, the most appropriate valuation approach has been chosen from alternative approaches to ensure the most accurate valuation for such security. To value a CLO, both the assets and the liabilities of the CLO capital structure are modeled. We use a waterfall engine to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, distribute the cash flows to the liability structure based on the payment priorities, and discount them back using current market discount rates. The main risk factors are: default risk, interest rate risk, downgrade risk, and credit spread risk. Valuation of Other Financial Assets and Financial Liabilities The Fair Value Option within ASC 825, Financial Instruments , specifically ASC 825-10-25, permits an entity to elect fair value as the initial and subsequent measurement attribute for eligible assets and liabilities for which the assets and liabilities are measured using another measurement attribute. For our non-investment assets and liabilities, we have elected not to value them at fair value as would be permitted by ASC 825-10-25. Senior Convertible Notes We have recorded the Senior Convertible Notes (see Note 5) at their contractual amounts. The Senior Convertible Notes were analyzed for any features that would require their accounting to be bifurcated and such features were determined to be immaterial. Revenue Recognition Realized gains or losses on the sale of investments are calculated using the specific identification method. 92 Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Accretion of such purchase discounts or amortization of premiums is calculated by the effective interest method as of the purchase date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as interest income. The purchase discount for portfolio investments acquired from Patriot Capital Funding, Inc. (“Patriot”) was determined based on the difference between par value and fair value as of December 2, 2009, and continues to accrete until maturity or repayment of the respective loans (see Note 3). As of June 30, 2014 , the purchase discount from the assets acquired from Patriot has been fully accreted. 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 principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, are likely to remain current. As of June 30, 2014 , approximately 0.1% of our total assets are in non-accrual status. Interest income from investments in the “equity” class of security of CLO funds (typically income notes or subordinated notes) 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 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 as earned, usually when paid. Structuring fees, excess deal deposits, net profits interests and overriding royalty interests are included in other income. Federal and State Income Taxes We have elected to be treated as a regulated investment company and intend to continue to comply with the requirements of the Internal Revenue 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. We had an excise tax liability of $1,918 for the calendar year ended December 31, 2012 and zero for the calendar year ended December 31, 2013. As of June 30, 2014, we had an accrued prepaid excise tax balance of $2,200 because we have made estimated excise tax payments in excess of our expected excise tax liability for the calendar year ending December 31, 2014. 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 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 Internal Revenue 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 reduced by an interest charge of 50% of such earnings and profits payable by us as an additional tax. 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. 93 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 June 30, 2014 and for the year then ended, we did not have a liability for any unrecognized tax benefits. 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 tax returns for each of our federal tax years since 2010 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 Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes® (collectively, our “Senior Notes”), as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method for our Revolving Credit Facility and the effective interest method for our Senior Notes, over the respective expected life or maturity. We record registration expenses related to shelf filings as prepaid assets. These expenses consist principally of SEC registration fees, legal fees and accounting fees incurred. These prepaid assets are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is completed. 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 June 2013, the FASB issued Accounting Standards Update 2013-08, Financial Services — Investment Companies (Topic 946), Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”). The update clarifies the approach to be used for determining whether an entity is an investment company and provides new measurement and disclosure requirements. ASU 2013-08 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited. The adoption of the amended guidance in ASU 2013-08 is not expected to have a significant effect on our consolidated financial statements and disclosures. In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The update supersedes the revenue recognition requirements in ASC 605, Revenue Recognition . Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The adoption of the amended guidance in ASU 2014-09 is not expected to have a significant effect on our consolidated financial statements and disclosures. 94 Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are subject to financial market risks, including changes in interest rates and equity price risk. Some of the loans in our portfolio have floating interest rates. 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 year ended June 30, 2014 , we did not engage in hedging activities. 95 Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm Consolidated Statements of Assets and Liabilities as of June 30, 2014 and 2013 Consolidated Statements of Operations for the years ended June 30, 2014, 2013 and 2012 Consolidated Statements of Changes in Net Assets for the years ended June 30, 2014, 2013 and 2012 Consolidated Statements of Cash Flows for the years ended June 30, 2014, 2013 and 2012 Consolidated Schedules of Investments as of June 30, 2014 and 2013 Notes to Consolidated Financial Statements 96 Page 97 98 99 100 101 102 136 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Prospect Capital Corporation New York, New York We have audited the accompanying consolidated statements of assets and liabilities of Prospect Capital Corporation (the "Company"), including the consolidated schedules of investments, as of June 30, 2014 and 2013 , and the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended June 30, 2014 , and the financial highlights for each of the five years in the period ended June 30, 2014 . These consolidated financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2014 and 2013 by correspondence with the custodian, trustees and portfolio companies, or by other appropriate auditing procedures where replies were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Prospect Capital Corporation at June 30, 2014 and 2013 , the results of its operations, the changes in its net assets, and its cash flows for each of the three years in the period ended June 30, 2014 , and the financial highlights for each of the five years in the period ended June 30, 2014 , in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Prospect Capital Corporation's internal control over financial reporting as of June 30, 2014 , based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated August 25, 2014 expressed an unqualified opinion thereon. /s/ BDO USA, LLP BDO USA, LLP New York, New York August 25, 2014 97 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except share and per share data) Assets Investments at fair value: Control investments (amortized cost of $1,719,242 and $830,151, respectively) Affiliate investments (amortized cost of $31,829 and $49,189, respectively) Non-control/non-affiliate investments (amortized cost of $4,620,451 and $3,376,438, respectively) Total investments at fair value (amortized cost of $6,371,522 and $4,255,778, respectively) Cash and cash equivalents Receivables for: Interest, net Other Prepaid expenses Deferred financing costs Total Assets Liabilities Revolving Credit Facility (Notes 4 and 8) Senior Convertible Notes (Notes 5 and 8) Senior Unsecured Notes (Notes 6 and 8) Prospect Capital InterNotes ® (Notes 7 and 8) Due to broker Dividends payable Due to Prospect Administration (Note 13) Due to Prospect Capital Management (Note 13) Accrued expenses Interest payable Other liabilities Total Liabilities Net Assets Components of Net Assets Common stock, par value $0.001 per share (1,000,000,000 common shares authorized; 342,626,637 and 247,836,965 issued and outstanding, respectively) (Note 9) Paid-in capital in excess of par (Note 9) Undistributed net investment income Accumulated realized losses on investments Unrealized depreciation on investments Net Assets June 30, 2014 June 30, 2013 $ 1,640,454 $ 32,121 4,581,164 6,253,739 134,225 21,997 2,587 2,828 61,893 6,477,269 811,634 42,443 3,318,775 4,172,852 203,236 22,863 4,397 540 44,329 4,448,217 92,000 1,247,500 647,881 785,670 — 37,843 2,208 3 4,790 37,459 3,733 2,859,087 124,000 847,500 347,725 363,777 43,588 27,299 1,366 5,324 2,345 24,384 4,415 1,791,723 $ 3,618,182 $ 2,656,494 $ 343 $ 248 2,772,191 82,112 (115,131 ) (82,926 ) $ 3,618,182 $ 2,656,494 3,814,634 42,086 (121,098 ) (117,783 ) Net Asset Value Per Share (Note 16) $ 10.56 $ 10.72 See notes to consolidated financial statements. 98 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year Ended June 30, 2013 2012 2014 Investment Income Interest income: Control investments Affiliate investments Non-control/non-affiliate investments CLO fund securities Total interest income Dividend income: Control investments Affiliate investments Non-control/non-affiliate investments Money market funds Total dividend income Other income: (Note 10) Control investments Affiliate investments Non-control/non-affiliate investments Total other income Total Investment Income Operating Expenses Investment advisory fees: Base management fee (Note 13) Income incentive fee (Note 13) Total investment advisory fees Interest and credit facility expenses Legal fees Valuation services Audit, compliance and tax related fees Allocation of overhead from Prospect Administration (Note 13) Insurance expense Directors’ fees Excise tax Other general and administrative expenses Total Operating Expenses Net Investment Income $ 153,307 $ 4,358 334,039 122,037 613,741 106,425 $ 6,515 234,013 88,502 435,455 26,687 — 98 52 26,837 43,671 17 28,025 71,713 712,291 108,990 89,306 198,296 130,103 2,771 1,836 2,959 14,373 373 325 (4,200 ) 8,232 355,068 357,223 78,282 728 3,656 39 82,705 16,821 623 40,732 58,176 576,336 69,800 81,231 151,031 76,341 1,918 1,579 1,566 8,737 356 300 6,500 3,084 251,412 324,924 53,408 12,155 144,592 9,381 219,536 63,144 — 1,733 4 64,881 25,464 108 10,921 36,493 320,910 35,836 46,671 82,507 38,534 279 1,212 1,446 6,848 324 273 — 2,803 134,226 186,684 Net realized (loss) gain on investments Net change in unrealized depreciation on investments Net Increase in Net Assets Resulting from Operations Net increase in net assets resulting from operations per share Dividends declared per share (3,346 ) (34,857 ) 319,020 $ (26,234 ) (77,834 ) 220,856 $ 36,588 (32,368 ) 190,904 1.06 $ (1.32 ) $ 1.07 $ (1.28 ) $ 1.67 (1.22 ) $ $ $ See notes to consolidated financial statements. 99  PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (in thousands, except share data) Operations Net investment income Net realized (loss) gain on investments Net change in unrealized depreciation on investments Net Increase in Net Assets Resulting from Operations Distributions to Shareholders Distribution from net investment income Distribution of return of capital Net Decrease in Net Assets Resulting from Distributions to Shareholders Common Stock Transactions Issuance of common stock, net of underwriting costs Less: Offering costs from issuance of common stock Value of shares issued to acquire controlled investments Value of shares issued through reinvestment of dividends Net Increase in Net Assets Resulting from Common Stock Transactions Year Ended June 30, 2013 2012 2014 $ 357,223 $ (3,346 ) (34,857 ) 319,020 324,924 $ (26,234 ) (77,834 ) 220,856 186,684 36,588 (32,368 ) 190,904 (403,188 ) — (271,507 ) — (136,875 ) (4,504 ) (403,188 ) (271,507 ) (141,379 ) 973,832 (1,380 ) 57,830 15,574 1,045,856 1,121,648 (1,815 ) 59,251 16,087 1,195,171 177,699 (708 ) 160,571 10,530 348,092 Total Increase in Net Assets Net assets at beginning of year Net Assets at End of Year Common Stock Activity Shares sold Shares issued to acquire controlled investments Shares issued through reinvestment of dividends Total shares issued due to common stock activity Shares issued and outstanding at beginning of year Shares Issued and Outstanding at End of Year 961,688 2,656,494 397,617 1,114,357 $ 3,618,182 $ 2,656,494 $ 1,511,974 1,144,520 1,511,974 16,452,489 88,054,653 101,245,136 14,518,207 5,507,381 5,326,949 1,056,484 1,450,578 1,408,070 94,789,672 108,203,095 32,027,180 247,836,965 139,633,870 107,606,690 342,626,637 247,836,965 139,633,870 See notes to consolidated financial statements. 100 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except share data) Operating Activities Net increase in net assets resulting from operations Net realized loss (gain) on investments Net change in unrealized depreciation on investments Amortization (accretion) of discounts and premiums, net Amortization of deferred financing costs Payment-in-kind interest Structuring fees Change in operating assets and liabilities: Payments for purchases of investments Proceeds from sale of investments and collection of investment principal Decrease (increase) in interest receivable, net Decrease (increase) in other receivables Increase in prepaid expenses Decrease in due to broker Increase in due to Prospect Administration (Decrease) increase in due to Prospect Capital Management Increase (decrease) in accrued expenses Increase in interest payable (Decrease) increase in other liabilities Net Cash Used in Operating Activities Financing Activities Borrowings under Revolving Credit Facility (Note 4) Principal payments under Revolving Credit Facility (Note 4) Issuance of Senior Convertible Notes (Note 5) Repurchases of Senior Convertible Notes (Note 5) Issuance of Senior Unsecured Notes, net of original issue discount (Note 6) Accretion of discount on Senior Unsecured Notes (Note 6) Issuance of Prospect Capital InterNotes® (Note 7) Redemptions of Prospect Capital InterNotes® (Note 7) Financing costs paid and deferred Proceeds from issuance of common stock, net of underwriting costs Offering costs from issuance of common stock Dividends paid Net Cash Provided by Financing Activities 2014 Year Ended June 30, 2013 2012 $ 319,020 $ 3,346 34,857 46,297 11,491 (15,145 ) (45,087 ) 220,856 $ 26,234 77,834 (11,016 ) 8,232 (10,947 ) (52,699 ) (2,834,394 ) 787,069 866 1,810 (2,288 ) (43,588 ) 842 (5,321 ) 2,445 13,075 (682 ) (1,725,387 ) 1,078,500 (1,110,500 ) 400,000 — 255,000 156 473,762 (6,869 ) (29,055 ) 973,832 (1,380 ) (377,070 ) 1,656,376 (2,980,320 ) 931,534 (8,644 ) (3,613 ) (119 ) (945 ) 708 (2,589 ) (580 ) 17,661 2,205 (1,786,208 ) 223,000 (195,000 ) 400,000 — 247,675 50 343,139 — (28,146 ) 1,121,648 (1,815 ) (242,301 ) 1,868,250 190,904 (36,588 ) 32,368 (7,284 ) 8,511 (5,647 ) (8,075 ) (901,833 ) 500,952 (4,950 ) (517 ) (320 ) — 446 207 1,052 2,720 (1,361 ) (229,415 ) 726,800 (715,000 ) 130,000 (5,000 ) 100,000 — 20,638 — (17,651 ) 177,699 (708 ) (127,564 ) 289,214 Total Increase in Cash and Cash Equivalents Cash and cash equivalents at beginning of year Cash and Cash Equivalents at End of Year (69,011 ) 203,236 134,225 $ 82,042 121,194 203,236 $ 59,799 61,395 121,194 $ Supplemental Disclosures Cash paid for interest Non-Cash Financing Activities Value of shares issued through reinvestment of dividends Value of shares issued to acquire controlled investments $ 105,410 $ 45,363 $ 24,515 $ $ 15,574 $ 57,830 $ 16,087 $ 59,251 $ 10,530 160,571 Exchange of Prospect Capital InterNotes® for Senior Unsecured Notes $ 45,000 $ — $ — See notes to consolidated financial statements. 101 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(46) AMU Holdings Inc.(27) Pennsylvania / Property Management Senior Secured Term Loan A to Airmall Inc. (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor), due 6/30/2015)(3)(4) Senior Secured Term Loan B to Airmall Inc. (12.00% plus 6.00% PIK, due 12/31/2015) Series A Preferred Stock of AMU Holdings Inc. (9,919.684 shares) Common Stock of AMU Holdings Inc. (100 shares) $ APH Property Holdings, LLC(32) Florida / Real Estate Senior Term Loan to American Property REIT Corp. (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4) Membership Interest in APH Property Holdings, LLC Arctic Oilfield Equipment USA, Inc. (45) Wyoming / Oil & Gas Production ARRM Services, Inc. (f/k/a ARRM Holdings Inc.)(42) South Carolina / Manufacturing Senior Secured Term Loan to Arctic Energy Services, LLC (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor), due 5/5/2019)(4) Senior Subordinated Term Loan to Arctic Energy Services, LLC (14.00% (LIBOR + 11.00% with 3.00% LIBOR floor), due 5/5/2019)(4) Common Stock of Arctic Oilfield Equipment USA, Inc. (100 shares) Senior Secured Note to Ajax Rolled Ring & Machine, LLC (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 3/30/2018)(4) Series B Preferred Stock of ARRM Services, Inc. (25,000 shares) Series A Convertible Preferred Stock of ARRM Services, Inc. (6,142.60 shares) Common Stock of ARRM Services, Inc. (6.00 shares) AWC, LLC(19) North Carolina / Machinery Members Units – Class A (1,800,000 units) Members Units – Class B-1 (1 unit) Members Units – Class B-2 (7,999,999 units) 27,587 $ 27,587 $ 27,587 0.8% 19,993 19,993 17,697 0.5% 9,920 — 57,500 — —% — —% 45,284 1.3% 167,743 167,743 167,743 4.6% 35,024 202,767 38,416 206,159 1.1% 5.7% 31,640 31,640 31,640 0.9% 20,230 20,230 20,230 0.6% 9,006 60,876 9,244 61,114 0.2% 1.7% 19,337 19,337 19,337 0.5% 21,156 6,199 0.2% 6,057 — 46,550 — — — — — —% — —% 25,536 0.7% — —% — —% — —% — —% See notes to consolidated financial statements. 102 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(46) BXC Company, Inc. (f/k/a BXC Holding Company)(20) Georgia / Textiles, Apparel & Luxury Goods Senior Secured Term Loan A to Boxercraft Incorporated (10.00% plus 1.00% PIK, in non- accrual status effective 1/1/2014, due 9/15/2015) Senior Secured Term Loan B to Boxercraft Incorporated (10.00% plus 1.00% PIK, in non- accrual status effective 1/1/2014, due 9/15/2015) Senior Secured Term Loan C to Boxercraft Incorporated (10.00% plus 1.00% PIK, in non- accrual status effective 1/1/2014, due 9/15/2015) Senior Secured Term Loan D to Boxercraft Incorporated (10.00% plus 1.00% PIK, in non- accrual status effective 4/18/2014, due 9/15/2015) Senior Secured Term Loan to Boxercraft Incorporated (10.00% plus 1.00% PIK, in non- accrual status effective 1/1/2014, due 9/15/2015) Series A Preferred Stock of BXC Company, Inc. (12,520,000 shares) Series B Preferred Stock of BXC Company, Inc. (2,400,000 shares) Common Stock of BXC Company, Inc. (138,250 shares) Warrant (to purchase 15% of all classes of equity of BXC Company, Inc., expires 8/31/2022) CCPI Holdings Inc.(33) Ohio / Manufacturing Senior Secured Term Loan A to CCPI Inc. (10.00%, CP Holdings of Delaware LLC(38) Oklahoma / Oil & Gas Production Credit Central Holdings of Delaware, LLC(22)(34) Ohio / Consumer Finance Echelon Aviation LLC New York / Aerospace & Defense due 12/31/2017)(3) Senior Secured Term Loan B to CCPI Inc. (12.00% plus 7.00% PIK, due 12/31/2017) Common Stock of CCPI Holdings Inc. (100 shares) Senior Secured Term Loan A to CP Well Testing, LLC (7.00% (LIBOR + 5.00% with 2.00% LIBOR floor), due 4/1/2019)(4) Senior Secured Term Loan B to CP Well Testing, LLC (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor) plus 7.50% PIK, due 4/1/2019)(4) Second Lien Term Loan to CP Well Testing, LLC (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor) plus 9.00% PIK, due 4/1/2019)(4) Membership Interest in CP Holdings of Delaware LLC Subordinated Term Loan to Credit Central Loan Company, LLC (10.00% plus 10.00% PIK, due 6/26/2019) Membership Interest in Credit Central Holdings of Delaware, LLC Senior Secured Revolving Credit Facility to Echelon Aviation LLC – $150,000 Commitment (11.75% (LIBOR + 9.75% with 2.00% LIBOR floor) plus 2.25% PIK, due 3/31/2022)(4)(25) Membership Interest in Echelon Aviation LLC See notes to consolidated financial statements. $ 1,629 $ 1,621 $ 1,629 0.1% 4,942 4,917 486 —% 2,395 2,383 — —% 301 300 — —% 8,410 8,227 — —% — — — — —% — —% — —% — 17,448 — —% 2,115 0.1% 17,213 17,213 17,213 0.5% 8,245 8,245 8,579 34,037 8,245 7,136 32,594 0.2% 0.2% 0.9% 11,035 11,035 11,035 0.3% 72,238 72,238 72,238 2.0% 15,000 15,000 15,228 113,501 15,000 31,846 130,119 0.4% 0.9% 3.6% 36,333 36,333 36,333 1.0% 13,670 50,003 14,099 50,432 0.4% 1.4% 78,521 78,521 14,107 92,628 78,521 14,107 92,628 2.2% 0.4% 2.6% 103 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(46) Energy Solutions Holdings Inc.(8) Texas / Energy Senior Secured Note to Vessel Company, LLC (18.00%, due 12/12/2016) Senior Secured Note to Vessel Company II, LLC (13.00%, due 11/25/2018) Senior Secured Note to Vessel Company III, LLC (13.00%, due 12/3/2018) Senior Secured Note to Yatesville Coal Company, LLC (in non-accrual status effective 1/1/2009, past due) Common Stock of Energy Solutions Holdings Inc. (100 shares) First Tower Holdings of Delaware LLC(22)(29) Mississippi / Consumer Finance Subordinated Term Loan to First Tower, LLC (10.00% plus 7.00% PIK, due 6/24/2019) Membership Interest in First Tower Holdings of Delaware LLC Gulf Coast Machine & Supply Company Texas / Manufacturing Harbortouch Holdings of Delaware Inc.(44) Pennsylvania / Business Services The Healing Staff, Inc.(9) North Carolina / Contracting Manx Energy, Inc.(12) Kansas / Oil & Gas Production Senior Secured Term Loan to Gulf Coast Machine & Supply Company (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor) plus 2.00% default interest on principal, due 10/12/2017)(4) Series A Convertible Preferred Stock of Gulf Coast Machine & Supply Company (99,900 shares) Senior Secured Term Loan A to Harbortouch Payments, LLC (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor), due 9/30/2017)(4) Senior Secured Term Loan B to Harbortouch Payments, LLC (5.50% (LIBOR + 4.00% with 1.50% LIBOR floor) plus 5.50% PIK, due 3/31/2018)(4) Common Stock of Harbortouch Holdings of Delaware Inc. (100 shares) Secured Promissory Notes to The Healing Staff, Inc. and Vets Securing America, Inc. (15.00%, in non- accrual status effective 12/22/2010, past due) Senior Demand Note to The Healing Staff, Inc. (15.00%, in non-accrual status effective 11/1/2010, past due) Common Stock of The Healing Staff, Inc. (1,000 shares) Common Stock of Vets Securing America, Inc. (1 share) Senior Secured Note to Manx Energy, Inc. (13.00%, in non-accrual status effective 1/19/2010, past due) Series A-1 Preferred Stock of Manx Energy, Inc. (6,635 shares) Common Stock of Manx Energy, Inc. (17,082 shares) $ 3,500 $ 3,500 $ 3,500 0.1% 13,000 12,504 12,504 0.4% 16,000 16,000 16,000 0.4% 1,449 1,449 — —% 8,293 41,746 — —% 32,004 0.9% 251,246 251,246 251,246 6.9% 68,405 319,651 75,539 326,785 2.1% 9.0% 17,500 17,500 14,459 0.4% 25,950 43,450 — —% 14,459 0.4% 130,796 130,796 130,796 3.6% 137,226 137,226 137,226 3.8% 10,672 278,694 23,292 291,314 0.6% 8.0% 1,688 1,686 — —% 1,170 50 1,170 — 975 3,831 50 — — 50 — —% — —% — —% — —% — —% — —% — —% — —% See notes to consolidated financial statements. 104 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(46) MITY Holdings of Delaware Inc.(17) Utah / Durable Consumer Products Revolving Line of Credit to MITY, Inc. – $7,500 Commitment (9.50% (LIBOR + 7.00% with 2.50% LIBOR floor), due 12/23/2014)(4)(25) Senior Secured Note A to MITY, Inc. (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor), due 3/19/2019)(3)(4) Senior Secured Note B to MITY, Inc. (10.00% (LIBOR + 7.00% with 3.00% LIBOR floor) plus 10.00% PIK, due 3/19/2019)(4) Common Stock of MITY Holdings of Delaware Inc. (100 shares) Nationwide Acceptance Holdings LLC(22)(36) Illinois / Consumer Finance Subordinated Term Loan to Nationwide Acceptance LLC (10.00% plus 10.00% PIK, due 6/18/2019) Membership Interest in Nationwide Acceptance Holdings LLC NMMB Holdings, Inc.(24) New York / Media Senior Secured Note to NMMB, Inc. (14.00%, due 5/6/2016) Senior Secured Note to Armed Forces Communications, Inc. (14.00%, due 5/6/2016) Series B Convertible Preferred Stock of NMMB Holdings, Inc. (8,086 shares) Series A Preferred Stock of NMMB Holdings, Inc. (4,400 shares) 3,714 7,000 $ — $ — $ — —% 18,250 18,250 18,250 0.5% 15,769 15,769 15,769 0.4% 14,143 48,162 15,270 49,289 0.4% 1.3% 14,820 14,820 14,820 0.4% 14,331 29,151 3,714 7,000 8,086 4,400 23,200 15,103 29,923 0.4% 0.8% 2,183 0.1% 4,114 0.1% — —% — —% 6,297 0.2% NPH Property Holdings, LLC(40) Texas / Real Estate Senior Term Loan to National Property REIT Corp. (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4) Membership Interest in NPH Property Holdings, LLC R-V Industries, Inc. Pennsylvania / Manufacturing STI Holding, Inc.(21) California / Manufacturing Senior Subordinated Note to R-V Industries, Inc. (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 6/12/2018)(3)(4) Common Stock of R-V Industries, Inc. (545,107 shares) Warrant (to purchase 200,000 shares of Common Stock of R-V Industries, expires 6/30/2017) Revolving Line of Credit to Borga, Inc. – $1,150 Commitment (5.00% (PRIME + 1.75%), in non- accrual status effective 3/2/2010, past due)(4)(25) Senior Secured Term Loan B to Borga, Inc. (8.50% (PRIME + 5.25%), in non-accrual status effective 3/2/2010, past due)(4) Senior Secured Term Loan C to Borga, Inc. (12.00% plus 4.00% PIK, in non-accrual status effective 3/2/2010, past due) Common Stock of STI Holding, Inc. (100 shares) Warrant (to purchase 33,750 shares of Common Stock of Borga, Inc., expires 5/6/2015) UPH Property Holdings, LLC(41) Georgia / Real Estate Senior Term Loan to United Property REIT Corp. (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 4/1/2019)(4) 105,309 105,309 105,309 2.9% 21,290 126,599 19,202 124,511 0.5% 3.4% 30,411 30,411 30,411 0.8% 5,087 19,989 0.6% 1,682 37,180 7,334 57,734 0.2% 1.6% 1,150 1,095 436 —% 1,612 1,501 — —% 10,141 581 — — 3,177 — —% — —% — —% 436 —% 19,027 19,027 19,027 0.5% Membership Interest in UPH Property Holdings, LLC 5,113 24,140 5,539 24,566 0.2% 0.7% See notes to consolidated financial statements. 105 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(46) Valley Electric Holdings I, Inc.(35) Washington / Construction & Engineering Wolf Energy Holdings Inc.(12) Kansas / Oil & Gas Production 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 12/31/2017)(3)(4) $ 10,081 $ Senior Secured Note to Valley Electric Company, Inc. (10.00% plus 8.5% PIK, due 12/31/2018) Common Stock of Valley Electric Holdings I, Inc. (100 shares) 20,500 10,081 $ 10,081 0.3% 20,500 20,500 0.6% 26,279 56,860 2,975 —% 33,556 0.9% Senior Secured Promissory Note to Wolf Energy, LLC secured by assets formerly owned by H&M (18.00%, in non-accrual status effective 4/15/2013, due 4/15/2018) (37) Senior Secured Note to Appalachian Energy LLC (8.00%, in non-accrual status effective 1/19/2010, past due) Senior Secured Note to Appalachian Energy LLC (8.00%, in non-accrual status, past due) Senior Secured Note to Coalbed, LLC (8.00%, in non- accrual status effective 1/19/2010, past due)(6) Common Stock of Wolf Energy Holdings Inc. (100 shares) Net Profits Interest in Wolf Energy, LLC (8% of Equity Distributions)(7) 22,000 — 3,386 0.1% 2,865 2,000 — —% 56 50 — —% 8,595 5,991 — —% — — —% 3,599 Total Control Investments $ 1,719,242 $ 1,640,454 0.1% 45.3% — 8,041 213 —% Affiliate Investments (5.00% to 24.99% voting control)(47) BNN Holdings Corp. (f/k/a Biotronic NeuroNetwork) Michigan / Healthcare Senior Secured Note (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 12/17/2017)(3)(4) Series A Preferred Stock (9,925.455 shares)(13) 28,950 Series B Preferred Stock (1,753.636 shares)(13) Total Affiliate Investments $ See notes to consolidated financial statements. 106 28,950 2,879 — 31,829 31,829 $ 28,950 3,171 0.8% 0.1% — —% 32,121 32,121 0.9% 0.9% PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Aderant North America, Inc.(16) Georgia / Software & Computer Services Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 6/20/2019)(4) $ 7,000 $ 6,914 $ 7,000 0.2% Aircraft Fasteners International, LLC California / Machinery Class A Units (32,500 units) 6,914 396 7,000 505 0.2% —% 396 505 —% ALG USA Holdings, LLC(16) Pennsylvania / Hotels, Restaurants & Leisure Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 2/28/2020)(4) 12,000 11,792 12,000 0.3% Allied Defense Group, Inc. Virginia / Aerospace & Defense Common Stock (10,000 shares) 11,792 5 12,000 — 0.3% —% 5 — —% American Broadband Holding Company and Cameron Holdings of NC, Inc. North Carolina / Telecommunication Services Senior Secured Term Loan B (11.00% (LIBOR + 9.75% with 1.25% LIBOR floor), due 9/30/2018)(3)(4) 74,654 74,654 74,654 2.1% American Gilsonite Company Utah / Metal Services & Minerals Second Lien Term Loan (11.50%, due 9/1/2017) Membership Interest (99.9999%)(15) 38,500 Apidos CLO IX(22) Apidos CLO XI(22) Apidos CLO XII(22) Apidos CLO XV(22) Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Arctic Glacier U.S.A., Inc. Minnesota / Food Products Ark-La-Tex Wireline Services, LLC(4) Louisiana / Oil and Gas Production 74,654 74,654 2.1% 38,500 — 38,500 18,444 38,500 3,477 41,977 19,903 1.1% 0.1% 1.2% 0.5% Subordinated Notes (Residual Interest) 20,525 Subordinated Notes (Residual Interest) Subordinated Notes (Residual Interest) Subordinated Notes (Residual Interest) Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 11/10/2019)(3)(4) Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 4/8/2019) Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/8/2019) Delayed Draw Term Loan – $5,000 Commitment (due 4/8/2019)(25) 38,340 18,444 33,937 19,903 37,087 0.5% 1.0% 44,063 33,937 42,042 37,087 42,499 1.0% 1.2% 36,515 42,042 37,038 42,499 36,715 1.2% 1.0% 37,038 36,715 1.0% 150,000 150,000 150,000 150,000 150,000 4.1% 4.1% 26,831 26,831 26,831 0.7% 26,831 26,831 26,831 0.7% — — 53,662 — —% 53,662 1.4% Armor Holding New York / Diversified Second Lien Term Loan (10.25% II LLC(16) Financial Services (LIBOR + 9.00% with 1.25% LIBOR floor), due 12/26/2020)(3)(4) 7,000 6,874 6,874 6,874 6,874 0.2% 0.2% See notes to consolidated financial statements. 107 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Atlantis Health Care Group (Puerto Rico), Inc. Puerto Rico / Healthcare Revolving Line of Credit – $3,000 Commitment (13.00% (LIBOR + 11.00% with 2.00% LIBOR floor), due 8/21/2014)(4)(25) (26) Senior Term Loan (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 2/21/2018)(3) (4) Babson CLO Ltd. 2011-I(22) Babson CLO Ltd. 2012-I(22) Babson CLO Ltd. 2012-II(22) Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 35,000 Subordinated Notes (Residual Interest) 29,075 Subordinated Notes (Residual Interest) 27,850 June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets $ 2,350 $ 2,350 $ 2,350 0.1% 38,957 38,957 41,307 33,591 34,102 36,452 33,801 0.9% 1.0% 0.9% 33,591 23,471 33,801 26,401 0.9% 0.7% 23,471 26,764 26,401 27,230 0.7% 0.8% Blue Coat Systems, Inc.(16) Massachusetts / Software & Computer Services Second Lien Term Loan (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor), due 6/28/2020)(3)(4) Broder Bros., Co. Pennsylvania / Textiles, Apparel & Luxury Goods Senior Secured Notes (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 4/8/2019)(3)(4) 26,764 27,230 0.8% 11,000 10,902 11,000 0.3% 10,902 11,000 0.3% 257,575 257,575 257,575 7.1% Brookside Mill CLO Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 26,000 257,575 22,613 257,575 25,081 7.1% 0.7% Byrider Systems Acquisition Corp.(22) Indiana / Auto Finance Senior Subordinated Notes (12.00% plus 2.00% PIK, due 11/3/2016)(3) Caleel + Hayden, LLC(14) (31) Colorado / Personal & Nondurable Consumer Products Membership Interest Escrow Receivable Capstone Logistics, LLC Georgia / Commercial Services Senior Secured Term Loan A (6.50% (LIBOR + 5.00% with 1.50% LIBOR floor), due 9/16/2016)(4) Senior Secured Term Loan B (11.50% (LIBOR + 10.00% with 1.50% LIBOR floor), due 9/16/2016)(3)(4) Cent CLO 17 Limited(22) Cayman Islands / Subordinated Notes (Residual Interest) 24,870 Diversified Financial Services Cent CLO 20 Limited(22) Cayman Islands / Subordinated Notes (Residual Interest) 40,275 Diversified Financial Services 22,613 25,081 0.7% 11,139 11,139 11,139 11,139 11,139 0.3% 0.3% — — — 182 —% 118 —% 300 —% 92,085 92,085 92,085 2.6% 98,465 98,465 190,550 21,999 98,465 190,550 23,896 2.7% 5.3% 0.7% 21,999 40,483 23,896 40,259 0.7% 1.1% 40,483 40,259 1.1% Cent CLO 21 Limited(22) Cayman Islands / Subordinated Notes (Residual Interest) 48,528 46,597 46,154 1.3% Diversified Financial Services 46,597 46,154 1.3% See notes to consolidated financial statements. 108 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) CIFC Funding 2011-I, Ltd.(4)(22) Cayman Islands / Diversified Financial Services Class D Senior Secured Notes (5.23% (LIBOR + 5.00%, due 1/19/2023) Class E Subordinated Notes (7.23% (LIBOR + 7.00%, due 1/19/2023) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets $ 19,000 $ 15,304 $ 18,037 0.5% 15,400 CIFC Funding 2013-III, Ltd.(22) CIFC Funding 2013-IV, Ltd.(22) Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 44,100 Subordinated Notes (Residual Interest) 45,500 Cinedigm DC Holdings, LLC New York / Software & Computer Services Senior Secured Term Loan (11.00% (LIBOR + 9.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/31/2021)(4) 68,714 The Copernicus Group, Inc. North Carolina / Healthcare Escrow Receivable Correctional Healthcare Holding Company, Inc. Colorado / Healthcare Second Lien Term Loan (11.25%, due 1/11/2020)(3) 27,100 12,814 28,118 39,534 15,162 33,199 43,217 0.4% 0.9% 1.2% 39,534 40,255 43,217 40,934 1.2% 1.1% 40,255 40,934 1.1% 68,664 68,664 — — 27,100 68,714 68,714 115 1.9% 1.9% —% 115 —% 0.8% 27,642 27,100 27,642 0.8% Coverall North America, Inc. Florida / Commercial Services Senior Secured Term Loan (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor), due 12/17/2017)(3)(4) Crosman Corporation New York / Manufacturing Second Lien Term Loan (12.00% (LIBOR + 10.50% with 1.50% LIBOR floor), due 12/30/2019)(3)(4) CRT MIDCO, LLC Wisconsin / Media Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 6/30/2017)(3)(4) Deltek, Inc.(16) Virginia / Software & Computer Services Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 10/10/2019)(3)(4) Diamondback Operating, LP Oklahoma / Oil & Gas Production Net Profits Interest (15% of Equity Distributions) 51,210 51,210 51,210 1.4% 51,210 51,210 1.4% 40,000 47,504 40,000 40,000 47,504 47,504 39,708 39,708 1.1% 1.1% 47,504 47,504 1.3% 1.3% 12,000 11,852 12,000 0.3% 11,852 — 12,000 — 0.3% —% — — —% Edmentum, Inc. (f/k/a Archipelago Learning, Inc.)(16) Minnesota / Consumer Services Second Lien Term Loan (11.25% (LIBOR + 9.75% with 1.50% LIBOR floor), due 5/17/2019)(3)(4) 50,000 48,439 50,000 1.4% Empire Today, LLC Illinois / Durable Consumer Products Senior Secured Note (11.375%, due 2/1/2017) 15,700 Fischbein, LLC North Carolina / Machinery Escrow Receivable 48,439 15,419 15,419 — 50,000 15,700 1.4% 0.4% 15,700 116 0.4% —% — 116 —% See notes to consolidated financial statements. 109  PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Fleetwash, Inc.(4) New Jersey / Business Services Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 4/30/2019) Senior Secured Term Loan B (10.50% (LIBOR + 9.50% with 1.00% LIBOR floor), due 4/30/2019) Delayed Draw Term Loan – $15,000 Commitment (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor), due 4/30/2019)(25) Focus Brands, Inc.(16) Georgia / Consumer Services Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 8/21/2018)(4) Focus Products Group International, LLC (f/k/a FPG, LLC) Illinois / Durable Consumer Products Senior Secured Term Loan (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 1/20/2017)(3)(4) Common Stock (5,638 shares) — 18,000 20,297 Galaxy XII CLO, Ltd.(22) Galaxy XV CLO, Ltd.(22) Galaxy XVI CLO, Ltd.(22) Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 22,000 Subordinated Notes (Residual Interest) 35,025 Subordinated Notes (Residual Interest) 22,575 Galaxy XVII CLO, Ltd.(22) Cayman Islands / Subordinated Notes (Residual Interest) 39,905 Diversified Financial Services June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets $ 25,000 $ 25,000 $ 25,000 0.7% 25,000 25,000 25,000 0.7% — 50,000 17,776 17,776 20,297 27 20,324 19,498 — —% 50,000 1.4% 18,000 18,000 0.5% 0.5% 19,886 0.5% — —% 19,886 20,449 0.5% 0.6% 19,498 29,777 20,449 31,824 0.6% 0.9% 29,777 20,790 31,824 20,573 0.9% 0.6% 20,790 36,811 20,573 36,589 0.6% 1.0% 36,811 36,589 1.0% Global Employment Solutions, Inc. Colorado / Business Services Senior Secured Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 3/25/2019)(3)(4) Grocery Outlet, Inc.(16) California / Retail Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 6/17/2019)(4) GTP Operations, LLC (f/k/a CI (Transplace) Holdings, LLC)(10) Texas / Software & Computer Services Senior Secured Term Loan (10.00% (LIBOR + 5.00% with 5.00% LIBOR floor), due 12/11/2018)(3)(4) 28,464 14,457 28,464 28,464 14,168 14,168 28,464 28,464 0.8% 0.8% 14,457 14,457 0.4% 0.4% 112,546 112,546 112,546 3.1% Halcyon Loan Advisors Funding 2012-1 Ltd.(22) Cayman Islands / Diversified Financial Services Halcyon Loan Advisors Funding 2013-1 Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 23,188 Subordinated Notes (Residual Interest) 40,400 112,546 20,600 112,546 22,570 3.1% 0.6% 20,600 38,460 22,570 41,509 0.6% 1.1% Halcyon Loan Advisors Funding 2014-1 Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 24,500 38,460 23,471 41,509 23,110 1.1% 0.6% 23,471 23,110 0.6% See notes to consolidated financial statements. 110 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2014 Principal Value 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 2014-2 Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) $ 41,164 $ 38,630 $ 38,066 1.1% Harley Marine Services, Inc.(16) Washington / Transportation Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 12/20/2019)(3)(4) ICON Health & Fitness, Inc. Utah / Durable Consumer Products Senior Secured Note (11.875%, due 10/15/2016) ICV-CSI Holdings, LLC (f/k/a Cargo Airport Services USA, LLC) New York / Transportation Common Equity (1.6 units) IDQ Holdings, Inc. Texas / Automobile Senior Secured Note (11.50%, due 4/1/2017) Ikaria, Inc.(16) New Jersey / Healthcare Second Lien Term Loan (8.75% (LIBOR + 7.75% with 1.00% LIBOR floor), due 2/12/2022)(4) Injured Workers Pharmacy, LLC Massachusetts / Healthcare Second Lien Term Loan (11.50% (LIBOR + 7.00% with 4.50% LIBOR floor) plus 1.00% PIK, due 5/31/2019)(3)(4) Instant Web, LLC(4) Minnesota / Media Senior Secured Term Loan A (5.50% (LIBOR + 4.50% with 1.00% LIBOR floor), due 3/28/2019) Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 3/28/2019)(3) Senior Secured Term Loan C (12.75% (LIBOR + 11.75% with 1.00% LIBOR floor), due 3/28/2019) InterDent, Inc. California / Healthcare Senior Secured Term Loan A (7.25% (LIBOR + 5.75% with 1.50% LIBOR floor), due 8/3/2017)(4) Senior Secured Term Loan B (12.25% (LIBOR + 9.25% with 3.00% LIBOR floor), due 8/3/2017)(3)(4) JHH Holdings, Inc. Texas / Healthcare LaserShip, Inc. Virginia / Transportation Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor) plus 0.50% PIK, due 3/30/2019)(3)(4) Revolving Line of Credit – $5,000 Commitment (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 12/21/2014) (4)(25) Senior Secured Term Loan A (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 3/18/2019)(3)(4) Senior Secured Term Loan B (10.25% 38,630 38,066 1.1% 8,832 8,832 22,005 22,005 1,639 8,832 8,832 20,889 0.2% 0.2% 0.6% 20,889 2,079 0.6% 0.1% 1,639 2,079 0.1% 12,344 12,344 24,430 24,430 22,678 22,678 12,500 12,500 0.3% 0.3% 25,000 25,000 0.7% 0.7% 22,904 22,904 0.6% 0.6% 9,000 21,850 12,500 25,000 22,678 126,453 126,453 126,453 3.5% 128,000 128,000 128,000 3.6% 12,500 12,500 266,953 12,500 266,953 0.3% 7.4% 63,225 63,225 63,225 1.7% 67,625 67,625 130,850 67,625 130,850 1.9% 3.6% 35,119 35,119 35,119 35,119 35,119 1.0% 1.0% — — — —% 36,094 36,094 36,094 1.0% (LIBOR + 8.25% with 2.00% LIBOR floor), due 3/18/2019)(3)(4) Delayed Draw Term Loan – $6,000 Commitment (2.00%, due 12/31/2015)(4) (25) 22,111 22,111 22,111 0.6% — — 58,205 24,914 — —% 58,205 25,124 1.6% 0.7% 24,914 25,124 0.7% LCM XIV Ltd.(22) Cayman Islands / Diversified Financial Services Income Notes (Residual Interest) 26,500 See notes to consolidated financial statements. 111 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) LHC Holdings Corp. Florida / Healthcare Revolving Line of Credit – $750 Commitment (8.50% (LIBOR + 6.00% with 2.50% LIBOR floor), due 5/31/2015)(4)(25)(26) Senior Subordinated Debt (10.50%, due 5/31/2015) (3) Membership Interest (125 units) Madison Park Funding IX, Ltd.(22) Cayman Islands / Diversified Financial Services Matrixx Initiatives, Inc. New Jersey / Pharmaceuticals Subordinated Notes (Residual Interest) 31,110 Senior Secured Term Loan A (7.50% (LIBOR + 6.00% with 1.50% LIBOR floor), due 8/9/2018)(3) (4) Senior Secured Term Loan B (12.50% (LIBOR + 11.00% with 1.50% LIBOR floor), due 8/9/2018)(3) (4) 39,750 Maverick Healthcare Equity, LLC Arizona / Healthcare Preferred Units (1,250,000 units) Class A Common Units (1,250,000 units) Mountain View CLO 2013-I Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 43,650 NCP Finance Limited Partnership(22)(23) Ohio / Consumer Finance Subordinated Secured Term Loan (11.00% (LIBOR + 9.75% with 1.25% LIBOR floor), due 9/30/2018)(3)(4) (16) New Century Transportation, Inc. New Jersey / Transportation Senior Subordinated Term Loan (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 4.00% PIK, in non-accrual status effective 4/1/2014, due 2/3/2018)(4) Nixon, Inc. California / Durable Consumer Products Senior Secured Term Loan (8.75% plus 2.75% PIK, due 4/16/2018)(16) NRG Manufacturing, Inc. Texas / Manufacturing Escrow Receivable 44,000 13,532 Income Notes (Residual Interest) 26,901 Octagon Investment Partners XV, Ltd.(22) Cayman Islands / Diversified Financial Services Onyx Payments, Inc. (f/k/a Pegasus Business Intelligence, LP) Texas / Diversified Financial Services Senior Secured Term Loan A (6.75% (LIBOR + 5.50% with 1.25% LIBOR floor), due 4/18/2018) (4) Senior Secured Term Loan B (13.75% (LIBOR + 12.50% with 1.25% LIBOR floor), due 4/18/2018) (4) Pelican Products, Inc.(16) California / Durable Consumer Products Second Lien Term Loan (9.25% (LIBOR + 8.25% with 1.00% LIBOR floor), due 4/9/2021)(4) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets $ — $ — $ — —% 1,865 1,865 216 2,081 24,546 1,865 0.1% 253 —% 2,118 27,266 0.1% 0.8% 24,546 27,266 0.8% 38,319 38,319 36,839 1.0% 11,910 11,692 11,692 12,208 12,208 0.3% 0.3% 39,750 78,069 1,252 — 1,252 40,754 36,851 73,690 1.0% 2.0% 821 —% — —% 821 —% 1.2% 43,555 40,754 43,555 1.2% 44,000 44,000 13,316 13,316 — — 24,338 — —% — —% 0.4% 13,316 13,316 0.4% 1,110 —% 1,110 —% 0.7% 26,732 24,338 26,732 0.7% 15,125 15,125 15,125 0.4% 15,938 17,500 15,938 31,063 17,482 17,482 15,938 31,063 17,500 17,500 0.4% 0.8% 0.5% 0.5% Photonis Technologies SAS(16)(22) France / Aerospace & Defense First Lien Term Loan (8.50% (LIBOR + 7.50% with 1.00% LIBOR floor), due 9/18/2019)(4) Pinnacle (US) Acquisition Co. Limited(16) Texas / Software & Computer Services Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 8/3/2020)(4) 10,448 10,000 10,170 10,170 9,833 9,833 10,339 10,339 10,000 10,000 0.3% 0.3% 0.3% 0.3% See notes to consolidated financial statements. 112 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets PrimeSport, Inc. Georgia / Hotels, Restaurants & Leisure Revolving Line of Credit – $15,000 Commitment (10.00% (LIBOR + 9.50% with 0.50% LIBOR floor), due 12/23/2014)(4)(25) $ Senior Secured Term Loan A (7.50% (LIBOR + 6.50% with 1.00% LIBOR floor), due 12/23/2019)(3)(4) Senior Secured Term Loan B (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor) plus 1.00% PIK, due 12/23/2019)(3)(4) Prince Mineral Holding Corp. New York / Metal Services & Minerals Senior Secured Term Loan (11.50%, due 12/15/2019) Progrexion Holdings, Inc.(28) Utah / Consumer Services Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), due 9/14/2017)(3)(4) Rocket Software, Inc.(16) Massachusetts / Software & Computer Services Second Lien Term Loan (10.25% (LIBOR + 8.75% with 1.50% LIBOR floor), due 2/8/2019)(3)(4) Royal Adhesives & Sealants, LLC Indiana / Chemicals Second Lien Term Loan (9.75% (LIBOR + 8.50% with 1.25% LIBOR floor), due 1/31/2019)(4) Ryan, LLC Texas / Business Services Subordinated Unsecured Notes (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor) plus 3.00% PIK, due 6/30/2018)(4) Sandow Media, LLC Florida / Media Senior Secured Term Loan (12.00%, due 5/8/2018)(3) Small Business Whole Loan Portfolio(43) New York / Diversified Financial Services 144 small business loans issued by OnDeck Capital, Inc. Snacks Parent Corporation Minnesota / Food Products Series A Preferred Stock (4,021.45 shares) Series B Preferred Stock (1,866.10 shares) Warrant (to purchase 31,196.52 shares of Common Stock, expires 11/12/2020) Spartan Energy Services, Inc. Louisiana / Energy Senior Secured Term Loan (10.50% (LIBOR + 9.00% with 1.50% LIBOR floor), due 12/28/2017)(3)(4) Speedy Group Holdings Corp.(22) Canada / Consumer Finance Senior Unsecured Notes (12.00%, due 11/15/2017) Sport Helmets Holdings, LLC(14) New York / Personal & Nondurable Consumer Products Escrow Receivable Stauber Performance Ingredients, Inc. California / Food Products Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due — $ — $ — —% 43,263 43,263 43,263 1.2% 43,700 10,000 43,700 86,963 9,902 43,700 86,963 10,000 1.2% 2.4% 0.3% 9,902 10,000 0.3% 436,647 436,647 436,647 436,647 436,647 12.1% 12.1% 20,000 19,758 20,000 0.6% 19,758 20,000 0.6% 20,000 70,531 25,081 4,637 35,633 15,000 19,648 19,648 70,531 70,531 25,081 25,081 4,637 4,637 — — 591 591 35,633 35,633 15,000 15,000 — 19,713 19,713 0.5% 0.5% 70,531 70,531 23,524 23,524 4,252 1.9% 1.9% 0.7% 0.7% 0.1% 4,252 0.1% — —% — —% 1,819 1,819 0.1% 0.1% 35,633 35,633 15,000 1.0% 1.0% 0.4% 15,000 130 0.4% —% — 130 —% 1/21/2016)(3)(4) Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 5/21/2017)(3)(4) 12,809 12,809 12,809 0.4% 9,975 9,975 22,784 9,975 22,784 0.3% 0.7% See notes to consolidated financial statements. 113 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets Stryker Energy, LLC Ohio / Oil & Gas Production Sudbury Mill CLO Ltd.(22) Cayman Islands / Diversified Financial Services Symphony CLO IX Ltd.(22) Cayman Islands / Diversified Financial Services Symphony CLO XIV Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Secured Revolving Credit Facility – $50,300 Commitment (12.25% (LIBOR + 10.75% with 1.50% LIBOR floor) plus 3.75% PIK, in non- accrual status effective 12/1/2011, due 12/1/2015)(4) (25) Overriding Royalty Interests(18) $ 36,080 $ Subordinated Notes (Residual Interest) 28,200 Preference Shares (Residual Interest) 45,500 Subordinated Notes (Residual Interest) 49,250 System One Holdings, LLC Pennsylvania / Business Services Senior Secured Term Loan (11.00% (LIBOR + 9.50% with 1.50% LIBOR floor), due 12/31/2018) (3)(4) Targus Group International, Inc.(16) California / Durable Consumer Products First Lien Term Loan (11.00% (LIBOR + 9.50% with 1.50% LIBOR floor) plus 1.0% PIK, due 5/24/2016)(3) (4) TB Corp. Texas / Hotels, Restaurants & Leisure Senior Subordinated Note (12.00% plus 1.50% PIK, due 12/19/2018)(3) Tectum Holdings, Inc.(16) Michigan / Automobile Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 3/12/2019)(4) Therakos, Inc. New Jersey / Healthcare Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor), due 6/27/2018)(4) 44,646 21,911 23,628 10,000 13,000 32,710 $ — 32,710 26,914 — —% — —% — —% 0.7% 26,140 26,914 37,734 26,140 44,294 0.7% 1.2% 37,734 49,858 44,294 49,025 1.2% 1.4% 49,858 49,025 1.4% 44,646 44,646 21,697 21,697 23,628 23,628 9,952 9,952 12,762 12,762 44,646 44,646 1.2% 1.2% 19,949 19,949 23,628 23,628 0.6% 0.6% 0.7% 0.7% 9,952 9,952 0.3% 0.3% 13,000 13,000 0.4% 0.4% Tolt Solutions, Inc. South Carolina / Business Services Traeger Pellet Grills LLC Oregon / Durable Consumer Products Senior Secured Term Loan A (7.00% (LIBOR + 6.00% with 1.00% LIBOR floor), due 3/7/2019)(3) (4) Senior Secured Term Loan B (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 3/7/2019)(3) (4) Senior Secured Term Loan A (6.50% (LIBOR + 4.50% with 2.00% LIBOR floor), due 6/18/2018)(3) (4) Senior Secured Term Loan B (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 6/18/2018)(3) (4) 48,705 48,705 48,705 1.3% 48,900 48,900 97,605 48,900 97,605 1.4% 2.7% 29,100 29,100 29,100 0.8% 29,700 29,700 58,800 29,700 58,800 0.8% 1.6% Transaction Network Services, Inc.(16) Virginia / Telecommunication Services Second Lien Term Loan (9.00% (LIBOR + 8.00% with 1.00% LIBOR floor), due 8/14/2020)(4) 5,000 4,976 5,000 0.1% 4,976 5,000 0.1% TriMark USA, LLC(16) Massachusetts / Hotels, Restaurants & Leisure Second Lien Term Loan (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 8/11/2019)(4) 10,000 9,810 9,810 9,810 9,810 0.3% 0.3% See notes to consolidated financial statements. 114 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) June 30, 2014 Principal Value Cost Fair Value(2) % of Net Assets United Sporting Companies, Inc.(5) South Carolina / Durable Consumer Products Second Lien Term Loan (12.75% (LIBOR + 11.00% with 1.75% LIBOR floor), due 5/16/2018) (3)(4) United States Environmental Services, LLC Texas / Commercial Services Senior Secured Term Loan A (6.50% (LIBOR + 5.50% with 1.00% LIBOR floor), due 3/31/2019)(3) (4) Senior Secured Term Loan B (11.50% (LIBOR + 10.50% with 1.00% LIBOR floor), due 3/31/2019)(3) (4) Venio LLC (f/k/a LM Keane Acquisition Co.) Pennsylvania / Business Services Second Lien Term Loan (12.00% (LIBOR + 9.50% with 2.50% LIBOR floor), due 2/19/2020)(3)(4) Voya CLO 2012-2, Ltd. (f/k/a ING IM CLO 2012-2, Ltd.)(22) Cayman Islands / Diversified Financial Services Income Notes (Residual Interest) $ 160,000 $ 160,000 $ 160,000 4.4% 160,000 160,000 4.4% 23,850 23,850 23,850 0.7% 36,000 17,000 38,070 36,000 59,850 17,000 17,000 31,058 36,000 59,850 16,726 16,726 35,843 1.0% 1.7% 0.5% 0.5% 1.0% Voya CLO 2012-3, Ltd. (f/k/a ING IM CLO 2012-3, Ltd.)(22) Cayman Islands / Diversified Financial Services Voya CLO 2012-4, Ltd. (f/k/a ING IM CLO 2012-4, Ltd.)(22) Cayman Islands / Diversified Financial Services Voya CLO 2014-1, Ltd. (f/k/a ING IM CLO 2014-1, Ltd.)(22) Cayman Islands / Diversified Financial Services Washington Mill CLO Ltd. (22) Cayman Islands / Diversified Financial Services Income Notes (Residual Interest) 46,632 Income Notes (Residual Interest) 40,613 Subordinated Notes (Residual Interest) 32,383 Subordinated Notes (Residual Interest) 22,600 31,058 39,368 35,843 43,960 1.0% 1.2% 39,368 34,941 43,960 39,647 1.2% 1.1% 34,941 33,825 39,647 32,949 1.1% 0.9% 33,825 21,601 32,949 21,583 0.9% 0.6% Water Pik, Inc.(16) Colorado / Personal & Nondurable Consumer Products Second Lien Term Loan (9.75% (LIBOR + 8.75% with 1.00% LIBOR floor), due 1/8/2021)(4) Wheel Pros, LLC(4) Colorado / Business Services Senior Subordinated Secured Note (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 6/29/2020) Delayed Draw Term Loan – $3,000 Commitment (11.00% (LIBOR + 7.00% with 4.00% LIBOR floor), due 12/30/2015)(25) 21,601 21,583 0.6% 11,000 10,604 10,604 0.3% 10,604 10,604 0.3% 12,000 12,000 12,000 0.3% — — 12,000 — —% 12,000 0.3% Wind River Resources Corporation(39) Utah / Oil & Gas Production Senior Secured Note (13.00% (LIBOR + 7.50% with 5.50% LIBOR floor) plus 3.00% default interest on principal and 16.00% default interest on past due interest, in non-accrual status effective 12/1/2008, past due)(4) Net Profits Interest (5% of Equity Distributions)(7) — —% — —% — —% Total Non-Control/Non-Affiliate Investments (Level 3) $ 4,620,388 $ 4,580,996 126.6% 14,650 — 14,650 15,000 Total Level 3 Portfolio Investments $ 6,371,459 $ 6,253,571 172.8% See notes to consolidated financial statements. 115 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) Principal Value Cost Fair Value(2) % of Net Assets June 30, 2014 LEVEL 1 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Dover Saddlery, Inc. Massachusetts / Retail Common Stock (30,974 shares) $ 63 $ 168 —% Total Non-Control/Non-Affiliate Investments (Level 1) $ 63 63 $ 168 —% 168 —% Total Non-Control/Non-Affiliate Investments $ 4,620,451 $ 4,581,164 126.6% Total Portfolio Investments $ 6,371,522 $ 6,253,739 172.8% See notes to consolidated financial statements. 116 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(48) AMU Holdings Inc.(27) Pennsylvania / Property Management APH Property Holdings, LLC(32) Georgia / Real Estate ARRM Holdings Inc. South Carolina / Manufacturing Senior Secured Term Loan (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor), due 6/30/2015)(3)(4) Senior Subordinated Term Loan (12.00% plus 6.00% PIK, due 12/31/2015) Series A Preferred Stock (9,919.684 shares) Common Stock (100 shares) Senior Term Loan (6.00% (LIBOR + 4.00% with 2.00% LIBOR floor) plus 5.50% PIK, due 10/24/2020)(4) Membership Interest Senior Secured Note — Tranche A (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 3/30/2018)(3)(4) Subordinated Unsecured Term Loan (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor) plus 6.00% PIK, due 3/30/2018)(4) Series A Convertible Preferred Stock (6,142.60 shares) Common Stock (6.00 shares) AWC, LLC(19) North Carolina / Machinery Members Units — Class A (1,800,000 units) Members Units — Class B-1 (1 unit) Members Units — Class B-2 (7,999,999 units) Borga, Inc.(21) California / Manufacturing CCPI Holdings Inc.(33) Ohio / Manufacturing Credit Central Holdings of Delaware, LLC(22)(34) Ohio / Consumer Finance Revolving Line of Credit — $1,150 Commitment (5.00% (PRIME + 1.75%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4)(25) Senior Secured Term Loan B (8.50% (PRIME + 5.25%) plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due)(4) Senior Secured Term Loan C (12.00% plus 4.00% PIK plus 3.00% default interest, in non-accrual status effective 03/02/2010, past due) Common Stock (100 shares) Warrant (to purchase 33,750 shares of Common Stock, expires 5/6/2015) Senior Secured Note (10.00%, due 12/31/2017)(3) Senior Secured Note (12.00% plus 7.00% PIK, due 6/30/2018) Common Stock (100 shares) Net Revenue Interest (4% of Net Revenue) Senior Secured Revolving Credit Facility — $60,000 Commitment (20.00% (LIBOR + 18.50% with 1.50% LIBOR floor), due 12/31/2022)(4)(25) Membership Interest Net Revenue Interest (5% of Net Revenue) $ 28,750 $ 28,750 $ 28,750 1.1% 12,500 12,500 9,920 — 51,170 12,500 9,920 3,478 54,648 0.5% 0.4% 0.1% 2.1% 125,892 125,892 26,648 152,540 125,892 26,648 152,540 4.8% 1.0% 5.8% 19,737 19,737 19,737 0.7% 19,700 19,700 19,700 0.7% 6,057 — 45,494 — — — — 39,437 — —% — —% 1.4% — —% — —% — —% — —% 1,150 1,095 586 —% 1,611 1,501 — —% 9,738 17,663 7,659 38,082 706 — — 3,302 17,663 7,659 8,581 — 33,903 38,082 9,581 — 47,663 — —% — —% — —% 586 —% 0.7% 17,663 7,659 7,977 0.3% 0.3% 604 —% 1.3% 33,903 38,082 8,361 4,019 50,462 1.4% 0.3% 0.2% 1.9% See notes to consolidated financial statements. 117 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(48) Energy Solutions Holdings Inc.(8) Texas / Energy Junior Secured Note (18.00%, due 12/12/2016) Senior Secured Note to Vessel Holdings, LLC (18.00%, due 12/12/2016) Subordinated Secured Note to Jettco Marine Services, LLC (12.00% (LIBOR + 6.11% with 5.89% LIBOR floor) plus 4.00% PIK, in non-accrual status effective 10/1/2010, past due)(4) Senior Secured Note to Yatesville Coal Holdings, LLC (in non-accrual status effective 1/1/2009, past due) Escrow Receivable Common Stock (100 shares) First Tower Holdings of Delaware LLC(22)(29) Mississippi / Consumer Finance Senior Secured Revolving Credit Facility — $400,000 Commitment (20.00% (LIBOR + 18.50% with 1.50% LIBOR floor), due 6/30/2022)(4)(25) Membership Interest Net Revenue Interest (5% of Net Revenue) The Healing Staff, Inc.(9) North Carolina / Contracting Secured Promissory Notes (15.00%, in non-accrual status effective 12/22/2010, past due) Senior Demand Note (15.00%, in non-accrual status effective 11/1/2010, past due) Common Stock (1,000 shares) Manx Energy, Inc.(12) Kansas / Oil & Gas Production Senior Secured Note (13.00%, in non-accrual status effective 1/19/2010, past due) Series A-1 Preferred Stock (6,635 shares) Common Stock (17,082 shares) Nationwide Acceptance Holdings LLC(22)(36) Illinois / Consumer Finance Senior Secured Revolving Credit Facility — $30,000 Commitment (20.00% (LIBOR + 18.50% with 1.50% LIBOR floor), due 1/31/2023)(4)(25) Membership Interest Net Revenue Interest (5% of Net Revenue) NMMB Holdings, Inc.(24) New York / Media Senior Term Loan (14.00%, due 5/6/2016) R-V Industries, Inc. Pennsylvania / Manufacturing Senior Subordinated Term Loan (15.00%, due 5/6/2016) Series A Preferred Stock (4,400 shares) Senior Subordinated Note (10.00% (LIBOR + 9.00% with 1.00% LIBOR floor), due 6/12/2018)(4) Common Stock (545,107 shares) Warrant (to purchase 200,000 shares of Common Stock, expires 6/30/2017) $ 8,500 $ 8,500 $ 8,500 0.3% 3,500 3,500 3,500 0.1% 13,906 12,503 8,449 0.3% 1,449 264,760 1,688 1,170 500 21,308 16,000 2,800 32,750 1,449 — 8,318 34,270 264,760 43,193 — 307,953 1,686 1,170 975 3,831 500 — — 500 21,308 3,843 — 25,151 16,000 2,800 4,400 23,200 32,750 5,087 1,682 39,519 — —% — —% 0.2% 0.9% 6,247 26,696 264,760 20,447 12,877 298,084 10.0% 0.8% 0.5% 11.3% — —% — —% — —% — —% 346 —% — —% — —% 346 —% 21,308 2,142 1,701 25,151 13,149 0.8% 0.1% 0.1% 1.0% 0.5% — —% — —% 0.5% 13,149 32,750 18,522 6,796 58,068 1.2% 0.7% 0.3% 2.2% See notes to consolidated financial statements. 118 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Control Investments (greater than 25.00% voting control)(48) Valley Electric Holdings I, Inc.(35) Washington / Construction & Engineering Wolf Energy Holdings Inc.(12) Kansas / Oil & Gas Production Senior Secured Note (9.00% (LIBOR + 6.00%, with 3.00% LIBOR floor) plus 9.00% PIK, due 12/31/2018)(4) Senior Secured Note (8.00% (LIBOR + 5.00% with 3.00% LIBOR floor) plus 2.50% PIK, due 12/31/2017)(3)(4) Common Stock (100 shares) Net Revenue Interest (5% of Net Revenue) 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)(37) Senior Secured Note to Appalachian Energy Holdings, LLC (8.00%, in non-accrual status effective 1/19/2010, past due) Senior Secured Note to Appalachian Energy Holdings, LLC (8.00%, in non-accrual status, past due) Senior Secured Note to Coalbed, LLC (8.00%, in non-accrual status effective 1/19/2010, past due)(6) Common Stock (100 shares) Net Profits Interest (8% of Equity Distributions)(7) $ 34,063 $ 34,063 $ 34,063 1.3% 10,026 10,026 9,526 — 53,615 10,026 8,288 1,238 53,615 0.4% 0.3% 0.1% 2.1% 22,000 — 3,832 0.1% 2,642 2,000 546 —% 51 7,930 50 51 —% 5,990 — — 8,040 830,151 $ — —% — —% 520 —% 0.1% 30.6% 4,949 811,634 Affiliate Investments (5.00% to 24.99% voting control)(49) Total Control Investments $ BNN Holdings Corp. (f/k/a Biotronic NeuroNetwork) Michigan / Healthcare BXC Holding Company(20) Georgia / Textiles, Apparel & Luxury Goods Senior Secured Note (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 12/17/2017)(3)(4) Series A Preferred Stock (9,925.455 shares)(13) Series B Preferred Stock (1,753.636 shares)(13) Senior Secured Term Loan A (10.00% plus 1.00% PIK, due 9/15/2015) Senior Secured Term Loan B (10.00% plus 1.00% PIK, due 9/15/2015) Senior Secured Term Loan C (10.00% plus 1.00% PIK, due 9/15/2015) Senior Secured Term Loan (10.00% plus 1.00% PIK, due 9/15/2015) Series A Preferred Stock (1,000,000 shares) Common Stock (10,000 shares) Warrant (to purchase 15% of all classes of equity, expires 8/31/2022) Smart, LLC(14) New York / Diversified / Conglomerate Service Membership Interest 29,550 29,550 2,300 579 32,429 29,550 2,832 1.1% 0.1% 533 —% 1.2% 32,915 1,712 1,702 1,712 0.1% 4,892 4,809 4,892 0.2% 2,371 2,371 2,371 0.1% 8,325 7,878 — — — 16,760 — 410 —% — —% — —% — —% 0.4% —% 9,385 143 Total Affiliate Investments $ — 49,189 $ 143 —% 1.6% 42,443 See notes to consolidated financial statements. 119 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) ADAPCO, Inc. Florida / Ecological Common Stock (5,000 shares) Aderant North America, Inc. Georgia / Software & Computer Services Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 6/20/2019)(4) Aircraft Fasteners International, LLC California / Machinery Class A Units (32,500 units) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets $ 141 $ 141 335 —% 335 —% $ 7,000 6,900 7,000 0.3% 6,900 396 7,000 565 0.3% —% 396 565 —% 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)(4) 12,000 11,764 12,000 0.4% Allied Defense Group, Inc. Virginia / Aerospace & Defense Common Stock (10,000 shares) American Gilsonite Company Utah / Metal Services & Minerals Second Lien Term Loan (11.50%, due 9/1/2017) 38,500 Membership Interest(15) Apidos CLO VIII(22) Apidos CLO IX(22) Apidos CLO XI(22) Apidos CLO XII(22) Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 19,730 Subordinated Notes (Residual Interest) 20,525 Subordinated Notes (Residual Interest) 38,340 Subordinated Notes (Residual Interest) 44,063 11,764 56 56 38,500 — 38,500 19,931 12,000 — 0.4% —% — —% 1.4% 38,500 4,058 42,558 19,718 0.2% 1.6% 0.7% 19,931 19,609 19,718 19,294 0.7% 0.7% 19,609 39,239 19,294 37,972 0.7% 1.4% 39,239 43,480 37,972 40,294 1.4% 1.5% 43,480 40,294 1.5% Arctic Glacier U.S.A., Inc. Canada / Food Products Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor), due 11/10/2019)(4) Armor Holding II LLC(16) New York / Diversified Financial Services Second Lien Term Loan (9.25% (LIBOR + 8.00% with 1.25% LIBOR floor), due 12/26/2020)(4) Atlantis Health Care Group (Puerto Rico), Inc. Puerto Rico / Healthcare Revolving Line of Credit — $7,000 Commitment (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 2/21/2014)(4)(25)(26) Senior Term Loan (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 2/21/2018)(3)(4) Babson CLO Ltd. 2011-I(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 35,000 150,000 150,000 150,000 150,000 150,000 5.6% 5.6% 7,000 6,860 7,000 0.3% 6,860 7,000 0.3% 2,000 2,000 2,000 0.1% 39,352 39,352 41,352 34,499 39,352 41,352 34,450 1.5% 1.6% 1.3% See notes to consolidated financial statements. 120 34,499 34,450 1.3% PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Babson CLO Ltd. 2012-I(22) Cayman Islands / Diversified Financial Services Babson CLO Ltd. 2012-II(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) $ 29,075 $ 25,917 $ 27,269 1.0% Subordinated Notes (Residual Interest) 27,850 25,917 28,863 27,269 27,510 1.0% 1.0% Blue Coat Systems, Inc.(16) Massachusetts / Software & Computer Services Second Lien Term Loan (9.50% (LIBOR + 8.50% with 1.00% LIBOR floor), due 6/28/2020)(4) Broder Bros., Co. Pennsylvania / Textiles, Apparel & Luxury Goods Senior Secured Notes (10.75% (LIBOR + 9.00% with 1.75% LIBOR floor), due 6/27/2018)(3)(4) 28,863 27,510 1.0% 11,000 10,890 11,000 0.4% 10,890 11,000 0.4% 99,500 99,500 99,323 3.7% Brookside Mill CLO Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 26,000 99,500 23,896 99,323 23,743 3.7% 0.9% Byrider Systems Acquisition Corp.(22) Indiana / Auto Finance Senior Subordinated Notes (12.00% plus 2.00% PIK, due 11/3/2016)(3) Caleel + Hayden, LLC (14)(31) Colorado / Personal & Nondurable Consumer Products Membership Interest Escrow Receivable Capstone Logistics, LLC Georgia / Commercial Services Senior Secured Term Loan A (6.50% (LIBOR + 5.00% with 1.50% LIBOR floor), due 9/16/2016)(4) Senior Secured Term Loan B (11.50% (LIBOR + 10.00% with 1.50% LIBOR floor), due 9/16/2016)(3)(4) 23,896 23,743 0.9% 10,914 10,914 10,914 10,417 10,417 0.4% 0.4% — — — 104 —% 137 —% 241 —% 97,291 97,291 97,291 3.7% 100,000 100,000 197,291 100,000 197,291 3.8% 7.5% Cargo Airport Services USA, LLC New York / Transportation Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 3/31/2016)(3)(4) Common Equity (1.6 units) 43,977 Cent CLO 17 Limited(22) Cayman Islands / Subordinated Notes (Residual Interest) 24,870 Diversified Financial Services 43,977 1,639 45,616 24,615 44,417 1,860 46,277 25,454 1.7% 0.1% 1.8% 1.0% CI Holdings(4) Texas / Software & Computer Services Senior Secured Term Loan (10.00% (LIBOR + 5.00% with 5.00% LIBOR floor), due 6/11/2019) CIFC Funding 2011-I, Ltd.(4)(22) Cayman Islands / Diversified Financial Services Class D Senior Secured Notes (5.32% (LIBOR + 5.00%), due 1/19/2023) Class E Subordinated Notes (7.32% (LIBOR + 7.00%), due 1/19/2023) Cinedigm DC New York / Software & Senior Secured Term Loan (11.00% (LIBOR 24,615 25,454 1.0% 114,713 114,713 114,713 4.3% 114,713 114,713 4.3% 19,000 15,029 15,844 0.6% 15,400 12,638 27,667 12,745 28,589 0.5% 1.1% Holdings, LLC(4) Computer Services + 9.00% with 2.00% LIBOR floor) plus 2.50% PIK, due 3/31/2021) 70,595 70,595 70,595 70,595 70,595 2.7% 2.7% See notes to consolidated financial statements. 121 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) The Copernicus Group, Inc. North Carolina / Healthcare Escrow Receivable $ — $ 130 —% Correctional Healthcare Holding Company, Inc. Colorado / Healthcare Second Lien Term Loan (11.25%, due 1/11/2020)(3) $ 27,100 — 27,100 130 —% 1.0% 27,100 27,100 27,100 1.0% Coverall North America, Inc. Florida / Commercial Services Senior Secured Term Loan (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor), due 12/17/2017)(3)(4) CP Well Testing, LLC Oklahoma / Oil & Gas Production Senior Secured Term Loan (13.50% (LIBOR + 11.00% with 2.50% LIBOR floor), due 10/03/2017)(4) CRT MIDCO, LLC Wisconsin / Media Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 6/30/2017)(3)(4) Deltek, Inc. Virginia / Software & Computer Services Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 10/10/2019)(4) Diamondback Operating, LP Oklahoma / Oil & Gas Production Net Profits Interest (15% of Equity Distributions)(7) Edmentum, Inc. (f/k/a Archipelago Learning, Inc.)(4) Minnesota / Consumer Services Second Lien Term Loan (11.25% (LIBOR + 9.75% with 1.50% LIBOR floor), due 5/17/2019) EIG Investors Corp. Massachusetts / Software & Computer Services Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 5/09/2020)(4)(16) 39,303 39,303 39,303 1.5% 39,303 39,303 1.5% 19,125 71,106 19,125 19,125 71,106 71,106 19,125 19,125 0.7% 0.7% 71,106 71,106 2.7% 2.7% 12,000 11,833 12,000 0.5% 11,833 — 12,000 — 0.5% —% — — —% 50,000 48,218 50,000 1.9% 48,218 50,000 1.9% 22,000 21,792 22,000 0.8% Empire Today, LLC Illinois / Durable Consumer Products Senior Secured Note (11.375%, due 2/1/2017) 15,700 EXL Acquisition Corp. South Carolina / Biotechnology Escrow Receivable Evanta Ventures, Inc.(11) Oregon / Commercial Services Subordinated Unsecured (12.00% plus 1.00% PIK, due 9/28/2018) 10,479 Fairchild Industrial Products, Co. North Carolina / Electronics Escrow Receivable Fischbein, LLC North Carolina / Machinery Escrow Receivable 21,792 15,332 15,332 — — 10,479 10,479 — — — — 22,000 14,650 0.8% 0.6% 14,650 14 0.6% —% 14 —% 10,479 10,479 149 0.4% 0.4% —% 149 —% —% 225 225 —% Focus Brands, Inc.(4) Georgia / Consumer Services Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 8/21/2018) 18,000 17,731 17,731 18,000 18,000 0.7% 0.7% FPG, LLC Illinois / Durable Consumer Products Senior Secured Term Loan (12.00% (LIBOR + 11.00% with 1.00% LIBOR floor), due 1/20/2017)(4) Common Stock (5,638 shares) 21,401 21,401 27 21,428 21,401 0.8% 19 —% 21,420 0.8% See notes to consolidated financial statements. 122 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Subordinated Notes (Residual Interest) $ 22,000 $ 20,792 $ 21,657 0.8% Gulf Coast Machine & Supply Company Texas / Manufacturing Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), due 10/12/2017)(3)(4) Galaxy XII CLO, Ltd.(22) Galaxy XV CLO, Ltd.(22) Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Grocery Outlet, Inc. California / Retail Halcyon Loan Advisors Funding 2012-1 Ltd.(22) Cayman Islands / Diversified Financial Services Halcyon Loan Advisors Funding 2013-1 Ltd.(22) Cayman Islands / Diversified Financial Services Hoffmaster Group, Inc.(4) Wisconsin / Personal & Nondurable Consumer Products Subordinated Notes (Residual Interest) 35,025 Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 6/17/2019)(4) 14,457 41,213 Subordinated Notes (Residual Interest) 23,188 Subordinated Notes (Residual Interest) 40,400 20,792 32,119 21,657 30,227 0.8% 1.1% 32,119 30,227 1.1% 14,127 14,127 41,213 41,213 22,279 14,457 14,457 0.5% 0.5% 31,972 31,972 22,724 1.2% 1.2% 0.9% 22,279 41,085 22,724 38,291 0.9% 1.4% 41,085 38,291 1.4% Second Lien Term Loan (11.00% (LIBOR + 9.50% with 1.50% LIBOR floor), due 1/3/2019) Second Lien Term Loan (10.25% (LIBOR + 9.00% with 1.25% LIBOR floor), due 1/3/2019) 20,000 19,831 19,598 0.7% 1,000 43,100 991 20,822 43,310 955 —% 20,553 33,929 0.7% 1.3% ICON Health & Fitness, Inc. Utah / Durable Consumer Products Senior Secured Note (11.875%, due 10/15/2016)(3) IDQ Holdings, Inc. Texas / Automobile Senior Secured Note (11.50%, due 4/1/2017) 12,500 ING IM CLO 2012-2, Ltd.(22) ING IM CLO 2012-3, Ltd.(22) ING IM CLO 2012-4, Ltd.(22) Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Cayman Islands / Diversified Financial Services Income Notes (Residual Interest) 38,070 Income Notes (Residual Interest) 46,632 Income Notes (Residual Interest) 40,613 43,310 33,929 1.3% 12,300 12,300 34,904 12,500 12,500 36,848 0.5% 0.5% 1.4% 34,904 44,454 36,848 46,361 1.4% 1.7% 44,454 39,255 46,361 41,153 1.7% 1.5% 39,255 41,153 1.5% Injured Workers Pharmacy, LLC Massachusetts / Healthcare Second Lien Term Loan (11.50% (LIBOR + 7.00% with 4.50% LIBOR floor) plus 1.00% PIK, due 5/31/2019)(3)(4) 22,430 22,430 22,430 22,430 22,430 0.8% 0.8% InterDent, Inc.(4) California / Healthcare Senior Secured Term Loan A (8.00% (LIBOR + 6.50% with 1.50% LIBOR floor), due 8/3/2017) Senior Secured Term Loan B (13.00% (LIBOR + 10.00% with 3.00% LIBOR floor), due 8/3/2017)(3) 53,475 53,475 53,475 2.0% 55,000 55,000 108,475 55,000 108,475 2.1% 4.1% See notes to consolidated financial statements. 123 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets JHH Holdings, Inc. Texas / Healthcare Second Lien Term Loan (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 1.50% PIK, due 6/23/2018)(3)(4) LaserShip, Inc.(4) Virginia / Transportation Revolving Line of Credit — $5,000 Commitment (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 12/21/2014)(25) Senior Secured Term Loan (10.25% (LIBOR + 8.25% with 2.00% LIBOR floor), due 12/21/2017) (3) LCM XIV Ltd.(22) Cayman Islands / Diversified Financial Services Income Notes (Residual Interest) $ 16,119 $ 16,119 $ 16,119 16,119 16,119 0.6% 0.6% — — — —% 37,031 26,500 37,031 37,031 25,838 37,031 37,031 25,838 1.4% 1.4% 1.0% LHC Holdings Corp. Florida / Healthcare Madison Park Funding IX, Ltd.(22) Cayman Islands / Diversified Financial Services Material Handling Services, LLC(4) Ohio / Business Services Revolving Line of Credit — $750 Commitment (8.50% (LIBOR + 6.00% with 2.50% LIBOR floor), due 5/31/2015)(4)(25)(26) Senior Subordinated Debt (10.50%, due 5/31/2015) (3) Common Stock (125 shares) — 2,865 Subordinated Notes (Residual Interest) 31,110 25,838 25,838 1.0% — — —% 2,865 216 3,081 26,401 2,865 0.1% 245 —% 3,110 26,596 0.1% 1.0% 26,401 26,596 1.0% Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), due 7/5/2017) (3) Senior Secured Term Loan (10.00% (LIBOR + 8.00% with 2.00% LIBOR floor), due 12/21/2017) Maverick Healthcare Equity, LLC Arizona / Healthcare Preferred Units (1,250,000 units) Class A Common Units (1,250,000 units) Medical Security Card Company, LLC(4) Arizona / Healthcare Revolving Line of Credit — $1,500 Commitment (9.50% (LIBOR + 7.00% with 2.50% LIBOR floor), due 2/1/2016)(25) First Lien Term Loan (11.25% (LIBOR + 8.75% with 2.50% LIBOR floor), due 2/1/2016)(3) Mountain View CLO 2013-I Ltd.(22) Cayman Islands / Diversified Financial Services Subordinated Notes (Residual Interest) 43,650 27,580 27,580 27,199 1.0% 37,959 37,959 65,539 1,252 — 1,252 37,035 64,234 1.4% 2.4% 780 —% — —% 780 —% — — — —% 13,427 13,427 13,427 44,235 13,427 13,427 43,192 0.5% 0.5% 1.6% 44,235 43,192 1.6% National Bankruptcy Services, LLC(3)(4) Texas / Diversified Financial Services Senior Subordinated Term Loan (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor) plus 1.50% PIK, due 7/17/2017) Naylor, LLC(4) Florida / Media Revolving Line of Credit — $2,500 Commitment (11.00% (LIBOR + 8.00% with 3.00% LIBOR floor), due 6/7/2017)(25) Senior Secured Term Loan (11.00% (LIBOR + 18,683 18,683 18,683 16,883 16,883 0.6% 0.6% — — — —% 8.00% with 3.00% LIBOR floor), due 6/7/2017) (3) 46,170 46,170 46,170 46,170 46,170 1.7% 1.7% See notes to consolidated financial statements. 124 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) New Century Transportation, Inc. New Jersey / Transportation Senior Subordinated Term Loan (12.00% (LIBOR + 10.00% with 2.00% LIBOR floor) plus 3.00% PIK, due 2/3/2018)(3)(4) New Star Metals, Inc. Indiana / Metal Services & Minerals Senior Subordinated Term Loan (11.50% (LIBOR + 8.50% with 3.00% LIBOR floor) plus 1.00% PIK, due 2/2/2018)(4) Nixon, Inc. California / Durable Consumer Products Senior Secured Term Loan (8.75% plus 2.75% PIK, due 4/16/2018)(16) NRG Manufacturing, Inc. Texas / Manufacturing Escrow Receivable Octagon Investment Partners XV, Ltd.(22) Cayman Islands / Diversified Financial Services Pegasus Business Intelligence, LP(4) Texas / Diversified Financial Services Income Notes (Residual Interest) 26,901 Revolving Line of Credit — $2,500 Commitment (9.00% (LIBOR + 7.75% with 1.25% LIBOR floor), due 4/18/2014)(25) Senior Secured Term Loan A (6.75% (LIBOR + 5.50% with 1.25% LIBOR floor), due 4/18/2018) Senior Secured Term Loan B (13.75% (LIBOR + 12.50% with 1.25% LIBOR floor), due 4/18/2018) Pelican Products, Inc.(16) California / Durable Consumer Products Second Lien Term Loan (11.50% (LIBOR + 10.00% with 1.50% LIBOR floor), due 6/14/2019) (3)(4) The Petroleum Place, Inc. Colorado / Software & Computer Services Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 5/20/2019) (4) Pinnacle (US) Acquisition Co. Limited(16) Texas / Software & Computer Services Second Lien Term Loan (10.50% (LIBOR + 9.25% with 1.25% LIBOR floor), due 8/3/2020) (4) Pre-Paid Legal Services, Inc.(16) Oklahoma / Consumer Services Senior Subordinated Term Loan (11.50% (PRIME + 8.25%), due 12/31/2016)(3)(4) Prince Mineral Holding Corp. New York / Metal Services & Minerals Senior Secured Term Loan (11.50%, due 12/15/2019) Progrexion Holdings, Inc.(4)(28) Utah / Consumer Services Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor), due 9/14/2017) (3) $ 45,120 $ 45,120 $ 45,120 44,166 44,166 1.7% 1.7% 50,274 15,509 50,274 50,274 15,252 15,252 — — 26,919 50,274 50,274 14,992 14,992 3,618 3,618 25,515 1.9% 1.9% 0.6% 0.6% 0.1% 0.1% 1.0% 26,919 25,515 1.0% — — — —% 15,938 15,938 15,938 0.6% 15,938 15,000 15,938 31,876 14,729 14,729 15,938 31,876 0.6% 1.2% 15,000 15,000 0.6% 0.6% 22,000 21,690 22,000 0.8% 21,690 22,000 0.8% 10,000 5,000 10,000 9,815 9,815 5,000 5,000 9,888 10,000 10,000 5,000 5,000 10,000 0.4% 0.4% 0.2% 0.2% 0.4% 9,888 10,000 0.4% 241,033 241,033 241,033 241,033 241,033 9.1% 9.1% Rocket Software, Inc.(3)(4) Massachusetts / Software & Computer Services Second Lien Term Loan (10.25% (LIBOR + 8.75% with 1.50% LIBOR floor), due 2/8/2019) 20,000 19,719 20,000 0.8% Royal Adhesives & Sealants, LLC Indiana / Chemicals Senior Subordinated Unsecured Term Loan (12.00% plus 2.00% PIK, due 11/29/2016) 19,719 20,000 0.8% 28,364 28,364 28,364 28,648 28,648 1.1% 1.1% See notes to consolidated financial statements. 125 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Ryan, LLC(4) Texas / Business Services Subordinated Secured Notes (12.00% (LIBOR + 9.00% with 3.00% LIBOR floor) plus 3.00% PIK, due 6/30/2018) Sandow Media, LLC Florida / Media Senior Secured Term Loan (10.50% (LIBOR + 8.50% with 2.00% LIBOR floor) plus 1.50% PIK, due 5/8/2018)(4) Seaton Corp.(3)(4) Illinois / Business Services Subordinated Secured (12.50% (LIBOR + 9.00% with 3.50% LIBOR floor) plus 2.00% PIK, due 3/14/2014) Subordinated Secured (12.50% (LIBOR + 9.00% with 3.50% LIBOR floor) plus 2.00% PIK, due 3/14/2015) SESAC Holdco II LLC(16) Tennessee / Media Second Lien Term Loan (10.00% (LIBOR + 8.75% with 1.25% LIBOR floor), due 7/12/2019)(4) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets $ 70,000 $ 70,000 $ 70,000 70,000 70,000 2.6% 2.6% 24,900 24,900 24,900 24,900 24,900 0.9% 0.9% 3,305 3,249 3,305 0.1% 10,005 6,000 Skillsoft Public Limited Company(22) Ireland / Software & Computer Services Senior Unsecured Notes (11.125%, due 6/1/2018) 15,000 Snacks Parent Corporation Minnesota / Food Products Series A Preferred Stock (4,021.45 shares) Series B Preferred Stock (1,866.10 shares) Warrant (to purchase 31,196.52 shares of Common Stock, expires 11/12/2020) Southern Management Corporation(22)(30) South Carolina / Consumer Finance Second Lien Term Loan (12.00% plus 5.00% PIK, due 5/31/2017) Spartan Energy Services, Inc.(3)(4) Louisiana / Energy Senior Secured Term Loan (10.50% (LIBOR + 9.00% with 1.50% LIBOR floor), due 12/28/2017) 17,565 29,625 Speedy Group Holdings Corp. Canada / Consumer Finance Senior Unsecured Notes (12.00%, due 11/15/2017)(22) 15,000 Sport Helmets Holdings, LLC(14) New York / Personal & Nondurable Consumer Products Escrow Receivable Stauber Performance Ingredients, Inc.(3)(4) California / Food Products Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 1/21/2016) Senior Secured Term Loan (10.50% (LIBOR + 7.50% with 3.00% LIBOR floor), due 5/21/2017) 10,005 13,254 5,914 5,914 14,927 14,927 56 56 479 591 17,565 17,565 29,625 29,625 15,000 15,000 — 10,005 13,310 6,000 6,000 15,000 0.4% 0.5% 0.2% 0.2% 0.6% 15,000 0.6% 56 —% 56 —% 484 —% 596 —% 18,267 18,267 29,625 29,625 15,000 0.7% 0.7% 1.1% 1.1% 0.6% 15,000 389 0.6% —% — 389 —% 16,594 16,594 16,594 0.6% 10,238 10,238 26,832 10,238 26,832 0.4% 1.0% Stryker Energy, LLC Ohio / Oil & Gas Production Subordinated Secured Revolving Credit Facility — $50,300 Commitment (8.50% (LIBOR + 7.00% with 1.50% LIBOR floor) plus 3.75% PIK, in non-accrual status effective 12/1/2011, due 12/1/2015)(4)(25) Overriding Royalty Interest(18) 34,738 Symphony CLO IX Ltd.(22) Cayman Islands / Diversified Financial Services Preference Shares (Residual Interest) 45,500 32,711 — 32,711 42,289 — —% — —% — —% 1.7% 43,980 See notes to consolidated financial statements. 126 42,289 43,980 1.7% PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) LEVEL 3 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) June 30, 2013 Principal Value Cost Fair Value(2) % of Net Assets System One Holdings, LLC(3)(4) Pennsylvania / Business Services Senior Secured Term Loan (11.00% (LIBOR + 9.50% with 1.50% LIBOR floor), due 12/31/2018) Targus Group International, Inc.(16) California / Durable Consumer Products First Lien Term Loan (11.00% (LIBOR + 9.50% with 1.50% LIBOR floor), due 5/25/2016)(3)(4) TB Corp.(3) Texas / Hotels, Restaurants & Leisure Senior Subordinated Note (12.00% plus 1.50% PIK, due 12/18/2018) Therakos, Inc. New Jersey / Healthcare Second Lien Term Loan (11.25% (LIBOR + 10.00% with 1.25% LIBOR floor), due 6/27/2018)(4)(16) $ 32,000 $ 32,000 $ 32,000 23,520 23,361 8,000 23,209 23,209 23,361 23,361 7,773 7,773 32,000 32,000 23,520 23,520 23,361 23,361 1.2% 1.2% 0.9% 0.9% 0.9% 0.9% 8,000 8,000 0.3% 0.3% Second Lien Term Loan (10.75%, (LIBOR + 9.25% with 1.50% LIBOR floor), due 1/8/2018)(3)(4) 39,000 39,000 39,000 1.5% Totes Isotoner Corporation Ohio / Personal & Nondurable Consumer Products Traeger Pellet Grills LLC(4) Oregon / Durable Consumer Products Revolving Line of Credit — $10,000 Commitment (9.00% (LIBOR + 7.00% with 2.00% LIBOR floor), due 6/18/2014)(25) Senior Secured Term Loan A (6.50% (LIBOR + 4.50% with 2.00% LIBOR floor), due 6/18/2018) Senior Secured Term Loan B (11.50% (LIBOR + 9.50% with 2.00% LIBOR floor), due 6/18/2018) TransFirst Holdings, Inc.(4) New York / Software & Computer Services Second Lien Term Loan (11.00%, (LIBOR + 9.75% with 1.25% LIBOR floor), due 6/27/2018) United Sporting Companies, Inc.(5) South Carolina / Durable Consumer Products Wind River Resources Corporation Utah / Oil & Gas Production Second Lien Term Loan (12.75% (LIBOR + 11.00% with 1.75% LIBOR floor), due 5/16/2018)(4) 160,000 160,000 160,000 6.0% 160,000 160,000 6.0% Senior Secured Note (13.00% (LIBOR + 7.50% with 5.50% LIBOR floor) plus 3.00% default interest on principal, 16.00% default interest on past due interest, in non-accrual status effective 12/1/2008, past due)(4) Net Profits Interest (5% of Equity Distributions)(7) — —% — —% — —% Total Non-Control/Non-Affiliate Investments (Level 3) $ 3,376,375 $ 3,318,663 124.9% 14,750 — 14,750 15,000 Total Level 3 Portfolio Investments $ 4,255,715 $ 4,172,740 157.1% See notes to consolidated financial statements. 127 39,000 39,000 1.5% 6,143 6,143 6,143 0.3% 30,000 30,000 30,000 1.1% 30,000 30,000 66,143 30,000 66,143 1.1% 2.5% 5,000 4,860 5,000 0.2% 4,860 5,000 0.2% PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Portfolio Company Locale / Industry Investments(1) Principal Value Cost Fair Value(2) % of Net Assets June 30, 2013 LEVEL 1 PORTFOLIO INVESTMENTS: Non-Control/Non-Affiliate Investments (less than 5.00% voting control) Dover Saddlery, Inc. Massachusetts / Retail Common Stock (30,974 shares) $ 63 $ 112 —% Total Non-Control/Non-Affiliate Investments (Level 1) $ 63 63 $ 112 —% 112 —% Total Non-Control/Non-Affiliate Investments $ 3,376,438 $ 3,318,775 124.9% Total Portfolio Investments $ 4,255,778 $ 4,172,852 157.1% See notes to consolidated financial statements. 128 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Endnote Explanations for the Consolidated Schedules of Investments (1) References herein to "we", "us" or "our" refer to Prospect Capital Corporation ("Prospect") 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) (3) Fair value is determined by or under the direction of our Board of Directors. As of June 30, 2014 and June 30, 2013 , one of our portfolio investments, Dover Saddlery, Inc. was publicly traded and classified as Level 1 within the valuation hierarchy established by ASC 820, Fair Value Measurement (“ASC 820”). As of June 30, 2014 and June 30, 2013 , the fair value of our remaining portfolio investments was determined using significant unobservable inputs. ASC 820 classifies such 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. 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 these investments held by PCF at June 30, 2014 and June 30, 2013 were $1,500,897 and $833,310 , respectively; they represent 24.0% and 20.0% of our total investments, respectively. (4) Security, or portion thereof, has a floating interest rate which may be subject to a LIBOR or PRIME floor. Stated interest rate was in effect at June 30, 2014 and June 30, 2013 . (5) 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 our second lien loan. United Sporting Companies, Inc. is a parent guarantor of this debt investment. (6) During the quarter ended December 31, 2009, we created two new entities, Coalbed, Inc. and Coalbed, LLC, to foreclose on the outstanding senior secured loan and assigned rights and interests of Conquest Cherokee, LLC (“Conquest”) as a result of the deterioration of Conquest’s financial performance and inability to service debt payments. We owned 1,000 shares of common stock in Coalbed, Inc., representing 100% of the issued and outstanding common stock. Coalbed, Inc., in turn, owned 100% of the membership interest in Coalbed, LLC. On October 21, 2009, Coalbed, LLC foreclosed on the loan formerly made to Conquest. On January 19, 2010, as part of the Manx Energy, Inc. ("Manx") rollup, the Coalbed, LLC assets and loan were assigned to Manx, the holding company. On June 30, 2012, Manx contributed our investment in Coalbed, LLC to Wolf Energy Holdings Inc. ("Wolf Energy Holdings"), a newly-formed, separately owned holding company. Our Board of Directors set the fair value at zero for the loan position in Coalbed, LLC investment as of June 30, 2014 and June 30, 2013 . As of June 30, 2014, Prospect owns 41% of the equity of Manx. (7) 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. (8) During the quarter ended December 31, 2011, our ownership of Change Clean Energy Holdings, LLC, Change Clean Energy, LLC, Freedom Marine Services Holdings, LLC (“Freedom Marine”), and Yatesville Coal Holdings, LLC was transferred to Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings, Inc.) (“Energy Solutions”) to consolidate all of our energy holdings under one management team. We own 100% of Energy Solutions. On December 28, 2011, we made a $3,500 debt investment in Vessel Holdings, LLC, a subsidiary of Freedom Marine. On November 25, 2013, we provided $13,000 in senior secured debt financing for the recapitalization of our investment in Jettco Marine Services, LLC (“Jettco”), a subsidiary of Freedom Marine. The subordinated secured loan to Jettco was replaced with a senior secured note to Vessel Holdings II, LLC, a new subsidiary of Freedom Marine. On December 3, 2013, we made a $16,000 senior secured investment in Vessel Holdings III, LLC, another new subsidiary of Freedom Marine. In June 2014, Freedom Marine Services Holdings, LLC was renamed Freedom Marine Solutions, LLC; Vessel Holdings, LLC was renamed Vessel Company, LLC; Vessel Holdings II, LLC was renamed Vessel Company II, LLC; Vessel Holdings III, LLC was renamed Vessel Company III, LLC; Yatesville Coal Holdings, LLC was renamed Yatesville Coal Company, LLC; and Change Clean Energy Holdings, LLC was renamed change Clean Energy Company, LLC. Energy Solutions continues to own 100% of all entities as of June 30, 2014 . (9) We own 100% of the equity of The Healing Staff, Inc. ("THS") and 100% of the equity of Vets Securing America, Inc., which is operated by THS management. (10) GTP Operations, LLC (f/k/a CI (Transplace) Holdings, LLC), Transplace, LLC, CI (Transplace) International, LLC, Transplace Freight Services, LLC, Transplace Texas, LP, Transplace Stuttgart, LP, Transplace International, Inc., Celtic International, LLC, and Treetop Merger Sub, LLC are joint borrowers on our senior secured investment. (11) Evanta Ventures, Inc. and Sports Leadership Institute, Inc. are joint borrowers on our investment. See notes to consolidated financial statements. 129 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Endnote Explanations for the Consolidated Schedules of Investments (Continued) (12) On January 19, 2010, we modified the terms of our senior secured debt in Appalachian Energy Holdings, LLC ("AEH") and Coalbed, LLC ("Coalbed") in conjunction with the formation of Manx, a new entity consisting of the assets of AEH, Coalbed and Kinley Exploration. The assets of the three companies were brought under new common management. We funded $2,800 at closing to Manx to provide for working capital. A portion of our loans to AEH and Coalbed was exchanged for Manx preferred equity, while our AEH equity interest was converted into Manx common stock. There was no change to fair value at the time of restructuring. On June 30, 2012, Manx returned the investments in Coalbed and AEH to us and we contributed these investments to Wolf Energy Holdings, a newly-formed, separately owned holding company. Effective June 6, 2014, Appalachian Energy Holdings LLC was renamed Appalachian Energy LLC. We continue to fully reserve any income accrued for Manx. During the quarter ended June 30, 2013, we determined that the impairment of Manx was other-than-temporary and recorded a realized loss of $9,397 for the amount that the amortized cost exceeded the fair value. The Board of Directors set the fair value of our investment in Manx at zero and $346 as of June 30, 2014 and June 30, 2013 , respectively. (13) On a fully diluted basis represents 10.00% of voting common shares. (14) A portion of the positions listed was issued by an affiliate of the portfolio company. (15) We own 99.9999% of AGC/PEP, LLC. AGC/PEP, LLC owns 2,037.65 out of a total of 83,818.69 shares (including 5,111 vested and unvested management options) of American Gilsonite Holding Company which owns 100% of American Gilsonite Company. (16) Syndicated investment which had been originated by another financial institution and broadly distributed. (17) MITY Holdings of Delaware Inc. (“Mity Delaware”), an entity in which we own 100% of the common stock, owns 94.99% of the equity of MITY Enterprises, Inc. (“Mity”). Mity owns 100% of each of MITY-Lite, Inc., Broda Enterprises USA, Inc. and Broda Canada ULC. On June 23, 2014, Prospect made a new $15,769 debt investment in Mity and Mity distributed proceeds to Mity Delaware as a return of capital. Mity Delaware used this distribution to pay down the senior secured debt of Mity Delaware to Prospect by the same amount. The remaining amount of the senior secured debt due from Mity Delaware to Prospect, $7,200, was then contributed to the capital of Mity Delaware. As a result of this transaction, Prospect held the $15,769 Mity note. Effective June 23, 2014, Mity Enterprises, Inc. was renamed MITY, Inc. and Broda Enterprises USA, Inc. was renamed Broda USA, Inc. On June 23, 2014, Prospect also extended a new $7,500 senior secured revolving facility to Mity, of which none was funded at closing. (18) The overriding royalty interests held receive payments at the stated rates based upon operations of the borrower. (19) On December 31, 2009, we sold our investment in Aylward Enterprises, LLC. AWC, LLC is the remaining holding company with zero assets. Our remaining outstanding debt after the sale was written off on December 31, 2009 and no value has been assigned to the equity position as of June 30, 2014 and June 30, 2013 . (20) Boxercraft Incorporated ("Boxercraft") and BXC Company, Inc. (f/k/a BXC Holding Company) ("BXC") are joint borrowers on our senior secured investments. Effective as of March 28, 2014, we acquired voting control of BXC pursuant to a voting agreement and irrevocable proxy. Effective May 8, 2014, we acquired control of BXC by transferring shares held by the other equity holders of BXC to Prospect pursuant to an assignment agreement entered into with such other equity holders. We own 86.7% of Series A preferred stock, 96.8% of Series B preferred stock, and 83.1% of the fully-diluted common stock of BXC. BXC owns 100% of the common stock of Boxercraft. We own a warrant to purchase 15% of all classes of equity of BXC, which currently consists of 3,755,000 shares of Series A preferred stock, 625,000 shares of Series B preferred stock, and 43,800 shares of voting common stock. (21) We owned warrants to purchase 33,750 shares of common stock in Metal Buildings Holding Corporation (“Metal Buildings”), the former holding company of Borga, Inc. Metal Buildings owned 100% of Borga, Inc. On March 8, 2010, we foreclosed on the stock in Borga, Inc. that was held by Metal Buildings, obtaining 100% ownership of Borga, Inc. On January 24, 2014, we contributed our holdings in Borga, Inc. to STI Holding, Inc., a wholly-owned holding company. (22) 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. We monitor the status of these assets on an ongoing basis. (23) NCP Finance Limited Partnership, NCP Finance Ohio, LLC and certain affiliates thereof, are joint borrowers on our subordinated secured investment. See notes to consolidated financial statements. 130 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Endnote Explanations for the Consolidated Schedules of Investments (Continued) (24) On May 6, 2011, we made a secured first lien $24,250 debt investment to NMMB, Inc. (f/k/a NMMB Acquisition, Inc.) ("NMMB" ), a $2,800 secured debt and $4,400 equity investment to NMMB Holdings, Inc ("NMMB Holdings"). We owned 100% of the Series A Preferred Stock in NMMB Holdings. NMMB Holdings owned 100% of the Convertible Preferred Stock in NMMB. On December 13, 2013, we provided $8,086 in preferred equity for the recapitalization of NMMB Holdings. After the restructuring, we received repayment of $2,800 secured debt outstanding. We own 100% of the equity of NMMB Holdings as of June 30, 2014 and June 30, 2013 . NMMB Holdings owns 92.93% and 83.48% of the fully diluted equity of NMMB as of June 30, 2014 and June 30, 2013 , respectively. NMMB owns 100% of Refuel Agency, Inc (“Refuel Agency”), which owns 100% of Armed Forces Communications, Inc. (“Armed Forces”). On June 12, 2014, Prospect made a new $7,000 senior secured term loan to Armed Forces. Armed Forces distributed this amount to Refuel Agency as a return of capital. Refuel Agency distributed this amount to NMMB as a return of capital, which was used to pay down $7,000 of NMMB’s $10,714 senior secured term loan to Prospect. (25) Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 2.00%. As of June 30, 2014 and June 30, 2013 , we had $143,597 and $202,518 , respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies. (26) Stated interest rates are based on June 30, 2014 and June 30, 2013 one month or three month Libor rates plus applicable spreads based on the respective credit agreements. Interest rates are subject to change based on actual elections by the borrower for a Libor rate contract or Base Rate contract when drawing on the revolver. (27) On July 30, 2010, we made a $30,000 senior secured debt investment in Airmall Inc. (f/k/a AIRMALL USA Holdings, Inc.) ("Airmall" ), a $12,500 secured second lien in AMU Holdings Inc. ("AMU"), and acquired 100% of the Series A preferred stock and common stock of AMU. Our preferred stock in AMU has a 12.0% dividend rate which is paid from the dividends received from its operating subsidiary, Airmall. AMU owns 100% of the common stock in Airmall. On December 4, 2013, we sold a $972 participation in both debt investments, equal to 2% of the outstanding principal amount of loans on that date. On June 13, 2014, Prospect made a new $19,993 investment as a senior secured loan to Airmall. Airmall then distributed this amount to AMU as a return of capital, which AMU used to pay down the senior subordinated loan in the same amount. The minority interest held by a third party in AMU was exchanged for common stock of Airmall. As of June 30, 2014 , we own 100% of the equity of AMU, which owns 98% of Airmall. (28) Progrexion Marketing, Inc., Progrexion Teleservices, Inc., Progrexion ASG, Inc. Progrexion IP, Inc. and Efolks, LLC, are joint borrowers on our senior secured investment. Progrexion Holdings, Inc. and eFolks Holdings, Inc. are the guarantors of this debt investment. (29) First Tower Holdings of Delaware, LLC (“First Tower Delaware”), an entity that 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 (“First Tower”), the operating company. On June 24, 2014, Prospect made a new $251,246 second lien term loan to First Tower. First Tower distributed this amount to First Tower Finance, which distributed this amount to First Tower Delaware as a return of capital. First Tower Delaware used the distribution to partially pay down the Senior Secured Revolving Credit Facility. The remaining $23,712 of the Senior Secured Revolving Credit Facility was then converted to additional membership interests held by Prospect in First Tower Delaware. (30) Southern Management Corporation, Thaxton Investment Corporation, Southern Finance of Tennessee, Inc., Covington Credit of Texas, Inc., Covington Credit, Inc., Covington Credit of Alabama, Inc., Covington Credit of Georgia, Inc., Southern Finance of South Carolina, Inc. and Quick Credit Corporation, are joint borrowers on our senior secured investment. SouthernCo, Inc. is the guarantor of this debt investment. (31) We own 2.8% (13,220 shares) of the Mineral Fusion Natural, LLC, a subsidiary of Caleel + Hayden, LLC, common and preferred interest. (32) APH Property Holdings, LLC (“APH”), an entity that we own 100% of the membership interests, owns 100% of the common equity of American Property REIT Corp. (f/k/a American Property Holdings Corp.) ("APRC"), a qualified REIT which holds investments in several real estate properties. Effective as of April 1, 2014, Prospect made a new $167,162 senior term loan to APRC. APRC then distributed this amount to APH as a return of capital which was used to pay down the Senior Term Loan from APH by the same amount. See Note 3 for further discussion of the properties held by APRC. See notes to consolidated financial statements. 131 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Endnote Explanations for the Consolidated Schedules of Investments (Continued) (33) CCPI Holdings Inc. ("CCPI Holdings"), an entity that we own 100% of the common stock, owns 94.98% and 95.13% of CCPI Inc. ("CCPI"), the operating company, at June 30, 2014 and June 30, 2013 , respectively. On June 13, 2014, Prospect made a new $8,218 senior secured note to CCPI. CCPI then distributed this amount to CCPI Holdings as a return of capital which was used to pay down the $8,216 senior secured note from CCPI Holdings to Prospect. The remaining $2 was distributed to Prospect as a return of capital of Prospect's equity investment in CCPI Holdings. (34) Credit Central Holdings of Delaware, LLC ("Credit Central Delaware"), an entity that we own 100% of the membership interests, owns 74.75% of Credit Central Loan Company, LLC (f/k/a Credit Central Holdings, LLC) ("Credit Central"), which 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. On June 26, 2014, Prospect made a new $36,333 second lien term loan to Credit Central. Credit Central then distributed this amount to Credit Central Delaware as a return of capital which was used to pay down the Senior Secured Revolving Credit Facility from Credit Central Delaware by the same amount. The remaining amount of the Senior Secured Revolving Credit Facility, $3,874, was then converted into additional membership interests in Credit Central Delaware. (35) Valley Electric Holdings I, Inc. (“Valley Holdings I”), an entity that we own 100% of the common stock, owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”). Valley Holdings II owns 94.99% and 96.3% of Valley Electric Company, Inc. (“Valley Electric”), as of June 30, 2014 and June 30, 2013 , respectively. 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”). On June 24, 2014, Valley Holdings II and management of Valley formed Valley Electric and contributed their shares of Valley stock to Valley Electric. Prospect made a new $20,471 senior secured loan to Valley Electric. Valley Electric then distributed this amount to Valley Holdings I, via Valley Holdings II, as a return of capital which was used to pay down the senior secured note of Valley Holdings I by the same amount. The remaining principal amount of the senior secured note, $16,754, was then contributed to the capital of Valley Holdings I. (36) Nationwide Acceptance Holdings LLC ("Nationwide Holdings"), an entity that we own 100% of the membership interests, owns 93.79% of Nationwide Acceptance LLC ("Nationwide"), the operating company. On June 18, 2014, Prospect made a new $14,820 second lien term loan to Nationwide. Nationwide distributed this amount to Nationwide Holdings as a return of capital. Nationwide Holdings used the distribution to pay down the Senior Secured Revolving Credit Facility. The remaining $9,888 of the Senior Secured Revolving Credit Facility was then converted into additional membership interests in Nationwide Holdings. (37) On April 15, 2013, assets previously held by H&M Oil & Gas, LLC ("H&M") were assigned to Wolf Energy, LLC ("Wolf Energy") in exchange for a $66,000 term loan secured by the assets. The cost basis in this loan of $44,632 was determined in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors , and was equal to the fair value of assets at the time of transfer resulting in a capital loss of $19,647 in connection with the foreclosure on the assets. On May 17, 2013, Wolf Energy sold the assets located in Martin County, which were previously held by H&M, for $66,000. Proceeds from the sale were primarily used to repay the loan and net profits interest receivable due to us resulting in a realized capital gain of $11,826. We received $3,960 of structuring and advisory fees from Wolf Energy during the year ended June 30, 2013 related to the sale and $991 under the net profits interest agreement which was recognized as other income during the fiscal year ended June 30, 2013. (38) CP Holdings of Delaware LLC, an entity that we own 100% of the membership interests, owns 82.9% of CP Energy Services Inc. ("CP Energy), which owns 100% of several other subsidiaries. CP Energy owns directly or indirectly 100% of each of CP Well Testing Services, LLC (“CP Well Testing”), CP Well Testing, LLC, Fluid Management Services, Inc., Fluid Management Services LLC, Wright Transport, Inc., Wright Foster Disposals, LLC, Foster Testing Co, Inc., ProHaul Transports, LLC, Artexoma Logistics, LLC, Wright Trucking, Inc. On April 1, 2014, Prospect made new loans to CP Well, ProHaul Transports, LLC and Wright Trucking, Inc. and Foster Testing Co, Inc. as co-borrowers, comprised of two first lien loans in the amount of $11,035 and $72,238 and a second lien loan in the amount of $15,000. The proceeds of these loans were used to repay CP Well Testing’s senior secured term loan and CP Energy’s senior secured term loan from Prospect. CP Holdings continues to own 82.9% of the equity of CP Energy at June 30, 2014 . (39) Wind River Resources Corporation and Wind River II Corporation are joint borrowers on our senior secured loan. (40) NPH Property Holdings, LLC (“NPH”), an entity that we own 100% of the membership interests, owns 100% of the common equity of National Property REIT Corp. (f/k/a National Property Holdings Corp.) ("NPRC"), a property REIT which holds investments in several real estate properties, and 100% of the membership interests of NPH Property Holdings II, LLC, a Delaware single member limited liability company structured to enable subsidiaries of NPRC to invest in peer-to-peer consumer loans. Effective as of April 1, 2014, Prospect made a new $104,460 senior term loan to NPRC. NPRC then distributed this amount to NPH as a return of capital which was used to pay down the Senior Term Loan from NPH by the same amount. See Note 3 for further discussion of the properties held by NPRC. See notes to consolidated financial statements. 132 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Endnote Explanations for the Consolidated Schedules of Investments (Continued) (41) UPH Property Holdings, LLC (“UPH”), an entity that we own 100% of the membership interests, owns 100% of the common equity of United Property REIT Corp. (f/k/a United Property Holdings Corp.) ("UPRC"), a property REIT which holds investments in several real estate properties. Effective as of April 1, 2014, Prospect made a new $19,027 senior term loan to UPRC. UPRC then distributed this amount to UPH as a return of capital which was used to pay down the Senior Term Loan from UPH by the same amount. See Note 3 for further discussion of the properties held by UPRC. (42) On April 4, 2008, we acquired a controlling equity interest in ARRM Services, Inc (f/k/a ARRM Holdings Inc.) ("ARRM"), which owns 100% of Ajax Rolled Ring & Machine, LLC ("Ajax"), the operating company. As of June 30, 2014, we control 79.53% of the fully-diluted common, 85.76% of the Series A and 100% of the Series B Preferred equity of ARRM and the fair value of our senior secured debt issued to Ajax was $19,337 . (43) Our wholly-owned subsidiary, Prospect Small Business Lending LLC, purchases a series of small business whole loans on recurring basis, originated by OnDeck Capital, Inc., an online small business lender. (44) Harbortouch Holdings of Delaware Inc. ("Harbortouch Delaware"), an entity that we own 100% of the common stock, owns 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 Class D voting units of Harbortouch, which provide for a 46.5% residual profits allocation. Harbortouch owns 100% of Credit Card Processing USA, LLC. On April 1, 2014, Prospect made a new $137,226 senior secured term loan to Harbortouch. Harbortouch then distributed this amount to Harbortouch Delaware as a return of capital which was used to pay down the $123,000 senior secured note from Harbortouch Delaware to Prospect. The remaining $14,226 was distributed to Prospect as a return of capital of Prospect’s equity investment in Harbortouch Delaware. (45) Arctic Oilfield Equipment USA, Inc. (“Arctic Equipment”), an entity that we own 100% of the common equity, owns 70% of the equity of Arctic Energy Services, LLC (“Arctic Energy”), the operating company. See notes to consolidated financial statements. 133 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Endnote Explanations for the Consolidated Schedules of Investments (Continued) (46) 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, 2014 with these controlled investments are as follows: Sales Interest income Dividend income Other income Net realized gains (losses) Net unrealized gains (losses) $ 7,600 $ Purchases* Redemptions* (593 ) (118,186 ) ** — 163,747 60,876 $ (972 ) $ — — 6,579 $ 18,788 1,050 12,000 $ — — — $ 5,946 1,713 — $ — — Portfolio Company AMU Holdings Inc. APH Property Holdings, LLC Arctic Oilfield Equipment USA, Inc. ARRM Services, Inc. (f/k/a ARRM Holdings Inc.) AWC, LLC BXC Company, Inc. (f/k/a BXC Holding Company)*** CCPI Holdings Inc. CP Holdings of Delaware LLC Credit Central Holdings of Delaware, LLC Echelon Aviation LLC Energy Solutions Holdings Inc. First Tower Holdings of Delaware LLC Gulf Coast Machine & Supply Company Harbortouch Holdings of Delaware Inc. The Healing Staff, Inc. Manx Energy, Inc. MITY Holdings of Delaware Inc. Nationwide Acceptance Holdings LLC NMMB Holdings, Inc. NPH Property Holdings, LLC R-V Industries, Inc. STI Holding, Inc. UPH Property Holdings, LLC Valley Electric Holdings I, Inc. Wolf Energy Holdings Inc. 25,000 — 300 — 113,601 2,500 92,628 16,000 10,000 28,450 278,694 — — 47,985 4,000 8,086 40,425 — — 1,405 — — Total $ 901,297 $ (24,251 ) — — (450 ) (100 ) (159 ) — (8,525 ) — (26,213 ) — — (450 ) — — (8,086 ) 85,724 ** (2,339 ) (125 ) 22,562 ** (200 ) — (81,391 ) — — — — — — — — — — — — — — — — — — — — — — (733 ) — — 3,312 13,858 7,845 2,809 8,245 — — — 500 — 4,841 — — 148 — — 71 1,864 521 2,771 2,480 54,320 — 10,560 1,449 6,879 — — 4,693 4,429 2,051 5,973 3,188 — 1,101 7,471 — — — — — — — 5,000 — — 1,100 3,246 — — — 7,536 5,825 — 1,049 1,854 — 1,029 — — 156 148 — $ (972 ) $ 153,307 $ 26,687 $ 43,671 $ — — — — — — — — — — — — — — — — — — — — — — — $ (15,694 ) 3,393 238 (14,957 ) — (3,796 ) (1,443 ) 16,618 (2,371 ) — (2,168 ) 17,003 (777 ) 12,620 — 104 1,127 772 (6,852 ) (2,088 ) 2,005 (25 ) 426 (23,304 ) (1,350 ) (20,519 ) *Purchase amounts do not include payment-in-kind interest. Repayment amounts include impairments. **These amounts represent the investments transferred from APH to NPH and UPH, respectively. ***During the year ended June 30, 2014, we acquired control of BXC Company, Inc. (f/k/a BXC Holding Company). As such, this investment was a controlled investment for a part of the year and an affiliated investment for part of the year. See Note 14. (47) 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, 2014 with these affiliated investments are as follows: Portfolio Company Purchases* Redemptions* Sales Interest income Dividend income Other income Net realized gains (losses) Net unrealized gains (losses) BNN Holdings Corp. (f/k/a Biotronic NeuroNetwork) $ BXC Holding Company*** Smart, LLC — $ — — (600 ) $ — $ (100 ) — — — 2,974 $ 1,384 — — $ — — — $ 17 — — $ — — (194 ) (4,163 ) (143 ) Total $ — $ (700 ) $ — $ 4,358 $ — $ 17 $ — $ (4,500 ) See notes to consolidated financial statements. 134 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF INVESTMENTS – (CONTINUED) (in thousands, except share data) Endnote Explanations for the Consolidated Schedules of Investments (Continued) (48) 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, 2013 with these controlled investments are as follows: Portfolio Company Purchases* Redemptions* Sales Interest income Dividend income Net realized gains (losses) $ — $ (600 ) $ — $ — — (19,065 ) — — — (338 ) — — — 5,822 $ 2,898 5,176 — — 1,792 Other income — $ — $ — — — — — 4,651 155 — — 606 Net unrealized gains (losses) 7,266 — (17,208 ) — (232 ) — — $ — — — — — AMU Holdings Inc. APH Property Holdings, LLC ARRM Holdings LLC AWC, LLC Borga, Inc. CCPI Holdings Inc. Credit Central Holdings of Delaware, LLC Energy Solutions Holdings Inc. First Tower Holdings of Delaware LLC The Healing Staff, Inc. Manx Energy, Inc. Nationwide Acceptance Holdings LLC NMMB Holdings, Inc. R-V Industries, Inc. Valley Electric Holdings I, Inc. Wolf Energy Holdings Inc. 151,648 23,300 — 150 34,081 47,663 — 20,000 975 — 25,151 — 32,750 52,098 50 Total $ 387,866 $ — — — (28,975 ) — — (13,092 ) — (10,528 ) — — (5,700 ) — — (100 ) — — 3,893 24,809 52,476 2 — 1,787 3,026 781 3,511 452 (78,398 ) $ — $ 106,425 $ 78,282 $ 16,821 $ — 53,820 — — — — — 24,462 — — 1,680 — 2,426 — — 884 — 143 1,325 4,951 — — — — — — (12,117 ) (9,397 ) — — — — 11,826 (9,688 ) $ 2,799 (71,197 ) (9,869 ) 12,117 18,865 — (5,903 ) 1,463 — (3,092 ) (64,991 ) (49) 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, 2013 with these affiliated investments are as follows: Portfolio Company Purchases* Redemptions* Sales Interest income Dividend income Other income Net realized gains (losses) Net unrealized gains (losses) BNN Holdings Corp. (f/k/a Biotronic NeuroNetwork) BXC Holding Company Smart, LLC $ Total $ 30,000 $ — — 30,000 $ (26,676 ) $ — $ — — — — (26,676 ) $ — $ 3,159 $ 3,356 — 6,515 $ — $ — 728 728 $ 600 $ 23 — 623 $ — $ — — — $ 672 (9,414 ) 108 (8,634 ) See notes to consolidated financial statements. 135 PROSPECT CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share data) Note 1. Organization References herein to “we”, “us” or “our” refer to Prospect Capital Corporation (“Prospect”) and its subsidiaries unless the context specifically requires otherwise. We were organized on April 13, 2004 and were funded in an initial public offering completed on July 27, 2004. 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 “Internal Revenue Code”). We invest primarily in senior and subordinated debt and equity of companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. 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 a series of small business whole loans on recurring basis, which are originated by OnDeck Capital, Inc. (“OnDeck”), an online small business lender. Note 2. Significant Accounting Policies Basis of Presentation 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-K, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6 and 12 of Regulation S-X. The financial results of our portfolio investments are not consolidated in the financial statements. 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 year ended June 30, 2014 . 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. Basis of Consolidation Under the 1940 Act, the regulations pursuant to Article 6 of Regulation S-X and ASC 946, 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 our accounts and the accounts of PCF and PSBL, our wholly-owned, closely-managed subsidiaries that are also investment companies. All intercompany balances and transactions have been eliminated in consolidation. On May 6, 2014, we announced in our filing on Form 10-Q for the quarter ended March 31, 2014 that the SEC Staff had asserted certain of our wholly-owned holding companies were investment companies, such companies were required to be consolidated in our historical financial results and financial position, and restatement of such financial statements was needed. At that time, we disclosed that we disagreed with the views of the SEC Staff and wished to appeal the conclusion through the Office of the Chief Accountant. On June 10, 2014, based on those discussions with the Office of the Chief Accountant, we concluded the following: • Our historical non-consolidation of wholly-owned and substantially wholly-owned holding companies did not require restatement of our prior period financial statements. 136 • Upon our adoption of ASU 2013-08 for the fiscal year ended June 30, 2015, we will begin consolidating on a prospective basis certain of our wholly-owned and substantially wholly-owned holding companies formed by us in order to facilitate our investment strategy. The following companies will be consolidated: AMU Holdings Inc.; APH Property Holdings, LLC; 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; STI Holding, Inc.; UPH Property Holdings, LLC; Valley Electric Holdings I, Inc.; Valley Electric Holdings II, Inc.; and Wolf Energy Holdings Inc. Any operating companies owned by the holding companies will not be consolidated. We do not expect this consolidation to have any material effect on our financial position or results of operations. Cash and Cash Equivalents Cash and cash equivalents include funds deposited with financial institutions and short-term, highly-liquid investments in money market funds. Cash and cash equivalents are carried at cost which approximates fair value. 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 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. 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. 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. Specifically, we record all security transactions on a trade date basis. Amounts for investments recognized or derecognized but not yet settled are reported as receivables for investments sold and payables for investments purchased, respectively, in the Consolidated Statements of Assets and Liabilities. 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. 137 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 the security less likely to be an income producing instrument. 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 ab out 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 conduct independent valuations and make their own independent assessments; 3. The Audit Committee of our Board of Directors reviews and discusses the preliminary valuation of Prospect Capital Management LLC (the “Investment Adviser”) and that of the independent valuation firms; and 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. 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 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 M&A 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. 138 In applying these methodologies, additional factors that we consider in fair value pricing 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 ASC 820 Level 3 securities and are valued using a discounted cash flow model. The valuations have been accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view. For each CLO security, the most appropriate valuation approach has been chosen from alternative approaches to ensure the most accurate valuation for such security. To value a CLO, both the assets and the liabilities of the CLO capital structure are modeled. We use a waterfall engine to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, distribute the cash flows to the liability structure based on the payment priorities, and discount them back using current market discount rates. The main risk factors are: default risk, interest rate risk, downgrade risk, and credit spread risk. Valuation of Other Financial Assets and Financial Liabilities The Fair Value Option within ASC 825, Financial Instruments , specifically ASC 825-10-25, permits an entity to elect fair value as the initial and subsequent measurement attribute for eligible assets and liabilities for which the assets and liabilities are measured using another measurement attribute. For our non-investment assets and liabilities, we have elected not to value them at fair value as would be permitted by ASC 825-10-25. Senior Convertible Notes We have recorded the Senior Convertible Notes (see Note 5) at their contractual amounts. The Senior Convertible Notes were analyzed for any features that would require their accounting to be bifurcated and such features were determined to be immaterial. 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. Origination, closing and/or commitment fees associated with investments in portfolio companies are accreted into interest income over the respective terms of the applicable loans. Accretion of such purchase discounts or amortization of premiums is calculated by the effective interest method as of the purchase date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or debt security, any prepayment penalties and unamortized loan origination, closing and commitment fees are recorded as interest income. The purchase discount for portfolio investments acquired from Patriot Capital Funding, Inc. (“Patriot”) was determined based on the difference between par value and fair value as of December 2, 2009, and continues to accrete until maturity or repayment of the respective loans (see Note 3). As of June 30, 2014 , the purchase discount from the assets acquired from Patriot has been fully accreted. 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 principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and in management’s judgment, are likely to remain current. As of June 30, 2014 , approximately 0.1% of our total assets are in non-accrual status. Interest income from investments in the “equity” class of security of CLO funds (typically income notes or subordinated notes) 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 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 as earned, usually when paid. Structuring fees, excess deal deposits, net profits interests and overriding royalty interests are included in other income. Federal and State Income Taxes We have elected to be treated as a regulated investment company and intend to continue to comply with the requirements of the Internal Revenue 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 139 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. Based on our tax returns, we had an excise tax liability of $1,918 for the calendar year ended December 31, 2012 and none for the calendar year ended December 31, 2013. As of June 30, 2014, we had a prepaid excise tax balance of $2,200 because we have made estimated excise tax payments in excess of our expected excise tax liability for the calendar year ending December 31, 2014. 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 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 Internal Revenue 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 reduced by an interest charge of 50% of such earnings and profits payable by us as an additional tax. 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 June 30, 2013 and 2014 and for the year s then ended, we did not have a liability for any unrecognized tax benefits, respectively. 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 tax returns for each of our federal tax years since 2010 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 Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes® (collectively, our “Senior Notes”), as deferred financing costs. These expenses are deferred and amortized as part of interest expense using the straight-line method for our Revolving Credit Facility and the effective interest method for our Senior Notes over the respective expected life or maturity. We record registration expenses related to shelf filings as prepaid assets. These expenses consist principally of SEC registration fees, legal fees and accounting fees incurred. These prepaid assets are charged to capital upon the receipt of proceeds from an equity offering or charged to expense if no offering is completed. 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. 140 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 June 2013, the FASB issued Accounting Standards Update 2013-08, Financial Services — Investment Companies (Topic 946), Amendments to the Scope, Measurement, and Disclosure Requirements (“ASU 2013-08”). The update clarifies the approach to be used for determining whether an entity is an investment company and provides new measurement and disclosure requirements. ASU 2013-08 is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2013. Earlier application is prohibited. The adoption of the amended guidance in ASU 2013-08 is not expected to have a significant effect on our consolidated financial statements and disclosures. In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The update supersedes the revenue recognition requirements in ASC 605, Revenue Recognition . Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The adoption of the amended guidance in ASU 2014-09 is not expected to have a significant effect on our consolidated financial statements and disclosures. Note 3. Portfolio Investments At June 30, 2014 , we had investments in 143 long-term portfolio investments, which had an amortized cost of $6,371,522 and a fair value of $6,253,739 . At June 30, 2013 , we had investments in 124 long-term portfolio investments, which had an amortized cost of $4,255,778 and a fair value of $4,172,852 . The original cost basis of debt placements and equity securities acquired, including follow-on investments for existing portfolio companies, totaled $2,952,456 and $3,103,217 during the new cenyears ended June 30, 2014 and June 30, 2013 , respectively. Debt repayments and proceeds from sales of equity securities of approximately $787,069 and $931,534 were received during the years ended June 30, 2014 and June 30, 2013 , respectively. The following table shows the composition of our investment portfolio as of June 30, 2014 and June 30, 2013 : June 30, 2014 June 30, 2013 Revolving Line of Credit Senior Secured Debt Subordinated Secured Debt Subordinated Unsecured Debt Small Business Whole Loans(1) CLO Debt CLO Residual Interest Equity(2) Total Investments Cost Fair Value Cost $ 3,445 $ 2,786 $ 3,578,339 1,272,275 85,531 4,637 28,118 1,044,656 354,521 3,514,198 1,200,221 85,531 4,252 33,199 1,093,985 319,567 9,238 $ 2,262,327 1,062,386 88,470 — 27,667 660,619 145,071 Fair Value 8,729 2,207,091 1,024,901 88,827 — 28,589 658,086 156,629 4,172,852 $ $ 6,371,522 $ 6,253,739 $ 4,255,778 (1) Our wholly-owned subsidiary, PSBL, purchases a series of small business whole loans on recurring basis, which are originated by OnDeck. (2) Includes our investments in preferred stock, common stock, membership interests, net profits interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants, unless specifically stated otherwise. 141 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, 2014 : Revolving Line of Credit Senior Secured Debt Subordinated Secured Debt Subordinated Unsecured Debt Small Business Whole Loans CLO Debt CLO Residual Interest Equity Total Investments Level 1 Level 2 Level 3 Total $ $ — $ — — — — — — 168 168 $ — $ — — — — — — — — $ 2,786 $ 3,514,198 1,200,221 85,531 4,252 33,199 1,093,985 319,399 6,253,571 $ 2,786 3,514,198 1,200,221 85,531 4,252 33,199 1,093,985 319,567 6,253,739 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, 2013 : Level 1 Level 2 Level 3 Total Revolving Line of Credit Senior Secured Debt Subordinated Secured Debt Subordinated Unsecured Debt CLO Debt CLO Residual Interest Equity Total Investments $ $ — $ — — — — — 112 112 $ 142 8,729 $ 8,729 — $ 2,207,091 — 1,024,901 — 88,827 — 28,589 — 658,086 — — 156,629 — $ 4,172,740 $ 4,172,852 2,207,091 1,024,901 88,827 28,589 658,086 156,517 The following tables show the aggregate changes in the fair value of our Level 3 investments during the year ended June 30, 2014 : Fair Value Measurements Using Unobservable Inputs (Level 3) Control Investments Affiliate Investments Non-Control/ Non-Affiliate Investments Total Fair value as of June 30, 2013 Total realized loss, net Change in unrealized depreciation Net realized and unrealized loss Purchases of portfolio investments Payment-in-kind interest Accretion (amortization) of discounts and premiums Repayments and sales of portfolio investments Transfers within Level 3(1) Transfers in (out) of Level 3(1) $ 811,634 $ — (20,519 ) (20,519 ) 901,297 11,796 — (82,363 ) 18,609 — Fair value as of June 30, 2014 $ 1,640,454 $ — (4,500 ) (4,500 ) — 90 399 (700 ) (5,611 ) — 42,443 $ 3,318,663 $ 4,172,740 (3,346 ) (3,346 ) (34,913 ) (9,894 ) (38,259 ) (13,240 ) 2,937,311 2,036,014 15,145 3,259 (46,297 ) (46,696 ) (787,069 ) (704,006 ) — (12,998 ) — — 32,121 $ 4,580,996 $ 6,253,571 Fair value as of June 30, 2013 Total realized (loss) gain, net Change in unrealized (depreciation) appreciation Net realized and unrealized (loss) gain Purchases of portfolio investments Payment-in-kind interest Accretion (amortization) of discounts and premiums Repayments and sales of portfolio investments Transfers within Level 3(1) Transfers in (out) of Level 3(1) Subordinated Secured Debt Small Business Loans Senior Secured Debt — (150 ) (150 ) Revolving Line of Credit $ 8,729 $ 2,207,091 $ 1,024,901 $ (1,593 ) (8,907 ) (10,500 ) 14,850 1,692,384 13,850 683 (389,310 ) — — (7,558 ) (34,566 ) (42,124 ) 554,973 428 2,065 (270,022 ) (70,000 ) — — — (20,643 ) — — Subordinated Unsecured Debt 88,827 $ — $ — (386 ) (386 ) 6,540 — — (1,902 ) — — — (357 ) (357 ) — 867 73 (73,879 ) 70,000 — CLO Residual Interest Equity CLO Debt 28,589 $ 658,086 $ 156,517 $ 4,172,740 Total — 4,159 4,159 — — 451 — — — 4,622 1,183 (46,570 ) 51,864 53,047 (41,948 ) 453,492 215,072 — — (10,242 ) — — — (49,569 ) (21,071 ) — — (3,346 ) (34,913 ) (38,259 ) 2,937,311 15,145 (46,297 ) (787,069 ) — — $ 6,253,571 Fair value as of June 30, 2014 $ 2,786 $ 3,514,198 $ 1,200,221 $ 85,531 $ 4,252 $ 33,199 $ 1,093,985 $ 319,399 (1) Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. 143 The following tables show the aggregate changes in the fair value of our Level 3 investments during the year ended June 30, 2013 : Fair Value Measurements Using Unobservable Inputs (Level 3) Control Investments Affiliate Investments Non-Control/ Non-Affiliate Investments Total Fair value as of June 30, 2012 Total realized loss, net Change in unrealized depreciation Net realized and unrealized loss Purchases of portfolio investments Payment-in-kind interest Accretion of discounts and premiums Repayments and sales of portfolio investments Transfers within Level 3(1) Transfers in (out) of Level 3(1) Fair value as of June 30, 2013 $ $ 564,489 $ (9,688 ) (64,991 ) (74,679 ) 387,866 2,668 — (68,710 ) — — 811,634 $ — (8,634 ) (8,634 ) 30,000 715 922 (26,676 ) — — 46,116 $ 1,483,487 $ 2,094,092 (26,360 ) (16,672 ) (77,817 ) (4,192 ) (104,177 ) (20,864 ) 3,092,270 2,674,404 10,947 7,564 11,017 10,095 (931,409 ) (836,023 ) — — — — $ 4,172,740 $ 3,318,663 42,443 Revolving Line of Credit Senior Secured Debt Subordinated Secured Debt Small Business Loans Subordinated Unsecured Debt 73,195 $ — $ CLO Residual Interest Equity CLO Debt 27,717 $ 218,009 $ 206,137 $ 2,094,092 Total Fair value as of June 30, 2012 $ Total realized (loss) gain, net Change in unrealized (depreciation) appreciation Net realized and unrealized (loss) gain Purchases of portfolio investments Payment-in-kind interest Accretion of discounts and premiums Repayments and sales of portfolio investments Transfers within Level 3(1) Transfers in (out) of Level 3(1) 868 $ 1,080,053 $ 488,113 $ — (232 ) (232 ) (21,545 ) 3,197 (18,348 ) 21,143 1,626,172 4,401 1,747 (499,900 ) 12,966 — — — (13,050 ) — — (22,001 ) 19,265 (2,736 ) 812,025 3,687 2,346 (265,568 ) (12,966 ) — — (222 ) (222 ) 133,700 2,859 508 (121,213 ) — — — — — — — — — — — — — (5,981 ) 464 464 (5,981 ) — 440,050 — — 6,008 408 — — — — — — 17,186 (94,308 ) (77,122 ) 59,180 — — (31,678 ) — — (26,360 ) (77,817 ) (104,177 ) 3,092,270 10,947 11,017 (931,409 ) — — $ 4,172,740 Fair value as of June 30, 2013 $ 8,729 $ 2,207,091 $ 1,024,901 $ 88,827 $ — $ 28,589 $ 658,086 $ 156,517 (1) Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. For the year ended June 30, 2014 and 2013 , the net increase in unrealized depreciation on the investments that use Level 3 inputs was $55,956 and $77,488 for investments still held as of June 30, 2014 and 2013 , respectively. 144 Asset Category Senior Secured Debt Senior Secured Debt Senior Secured Debt Senior Secured Debt Senior Secured Debt Subordinated Secured Debt Subordinated Secured Debt Subordinated Secured Debt Subordinated Unsecured Debt Small Business Whole Loans CLO Debt CLO Residual Interest Equity Equity Equity Equity Net Profits Interest Escrow Receivable Total Level 3 Investments $ Asset Category Senior Secured Debt Senior Secured Debt Senior Secured Debt Senior Secured Debt Subordinated Secured Debt Subordinated Secured Debt Subordinated Unsecured Debt Subordinated Unsecured Debt CLO Debt CLO Residual Interest Equity Escrow Receivable Total Level 3 Investments $ 2,550,073 560,485 110,525 3,822 292,079 832,181 353,220 14,820 85,531 4,252 33,199 1,093,985 237,162 3,171 63,157 14,107 213 1,589 6,253,571 1,616,485 468,082 5,361 125,892 962,702 62,199 69,127 19,700 28,589 658,086 151,855 4,662 4,172,740 The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of June 30, 2014 were as follows: Fair Value $ Primary Valuation Technique Input Range Weighted Average Unobservable Input Market Yield 5.5%-20.3% 11.1% EBITDA Multiple 3.5x-9.0x Yield Analysis EV Analysis EV Analysis Liquidation Analysis N/A N/A Net Asset Value Analysis Capitalization Rate Yield Analysis EV Analysis EV Analysis Yield Analysis Yield Analysis Discounted Cash Flow Discounted Cash Flow EV Analysis Yield Analysis Market Yield EBITDA Multiple Book Value Multiple Market Yield Market Yield Discount Rate Discount Rate EBITDA Multiple Market Yield Net Asset Value Analysis Capitalization Rate N/A N/A 4.5%-10.0% 8.7%-14.7% 4.5x-8.2x 8.4x-8.9x 7.4%-14.4% 75.5%-79.5% 4.2%-5.8% 10.4%-23.7% 0.0x-15.3x 13.7%-16.5% 4.5%-10.0% 8.0%-10.0% N/A Discounted Cash Flow Liquidation Analysis Discounted Cash Flow Discount Rate N/A Discount Rate 6.6%-7.8% The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of June 30, 2013 were as follows: Fair Value $ Primary Valuation Technique Input Range Unobservable Input Yield Analysis EV Analysis Market Yield 5.7%-20.8% EBITDA Multiple Liquidation Analysis N/A Net Asset Value Analysis Capitalization Rate Yield Analysis EV Analysis Yield Analysis EV Analysis Discounted Cash Flow Discounted Cash Flow Market Yield EBITDA Multiple Market Yield EBITDA Multiple Discount Rate Discount Rate EV Analysis EBITDA Multiple 3.3x-8.8x N/A 5.0%-10.0% 7.7%-19.8% 3.3x-7.0x 6.1%-14.6% 5.5x-6.5x 12.1%-20.1% 11.3%-19.8% 0.1x-8.8x Discounted Cash Flow Discount Rate 6.5%-7.0% In determining the range of value for debt instruments except CLOs, management and the independent valuation firm generally estimate corporate and security credit ratings and identify 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 range of value. For non-traded equity investments, the enterprise value was determined by applying earnings before income tax, depreciation and amortization (“EBITDA”) multiples for similar guideline public companies and/or similar recent investment transactions. For stressed equity investments, a liquidation analysis was prepared. 145 7.1x N/A N/A 7.4% 10.9% 6.2x 8.6x 12.1% 77.5% 4.9% 16.8% 5.3x 15.1% 7.4% 9.0% N/A 7.2% Weighted Average 10.8% 6.7x N/A 7.5% 11.6% 4.4x 10.7% 6.0x 15.7% 15.3% 3.9x 6.8% In determining the range of value for our investments in CLOs, management and the independent valuation firm used discounted 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. For each CLO security, the most appropriate valuation approach was chosen from alternative approaches to ensure the most accurate valuation for such security. A waterfall engine is used to store the collateral data, generate collateral cash flows from the assets based on various assumptions for the risk factors, and distribute the cash flows to the liability structure based on the payment priorities, and discount them back using proper discount rates. 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 payments. Significant increases or decreases in the discount rate would result in a decrease or increase, respectively, in the fair value measurement. Included in the consideration and selection of market yields or discount rates are the following factors: 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 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, is typically calculated. The independent valuation firm utilizes the determined multiples to estimate the portfolio company’s EV based on, generally, the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Significant increases or decreases in the multiple may result in an increase or decrease, respectively, in EV, which may increase or decrease the fair value estimate of the debt 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 investments based on the net asset value analysis is the capitalization rate applied to earnings measure of the underlying property. Significant increases or decreases in the discount rate would result in a decrease or increase, respectively, in the fair value measurement. Changes in market yields, discount rates, capitalization rates or EBITDA multiples, each in isolation, may change the fair value of certain of our investments. Generally, an increase in market yields, discount rates or capitalization rate, or decrease in EBITDA multiples, may result in a decrease in the fair value 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 valuations currently assigned. During the year ended June 30, 2014 , the valuation methodology for ARRM (as defined in Note 14) changed to incorporate a weighted sale value evidenced by a pending transaction into the EV analysis which was solely used in previous periods. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in ARRM to $25,536 as of June 30, 2014 , a discount of $21,014 from its amortized cost, compared to the $6,057 unrealized depreciation recorded at June 30, 2013 . During the year ended June 30, 2014 , the valuation methodology for Gulf Coast (as defined in Note 14) changed to incorporate an EV analysis in place of the yield analysis used in previous periods. Management adopted the EV analysis due to a deterioration in operating results and resulting foreclosure culminating in our obtaining majority voting control of the company. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in Gulf Coast to $14,459 as of June 30, 2014 , a discount of $28,991 from its amortized cost, compared to the $9,241 unrealized depreciation recorded at June 30, 2013 . 146 During the year ended June 30, 2014 , the valuation methodology for ICON Health & Fitness, Inc. (“ICON”) changed to incorporate limited secondary trade data in lieu of weighted broker quotes used previously, in addition to the yield analysis and EV analysis used in previous periods. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in ICON to $20,889 as of June 30, 2014 , a discount of $1,116 from its amortized cost, compared to the $9,381 unrealized depreciation recorded at June 30, 2013 . During the year ended June 30, 2014 , the valuation methodology for New Century Transportation, Inc. ("NCT") changed to a liquidation analysis in place of the yield analysis used in previous periods. Management adopted the liquidation analysis due to a deterioration in operating results and resulting credit impairment. In June 2014, NCT filed for bankruptcy. As we hold a second lien position and do not expect liquidation proceeds to exceed the first lien liability, we decreased the fair value of our investment in NCT to zero as of June 30, 2014 , a discount of $44,000 from its amortized cost, compared to the $954 unrealized depreciation recorded at June 30, 2013 . During the year ended June 30, 2014 , the valuation methodology for Sandow Media, LLC ("Sandow") changed to incorporate an EV analysis in addition to the yield analysis used in previous periods. Management adopted the EV analysis due to a deterioration in operating results and resulting credit impairment. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in Sandow to $23,524 as of June 30, 2014 , a discount of $1,557 from its amortized cost, compared to being valued at an amount which was the same as cost as of June 30, 2013 . During the year ended June 30, 2014 , the valuation methodology for Snacks Parent Corporation ("Snacks") changed to incorporate a weighted sale value evidenced by a pending transaction into the EV analysis used in previous periods. As a result of this change, and in recognition of recent company performance and current market conditions, we increased the fair value of our investment in Snacks to $1,819 as of June 30, 2014 , a premium of $1,228 from its amortized cost, compared to the $5 unrealized appreciation recorded at June 30, 2013 . During the year ended June 30, 2014 , the valuation methodology for Targus Group International, Inc. ("Targus") changed to incorporate weighted broker quotes in addition to the yield analysis used in previous periods. As a result of this change, and in recognition of recent company performance and current market conditions, we decreased the fair value of our investment in Targus to $19,949 as of June 30, 2014 , a discount of $1,748 from its amortized cost, compared to the $311 unrealized appreciation recorded at June 30, 2013 . During the year ended June 30, 2013 , we provided $125,892 and $26,648 of debt and equity financing, respectively, to APH Property Holdings, LLC ("APH") for the acquisition of various real estate properties. During the year ended June 30, 2014 , we provided $135,350 and $28,397 of debt and equity financing, respectively, to APH for the acquisition of certain properties. In December 2013, American Property REIT Corp. (“APRC”), a wholly-owned subsidiary of APH, distributed its investments in fourteen properties: eight to National Property REIT Corp. (“NPRC”), a wholly-owned subsidiary of NPH Property Holdings, LLC ("NPH"); and six to United Property REIT Corp. (“UPRC”), a wholly- owned subsidiary of UPH Property Holdings, LLC ("UPH"), two newly formed REIT holding companies which are discussed below. The investments transferred consisted of $98,164 and $20,022 of debt and equity financing, respectively. The eight investments transferred to NPRC from APRC consisted of $79,309 and $16,315 of debt and equity financing, respectively. The six investments transferred to UPRC from APRC consisted of $18,855 and $3,707 of debt and equity financing, respectively. There was no gain or loss realized on these transactions. 147 As of June 30, 2014 , APRC’s real estate portfolio was comprised of fourteen multi-family properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties: No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Property Name Abbington Pointe Amberly Place Lofton Place Vista at Palma Sola Arlington Park The Resort Cordova Regency Crestview at Oakleigh Inverness Lakes Kings Mill Apartments Plantations at Pine Lake Verandas at Rocky Ridge Crestview at Cordova Plantations at Hillcrest Taco Bell, OK City Marietta, GA Tampa, FL Tampa, FL Bradenton, FL Marietta, GA Pembroke Pines, FL Pensacola, FL Pensacola, FL Mobile, AL Pensacola, FL Tallahassee, FL Birmingham, AL Pensacola, FL Mobile, AL Yukon, OK Acquisition Date 12/28/2012 $ 1/17/2013 4/30/2013 4/30/2013 5/8/2013 6/24/2013 11/15/2013 11/15/2013 11/15/2013 11/15/2013 11/15/2013 11/15/2013 1/17/2014 1/17/2014 6/4/2014 $ Purchase Price Mortgage Outstanding 23,500 $ 63,400 26,000 27,000 14,850 225,000 13,750 17,500 29,600 20,750 18,000 15,600 8,500 6,930 1,719 512,099 $ 15,275 39,600 16,965 17,550 9,650 157,500 9,026 11,488 19,400 13,622 11,817 10,205 5,072 5,094 — 342,264 The eight investments transferred to NPRC from APRC consisted of $79,309 and $16,315 of debt and equity financing, respectively. There was no gain or loss realized on these transactions. During the year ended June 30, 2014 , we provided $34,050 and $6,375 of debt and equity financing, respectively, to NPH for the acquisition of certain properties and to invest in peer-to-peer consumer loans. As of June 30, 2014 , NPRC’s real estate portfolio was comprised of nine multi-family properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties: No. 1 2 3 4 5 6 7 8 9 10 Property Name 146 Forest Parkway Bexley St. Marin Mission Gate Vinings Corner Central Park City West Matthews Reserve Indigo Island Club City Forest Park, GA Marietta, GA Coppell, TX Plano, TX Smyrna, GA Altamonte Springs, FL Orlando, FL Matthews, NC Jacksonville, FL Atlantic Beach, FL Purchase Price Mortgage Outstanding 7,400 $ 30,600 73,078 47,621 35,691 36,590 23,562 22,063 38,000 13,025 327,630 $ — 22,497 53,863 36,148 26,640 27,471 18,533 17,571 28,500 9,118 240,341 Acquisition Date 10/24/2012 $ 11/1/2013 11/19/2013 11/19/2013 11/19/2013 11/19/2013 11/19/2013 11/19/2013 12/31/2013 1/31/2014 $ 148 The six investments transferred to UPRC from APRC consisted of $18,855 and $3,707 of debt and equity financing, respectively. There was no gain or loss realized on these transactions. During the year ended June 30, 2014 , we provided $1,405 of equity financing to UPH for the acquisition of certain properties. As of June 30, 2014 , UPRC’s real estate portfolio was comprised of six multi-families properties and one commercial property. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties: No. 1 2 3 4 5 6 7 Property Name Eastwood Village Monterey Village Hidden Creek Meadow Springs Meadow View Peachtree Landing Taco Bell, MO City Stockbridge, GA Jonesboro, GA Morrow, GA College Park, GA College Park, GA Fairburn, GA Marshall, MO Acquisition Date Purchase Price Mortgage Outstanding 12/12/2013 $ 12/12/2013 12/12/2013 12/12/2013 12/12/2013 12/12/2013 6/4/2014 $ 25,957 $ 11,501 5,098 13,116 14,354 17,224 1,405 88,655 $ 19,785 9,193 3,619 10,180 11,141 13,575 — 67,493 On January 4, 2012, Energy Solutions (as defined in Note 14) sold its gas gathering and processing assets (“Gas Solutions”) for a sale price of $199,805, adjusted for the final working capital settlement, including a potential earnout of $28,000 that may be paid based on the future performance of Gas Solutions. Through June 30, 2014 , we have not accrued income for any portion of the $28,000 potential payment. After expenses, including structuring fees of $9,966 paid to us, Energy Solutions received $158,687 in cash. The sale of Gas Solutions by Energy Solutions resulted in significant earnings and profits, as defined by the Internal Revenue Code, at Energy Solutions for calendar year 2012. As a result, distributions from Energy Solutions to us were required to be recognized as dividend income, in accordance with ASC 946, as cash distributions were received from Energy Solutions, to the extent there are current year earnings and profits sufficient to support such recognition. During the year ended June 30, 2013 , we received distributions of $53,820 from Energy Solutions which were recorded as dividend income. No such dividends were received during the year ended June 30, 2014 . During the year ended June 30, 2014 , Energy Solutions repaid the remaining $8,500 of our subordinated secured debt to us. In addition to the repayment of principal, we received $4,812 of make-whole fees for early repayment of the outstanding loan receivables, which was recorded as additional interest income during the year ended June 30, 2014 . On November 25, 2013, we provided $13,000 in senior secured debt financing for the recapitalization of our investment in Freedom Marine Services Holdings, LLC (“Freedom Marine”), a subsidiary of Energy Solutions. The subordinated secured loan to Jettco Marine Services, LLC (“Jettco”), a subsidiary of Freedom Marine, was replaced with a senior secured note to Vessel Holdings II, LLC (“Vessel II”), a new subsidiary of Freedom Marine. On December 3, 2013, we made a $16,000 senior secured investment in Vessel Holdings III, LLC, another new subsidiary of Freedom Marine. Overall the restructuring of our investment in Freedom Marine provided approximately $16,000 net senior secured debt financing to support the acquisition of two new vessels. We received $2,480 of structuring fees from Energy Solutions related to the Freedom Marine restructuring which was recognized as other income during the year ended June 30, 2014 . During the three months ended December 31, 2012, we determined that the impairment of Integrated Contract Solutions, Inc. (“ICS”) was other- than-temporary and recorded a realized loss of $12,198 for the amount that the amortized cost exceeded the fair market value. Our remaining investment in The Healing Staff, Inc. ("THS"), an affiliate of ICS, was valued at zero as of June 30, 2014 and continues to provide staffing solutions for health care facilities and security staffing. On November 30, 2012, we made a secured second lien investment of $9,500 to support the recapitalization of R-V (as defined in Note 14). As part of the recapitalization, we received a dividend of $11,073 for our investment in R-V’s common stock. On March 28, 2013, we sold our investment in New Meatco Provisions, LLC for net proceeds of approximately $1,965 and realized a loss of $10,814 on the sale. On April 30, 2013, we sold our investment in Fischbein, LLC for net proceeds of $3,168, recognizing a realized gain of $2,293 on the sale. In addition, there is $155 being held in escrow which will be recognized as additional gain if and when received. On April 15, 2013, assets previously held by H&M Oil & Gas, LLC ("H&M") were assigned to Wolf Energy, LLC ("Wolf Energy") in exchange for a $66,000 term loan secured by the assets. The cost basis in this loan of $44,632 was determined in accordance 149 with ASC 310-40, Troubled Debt Restructurings by Creditors , and was equal to the fair value of assets at the time of transfer resulting in a capital loss of $19,647 in connection with the foreclosure on the assets. On May 17, 2013, Wolf Energy sold the assets located in Martin County, which were previously held by H&M, for $66,000. Proceeds from the sale were primarily used to repay the loan and net profits interest receivable due to us resulting in a realized capital gain of $11,826. We received $3,960 of structuring and advisory fees from Wolf Energy during the year ended June 30, 2013 related to the sale and $991 under the net profits interest agreement which was recognized as other income during the fiscal year ended June 30, 2013. In June 2013, we determined that the impairment of Manx Energy, Inc. ("Manx") was other-than-temporary and recorded a realized loss of $9,397 for the amount that the amortized cost exceeded the fair market value On August 6, 2013, we received a distribution of $3,252 related to our investment in NRG Manufacturing, Inc. for which we realized a gain of the same amount. This was a partial release of the amount held in escrow. On October 31, 2013, we sold $18,755 of the National Bankruptcy Services, LLC loan receivable. The loan receivable was sold at a discount and we realized a loss of $7,853. During the year ended June 30, 2013 , we recognized $1,481 of interest income due to purchase discount accretion from the assets acquired from Patriot. Included in the $1,481 recorded during the year ended June 30, 2013 is $1,111 of normal accretion and $370 of accelerated accretion resulting from the repayment of Hudson Products Holdings, Inc. During the year ended June 30, 2014 , we recognized $400 of interest income due to purchase discount accretion from the assets acquired from Patriot. No accelerated accretion was recorded during the year ended June 30, 2014 . As of June 30, 2014 , there is no more purchase discount from the assets acquired from Patriot that remains to be accreted. As of June 30, 2014 , $4,499,955 of our loans, at fair value, bear interest at floating rates and $4,466,756 of those loans have Libor floors ranging from 1.25% to 6.00%. At June 30, 2014 , nine loan investments were on non-accrual status: BXC Company, Inc., STI Holding, Inc., THS, Manx, NCT, Stryker, Wind River, Wolf Energy and Yatesville. At June 30, 2013 , eight loan investments were on non-accrual status: Borga, Inc., Jettco, THS, Manx, Stryker, Wind River, Wolf Energy and Yatesville. Principal balances of these loans amounted to $163,533 and $106,395 as of June 30, 2014 and June 30, 2013 , respectively. The fair value of these loans amounted to $6,150 and $13,810 as of June 30, 2014 and June 30, 2013 , respectively. The fair values of these investments represent approximately 0.1% and 0.3% of our total assets as of June 30, 2014 and June 30, 2013 , respectively. For the years ended June 30, 2014 , 2013 and 2012 , the income foregone as a result of not accruing interest on non-accrual debt investments amounted to $24,040, $25,965 and $25,460, respectively. Undrawn committed revolvers to our portfolio companies incur commitment fees ranging from 0.00% to 2.00%. As of June 30, 2014 and June 30, 2013 , we have $143,597 and $202,518 of undrawn revolver commitments to our portfolio companies, respectively. Unconsolidated Significant Subsidiaries (Unaudited) Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with SEC Regulation S-X Rules 3-09 and 4-08(g), we must determine which of our unconsolidated majority-owned portfolio companies, if any, are considered "significant subsidiaries." In evaluating these investments, there are three tests utilized to determine if any of our investments are considered “significant subsidiaries”: the investment test, the asset test and the income test. SEC Regulation S-X 3-09, as interpreted by the SEC, requires separate audited financial statements of an unconsolidated majority-owned subsidiary if any of the three tests exceed 20% and SEC Regulation S-X 4-08 (g) requires summarized financial information if any of the three tests exceed 10%. At June 30, 2014 and June 30, 2013, we had no single investment that represented greater than 10% of our total investment portfolio at fair value. At June 30, 2014 and June 30, 2013, we had no single investment whose assets represented greater than 10% of our total assets. Income, consisting of interest, dividends, fees, other investment income and realization of gains or losses, can fluctuate upon repayment or sale of an investment or the marking to fair value of an investment in any given year can be highly concentrated among several investments. After performing the analysis, we determined that First Tower Holdings of Delaware LLC and Subsidiaries generated more than 10% of our income, but less than 20% of our income, primarily due to the unrealized gain that was recognized on the investment for the year ended June 30, 2014. As such, we provide summarized financial information as follows: 150 Balance Sheet Data Cash and short-term investments Finance receivables, net Intangibles, including goodwill Other assets Total liabilities Member's equity/(deficit) June 30, 2014 June 30, 2013 $ 60,368 $ 385,875 137,696 14,066 611,237 (13,233 ) 56,682 378,327 161,008 14,303 545,778 64,542 Summary of Operations Total revenue Total expenses Net loss Note 4. Revolving Credit Facility Twelve Months Ended June 30, 2014 2013 Period June 15, 2012 to June 30, 2012 $ $ 201,725 $ 237,884 (36,159 ) $ 188,672 $ 211,573 (22,901 ) $ 6,947 11,674 (4,727 ) On March 27, 2012, we closed on an expanded five-year $650,000 revolving credit facility with a syndicate of lenders through PCF (the “2012 Facility”). The lenders have extended commitments of $857,500 under the 2012 Facility as of June 30, 2014 , which was increased to $877,500 in July 2014 (see Note 18). The 2012 Facility includes an accordion feature which allows commitments to be increased up to $1,000,000 in the aggregate. The revolving period of the 2012 Facility extends through March 2015, with an additional two year amortization period (with distributions allowed) after the completion of the revolving period. During such two year amortization period, all principal payments on the pledged assets will be applied to reduce the balance. At the end of the two year amortization period, the remaining balance will become due, if required by the lenders. The 2012 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 2012 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 2012 Facility. The 2012 Facility also requires the maintenance of a minimum liquidity requirement. As of June 30, 2014 , we were in compliance with the applicable covenants. Interest on borrowings under the 2012 Facility is one-month Libor plus 275 basis points with no minimum Libor floor. Additionally, the lenders charge a fee on the unused portion of the 2012 Facility equal to either 50 basis points, if at least half of the credit facility is drawn, or 100 basis points otherwise. The 2012 Facility requires us to pledge assets as collateral in order to borrow under the credit facility. As of June 30, 2014 and 2013 , we had $780,620 and $473,508 , respectively, available to us for borrowing under the 2012 Facility, of which the amount outstanding was $92,000 and $124,000 , respectively. As additional eligible investments are transferred to PCF and pledged under the 2012 Facility, PCF will generate additional availability up to the current commitment amount of $877,500 . As of June 30, 2014 , the investments used as collateral for the 2012 Facility had an aggregate fair value of $1,535,476 , which represents 24.1% of our total investments 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 2012 Facility, we incurred $14,154 of fees, including $1,319 of fees carried over from the previous facility, which are being amortized over the term of the facility in accordance with ASC 470-50, Debt Modifications and Extinguishments , of which $4,883 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $12,216 , $9,082 and $14,883 , respectively, of interest costs, unused fees and amortization of financing costs on the 2012 Facility as interest expense. Note 5. Senior Convertible Notes 151 On December 21, 2010, we issued $150,000 aggregate principal amount of senior convertible notes that mature on December 15, 2015 (the “2015 Notes”), unless previously converted or repurchased in accordance with their terms. The 2015 Notes bear 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 February 18, 2011, we issued $172,500 aggregate principal amount of senior convertible notes that mature on August 15, 2016 (the “2016 Notes”), unless previously converted or repurchased in accordance with their terms. The 2016 Notes bear 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 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 April 16, 2012, we issued $130,000 aggregate principal amount of senior 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 August 14, 2012, we issued $200,000 aggregate principal amount of senior 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 December 21, 2012, we issued $200,000 aggregate principal amount of senior 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 senior 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. Certain key terms related to the convertible features for the 2015 Notes, the 2016 Notes, the 2017 Notes, the 2018 Notes, the 2019 Notes and the 2020 Notes (collectively, the “Senior Convertible Notes”) are listed below. Initial conversion rate(1) Initial conversion price Conversion rate at June 30, 2014(1)(2) Conversion price at June 30, 2014(2)(3) Last conversion price calculation date Dividend threshold amount (per share)(4) $ 11.35 $ 85.8442 78.3699 88.0902 2015 Notes 2016 Notes 2017 Notes 2018 Notes 2019 Notes 2020 Notes 80.6647 12.40 80.6647 12.40 4/11/2014 $ 0.101125 $ 0.101150 $ 0.101500 $ 0.101600 $ 0.110025 $ 0.110525 8/14/2013 12/21/2013 12/21/2013 4/16/2014 2/18/2014 89.0157 79.3176 86.9426 79.7865 82.8631 79.7766 82.3451 12.54 $ 12.53 $ 12.76 $ 11.65 $ 12.14 $ 12.61 $ 11.50 $ 12.07 $ 11.23 $ $ (1) Conversion rates denominated in shares of common stock per $1 principal amount of the Senior 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 in effect at June 30, 2014 was calculated on the last anniversary of the issuance and will be adjusted again on the next anniversary, unless the exercise price shall have changed by more than 1% before the anniversary. (4) The conversion rate is increased if monthly cash dividends paid to common shares exceed the monthly dividend threshold amount, subject to adjustment. In no event will the total number of shares of common stock issuable upon conversion exceed 96.8992 per $1 principal amount of the 2015 Notes (the “conversion rate cap”), except that, to the extent we receive written guidance or a no-action letter from the staff of the Securities and Exchange Commission (the “Guidance”) permitting us to adjust the conversion rate in certain instances without regard to the conversion rate cap and to make the 2015 Notes convertible into certain reference property in accordance with certain reclassifications, business combinations, asset sales and corporate events by us without regard to the conversion rate cap, we will make such adjustments without regard to the conversion rate cap and will also, to the extent that we make any such 152 adjustment without regard to the conversion rate cap pursuant to the Guidance, adjust the conversion rate cap accordingly. We will use our commercially reasonable efforts to obtain such Guidance as promptly as practicable. Prior to obtaining the Guidance, we will not engage in certain transactions that would result in an adjustment to the conversion rate increasing the conversion rate beyond what it would have been in the absence of such transaction unless we have engaged in a reverse stock split or share combination transaction such that in our reasonable best estimation, the conversion rate following the adjustment for such transaction will not be any closer to the conversion rate cap than it would have been in the absence of such transaction. 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 Senior Convertible Notes. No holder of Senior 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 Senior 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 Senior Convertible Notes upon a fundamental change at a price equal to 100% of the principal amount of the Senior 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 Senior Convertible Notes through and including the maturity date. In connection with the issuance of the Senior Convertible Notes, we incurred $39,558 of fees which are being amortized over the terms of the notes, of which $27,824 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $58,042 , $45,880 and $22,197 , respectively, of interest costs and amortization of financing costs on the Senior Convertible Notes as interest expense. Note 6. Senior Unsecured Notes On May 1, 2012, we issued $100,000 aggregate principal amount of senior unsecured notes that mature on November 15, 2022 (the “2022 Notes”). The 2022 Notes bear interest at a rate of 6.95% per year, payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning August 15, 2012. Total proceeds from the issuance of the 2022 Notes, net of underwriting discounts and offering costs, were $97,000. On March 15, 2013, we issued $250,000 aggregate principal amount of senior 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 $245,885. On April 7, 2014, we issued $300,000 aggregate principal amount of senior 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 $250,775. 153 The 2022 Notes, the 2023 Notes and the 5.00% 2019 Notes (collectively, the “Senior Unsecured Notes”) are direct unsecured obligations and rank equally with all of our unsecured senior indebtedness from time to time outstanding. In connection with the issuance of the Senior Unsecured Notes, we incurred $11,358 of fees which are being amortized over the term of the notes, of which $10,297 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $25,988 , $11,672 and $1,178 , respectively, of interest costs and amortization of financing costs on the Senior Unsecured 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 senior obligations and rank equally with all of our unsecured senior indebtedness 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 year ended June 30, 2014 , we issued $473,762 aggregate principal amount of our Prospect Capital InterNotes ® for net proceeds of $465,314 . These notes were issued with stated interest rates ranging from 3.75% to 6.75% with a weighted average interest rate of 5.12% . These notes mature between October 15, 2016 and October 15, 2043 . Below is a summary of the Prospect Capital InterNotes® issued during the year ended June 30, 2014 : Tenor at Origination (in years) 3 3.5 4 5 5.5 6.5 7 7.5 10 12 15 18 20 25 30 $ $ Principal Amount Interest Rate Range Weighted Average Interest Rate 5,710 3,149 45,751 217,915 43,820 1,800 62,409 1,996 23,850 2,978 2,495 4,062 2,791 34,886 20,150 473,762 4.00% 4.00% 3.75%–4.00% 4.25%–5.00% 4.75%–5.00% 5.50% 5.25%–5.75% 5.75% 5.75%–6.50% 6.00% 6.00% 6.00%–6.25% 6.00% 6.25%–6.50% 6.50%–6.75% 4.00 % 4.00 % 3.92 % 4.91 % 4.77 % 5.50 % 5.44 % 5.75 % 5.91 % 6.00 % 6.00 % 6.21 % 6.00 % 6.39 % 6.60 % Maturity Date Range October 15, 2016 April 15, 2017 November 15, 2017 – May 15, 2018 July 15, 2018 – August 15, 2019 February 15, 2019 – August 15, 2019 February 15, 2020 July 15, 2020 – May 15, 2021 February 15, 2021 January 15, 2024 – May 15, 2024 November 15, 2025 – December 15, 2025 August 15, 2028 – November 15, 2028 July 15, 2031 – August 15, 2031 September 15, 2033 – October 15, 2033 August 15, 2038 – May 15, 2039 July 15, 2043 – October 15, 2043 During the year ended June 30, 2013 , we issued $343,139 aggregate principal amount of our Prospect Capital InterNotes ® for net proceeds of $334,244 . These notes were issued with stated interest rates ranging from 3.28% to 6.625% with a weighted average interest rate of 5.59% . These notes mature between July 15, 2019 and June 15, 2043 . Below is a summary of the Prospect Capital InterNotes® issued during the year ended June 30, 2013 : 154 Tenor at Origination (in years) 7 10 15 18 20 30 $ $ Principal Amount Interest Rate Range 4.00%–6.45% 190,937 3.28%–3.78% 1,489 15,000 5.00% 22,157 4.125%–6.00% 3,106 5.625%–5.75% 110,450 5.50%–6.625% 343,139 Weighted Average Interest Rate 5.35 % 3.37 % 5.00 % 5.34 % 5.70 % 6.15 % 155 Maturity Date Range July 15, 2019 – June 15, 2020 March 15, 2023 – April 15, 2023 May 15, 2028 – June 15, 2028 December 15, 2030 – June 15, 2031 November 15, 2032 – December 15, 2032 November 15, 2042 – June 15, 2043 In connection with the issuance of the 5.00% 2019 Notes, $45,000 of previously-issued Prospect Capital InterNotes® were exchanged for the 5.00% 2019 Notes. During the year ended June 30, 2014 , we repaid $6,869 aggregate principal amount of our Prospect Capital InterNotes® in accordance with the Survivor’s Option, as defined in the InterNotes® Offering prospectus. Below are the Prospect Capital InterNotes® outstanding as of June 30, 2014 : Tenor at Origination (in years) 3 3.5 4 5 5.5 6.5 7 7.5 10 12 15 18 20 25 30 $ $ Principal Amount Interest Rate Range 4.00% 5,710 4.00% 3,149 3.75%–4.00% 45,751 4.25%–5.00% 212,915 5.00% 3,820 5.50% 1,800 4.00%–6.55% 256,903 5.75% 1,996 3.23%–7.00% 41,952 6.00% 2,978 17,465 5.00%–6.00% 25,435 4.125%–6.25% 5,847 5.625%–6.00% 6.25%–6.50% 34,886 5.50%–6.75% 125,063 785,670 Weighted Average Interest Rate 4.00 % 4.00 % 3.92 % 4.92 % 5.00 % 5.50 % 5.39 % 5.75 % 6.18 % 6.00 % 5.14 % 5.49 % 5.85 % 6.39 % 6.22 % Below are the Prospect Capital InterNotes® outstanding as of June 30, 2013 : Maturity Date Range October 15, 2016 April 15, 2017 November 15, 2017 – May 15, 2018 July 15, 2018 – August 15, 2019 February 15, 2019 February 15, 2020 June 15, 2019 – May 15, 2021 February 15, 2021 March 15, 2022 – May 15, 2024 November 15, 2025 – December 15, 2025 May 15, 2028 – November 15, 2028 December 15, 2030 – August 15, 2031 November 15, 2032 – October 15, 2033 August 15, 2038 – May 15, 2039 November 15, 2042 – October 15, 2043 Tenor at Origination (in years) 7 10 15 18 20 30 $ $ Principal Amount Interest Rate Range 4.00%–6.55% 194,937 3.28%–7.00% 18,127 15,000 5.00% 22,157 4.125%–6.00% 3,106 5.625%–5.75% 110,450 5.50%–6.625% 363,777 Weighted Average Interest Rate 5.37 % 6.56 % 5.00 % 5.34 % 5.70 % 6.15 % Maturity Date Range June 15, 2019 – June 15, 2020 March 15, 2022 – April 15, 2023 May 15, 2028 – June 15, 2028 December 15, 2030 – June 15, 2031 November 15, 2032 – December 15, 2032 November 15, 2042 – June 15, 2043 In connection with the issuance of the Prospect Capital InterNotes ® , we incurred $20,235 of fees which are being amortized over the term of the notes, of which $18,889 remains to be amortized and is included within deferred financing costs on the Consolidated Statements of Assets and Liabilities as of June 30, 2014 . During the years ended June 30, 2014 , 2013 and 2012 , we recorded $33,857 , $9,707 and $276 , respectively, of interest costs and amortization of financing costs on the Prospect Capital InterNotes ® as interest expense. 156 Note 8. Fair Value and Maturity of Debt Outstanding The following table shows the Revolving Credit Facility, Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes® maximum draw amounts and outstanding borrowings as of June 30, 2014 and June 30, 2013 : June 30, 2014 June 30, 2013 Maximum Amount Maximum Draw Amount Outstanding Draw Amount Revolving Credit Facility Senior Convertible Notes Senior Unsecured Notes Prospect Capital InterNotes ® Total $ $ 857,500 $ 1,247,500 647,881 785,670 3,538,551 $ 92,000 $ 1,247,500 647,881 785,670 2,773,051 $ 552,500 $ 847,500 347,725 363,777 2,111,502 $ Amount Outstanding 124,000 847,500 347,725 363,777 1,683,002 The following table shows the contractual maturities of our Revolving Credit Facility, Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes® as of June 30, 2014 : Revolving Credit Facility Senior Convertible Notes Senior Unsecured Notes Prospect Capital InterNotes ® Total Contractual Obligations Payments Due by Period Total Less than 1 Year 1 – 3 Years 3 – 5 Years After 5 Years $ 92,000 $ 1,247,500 647,881 785,670 $ 2,773,051 $ — $ — — — — $ 92,000 $ 317,500 — 8,859 418,359 $ — $ — 530,000 400,000 — 647,881 515,355 261,456 791,456 $ 1,563,236 The following table shows the contractual maturities of our Revolving Credit Facility, Senior Convertible Notes, Senior Unsecured Notes and Prospect Capital InterNotes® as of June 30, 2013 : Payments Due by Period Revolving Credit Facility Senior Convertible Notes Senior Unsecured Notes Prospect Capital InterNotes ® Total Contractual Obligations $ Total 124,000 $ 847,500 347,725 363,777 $ 1,683,002 $ Less than 1 Year After 5 Years 1 – 3 Years 3 – 5 Years — $ — $ — — — — $ 150,000 — — 150,000 $ 124,000 $ 297,500 — — — 400,000 347,725 363,777 421,500 $ 1,111,502 The fair values of our financial liabilities disclosed, but not carried, at fair value as of June 30, 2014 disaggregated into the three levels of the ASC 820 valuation hierarchy are as follows: Revolving Credit Facility(1) Senior Convertible Notes(2) Senior Unsecured Notes(2) Prospect Capital InterNotes®(3) Total Level 1 — — — — — $ $ $ Fair Value Hierarchy Level 2 92,000 1,293,495 679,816 766,660 $ 2,831,971 $ $ Level 3 Total — $ 92,000 — 1,293,495 — 679,816 — 766,660 — $ 2,831,971 (1) The carrying value of our Revolving Credit Facility approximates the fair value. (2) We use available market quotes to estimate the fair value of the Senior Convertible Notes and Senior Unsecured Notes. (3) The fair value of our Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates. 157 The fair values of our financial liabilities disclosed, but not carried, at fair value as of June 30, 2013 disaggregated into the three levels of the ASC 820 valuation hierarchy are as follows: Revolving Credit Facility(1) Senior Convertible Notes(2) Senior Unsecured Notes(2) Prospect Capital InterNotes®(3) Total Level 1 — — — — — $ $ Fair Value Hierarchy Level 2 $ 124,000 886,210 343,813 336,055 $ 1,690,078 $ $ Level 3 Total — $ 124,000 886,210 — 343,813 — — 336,055 — $ 1,690,078 (1) The carrying value of our Revolving Credit Facility approximates the fair value. (2) We use available market quotes to estimate the fair value of the Senior Convertible Notes and Senior Unsecured Notes. (3) The fair value of our Prospect Capital InterNotes® is estimated by discounting remaining payments using current Treasury rates. Note 9. Equity Offerings, Offering Expenses, and Distributions Excluding dividend reinvestments, we issued 93,381,602 and 106,752,517 shares of our common stock during the years ended June 30, 2014 and 2013 , respectively. The proceeds raised, the related underwriting fees, the offering expenses and the prices at which these shares were issued are as follows: Issuances of Common Stock During the year ended June 30, 2014: July 5, 2013 – August 21, 2013(1) August 2, 2013(2) August 29, 2013 – November 4, 2013(1) November 12, 2013 – February 5, 2014(1) February 10, 2014 – April 9, 2014(1) March 31, 2014(2) April 15, 2014 – May 2, 2014(1) May 5, 2014(2) During the year ended June 30, 2013: July 2, 2012 – July 12, 2012(1) July 16, 2012 July 27, 2012 September 13, 2012 – October 9, 2012(1) November 7, 2012 December 13, 2012(2) December 28, 2012(2) December 31, 2012(2) January 7, 2013 – February 5, 2013(1) February 14, 2013 – May 3, 2013(1) May 14, 2013 – May 31, 2013(1) Number of Gross Shares Issued Proceeds Underwriting Fees Offering Expenses Average Offering Price 9,818,907 $ 107,725 $ 1,918,342 24,127,242 27,301,889 21,592,715 2,306,294 5,213,900 1,102,313 21,006 272,114 307,045 239,305 24,908 56,995 11,916 2,247,275 21,000,000 3,150,000 8,010,357 35,000,000 467,928 897,906 4,141,547 10,248,051 17,230,253 4,359,200 26,040 234,150 35,123 94,610 388,500 5,021 9,581 44,649 115,315 191,893 47,528 902 $ — 2,703 3,069 2,233 — 445 — 260 2,100 315 946 4,550 — — — 1,153 1,788 399 169 $ — $ 414 $ 436 $ 168 $ — $ 193 $ — $ — $ 62 $ — $ 638 $ 814 $ — $ — $ — $ — $ 56 $ 245 $ 10.97 10.95 11.28 11.25 11.08 10.80 10.93 10.81 11.59 11.15 11.15 11.81 11.10 10.73 10.67 10.78 11.25 11.14 10.90 (1) Shares were issued in connection with our at-the-market offering program which we enter into from time to time with various counterparties. (2) On December 13, 2012 , December 28, 2012 , December 31, 2012 , August 2, 2013 , March 31, 2014 and May 5, 2014 , we issued 467,928 , 897,906 , 4,141,547 , 1,918,342 , 2,306,294 and 1,102,313 shares of our common stock, respectively, in conjunction with investments in CCPI , Credit Central , Valley Electric , CP Holdings , Harbortouch and Arctic Energy, which are controlled portfolio companies. 158 Our shareholders’ equity accounts as of June 30, 2014 and 2013 reflect cumulative shares issued as of those respective dates. Our common stock has been issued through public offerings, a registered direct offering, the exercise of over-allotment options on the part of the underwriters and our dividend reinvestment plan. 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. On August 24, 2011, our Board of Directors approved a share repurchase plan under which we may repurchase up to $100,000 of our common stock at prices below our net asset value. We have not made any purchases of our common stock during the period from August 24, 2011 to June 30, 2014 pursuant to this plan. Prior to any repurchase, we are required to notify shareholders of our intention to purchase our common stock. This notice lasts for six months after notice is given. Our last notice was delivered with our annual proxy mailing on September 10, 2013. Our Board of Directors, pursuant to the Maryland General Corporation Law, executed Articles of Amendment to increase the number of shares authorized for issuance from 500,000,000 to 1,000,000,000 in the aggregate. The amendment became effective May 6, 2014. On October 15, 2013, our Registration Statement on Form N-2 was declared effective by the SEC. Under this Shelf Registration Statement, we can issue up to $3,691,792 of additional debt and equity securities in the public market as of June 30, 2014 . During the years ended June 30, 2014 and 2013 , we distributed approximately $403,188 and $271,507 , respectively, to our stockholders. The following table summarizes our distributions declared and payable for 2013 and 2014 : Declaration Date Record Date Payment Date Amount Per Share Amount Distributed (in thousands) 5/7/2012 5/7/2012 8/21/2012 8/21/2012 11/7/2012 12/7/2012 12/7/2012 2/7/2013 2/7/2013 2/7/2013 5/6/2013 5/6/2013 5/6/2013 5/6/2013 6/17/2013 6/17/2013 6/17/2013 6/17/2013 8/21/2013 8/21/2013 8/21/2013 11/4/2013 11/4/2013 11/4/2013 7/31/2012 8/31/2012 9/28/2012 10/31/2012 11/30/2012 12/31/2012 1/31/2013 2/28/2013 3/29/2013 4/30/2013 5/31/2013 6/28/2013 7/31/2013 8/30/2013 9/30/2013 10/31/2013 11/29/2013 12/31/2013 1/31/2014 2/28/2014 3/31/2014 4/30/2014 5/30/2014 6/30/2014 8/24/2012 $ 9/21/2012 10/24/2012 11/22/2012 12/20/2012 1/23/2013 2/20/2013 3/21/2013 4/18/2013 5/23/2013 6/20/2013 7/18/2013 0.101575 $ 0.101600 0.101625 0.101650 0.101675 0.110000 0.110025 0.110050 0.110075 0.110100 0.110125 0.110150 Total declared and payable for 2013 $ 8/22/2013 $ 9/19/2013 10/24/2013 11/21/2013 12/19/2013 1/23/2014 2/20/2014 3/20/2014 4/17/2014 5/22/2014 6/19/2014 7/24/2014 0.110175 $ 0.110200 0.110225 0.110250 0.110275 0.110300 0.110325 0.110350 0.110375 0.110400 0.110425 0.110450 Total declared and payable for 2014 $ 16,886 16,897 17,597 17,736 21,308 23,669 24,641 25,307 26,267 26,620 27,280 27,299 271,507 28,001 28,759 29,915 31,224 32,189 33,229 34,239 35,508 36,810 37,649 37,822 37,843 403,188 Dividends and distributions to common stockholders are recorded on the ex-dividend date. As such, the table above includes distributions with record dates during the years ended June 30, 2014 and 2013 . It does not include distributions previously declared 159 to stockholders of record on any future dates, as those amounts are not yet determinable. The following dividends were previously declared and will be payable subsequent to June 30, 2014 : • $0.110475 per share for July 2014 to holders of record on July 31, 2014 with a payment date of August 21, 2014; • $0.110500 per share for August 2014 to holders of record on August 29, 2014 with a payment date of September 18, 2014; and • $0.110525 per share for September 2014 to holders of record on September 30, 2014 with a payment date of October 22, 2014. • $0.110550 per share for October 2014 to holders of record on October 31, 2014 with a payment date of November 20, 2014; • $0.110575 per share for November 2014 to holders of record on November 28, 2014 with a payment date of December 18, 2014; and • $0.110600 per share for December 2014 to holders of record on December 31, 2014 with a payment date of January 22, 2015. During the years ended June 30, 2014 and 2013 , we issued 1,408,070 and 1,450,578 shares of our common stock, respectively, in connection with the dividend reinvestment plan. As of June 30, 2014 , we have reserved 103,055,710 shares of our common stock for issuance upon conversion of the Senior 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/net revenue interests, deal deposits, administrative agent fees, and other miscellaneous and sundry cash receipts. Income from such sources for the years ended June 30, 2014 , 2013 and 2012 were as follows: Income Source Structuring, advisory and amendment fees (refer to Note 3) Recovery of legal costs from prior periods from legal settlement Royalty interests Administrative agent fees Total Other Income Note 11. Net Increase in Net Assets per Share Year Ended June 30, 2013 2012 2014 $ $ 59,527 $ 5,825 5,893 468 71,713 $ 53,708 $ — 4,122 346 58,176 $ 35,976 — 224 293 36,493 The following information sets forth the computation of net increase in net assets resulting from operations per share for the years ended June 30, 2014 , 2013 and 2012 . Net increase in net assets resulting from operations Weighted average common shares outstanding Net increase in net assets resulting from operations per share 160 Year Ended June 30, 2013 220,856 $ 2014 319,020 $ 2012 190,904 $ 300,283,941 207,069,971 114,394,554 1.67 $ 1.06 $ 1.07 $ 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. 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, 2013, 2012 and 2011 were as follows: Ordinary income Capital gain Return of capital Total dividends paid to shareholders Tax Year Ended August 31, 2012 147,204 $ 2013 282,621 $ 2011 $ — — — — $ 282,621 $ 147,204 $ 76,680 — 33,218 109,898 For the tax year ending August 31, 2014, the tax character of dividends paid to shareholders through June 30, 2014 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, 2014. 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, 2013, 2012 and 2011: Net increase in net assets resulting from operations Net realized loss (gain) on investments Net unrealized depreciation (appreciation) on investments Other temporary book-to-tax differences Permanent differences Taxable income before deductions for distributions $ $ Tax Year Ended August 31, 2012 208,331 $ (38,363 ) 32,367 (1,078 ) (6,103 ) 195,154 $ 2013 238,721 $ 24,632 77,835 (4,357 ) 5,939 342,770 $ 2011 119,281 (16,465 ) (7,552 ) 1,417 (20,000 ) 76,681 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, 2013, we had capital loss carryforwards of approximately $84,470 available for use in later tax years. Of the amount available as of August 31, 2013, $582, $33,096 and $34,471 will expire on August 31, 2016, 2017 and 2018, respectively, and $16,321 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, substantially all of the Company's capital loss carryforwards may become permanently unavailable due to limitations by the Code. Under current tax law, capital losses and specific ordinary losses realized after October 31st and December 31st, respectively, may be deferred and treated as occurring on the first business day of the following tax year. As of August 31, 2013, we had deferred $10,793 long-term capital losses, which will be treated as arising on the first day of the tax year ending August 31, 2014. For the tax year ended August 31, 2013, we had taxable income in excess of the distributions made from such taxable income during the year, and therefore, we elected to carry forward the excess for distribution to shareholders in the tax year ending August 31, 2014. The amount carried forward to 2014 was approximately $108,099. For the tax year ended August 31, 2012, we had taxable income in excess of the distributions made from such taxable income during the year, and therefore, we elected to carry forward the excess for distribution to shareholders in the tax year ended August 31, 2013. The amount carried forward to 2013 was approximately $47,950. For the tax year ended August 31, 2011, we did not have taxable income in excess of distributions 161 made from such taxable income during the year, and therefore, there was no excess available for us to carry forward for distribution to shareholders in the tax year ended August 31, 2012. As of June 30, 2014, the cost basis of investments for tax purposes was $6,354,811 resulting in estimated gross unrealized appreciation and depreciation of $146,820 and $247,891, respectively. As of June 30, 2013, the cost basis of investments for tax purposes was $4,247,038 resulting in estimated gross unrealized appreciation and depreciation of $76,112 and $150,298, 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 June 30, 2014 and 2013 was calculated based on the book cost of investments as of June 30, 2014 and 2013, respectively, with cumulative book-to-tax adjustments for investments through August 31, 2013 and 2012, 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 taxes, among other items. During the tax year ended August 31, 2013, we increased accumulated undistributed net investment income by $5,939, increased accumulated net realized loss on investments by $2,621 and decreased capital in excess of par value by $3,318. During the tax year ended August 31, 2012, we increased accumulated undistributed net investment income by $5,028, increased accumulated net realized loss on investments by $37,355 and increased capital in excess of par value by $32,327. Due to the difference between our fiscal and tax year end, the reclassifications for the taxable years ended August 31, 2013 and 2012 were recorded in the fiscal years ended June 30, 2014 and 2013, respectively. 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 gross assets (including amounts borrowed). 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 base management fee incurred to the favor of the Investment Adviser was $108,990 , $69,800 and $35,836 for the years ended June 30, 2014 , 2013 and 2012 , 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 appreciation or depreciation. 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; 162 • 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 its portfolio. For the purpose of this calculation, an “investment” is defined as the total of all rights and claims which maybe 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 $89,306 , $81,231 and $46,671 for the years ended June 30, 2014 , 2013 and 2012 , respectively. No capital gains incentive fee was incurred for the years ended June 30, 2014 , 2013 and 2012 . Administration Agreement We have also entered into an Administration Agreement with Prospect Administration LLC (“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. For the years ended June 30, 2014 , 2013 and 2012 , the reimbursement was approximately $14,373 , $8,737 and $6,848 , respectively. 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" 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 subsidiary of the Investment Adviser. During the years ended June 30, 2014, 2013 and 2012, Prospect Administration received payments of $7,582, $1,394 and $1,092 directly from our controlled portfolio companies for legal, tax and portfolio level accounting services. 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. 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 163 settlement) arising from the rendering of Prospect Administration’s services under the Administration Agreement or otherwise as administrator for us. 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 will vary according to the particular needs of each portfolio company. Examples of such activities include advice on marketing, operations, fulfillment and overall strategy, capital budgeting, managing relationships with financing sources, recruiting management personnel, evaluating acquisition and divestiture opportunities, participating in board and management meetings, consulting with and advising officers of portfolio companies, and providing other organizational and financial guidance. Prospect Administration, through a managerial assistance agreement executed with each portfolio company to which we provide managerial assistance, provides such managerial assistance on our behalf. In doing so, Prospect Administration utilizes personnel of our Investment Adviser, Prospect Capital Management. We, on behalf of Prospect Administration, invoice portfolio companies receiving and paying for managerial assistance, and we remit to Prospect Administration its allocated cost of providing such services, including the allocated cost of Prospect Capital Management personnel it utilizes for that purpose. Our payments to Prospect Administration are periodically reviewed by our Board of Directors. During the years ended June 30, 2014, 2013 and 2012, we received payments of $7,472, $5,414 and $1,849, respectively, from our portfolio companies for managerial assistance and subsequently remitted these amounts to Prospect Administration. 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 Senior Secured Income Fund, Inc. and Pathway Energy Infrastructure Fund, Inc., subject to the conditions included therein. 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. As of June 30, 2014, we had co-investments in the following: Cent CLO 21 Limited, Galaxy XVII CLO, Ltd., Halcyon Loan Advisors Funding 2014-2 Ltd., Symphony CLO XIV Ltd., Voya CLO 2014-1, Ltd. (f/k/a ING IM CLO 2014-1, Ltd.), and Washington Mill CLO Ltd. 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. AMU Holdings Inc. Prospect owns 100% of the equity of AMU Holdings Inc. (“AMU”). AMU owns 98% of Airmall Inc. (“Airmall”). Airmall is a developer and manager of airport retail operations. On July 30, 2010, Prospect made a $22,420 investment in AMU, of which $12,500 was a senior subordinated note and $9,920 was used to purchase 100% of the preferred and common equity of AMU. AMU used its combined debt and equity proceeds of $22,420 to purchase 100% of Airmall’s common stock for $18,000, to pay $1,573 of structuring fees from AMU to Prospect (which was recognized by Prospect as structuring fee income), $836 of third party expenses, $11 of legal services provided by attorneys at Prospect Administration, and $2,000 of withholding tax. Prospect then purchased for $30,000 two loans of Airmall payable to unrealized third parties, one for $10,000 and the other $20,000. Prospect and Airmall subsequently refinanced the two loans into a single $30,000 loan from Airmall to Prospect. 164 On October 1, 2013, Prospect made an additional $2,600 investment in the senior subordinated note, of which $575 was utilized by AMU to pay interest due to Prospect and $2,025 was retained by AMU for working capital. On December 4, 2013, Prospect sold 2% of the outstanding principal balance of the senior secured term loan to Airmall and 2% of the outstanding principal balance of the senior subordinated note to AMU for $972. On November 25, 2013, Prospect funded an additional $5,000 to the senior subordinated note, which was utilized by AMU to pay a $5,000 of dividend to Prospect. On June 13, 2014, Prospect made a new $19,993 investment as a senior secured loan to Airmall. Airmall then distributed this amount to AMU as a return of capital, which AMU used to pay down the senior subordinated loan in the same amount. The minority interest held by a third party in AMU was exchanged for common stock of Airmall. The following dividends were declared and paid from Airmall to AMU and recorded as dividend income by AMU: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — — 7,000 The following dividends were declared and paid from AMU to Prospect and recorded as dividend income by Prospect: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — — 12,000 All dividends were paid from earnings and profits of Airmall and AMU. The following cash payments from Airmall to Prospect were recorded as a repayment of loan receivable from Airmall: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 650 550 644 The following interest payments were accrued and subsequently paid to Prospect from Airmall for interest due and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 3,617 3,536 3,420 At June 30, 2013, $2 of interest recognized above had not yet been paid by Airmall to Prospect and was included by Prospect within interest receivable. The following interest payments were paid from AMU to Prospect and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 2,282 2,286 3,159 The following payment-in-kind interest was capitalized in the senior secured note to AMU and recognized as interest income by Prospect: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — — 295 165 The following managerial assistance payments were paid from AMU to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 375 225 300 At June 30, 2013 and 2014, $45 and $45 of managerial assistance recognized above had not yet been paid by Airmall to Prospect and was included by Prospect within other receivables due from Airmall and other liabilities due to Prospect Administration, respectively. The following payments were paid from AMU to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to AMU (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): July 1, 2011 to June 30, 2012 July 1, 2011 to June 30, 2012 July 1, 2013 to June 30, 2014 $ — 8 — At June 30, 2013 and 2014, Prospect had a $5 and $11 payable to AMU for reimbursement in excess of expenses which was subsequently utilized to pay other expenses by Prospect on behalf of AMU, respectively. APH Property Holdings, LLC Prospect owns 100% of the equity of APH Property Holdings, LLC (“APH”). APH owns 100% of the common equity of American Property Holdings Corp. (“APRC”). APRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, APRC 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 APRC. APRC was formed to acquire, 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. On October 24, 2012, Prospect initially made a $7,808 investment in APH, of which $6,000 was a Senior Term Loan and $1,808 was used to purchase the membership interests of APH. The proceeds were utilized by APH to purchase APRC common equity for $7,806, with $2 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 100% ownership interest in 146 Forest Parkway, LLC for $7,326, with $480 retained by APRC for working capital. 146 Forest Parkway, LLC was purchased by APRC for $7,400. The remaining proceeds were used to pay $222 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $178 of third party expenses and $5 of legal services provided by attorneys at Prospect Administration. The investment was subsequently contributed to NPRC. On December 28, 2012, Prospect made a $9,593 investment in APH, of which $6,400 was a Senior Term Loan and $3,193 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $9,594, with $1 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 92.7% ownership interest in 1557 Terrell Mill Road, LLC for $9,548, with $46 retained by APRC for other expenses. 1557 Terrell Mill Road, LLC was purchased by APRC for $23,500 which included debt financing and minority interest of $15,275 and $757, respectively. The remaining proceeds were used to pay $286 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income) and $1,652 of third party expenses, with $142 retained by APRC for working capital. On January 17, 2013, Prospect made a $30,348 investment in APH, of which $27,600 was a Senior Term Loan and $2,748 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $29,348, with $1,000 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 97.7% ownership interest in 5100 Live Oaks Blvd, LLC for $29,348. 5100 Live Oaks Blvd, LLC was purchased by APRC for $63,400 which included debt financing and minority interest of $39,600 and $686, respectively. The remaining proceeds were used to pay $880 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $4,265 of third party expenses, $14 of legal services provided by attorneys at Prospect Administration, and $1,030 of pre-paid assets, with $45 retained by APRC for working capital. 166 On April 30, 2013, Prospect made a $10,383 investment in APH, of which $9,000 was a Senior Term Loan and $1,383 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $10,233, with $150 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 93.2% ownership interest in Lofton Place, LLC for $10,233. Lofton Place, LLC was purchased by APRC for $26,000 which included debt financing and minority interest of $16,965 and $745, respectively. The remaining proceeds were used to pay $306 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,223 of third party expenses, $5 of legal services provided by attorneys at Prospect Administration, and $364 of pre-paid assets, with $45 retained by APRC for working capital. On April 30, 2013, Prospect made a $10,863 investment in APH, of which $9,000 was a Senior Term Loan and $1,863 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $10,708, with $155 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 93.2% ownership interest in Vista Palma Sola, LLC for $10,708. Vista Palma Sola, LLC was purchased by APRC for $27,000 which included debt financing and minority interest of $17,550 and $785, respectively. The remaining proceeds were used to pay $321 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,272 of third party expenses, $4 of legal services provided by attorneys at Prospect Administration, and $401 of pre- paid assets with $45 retained by APRC for working capital. On May 8, 2013, Prospect made a $6,118 investment in APH, of which $4,000 was a Senior Term Loan and $2,118 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $6,028, with $90 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 93.3% ownership interest in Arlington Park Marietta, LLC for $6,028. Arlington Park Marietta, LLC was purchased by APRC for $14,850 which included debt financing and minority interest of $9,650 and $437, respectively. The remaining proceeds were used to pay $181 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $911 of third party expenses and $128 of pre-paid assets with $45 retained by APRC for working capital. On June 24, 2013, Prospect made a $76,533 investment in APH, of which $63,000 was a Senior Term Loan and $13,533 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $75,233, with $1,300 retained by APH for working capital. The proceeds were utilized by APRC to purchase a 95.0% ownership interest in APH Carroll Resort, LLC for $74,398 and $835 was used to pay structuring fees (which was recognized by Prospect as structuring fee income). APH Carroll Resort, LLC was purchased by APRC for $225,000 which included debt financing and minority interest of $157,500 and $3,916, respectively. The remaining proceeds were used to pay $1,436 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $7,687 of third party expenses, $8 of legal services provided by attorneys at Prospect Administration and $1,683 of pre-paid assets. Between October 29, 2013 and December 4, 2013, Prospect made an $11,000 investment in APH, of which $9,350 was a Senior Term Loan and $1,650 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase consumer loans from a third party. The investment was subsequently contributed to NPRC. On November 1, 2013, Prospect made a $9,869 investment in APH, of which $8,200 was a Senior Term Loan and $1,669 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $9,869. The proceeds were utilized by APRC to purchase a 94.0% ownership interest in APH Carroll 41, LLC for $9,548 and to pay $102 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $219 retained by APRC for working capital. APH Carroll 41, LLC was purchased by APRC for $30,600 which included debt financing and minority interest of $22,497 and $609, respectively. The remaining proceeds were used to pay structuring fees of $190 to Prospect (which was recognized by Prospect as structuring fee income), $1,589 of third party expenses, $5 of legal services provided by attorneys at Prospect Administration, and $270 of pre-paid assets. The investment was subsequently contributed to NPRC. On November 15, 2013, Prospect made a $45,900 investment in APH, of which $38,500 was a Senior Term Loan and $7,400 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $45,900. The proceeds were utilized by APRC to purchase a 99.3% ownership interest in APH Gulf Coast Holdings, LLC for $45,024 and to pay $364 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $511 retained by APRC for working capital. APH Gulf Coast Holdings, LLC was purchased by APRC for $115,200 which included debt financing and minority interest of $75,558 and $337, respectively. The remaining proceeds were used to pay $1,013 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $2,590 of third party expenses, $23 of legal services provided by attorneys at Prospect Administration, and $2,023 of pre-paid assets, with $70 retained by APRC for working capital. On November 19, 2013, Prospect made a $66,188 investment in APH, of which $55,000 was a Senior Term Loan and $11,188 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC 167 common equity for $66,188. The proceeds were utilized by APRC to purchase a 90.0% ownership interest in NPH McDowell, LLC for $64,392 and to pay $695 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $1,101 retained by APRC for working capital. NPH McDowell, LLC was purchased by APRC for $238,605 which included debt financing and minority interest of $180,226 and $7,155, respectively. The remaining proceeds were used to pay $1,290 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $9,205 of third party expenses, $23 of legal services provided by attorneys at Prospect Administration, and $1,160 of pre-paid assets, with $1,490 retained by APRC for working capital. The investment was subsequently contributed to NPRC. On December 12, 2013, Prospect made a $22,507 investment in APH, of which $18,800 was a Senior Term Loan and $3,707 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $22,507. The proceeds were utilized by APRC to purchase a 92.6% ownership interest in South Atlanta Portfolio Holding Company, LLC for $21,874 and to pay $238 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $395 retained by APRC for working capital. South Atlanta Portfolio Holding Company, LLC was purchased by APRC for $87,250 which included debt financing and minority interest of $67,493 and $1,756, respectively. The remaining proceeds were used to pay $437 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $2,920 of third party expenses, and $116 of pre-paid assets, with $400 retained by APRC for working capital. The investment was subsequently contributed to UPH. On December 31, 2013, APRC distributed its majority interests in five joint ventures (“JVs”) holding real estate assets to APH. APH then distributed these JV interests to Prospect in a transaction characterized as a return of capital. Prospect, on the same day, contributed certain of these JV interests to NPH Property Holdings, LLC and the remainder to UPH Property Holdings, LLC (each wholly-owned subsidiaries of Prospect). Each of NPH and UPH immediately thereafter contributed these JV interests to NPRC and UPRC, respectively. The total investments in the JVs transferred consisted of $98,164 and $20,022 of debt and equity financing, respectively. There was no material gain or loss realized on these transactions. On January 17, 2014, Prospect made a $6,565 investment in APH, of which $5,500 was a Senior Term Loan and $1,064 was used to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $6,565. The proceeds were utilized by APRC to purchase a 99.3% ownership interest in APH Gulf Coast Holdings, LLC for $6,336 and to pay $216 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $13 retained by APRC for working capital and other expenses. APH Gulf Coast Holdings, LLC was purchased by APRC for $15,430 which included debt financing and minority interest of $10,167 and $48, respectively. The remaining proceeds were used to pay $143 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $627 of third party expenses, $4 of legal services provided by attorneys at Prospect Administration, and $312 of pre- paid assets, with $35 retained by APRC for working capital. Effective as of April 1, 2014, Prospect made a new $167,162 senior term loan to APRC. APRC then distributed this amount to APH as a return of capital which was used to pay down the Senior Term Loan from APH by the same amount. Effective April 1, 2014, American Property Holdings Corp. was renamed American Property REIT Corp. (continues as “APRC”). APH continues to own 100% of the common equity of APRC at June 30, 2014. On June 4, 2014, Prospect made a $1,719 investment in APH to purchase additional membership interests of APH. The proceeds were utilized by APH to purchase additional APRC common equity for $1,719. The proceeds were utilized by APRC to acquire the real property located at 975 South Cornwell, Yukon, OK (“Taco Bell, OK”) for $1,719. The following cash distributions were declared and paid from APRC to APH and recorded as a return of capital by APH: October 24, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 1,676 175,972 The following interest income was accrued and subsequently paid from APH to Prospect and recognized by Prospect as interest income: October 24, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 2,006 9,844 At June 30, 2013 and June 30, 2014, $121 and $53 of interest recognized above had not yet been paid by APH to Prospect and was included by Prospect within interest receivable, respectively. At June 30, 2013 and June 30, 2014, $892 and $4,084 of interest from APH was capitalized payment-in-kind interest and was included by Prospect in the investment cost basis, respectively. 168 The following interest income was accrued and subsequently paid from APRC to Prospect and recognized by Prospect as interest income: October 24, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 4,279 At June 30, 2014, $53 of interest recognized above had not yet been paid by APRC to Prospect and was included by Prospect within interest receivable. At June 30, 2014, $581 of interest from APRC was capitalized payment-in-kind interest and was included by Prospect in the investment cost basis. The following royalty payments were paid from APH to Prospect and recognized by Prospect as other income: October 24, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 78 999 The following royalty payments were paid from APRC to Prospect and recognized by Prospect as other income: October 24, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 419 The following managerial assistance payments were paid from APRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): October 24, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 148 784 The following amounts were due from Prospect to Prospect Administration for managerial assistance payments (no direct income was recognized by Prospect): June 30, 2013 June 30, 2014 $ 76 148 The following amounts were due from APH to Prospect for reimbursement of expenses paid by Prospect on behalf of APH and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities: June 30, 2013 June 30, 2014 $ 13 202 The following amounts were due to APH from Prospect for reimbursement of expenses paid by APH on behalf of Prospect and included by Prospect within other liabilities on the respective Consolidated Statement of Assets and Liabilities: June 30, 2013 June 30, 2014 $ — 148 Arctic Oilfield Equipment USA, Inc. Prospect owns 100% of the equity of Arctic Oilfield Equipment USA, Inc. (“Arctic Equipment”). 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 May 5, 2014, Prospect initially purchased 100% of the common shares of Arctic Equipment for $9,006. Proceeds were utilized by Arctic Equipment to purchase 70% of Arctic Energy as described in the following paragraph. On May 5, 2014, Prospect made an additional $51,870 investment (including in exchange for 1,102,313 common shares of Prospect at fair value of $11,916) in Arctic Energy in exchange for a $31,640 senior secured loan and a $20,230 subordinated loan. Total 169 proceeds received by Arctic Energy of $60,876 were used to purchase 70% of the equity interests in Arctic Energy from Ailport for $47,516, pay $875 of third-party expenses, $1,713 of structuring fees to Prospect (which was recognized as structuring fee income), $445 of legal services provided by attorneys at Prospect Administration and $10,327 was retained as working capital. The following interest income was accrued and subsequently paid from Arctic Energy to Prospect for interest due and recognized by Prospect as interest income: May 5, 2014 to June 30, 2014 $ 1,050 At June 30, 2014, $18 of interest recognized above had not yet been paid by Arctic Energy to Prospect and was included by Prospect within interest receivable. The following managerial assistance payments were paid from Arctic Energy to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): May 5, 2014 to June 30, 2014 $ 15 The following amounts were due from Arctic Energy to Prospect for reimbursement of expenses paid by Prospect on behalf of Arctic Energy and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect). ARRM Services, Inc. June 30, 2014 $ 6 Prospect owns 79.53% of the fully-diluted common, 85.76% of the Series A Preferred and 100.00% of the Series B Preferred equity of ARRM Holdings, Inc. (“ARRM”). ARRM owns 100% of the equity of Ajax Rolled Ring & Machine, LLC (“Ajax LLC”). 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. As of July 1, 2011, the cost basis of Prospect’s total debt and equity investment in Ajax, Inc., including capitalized payment-in-kind interest of $3,535, was $41,699, consisting of $20,607 for senior secured term loans, $15,035 for subordinated secured term debt and $6,057 for common equity. The equity of Ajax Inc. was exchanged for equity in ARRM on October 4, 2011, and Ajax Inc. was converted to a limited liability company and became Ajax LLC. On December 28, 2012, Prospect funded $3,600 of unsecured debt to ARRM. On April 1, 2013, Prospect refinanced the existing $19,837 and $18,635 senior loans to Ajax LLC and ARRM, respectively, increasing the total size of the debt investment to $38,537. Concurrent with the refinancing, Prospect received repayment of the $18,635 loans that Prospect previously outstanding. On October 11, 2013, Prospect provided $25,000 in preferred equity for the recapitalization of ARRM. After the financing, Prospect received repayment of the $20,009 subordinated unsecured loan previously outstanding. On June 12, 2014, ARRM was renamed to ARRM Services, Inc. The following cash payments from Ajax Inc. to Prospect were recorded as a repayment of loan receivable by Prospect: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 440 357 400 The following interest income was accrued and subsequently paid from ARRM to Prospect for interest due and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 2,003 3,052 929 At June 30, 2013, $29 of interest recognized above had not yet been paid by ARRM to Prospect and was included by Prospect within interest receivable. 170 The following interest income was accrued and subsequently paid from Ajax LLC to Prospect for interest due and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 2,847 2,124 1,873 At June 30, 2013 and June 30, 2014, $20 and $6 of interest recognized above had not yet been paid by Ajax LLC to Prospect and was included by Prospect within interest receivable, respectively. The following payment-in-kind interest was capitalized in the senior secured note to Ajax LLC and recorded as interest income by Prospect: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 309 As of June 30, 2014, due to a pending sale transaction, we reversed $3,844 of previously recognized payment-in-kind interest of which we do not expect to receive. The following managerial assistance payments were paid from Ajax LLC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 315 90 80 The following payments were paid from ARRM to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to ARRM 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): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 49 14 BXC Company, Inc. Prospect owns 86.7% of Series A Preferred Stock, 96.8% of Series B Preferred Stock, and 83.1% of fully diluted common stock of BXC Company, Inc. (“BXC”). BXC owns 100% of the common stock of Boxercraft Incorporated (“Boxercraft”). As of July 1, 2011, the cost basis of Prospect’s total debt and equity investment in Boxercraft, including capitalized payment-in-kind interest of $763, was $12,931. On September 28, 2012 and April 18, 2014, Prospect issued additional debt to BXC in the amount of $2,293 and $300, respectively. From inception to date, Prospect received a total of $4,684 in repayments of the combined debt and capitalized a total of $1,674 of paid-in-kind interest. Effective as of March 28, 2014, Prospect acquired voting control of BXC pursuant to a voting agreement and irrevocable proxy. Effective May 8, 2014, Prospect acquired control of BXC by transferring shares held by the other equity holders of BXC to Prospect pursuant to an assignment agreement entered into with such other equity holders. There was no income recognized by Prospect from the time BXC became a controlled company through June 30, 2014 due to the non-accrual status. CCPI Holdings Inc. Prospect owns 100% of the equity of CCPI Holdings Inc. (“CCPI Holdings”). CCPI Holdings owns 94.98% of the equity of CCPI Inc. (“CCPI”), with CCPI management owning the remaining 5.02% 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. On December 13, 2012, Prospect initially made a $15,921 investment (including 467,928 common shares of Prospect at fair value of $5,021) in CCPI Holdings, $7,500 senior secured note and $8,443 equity interest. The proceeds received by CCPI Holdings 171 were partially utilized to purchase 95.13% of CCPI common stock for $14,878. The remaining proceeds were used to pay $395 of structuring fees from CCPI Holdings to Prospect (which were recognized by Prospect as structuring fee income), $215 for legal services provided by attorneys at Prospect Administration, $137 for third party expenses and $318 was retained by CCPI Holdings for working capital. On December 13, 2012, Prospect made an additional investment of $18,000 in CCPI senior secured debt. The proceeds of the Prospect loan along with $14,878 of equity financing from CCPI Holdings, Inc. (mentioned above) were used to purchase 95.13% of CCPI equity from the sellers for $31,829, provide $120 of debt financing to CCPI management (to partially fund a purchase by management of CCPI stock), fund $180 of structuring fees from CCPI to Prospect (which were recognized by Prospect as structuring fee income), pay $548 of third-party expenses, reimburse $12 for reimbursement of expenses paid by Prospect on behalf of CCPI (no income was recognized by Prospect) and $189 was retained by CCPI as working capital. On June 13, 2014, Prospect made a new $8,218 senior secured note to CCPI. CCPI then distributed this amount to CCPI Holdings as a return of capital which was used to pay down the $8,216 senior secured note from CCPI Holdings to Prospect. The remaininga $2 was distributed to Prospect as a return of capital of Prospect's equity investment in CCPI Holdings. CCPI continues to own 94.98% of the common stock of CCPI Holdings at June 30, 2014. The following dividends were declared and paid from CCPI to CCPI Holdings and recorded as dividend income by CCPI Holdings: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 500 The following cash distributions were declared and paid from CCPI to CCPI Holdings and recorded as a return of capital by CCPI Holdings: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 795 1,265 The following dividends were paid from CCPI Holdings to Prospect and recognized by Prospect as dividend income: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 500 All amounts recorded as dividends were paid from earnings and profits of the company paying the dividend. The following interest income was accrued and subsequently paid from CCPI Holdings to Prospect for interest due and recognized by Prospect as interest income: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 642 906 At June 30, 2013 and June 30, 2014, $135 and $4 of interest recognized above had not yet been paid by CCPI Holdings to Prospect and was included by Prospect within interest receivable, respectively. The following payment-in-kind interest was capitalized in the senior secured note to CCPI Holdings and recorded as interest income by Prospect: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 159 557 The following interest income was accrued and subsequently paid from CCPI to Prospect for interest due and recognized by Prospect as interest income: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 991 1,822 172 The following payment-in-kind interest was capitalized in the senior secured note to CCPI and recorded as interest income by Prospect: The following royalty payments were paid from CCPI Holdings to Prospect and recognized by Prospect as other income: July 1, 2013 to June 30, 2014 $ 27 December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 32 71 The following cash payments from CCPI to Prospect were recorded as repayments of loans receivable by Prospect: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 225 562 The following managerial assistance payments were paid from CCPI to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 132 240 At June 30, 2013 and June 30, 2014, $60 and $60 of managerial assistance had been received by Prospect from CCPI Holdings and had not yet been paid to Prospect Administration, respectively. These amounts were included by Prospect in Due to Prospect Administration on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect). The following payments were paid from CCPI Holdings to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to CCPI Holdings (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable to Prospect Administration resulting in a reduction of the overhead allocation from Prospect Administration): December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 215 249 The following amounts were due from CCPI Holdings to Prospect for reimbursement of expenses and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect): June 30, 2013 June 30, 2014 $ — 10 At June 30, 2013, Prospect had a $119 payable to CCPI Holdings for reimbursement in excess of expenses which was subsequently utilized to pay other expenses by Prospect on behalf of CCPI Holdings. CP Holdings of Delaware LLC Prospect owns 100% of the equity of CP Holdings of Delaware LLC. (“CP Holdings”). CP Holdings owns 82.9% of the equity of CP Energy Services Inc. (“CP Energy”), and the remaining 17.1% of the equity is owned by CP Energy management. CP Energy owns directly or indirectly 100% of each of CP Well Testing Services, LLC (“CP Well Testing”), CP Well Testing, LLC (“CP Well”), Fluid Management Services, Inc., Fluid Management Services LLC, Wright Transport, Inc., Wright Foster Disposals, LLC, Foster Testing Co, Inc., ProHaul Transports, LLC, Artexoma Logistics, LLC, Wright Trucking, Inc. CP Energy provides oilfield flowback services and fluid hauling and disposal services through its subsidiaries. On October 3, 2012, Prospect initially made a $21,500 senior secured debt investment in CP Well. As part of the transaction, Prospect received $430 of structuring fees from CP Well (which was recognized by Prospect as structuring fee income) and $7 was paid by CP Well to Prospect Administration for legal services provided by attorneys at Prospect Administration. On August 2, 2013, Prospect invested $94,014 (including 1,918,342 unregistered shares of Prospect common stock at a fair value of $21,006) to support the recapitalization of CP Energy where Prospect acquired a controlling interest in CP Energy. 173 On August 2, 2013, Prospect invested $12,741 into CP Holdings to purchase 100% of the common stock in CP Holdings. The proceeds were used by CP Holdings to purchase 82.9% of the common stock in CP Energy for $12,135 and pay $606 of legal services provided by attorneys at Prospect Administration. On August 2, 2013, Prospect made a senior secured debt investment of $22,500 in CP Well Testing. Proceeds were used by CP Well Testing to partially fund the recapitalization of CP Energy and pay $450 of structuring fees from CP Well Testing to Prospect (which was recognized by Prospect as structuring fee income). On August 2, 2013, Prospect made an additional senior secured debt investment of $58,773 in CP Energy. CP Energy also received $2,505 management co-investment in exchange for 17.1% of CP Energy common stock. Total proceeds received at CP Well Testing and CP Energy of $95,913 (including the $12,135 of equity financing from CP Holdings mentioned above) were used to purchase 100% of the equity interests in CP Well Testing Holding Company, LLC and Fluid Management Holdings, Inc. (subsequently renamed CP Well Testing and Fluid Management Services, LLC) for a combined $70,423, to repay the principal, interest and fees of $19,803 on the loan previously outstanding from Prospect to CP Well, pay $1,414 of structuring fees from CP Energy to Prospect (which was recognized by Prospect as structuring fee income), $823 of third-party expenses and $3,000 was retained by CP Energy as working capital. On October 11, 2013, Prospect made a $746 follow-on investment in CP Holdings to fund equity into CP Energy and made an additional senior secured loan to CP Energy of $5,100. Management invested an additional $154 of equity in CP Energy, and the percentage ownership of CP Energy did not change. Total proceeds of $6,000 were used to purchase flowback equipment and expand the CP Well operations in West Texas. On December 26, 2013, Prospect made an additional $1,741 follow-on investment in CP Holdings to fund equity into CP Energy and made an additional senior secured loan to CP Energy of $11,900. Management invested an additional $359 of equity in CP Energy, and the percentage ownership of CP Energy did not change. Total proceeds of $14,000 were used to purchase additional equipment. On April 1, 2014, Prospect made new loans to CP Well, ProHaul Transports, LLC Wright Trucking, Inc. and Foster Testing Co, Inc. as co- borrowers, two first lien loans in the amount of $11,035 and $72,238 and a second lien loan in the amount of $15,000. The proceeds of these loans were used to repay CP Well Testing’s senior secured term loan and CP Energy’s senior secured term loan from Prospect. CP Holdings continues to own 82.9% of the equity of CP Energy at June 30, 2014. The following interest income was accrued and subsequently paid from CP Energy to Prospect and recognized by Prospect as interest income: August 2, 2013 to June 30, 2014 $ 8,083 The following interest income was accrued and subsequently paid from CP Well Testing to Prospect and recognized by Prospect as interest income: The following interest income was accrued and subsequently paid from CP Well to Prospect and recognized by Prospect as interest income: August 2, 2013 to June 30, 2014 $ 1,657 April 1, 2014 to June 30, 2014 $ 4,118 At June 30, 2014, $45 of interest recognized above had not yet been paid by CP Well to Prospect and was included by Prospect within interest receivable. The following managerial assistance payments were paid from CP Energy to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): July 1, 2013 to June 30, 2014 $ 275 The following amounts were due from Prospect to Prospect Administration for managerial assistance for CP Well for which Prospect received payment on behalf of Prospect Administration (no direct income was recognized by Prospect): June 30, 2014 $ 75 174 The following payments were paid from CP Holdings to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to CP Holdings (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable to Prospect Administration resulting in a reduction of the overhead allocation from Prospect Administration): Credit Central Loan Company, LLC July 1, 2013 to June 30, 2014 $ 609 Prospect owns 100% of the equity of Credit Central Holdings of Delaware, LLC (“Credit Central Delaware”). Credit Central Delaware owns 74.75% of the equity of Credit Central Holdings, LLC (“Credit Central”), with entities owned by Credit Central management owning the remaining 25.25% 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 December 28, 2012, Prospect initially made a $47,663 investment (including the fair value of 897,906 common shares of Prospect for $9,581 on that date, which were included in the purchase cost paid to acquire Credit Central) in Credit Central Delaware, of which $38,082 was a Senior Secured Revolving Credit Facility and $9,581 to purchase the membership interests of Credit Central Delaware. The proceeds were partially utilized to purchase 74.75% of Credit Central’s membership interests for $43,293. The remaining proceeds were used to pay $1,440 of structuring fees from Credit Central Delaware to Prospect (which was recognized by Prospect as structuring fee income), $638 for third party expenses, $292 for legal services provided by attorneys at Prospect Administration and $2,000 was retained by Credit Central Delaware for working capital. On March 28, 2014, Prospect funded an additional $2,500 ($2,125 to the Senior Secured Revolving Credit Facility and $375 to purchase additional membership interests of Credit Central Delaware) which was utilized by Credit Central Delaware to pay a $2,000 dividend to Prospect and $500 was retained by Credit Central Delaware for working capital. On June 26, 2014, Prospect made a new $36,333 second lien term loan to Credit Central. Credit Central then distributed this amount to Credit Central Delaware as a return of capital which was used to pay down the Senior Secured Revolving Credit Facility from Credit Central Delaware by the same amount. The remaining amount of the Senior Secured Revolving Credit Facility, $3,874, was then converted to additional membership interests in Credit Central Delaware. Effective June 26, 2014, Credit Central Holdings, LLC was renamed Credit Central Loan Company, LLC (continues as “Credit Central”). Credit Central Delaware continues to own 74.75% of the equity of Credit Central at June 30, 2014. The following dividends were declared and paid from Credit Central to Credit Central Delaware and recorded as dividend income by Credit Central Delaware: December 28, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 4,796 10,431 The following cash distributions were declared and paid from Credit Central to Credit Central Delaware and recorded as a return of capital by Credit Central Delaware: The following interest payments were paid from Credit Central Delaware to Prospect and recognized by Prospect as interest income: July 1, 2013 to June 30, 2014 $ 36,333 December 28, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 3,893 7,845 The following royalty payments were paid from Credit Central Delaware to Prospect and recognized by Prospect as other income: December 28, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 240 521 The following dividends were paid from Credit Central Delaware to Prospect and recognized by Prospect as dividend income: All dividends were paid from earnings and profits of the company paying the dividend. July 1, 2013 to June 30, 2014 $ 4,841 175 The following managerial assistance payments were paid from Credit Central to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): December 28, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 350 700 The following payments were paid from Credit Central Delaware to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Credit Central Delaware (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the expenses of Prospect Administration resulting in a reduction of the overhead allocation from Prospect Administration): December 28, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 292 131 The following amounts were due from Credit Central Delaware to Prospect for interest and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities: June 30, 2013 June 30, 2014 $ — 20 The following amounts were due from Credit Central Delaware to Prospect for reimbursement of expenses and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities: June 30, 2013 June 30, 2014 $ 17 — The following amounts were due to Credit Central Delaware from Prospect for reimbursement of expenses and included by Prospect within other liabilities on the respective Consolidated Statement of Assets and Liabilities: June 30, 2013 June 30, 2014 $ — 38 The following amounts were due from Prospect to Prospect Administration for reimbursement for legal, tax and portfolio level accounting services provided directly to Credit Central Delaware for which Prospect received payment on behalf of Prospect Administration (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the expenses of Prospect Administration resulting in a reduction of the overhead allocation from Prospect Administration): June 30, 2013 June 30, 2014 $ 175 175 Echelon Aviation LLC Prospect owns 100% of the membership interests of Echelon Aviation, LLC (“Echelon”). Echelon owns 60.7% of the equity of AerLift Leasing Limited (“AerLift”). On March 31, 2014, Prospect initially made a $92,628 investment in Echelon, of which $78,521 was a Senior Secured Revolving Credit Facility and $14,107 to purchase the membership interests of Echelon. The proceeds were partially utilized to purchase 60.7% of AerLift’s membership interests for $83,657. The remaining proceeds were used to pay $2,771 of structuring fees from Echelon to Prospect (which was recognized by Prospect as structuring fee income), $540 for third party expenses, $664 for legal and tax services provided by Prospect Administration and $4,996 was retained by Echelon for working capital. The following interest income was accrued and subsequently paid from Echelon to Prospect for interest due from Echelon and recognized by Prospect as interest income and included by Prospect within interest receivable: March 31, 2014 to June 30, 2014 $ 2,809 176 The following amounts were due from Echelon to Prospect for reimbursement of expenses paid by Prospect on behalf of Echelon and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect): June 30, 2014 $ 78 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 expenses of Prospect Administration resulting in a reduction of the overhead allocation from Prospect Administration): Energy Solutions Holdings Inc. March 31, 2014 to June 30, 2014 $ 664 As of June 30, 2014, Prospect owns 100% of the equity of Energy Solutions Holdings Inc. (f/k/a Gas Solutions Holdings Inc.) (“Energy Solutions”). Energy Solutions owns 100% of each of Change Clean Energy Holdings, LLC (“Change Clean”), Freedom Marine Solutions Holdings, LLC (“Freedom Marine”) and Yatesville Coal, LLC (“Yatesville”). Freedom Marine owns 100% of each of Vessel Holdings, LLC ("Vessel"), Vessel Holdings II, LLC (“Vessel II”) and Vessel Holdings III, LLC (“Vessel III”). Yatesville owns 100% of North Fork Collieries, LLC. Change Clean owns 100% of Change Clean Energy, LLC, Down East Power Company, LLC and 50.1% of BioChips 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. As of July 1, 2011, the cost basis of our investment in Energy Solutions, including debt and equity, was $42,003. In December 2011, Prospect completed a reorganization of Gas Solutions Holdings Inc. renaming the company Energy Solutions and transferring ownership of other operating companies owned by Prospect and operating within the energy industry. As part of the reorganization, Prospect transferred our debt and equity interests with cost basis of $2,540 in Change Clean Energy Holdings, Inc., Change Clean Energy, Inc., $12,504 in Freedom Marine Holdings, Inc. and $1,449 of Yatesville Coal Holdings, Inc. to Change Clean, Freedom Marine, and Yatesville, respectively. Each of these entities is wholly owned (directly or indirectly) by Energy Solutions. On December 28, 2011, Prospect made a follow-on $1,250 equity investment in Energy Solutions and a $3,500 debt investment in Vessel, a subsidiary of Freedom Marine. On November 25, 2013, Prospect restructured our investment in Freedom Marine. The $12,504 subordinated secured loan to Jettco Marine Services, LLC, a subsidiary of Freedom Marine, was replaced with a senior secured note to Vessel II, a new subsidiary of Freedom Marine. On December 3, 2013, Prospect made a $16,000 senior secured investment in Vessel III, a new subsidiary of Freedom Marine. Overall, the restructuring of our investment in Freedom Marine provided approximately $16,000 net new senior secured debt financing to support the acquisition of two new vessels. Prospect received $2,480 of structuring fees from Energy Solutions related to the Freedom Marine restructuring which was recognized as other income. On November 28, 2012 and January 1, 2014, Prospect received $475 and $25 of litigation settlement proceeds related to Change Clean and recorded a reduction in our equity investment cost basis for Energy Solutions, respectively. On January 4, 2012, Energy Solutions sold its gas gathering and processing assets held in Gas Solutions Ltd. (“Gas Solutions”) for a sale price of $199,805, adjusted for the final working capital settlement, including a potential earnout of $28,000 that may be paid based on the future performance of Gas Solutions. Through June 30, 2014, Prospect has not accrued income for any portion of the $28,000 potential payment. After expenses, including structuring fees of $9,966 paid to us, and $3,152 of third-party expenses, Gas Solutions LP LLC and Gas Solutions GP LLC, subsidiaries of Gas Solutions, received $157,100 and $1,587 in cash, respectively, subsequently distributed these amounts, $158,687 in total, to Energy Solutions. The sale of Gas Solutions by Energy Solutions resulted in significant earnings and profits, as defined by the Internal Revenue Code, at Energy Solutions for calendar year 2012. As a result, 2012 distributions from Energy Solutions to us were required to be recognized as dividend income, in accordance with ASC 946, as there were current year earnings and profits sufficient to support such recognition. In June, 2014, Freedom Marine Services Holdings, LLC was renamed Freedom Marine Solutions, LLC (continues as “Freedom Marine”), Vessel Holdings, LLC was renamed Vessel Company, LLC (continues as “Vessel”), Vessel Holdings II, LLC was renamed Vessel Company II, LLC (continues as “Vessel II”), Vessel Holdings III, LLC was renamed Vessel Company III, LLC (continues as “Vessel III”), Yatesville Coal Holdings, LLC was renamed Yatesville Coal Company, LLC (continues as “Yatesville”) and Change Clean Energy Holdings, LLC was renamed change Clean Energy Company, LLC (continues as “Change Clean”). Energy Solutions continues to own 100% of all entities as of June 30, 2014. 177 The following dividends were declared and paid from Energy Solutions to Prospect and recorded as dividend income by Prospect: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 47,850 53,820 — All dividends were paid from earnings and profits of Energy Solutions. The following cash payments from Energy Solutions to Prospect were recorded as a repayment of loan receivable by Prospect: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 28,500 8,500 The following interest income, including prepayment penalty fees, was accrued and subsequently paid from Energy Solutions to Prospect for interest due and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 6,771 24,172 5,368 At June 30, 2013, $23 of interest recognized above had not yet been paid by Energy Solutions to Prospect and was included by Prospect within interest receivable. The following interest income was accrued and subsequently paid from Vessel to Prospect for interest due and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 326 637 641 At June 30, 2014, $2 of interest recognized above had not yet been paid by Vessel to Prospect and was included by Prospect within interest receivable. The following interest payments were paid from Vessel II to Prospect and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — — 1,023 At June 30, 2014, $5 of interest recognized above had not yet been paid by Vessel II to Prospect and was included by Prospect within interest receivable. The following interest payments were paid from Vessel III to Prospect and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — — 1,213 At June 30, 2014, $6 of interest recognized above had not yet been paid by Vessel III to Prospect and was included by Prospect within interest receivable. 178 The following amounts were due from Energy Solutions to Prospect for reimbursement of expenses and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect): June 30, 2012 June 30, 2013 June 30, 2014 $ 45 — — The following managerial assistance payments were paid from Energy Solutions to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 180 180 180 The following amounts were due from Prospect to Prospect Administration for reimbursement of managerial assistance payments for which Prospect received payment on behalf of Prospect Administration (no direct income was recognized by Prospect): June 30, 2012 June 30, 2013 June 30, 2014 $ — 45 45 The following payments were paid from Energy Solutions to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Energy Solutions (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): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 119 38 First Tower Finance Company LLC Prospect owns 100% of the equity of First Tower Holdings of Delaware, LLC (“First Tower Delaware”). First Tower Delaware owns 80.1% of First Tower Finance Company LLC (“First Tower Finance”). First Tower Finance owns 100% of First Tower, LLC (“First Tower”), a multiline specialty finance company. On June 15, 2012, Prospect made a $287,953 investment (including 14,518,207 common shares of Prospect at a fair value of $160,571) in First Tower Delaware, of which $244,760 was a Senior Secured Revolving Credit Facility and $43,193 of membership interest in First Tower Delaware. $282,968 of the proceeds were utilized by First Tower Delaware to purchase 80.1% of the membership interests in First Tower Finance. The remaining proceeds at First Tower Delaware were used to pay $4,038 of structuring fees from First Tower Delaware to Prospect (which was recognized by Prospect as structuring fee income), $940 of legal services provided by attorneys at Prospect Administration, and $7 of third party expenses. Prospect received an additional $4,038 of structuring fees from First Tower (which was recognized by Prospect as structuring fee income). Management purchased the additional 19.9% of First Tower Finance common stock for $70,300. The combined proceeds received by First Tower Finance of $353,268 ($282,968 equity financing from First Tower Delaware mentioned above and $70,300 equity financing from management) were used to purchase 100% of the common stock of First Tower for $338,042, pay $11,188 of third-party expenses and $4,038 of structuring fees from First Tower mentioned above (which was recognized by Prospect as structuring fee income). On October 18, 2012, Prospect made an additional $20,000 investment through the Senior Secured Revolving Credit Facility, $12,008 of which was invested by First Tower Delaware in First Tower Finance as equity and $7,992 of which was retained by First Tower Delaware as working capital. On December 30, 2013, Prospect funded an additional $10,000 into First Tower Delaware, $8,500 through the Senior Secured Revolving Credit Facility and $1,500 through the purchase of additional membership interests in First Tower Delaware. $8,000 of the proceeds were utilized by First Tower Delaware to pay structuring fees to Prospect for the renegotiation and expansion of First Tower’s third-party revolver, and $2,000 of the proceeds were retained by First Tower Delaware for working capital. On June 24, 2014, Prospect made a new $251,246 second lien term loan to First Tower. First Tower distributed this amount to First Tower Finance, which distributed this amount to First Tower Delaware as a return of capital. First Tower Delaware used the 179 distribution to partially pay down the Senior Secured Revolving Credit Facility. The remaining $23,712 of the Senior Secured Revolving Credit Facility was then converted to additional membership interests held by Prospect in First Tower Delaware. The following dividends were declared and paid from First Tower Finance to First Tower Delaware and recognized as dividend income by First Tower Delaware: June 15, 2012 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 48,520 50,976 All dividends were paid from earnings and profits of First Tower Finance. The following cash distributions were declared and paid from First Tower Finance to First Tower Delaware and recognized as a return of capital by First Tower Delaware: June 15, 2012 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 7,614 — The following interest income was accrued and paid from First Tower Delaware to Prospect for interest due and recognized by Prospect as interest income: June 15, 2012 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 2,312 52,476 51,791 At June 30, 2013, $147 of interest recognized above had not yet been paid by First Tower Delaware to Prospect and was included by Prospect within interest receivable. The following interest income was accrued and paid from First Tower to Prospect for interest due and recognized by Prospect as interest income: June 15, 2012 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — — 831 At June 30, 2014, $119 of interest recognized above had not yet been paid by First Tower to Prospect and was included by Prospect within interest receivable. The following payment-in-kind interest was capitalized in the Senior Secured Revolving Credit Facility to First Tower Delaware and recognized as interest income by Prospect: December 13, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 1,698 The following royalty payments were paid from First Tower Delaware to Prospect and recognized by Prospect as other income: June 15, 2012 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 2,416 2,560 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): June 15, 2012 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 1,920 3,000 180 At June 30, 2013 and 2014, $600 and $600 of managerial assistance recognized above had not yet been paid by First Tower Finance to Prospect and was included by Prospect within Due to Prospect Administration, respectively. The following payments were paid from First Tower Delaware to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to First Tower Delaware (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): June 15, 2012 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 940 — 243 The following amounts were due from First Tower Delaware to Prospect for reimbursement of expenses paid by Prospect on behalf of First Tower Delaware and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities: June 30, 2013 June 30, 2014 $ 42 37 Gulf Coast Machine & Supply Company Prospect owns 100% of the preferred equity of Gulf Coast Machine & Supply Company (“Gulf Coast”). Gulf Coast is a provider of value-added forging solutions to energy and industrial end markets. On October 12, 2012, Prospect initially made a $42,000 first lien term loan to Gulf Coast, of which $840 was used to pay structuring fees from Gulf Coast to Prospect (which was recognized by Prospect as structuring fee income). 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. On November 29, 2013 and December 16, 2013, Prospect provided an additional $1,000 and $1,500, respectively, to fund working capital needs, increasing the first lien loan balance to $17,500. The following interest income was accrued and subsequently paid from Gulf Coast to Prospect for interest due and recognized by Prospect as interest income: November 8, 2013 to June 30, 2014 $ 1,449 At June 30, 2014, $6 of interest recognized above had not yet been paid by Gulf Coast to Prospect and was included by Prospect within interest receivable. The following amounts were due from Gulf Coast to Prospect for reimbursement of expenses paid by Prospect on behalf of Gulf Coast and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities (no income recognized by Prospect): November 8, 2013 to June 30, 2014 $ 342 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): Harbortouch Holdings of Delaware Inc. November 8, 2013 to June 30, 2014 $ 4 Prospect owns 100% of the equity of Harbortouch Holdings of Delaware Inc. (“Harbortouch Delaware”). Harbortouch Delaware owns 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. 181 On March 31, 2014, Prospect made a $147,898 investment (including 2,306,294 common shares of Prospect at a fair value of $24,908) in Harbortouch Delaware. Of this amount, $123,000 was loaned in exchanged for a subordinated note and $24,898 was an equity contribution. Harbortouch Delaware utilized $137,972 to purchase 100% of the Harbortouch Class A voting preferred units which provided an 11% preferred return and a 53.5% interest in the residual profits. Harbortouch Delaware used the remaining proceeds to pay $4,920 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,761 for legal services provided by attorneys at Prospect Administration and $3,245 was retained by Harbortouch Delaware for working capital. Additionally, on March 31, 2014, Prospect provided Harbortouch a senior secured loan of $130,796. Prospect received a structuring fee of $2,616 from Harbortouch (which was recognized by Prospect as structuring fee income). On April 1, 2014, Prospect made a new $137,226 senior secured term loan to Harbortouch. Harbortouch then distributed this amount to Harbortouch Delaware as a return of capital which was used to pay down the $123,000 senior secured note from Harbortouch Delaware to Prospect. The remaining $14,226 was distributed to Prospect as a return of capital of Prospect’s equity investment in Harbortouch Delaware. Harbortouch Delaware continues to own 100% of Harbortouch’s Class C voting units, which provide for a 53.5% residual profits allocation from Harbortouch at June 30, 2014. The following interest income was accrued and subsequently paid from Harbortouch Delaware to Prospect for interest due and recognized by Prospect as interest income: March 31, 2014 to June 30, 2014 $ 55 The following interest income was accrued and subsequently paid from Harbortouch to Prospect for interest due and recognized by Prospect as interest income: March 31, 2014 to June 30, 2014 $ 6,825 At June 30, 2014, $1,962 of interest recognized above had not yet been paid by Harbortouch Delaware to Prospect and was included by Prospect within interest receivable. The following managerial assistance payments were paid from Harbortouch to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): March 31, 2014 to June 30, 2014 $ 125 At June 30, 2014, this amount was included by Prospect in Due to Prospect Administration on the respective Consolidated Statement of Assets and Liabilities. The following payments were paid from Harbortouch Delaware to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Harbortouch Delaware (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): The Healing Staff, Inc. March 31, 2014 to June 30, 2014 $ 1,761 Prospect owns 100% of the equity of The Healing Staff, Inc. (“THS”). Prospect owns 100% of the equity of Vets Securing America, Inc. (“VSA”), which is operated by THS management. VSA provides out-sourced security guards staffing. As of July 1, 2011, the cost basis of Prospect’s investment in THS and VSA, including debt and equity, was $18,220. During the year ended June 30, 2012, Prospect made follow-on secured debt investments of $773 in THS to support the ongoing operations of THS and VSA. In October 2011, Prospect sold a previously acquired building from ESA for $894. In early May 2012, Prospect made short-term secured debt investments of $118 and $42 to support the operations of THS and VSA, respectively, which was repaid in early June 2012. In January 2012, Prospect received $2,250 towards a litigation settlement. The proceeds from both of these transactions were used to reduce the outstanding loan by $3,144. In May 2012, in connection with the implementation of accounts receivable based funding programs for THS and VSA with a third party provider, Prospect agreed to subordinate Prospect’s first priority security interest in all of the accounts receivable and other assets of THS and VSA to the third party provider of that accounts receivable based funding. 182 During the three months ended December 31, 2012, Prospect determined that the impairment of THS and VSA was other-than-temporary and decreased Prospect’s cost basis by $12,834 and recorded a realized loss of $12,117 for the amount that the amortized cost exceeded the fair market value. Manx Energy, Inc. As of June 30, 2014, Prospect owns 41% of the equity of Manx Energy Inc. (“Manx”). Manx was formed on January 19, 2010 for the purpose of rolling up the assets of existing Prospect portfolio companies, Coalbed, LLC (“Coalbed”), Appalachian Energy, LLC (“AEH”) and Kinley Exploration LLC. The three companies were combined under new common management. On January 19, 2010, Prospect made a $2,800 investment at closing to Manx to provide for working capital. On the same date, Prospect exchanged $2,100 and $4,500 of the loans to AEH and Coalbed, respectively, for Manx preferred equity, and Prospect’s AEH equity interest was converted into Manx common stock. There was no change to fair value at the time of restructuring, and Prospect continued to fully reserve any income accrued for Manx. On October 15, 2010 and May 26, 2011, Prospect increased its loan to Manx in the amount of $500 and $250, respectively, to provide additional working capital. As of June 30, 2011, the cost basis of Prospect’s investment in Manx, including debt and equity, was $19,019. On June 30, 2012, AEH and Coalbed loans held by Manx with a cost basis of $7,991 were removed from Manx and contributed by Prospect to Wolf Energy Holdings Inc., a separate holding company wholly owned by Prospect. On June 30, 2013, Prospect determined the remaining debt and equity investment in Manx was other-than-temporarily impaired and wrote-off $10,528 of the investment cost basis, leaving a cost basis in the remaining debt balance of $500. The following principal payments were paid from Manx to Prospect and recorded by Prospect as return of capital (no income was recognized by Prospect): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — — 450 MITY Holdings of Delaware Inc. Prospect owns 100% of the equity of Mity Holdings of Delaware, Inc. (“Mity Delaware”). Mity Delaware holds 94.99% of the equity of 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 Enterprises USA, Inc. (“Broda USA”) and Broda Canada ULC (“Broda Canada”). Mity is a designer, manufacturer and seller of multipurpose room furniture and specialty healthcare seating products. On September 19, 2013, Prospect made a $29,735 investment in Mity Delaware, of which $22,792 was a senior secured debt to Mity Delaware and $6,943 was a capital contribution to the equity of Mity Delaware. The proceeds were partially utilized to purchase 97.7% of Mity common stock for $21,027. The remaining proceeds were used to issue a $7,200 note from Broda Canada to Mity Delaware, pay $684 of structuring fees from Mity Delaware to Prospect (which was recognized by Prospect as structuring fee income), $311 for legal services provided by attorneys employed by Prospect Administration and $513 was retained by Mity Delaware for working capital. On September 19, 2013, Prospect made an additional $18,250 senior secured debt investment in Mity. The proceeds were used to repay existing third-party indebtedness, pay $365 of structuring fees from Mity to Prospect (which was recognized by Prospect as structuring fee income), $1,143 of third party expenses and $2,580 was retained by Mity for working capital. Members of management of Mity purchased additional shares of common stock of Mity, reducing Mity Delaware’s ownership to 94.99%. Mity, Mity-Lite and Broda USA are joint borrowers on the senior secured debt of Mity. On June 23, 2014, Prospect made a new $15,769 debt investment in Mity and Mity distributed proceeds to Mity Delaware as a return of capital. Mity Delaware used this distribution to pay down the senior secured debt of Mity Delaware to Prospect by the same amount. The remaining amount of the senior secured debt due from Mity Delaware to Prospect, $7,200, was then contributed to the capital of Mity Delaware. As a result of this transaction, Prospect held the $15,769 Mity note. Effective June 23, 2014, Mity Enterprises, Inc. was renamed Mity, Inc. (continues as “Mity”) and Broda Enterprises USA, Inc. was renamed Broda USA, Inc. (continues as “Broda”). Management shareholders of Mity made additional purchases of Mity stock such that Mity Delaware owns 94.99% of the equity of Mity at June 30, 2014. On June 23, 2014, Prospect also extended a new $7,500 senior secured revolving facility to Mity, of which none was funded at closing. 183 The following dividends were declared and paid from Mity to Mity Delaware and recorded as dividend income by Mity Delaware: All dividends were paid from earnings and profits of Mity. September 19, 2013 to June 30, 2014 $ 1,628 The following interest payments were paid from Broda to Mity Delaware and recognized by Mity Delaware as interest income: September 19, 2013 to June 30, 2014 $ 455 The following interest income was accrued by Prospect for interest due from Mity Delaware and recognized by Prospect as interest income: September 19, 2013 to June 30, 2014 $ 3,001 At June 30, 2014, $10 of interest recognized above had not yet been paid by Mity Delaware to Prospect and was included by Prospect within interest receivable. The following payment-in-kind interest was capitalized in the senior secured note to Mity Delaware and recorded as interest income by Prospect: The following interest income was accrued by Prospect for interest due from Mity and recognized by Prospect as interest income: September 19, 2013 to June 30, 2014 $ 177 September 19, 2013 to June 30, 2014 $ 1,515 The following managerial assistance payments were paid from Mity to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): September 19, 2013 to June 30, 2014 $ 150 The following payments were paid from Mity Delaware to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Mity Delaware (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): September 19, 2013 to June 30, 2014 $ 495 The following amounts were due from Prospect to Prospect Administration for reimbursement for legal, tax and portfolio level accounting services provided directly to Mity Delaware for which Prospect received payment on behalf of Prospect Administration (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): June 30, 2014 $ 75 The following amounts were due from Mity Delaware to Prospect for reimbursement of expenses and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect): June 30, 2014 $ 3 At June 30, 2014, Prospect had a $8 payable to Mity Delaware for reimbursement in excess of expenses which was subsequently utilized to pay other expenses by Prospect on behalf of Mity Delaware. Nationwide Acceptance Holdings LLC Prospect owns 100% of the membership interests of Nationwide Acceptance Holdings, LLC (“Nationwide Holdings”). Nationwide Holdings owns 93.79% of the equity of Nationwide Acceptance, LLC (“Nationwide”), with members of Nationwide management owning the remaining 6.21% of the equity. On January 31, 2013, Prospect initially made a $25,151 investment in Nationwide Holdings, of which $21,308 was a Senior Secured Revolving Credit Facility and $3,843 was in the form of membership interests in Nationwide Holdings. $21,885 of the 184 proceeds were utilized to purchase 93.79% of the membership interests in Nationwide. Proceeds were also used to pay $753 of structuring fees from Nationwide Holdings to Prospect (which was recognized by Prospect as structuring fee income), $350 of third party expenses and $163 of legal services provided by attorneys at Prospect Administration. The remaining $2,000 was retained by Nationwide Holdings as working capital. On March 28, 2014, Prospect funded an additional $4,000 to Nationwide Holdings ($3,400 through the Senior Secured Revolving Credit Facility and $600 to purchase additional membership interests in Nationwide Holdings). The additional funding along with cash on hand was utilized by Nationwide Holdings to fund a $5,000 dividend to Prospect. On June 18, 2014, Prospect made a new $14,820 second lien term loan to Nationwide. Nationwide distributed this amount to Nationwide Holdings as a return of capital. Nationwide Holdings used the distribution to pay down the Senior Secured Revolving Credit Facility. The remaining $9,888 of the Senior Secured Revolving Credit Facility was then converted to additional membership interests in Nationwide Holdings. The following dividends were declared and paid from Nationwide to Nationwide Holdings and recorded as dividend income by Nationwide Holdings: January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 2,615 7,074 The following dividends were paid from Nationwide Holdings to Prospect and recognized by Prospect as dividend income: January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 5,000 All dividends were paid from earnings and profits of the company paying the dividend. The following interest income was accrued and subsequently paid from Nationwide Holdings to Prospect for interest due and recognized by Prospect as interest income: January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 1,788 4,322 At June 30, 2013, $12 of interest recognized above had not yet been paid by Nationwide Holdings to Prospect and was included by Prospect within interest receivable. The following interest income was accrued and subsequently paid from Nationwide to Prospect for interest due and recognized by Prospect as interest income: January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 107 At June 30, 2014, $8 of interest recognized above had not yet been paid by Nationwide to Prospect and was included by Prospect within interest receivable. The following royalty payments were paid from Nationwide Holdings to Prospect and recognized by Prospect as other income: January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 131 354 The following managerial assistance payments were paid from Nationwide to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 167 400 At June 30, 2013 and June 30, 2014, $100 and $100 of managerial assistance had been received by Prospect from Nationwide and had not yet been paid to Prospect Administration, respectively. These amounts were included by Prospect in Due to Prospect Administration on the respective Consolidated Statement of Assets and Liabilities. 185 The following payments were paid from Prospect to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Nationwide Holdings (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): January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 163 — The following payments were paid from Nationwide to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Nationwide Holdings 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): January 31, 2013 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 234 The following amounts were due from Nationwide Holdings to Prospect for reimbursement of expenses paid by Prospect and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect): June 30, 2013 June 30, 2014 $ — 2 The following amounts were due to Nationwide Holdings from Prospect for reimbursement of expenses and included by Prospect within other liabilities on the respective Consolidated Statement of Assets and Liabilities (no income was recognized by Prospect): June 30, 2013 June 30, 2014 $ 7 — NMMB Holdings, Inc. Prospect owns 100% of the equity of NMMB Holdings, Inc. (“NMMB Holdings”). NMMB Holdings owns 92.93% of the fully-diluted equity of NMMB, Inc. (“NMMB,” previously NMMB Acquisition, Inc.), with NMMB management owning the remaining 7.07% 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. On May 6, 2011, Prospect initially made a $34,450 investment (of which $31,750 was funded at closing) in NMMB Holdings and NMMB, of which $24,250 was a senior secured term loan to NMMB, $3,000 was a senior secured revolver to NMMB (of which $300 was funded at closing), $2,800 was a senior subordinated term loan to NMMB Holdings and $4,400 to purchase 100% of the Series A Preferred Stock of NMMB Holdings. The proceeds received by NMMB were used to purchase 100% of the equity of Refuel Agency and assets related to the business for $30,069, pay $1,035 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), pay $396 for third party expenses and $250 was retained by NMMB for working capital. On May 31, 2011, NMMB repaid the $300 senior secured revolver. During the year ended June 30, 2012, NMMB repaid $2,550 of the senior secured term loan. During the year ended June 30, 2013, NMMB repaid $5,700 of the senior secured term loan due. On December 13, 2013, Prospect invested $8,086 for preferred equity to recapitalize NMMB Holdings. The proceeds were used by NMMB Holdings to repay in full the $2,800 outstanding under the subordinated term loan and the remaining $5,286 of proceeds from Prospect were used by NMMB Holdings to purchase preferred equity in NMMB. NMMB used the proceeds from the preferred equity issuance to pay down the senior term loan. On June 12, 2014, Prospect made a new $7,000 senior secured term loan to Armed Forces. Armed Forces distributed this amount to Refuel Agency as a return of capital. Refuel Agency distributed this amount to NMMB as a return of capital, which was used to pay down $7,000 of NMMB’s $10,714 senior secured term loan to Prospect. As of June 30, 2014, Prospect held $3,714 of senior secured term loan NMMB and $7,000 senior secured term loan of Armed Forces. Effective June 12, 2014, NMMB Acquisition, Inc. was renamed NMMB, Inc. (continues as “NMMB”). NMMB Holdings continues to own 92.93% of the fully-diluted equity of NMMB as of June 30, 2014. 186 The following interest income was accrued and subsequently paid to Prospect for interest due from NMMB Holdings and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 428 426 192 At June 30, 2013, $3 of interest recognized above had not yet been paid by NMMB Holdings to Prospect and was included by Prospect within interest receivable. There was no such outstanding interest due to Prospect from NMMB Holdings as of June 30, 2014. The following interest income was accrued by Prospect for interest due from NMMB and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 3,255 2,600 1,859 At June 30, 2013 and 2014, $20 and $4 of interest recognized above had not yet been paid by NMMB to Prospect and was included by Prospect within interest receivable. The following managerial assistance payments were paid from NMMB Holdings to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 361 500 100 At June 30, 2014, $300 of managerial assistance due had not yet been paid by NMMB Holdings to Prospect and was included by Prospect within other receivables. The following amounts were due from Prospect to Prospect Administration for reimbursement of managerial assistance payments for which Prospect received payment on behalf of Prospect Administration (no direct income was recognized by Prospect): June 30, 2013 June 30, 2014 $ 100 300 The following payments were paid from NMMB Holdings to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to NMMB Holdings (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): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 12 — NPH Property Holdings, LLC Prospect owns 100% of the equity of NPH Property Holdings, LLC (“NPH”). NPH owns 100% of the common equity of National Property Holdings Corp. (“NPRC”). 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 acquire, 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. On December 31, 2013, APRC distributed its majority interests in five JVs holding real estate assets to APH. APH then distributed these JV interests to Prospect in a transaction characterized as a return of capital. Prospect, on the same day, contributed certain 187 of these JV interests to NPH and the remainder to UPH (each wholly-owned subsidiaries of Prospect). Each of NPH and UPH immediately thereafter contributed these JV interests to NPRC and UPRC, respectively. The total investments in the JVs transferred to NPH and from NPH to NPRC consisted of $79,309 and $16,315 of debt and equity financing, respectively. There was no material gain or loss realized on these transactions. On December 31, 2013, Prospect made a $10,620 investment in NPH, of which $8,800 was a Senior Term Loan and $1,820 was used to purchase additional membership interests of NPH. The proceeds were utilized by NPH to purchase additional NPRC common equity for $10,620. The proceeds were utilized by NPRC to purchase a 93.0% ownership interest in APH Carroll Bartram Park, LLC for $10,288 and to pay $113 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $219 retained by NPRC for working capital. APH Carroll Bartram Park, LLC was purchased by NPRC for $38,000 which included debt financing and minority interest of $28,500 and $774, respectively. The remaining proceeds were used to pay $206 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $1,038 of third party expenses, $5 of legal services provided by attorneys at Prospect Administration, and $304 of pre- paid assets, with $9 retained by NPRC for working capital. Between January 7, 2014 and March 13, 2014, Prospect made a $14,000 investment in NPH, of which $11,900 was a Senior Term Loan and $2,100 was used to purchase additional membership interests of NPH. The proceeds were utilized by NPH to purchase consumer loans from a third party. On January 31, 2014, Prospect made a $4,805 investment in NPH, of which $4,000 was a Senior Term Loan and $805 used to purchase additional membership interests of NPH. The proceeds were utilized by NPH to purchase additional NPRC common equity for $4,805. The proceeds were utilized by NPRC to purchase a 93.0% ownership interest in APH Carroll Atlantic Beach, LLC for $4,603 and to pay $52 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), with $150 retained by NPRC for working capital. APH Carroll Atlantic Beach, LLC was purchased by NPRC for $13,025 which included debt financing and minority interest of $9,118 and $346, respectively. The remaining proceeds were used to pay $92 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $681 of third party expenses, $7 of legal services provided by attorneys at Prospect Administration, and $182 of pre-paid assets, with $80 retained by NPRC for working capital. Effective as of April 1, 2014, Prospect made a new $104,460 senior term loan to NPRC. NPRC then distributed this amount to NPH as a return of capital which was used to pay down the Senior Term Loan from NPH by the same amount. Effective April 1, 2014, National Property Holdings Corp. was renamed National Property REIT Corp. (continues as “NPRC”). NPH continues to own 100% of the common equity of NPRC at June 30, 2014. Between April 3, 2014 and May 21, 2014, Prospect made an $11,000 investment in NPH and NPRC, of which $9,350 was a Senior Term Loan to NPRC and $1,650 was used to purchase additional membership interests of NPH. The proceeds were utilized by NPH to purchase additional NPRC common equity for $1,650. The proceeds were utilized by NPRC to purchase consumer loans from a third party. The following cash distributions were declared and paid from NPRC to NPH and recorded as a return of capital by NPH: The following cash distributions were declared and paid from NPRC to Prospect and recorded as a return of capital by Prospect: December 31, 2013 to June 30, 2014 $ 106,810 December 31, 2013 to June 30, 2014 $ 9,900 The following interest income was accrued and subsequently paid by NPH to Prospect and recognized by Prospect as interest income: The following interest income was accrued and subsequently paid by NPRC to Prospect and recognized by Prospect as interest income: December 31, 2013 to June 30, 2014 $ 2,406 December 31, 2013 to June 30, 2014 $ 3,117 At June 30, 2014, $432 and $18 of interest from NPH and NPRC was capitalized payment-in-kind interest and was included by Prospect in the investment cost basis, respectively. 188 The following royalty payments were paid from NPH to Prospect and recognized by Prospect as other income: The following royalty payments were paid from NPRC to Prospect and recognized by Prospect as other income: December 31, 2013 to June 30, 2014 $ 278 December 31, 2013 to June 30, 2014 $ 288 The following managerial assistance payments were paid from NPRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): December 31, 2013 to June 30, 2014 $ 255 The following amounts were due from Prospect to Prospect Administration for managerial assistance payments for which Prospect received payment on behalf of Prospect Administration (no direct income was recognized by Prospect): June 30, 2014 $ 128 The following amounts were due from NPH to Prospect for reimbursement of expenses paid by Prospect on behalf of NPH and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities: R-V Industries, Inc. June 30, 2014 $ 7 As of July 1, 2011 and continuing through June 30, 2014, 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 November 30, 2012, Prospect made a $9,500 second lien term loan to R-V and R-V received an additional $4,000 of senior secured financing from a third-party lender. The combined $13,500 of proceeds was partially utilized by R-V to pay a dividend to its common stockholders in an aggregate amount equal to $13,288 (including $11,073 to Prospect recognized by Prospect as a dividend). The remaining proceeds were used by R-V to pay $142 of structuring fees to Prospect (which was recognized by Prospect as structuring fee income), $47 for third party expenses and $23 for legal services provided by attorneys at Prospect Administration. On June 12, 2013, Prospect provided an additional $23,250 to the second lien term loan to R-V. The proceeds were partially utilized by R-V to pay a dividend to the common stockholders in an aggregate amount equal to $15,000 (including $13,240 dividend to Prospect). The remaining proceeds were used to pay off $7,835 of outstanding debt due from R-V to a third-party, $11 for legal services provided by attorneys at Prospect Administration and $404 was retained by R-V for working capital. On February 28, 2014, R-V repaid $2,339 of the second lien term loan due to Prospect. The following dividends were paid from R-V to Prospect and recognized by Prospect as dividend income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 283 24,462 1,100 All dividends were paid from earnings and profits of R-V. The following income was accrued and subsequently paid from R-V to Prospect and recognized by Prospect as interest income: July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 781 3,188 189 The following amounts were due from R-V to Prospect for interest and included by Prospect within interest receivable on the respective Consolidated Statement of Assets and Liabilities: June 30, 2012 June 30, 2013 June 30, 2014 $ — 27 — The following managerial assistance payments were paid from R-V to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 174 180 180 The following amounts were due from Prospect to Prospect Administration for reimbursement of managerial assistance payments for which Prospect received payment on behalf of Prospect Administration (no direct income was recognized by Prospect): June 30, 2012 June 30, 2013 June 30, 2014 $ 45 15 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): July 1, 2011 to June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 37 — STI Holding, Inc. Prospect owns 100% of the equity of STI Holding, Inc. (“STI”), which owns 100% of the equity of Borga, Inc. (“Borga”). Borga manufactures pre-engineered metal buildings and components for the agricultural and light industrial markets. On May 6, 2005, Patriot Capital Funding, Inc. (previously acquired by Prospect) provided $14,000 in senior secured debt to Borga. The debt was comprised of $1,000 Senior Secured Revolver, $3,500 Senior Secured Term Loan A, $2,500 Senior Secured Term Loan B and $7,000 Senior Secured Term Loan C. On March 31, 2009, Borga made its final amortization payment on the Senior Secured Term Loan A. The other loans remained outstanding. Prospect owned warrants to purchase 33,750 shares of common stock in Metal Buildings Holding Corporation (“Metal Buildings”), the former holding company of Borga. Metal Buildings owned 100% of Borga, Inc. On March 8, 2010, Prospect acquired the remaining common stock of Borga. On January 24, 2014, Prospect contributed its holdings in Borga to STI. STI also holds $3,371 of proceeds from the sale of a minority equity interest in SMART LLC (“Smart”). Prospect initially acquired membership interests in SMART indirectly as part of the Patriot acquisition on December 2, 2009 recording a zero cost basis for the equity investment. The $3,371 was distributed to Prospect on May 29, 2014, of which $3,246 was paid from earnings and profits of STI and was recognized as dividend income by Prospect. The remaining $125 was recognized as return of capital by Prospect. UPH Property Holdings, LLC Prospect owns 100% of the equity of UPH Property Holdings, LLC (“UPH”). UPH owns 100% of the common equity of United Property Holdings Corp. (“UPRC”). UPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. In order to qualify as a REIT, UPRC 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 UPRC. 190 UPRC was formed to acquire, 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. On December 31, 2013, APRC distributed its majority interests in five JVs holding real estate assets to APH. APH then distributed these JV interests to Prospect in a transaction characterized as a return of capital. Prospect, on the same day, contributed certain of these JV interests to NPH and the remainder to UPH (each wholly-owned subsidiaries of Prospect). Each of NPH and UPH immediately thereafter contributed these JV interests to NPRC and UPRC, respectively. The total investments in the JVs transferred to UPH and from UPH to UPRC consisted of $18,855 and $3,707 of debt and equity financing, respectively. There was no material gain or loss realized on these transactions. Effective as of April 1, 2014, Prospect made a new $19,027 senior term loan to UPRC. UPRC then distributed this amount to UPH as a return of capital which was used to pay down the Senior Term Loan from UPH by the same amount. Effective April 1, 2014, United Property Holdings Corp. was renamed United Property REIT Corp. (continues as “UPRC”). UPH continues to own 100% of the common equity of UPRC at June 30, 2014. On June 4, 2014, Prospect made a $1,405 investment in UPH to purchase additional membership interests of UPH. The proceeds were utilized by UPH to purchase additional UPRC common equity for $1,405. The proceeds were utilized by UPRC to acquire the real property located at 1201 West College, Marshall, MO (“Taco Bell, MO”) for $1,405. The following cash distributions were declared and paid from UPRC to UPH and recorded as a return of capital by UPH: The following interest income was accrued and subsequently paid by UPH to Prospect and recognized by Prospect as interest income: December 31, 2013 to June 30, 2014 $ 20,086 The following interest income was accrued and subsequently paid by UPRC to Prospect and recognized by Prospect as interest income: December 31, 2013 to June 30, 2014 $ 375 December 31, 2013 to June 30, 2014 $ 553 At June 30, 2014, $6 of interest recognized above had not yet been paid by UPRC to Prospect and was included by Prospect within interest receivable. At June 30, 2014, $173 of interest from UPH was capitalized payment-in-kind interest and was included by Prospect in the investment cost basis. The following royalty payments were paid from UPH to Prospect and recognized by Prospect as other income: The following royalty payments were paid from UPRC to Prospect and recognized by Prospect as other income: December 31, 2013 to June 30, 2014 $ 69 December 31, 2013 to June 30, 2014 $ 87 The following managerial assistance payments were paid from UPRC to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): Valley Electric Holdings I, Inc. December 31, 2013 to June 30, 2014 $ 100 As of June 30, 2014, Prospect owns 100% of the common stock of Valley Electric Holdings I, Inc. (“Valley Holdings I”). Valley Holdings I owns 100% of Valley Electric Holdings II, Inc. (“Valley Holdings II”). 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 U.S. 191 On December 31, 2012, Prospect initially invested $52,098 (including 4,141,547 common shares of Prospect at a fair value of $44,650) in exchange for $32,572 was in the form of a senior secured note of Valley Holdings I, a $10,000 senior secured note of Valley Electric (discussed below) and $9,526 to purchase the common stock of Valley Holdings I. The proceeds were partially utilized by Valley Holdings I to purchase 100% of Valley Holdings II common stock for $40,528. The remaining proceeds at Valley Holdings I were used to pay $977 of structuring fees from Valley Holdings I to Prospect (which were recognized by Prospect as structuring fee income), $345 for legal services provided by attorneys at Prospect Administration and $248 was retained by Valley Holdings I as working capital. The $40,528 of proceeds received by Valley Holdings II were subsequently used to purchase 96.3% of Valley Electric’s common stock. The $40,528 proceeds received by Valley Electric, in addition to $1,500 co-invest from management, were used to fund an equity investment in Valley. On December 31, 2012, Prospect invested $10,000 (as mentioned above) into Valley in the form of senior secured debt. Total proceeds of $52,028 received by Valley (including $42,028 equity investment mentioned above) were used to purchase the equity of Valley from third-party sellers for $45,650, pay $4,628 of third-party transaction expenses (including bonuses to Valley’s management of $2,320), pay $250 from Valley to Prospect (which were recognized by Prospect as structuring fee income) and $1,500 was retained by Valley for working capital. On June 24, 2014, Valley Holdings II and management of Valley formed Valley Electric and contributed their shares of Valley stock to Valley Electric. Prospect made a new $20,471 senior secured loan to Valley Electric. Valley Electric then distributed this amount to Valley Holdings I, via Valley Holdings II, as a return of capital which was used to pay down the senior secured note of Valley Holdings I by the same amount. The remaining principal amount of the senior secured note, $16,754, was then contributed to the capital of Valley Holdings I. At June 30, 2014, Prospect holds $30,581 of senior secured debt issued by Valley. The following dividends were declared and paid from Valley to Valley Holdings II, which were subsequently distributed to and recognized as dividend income by Valley Holdings I: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 1,865 2,953 All dividends were paid from earnings and profits of Valley and Valley Holdings II. The following cash payments from Valley Holdings I to Prospect were recorded as a repayment of loan receivable by Prospect: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 20,471 The following cash payments from Valley to Prospect were recorded as a repayment of loan receivable by Prospect: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 100 200 The following interest income was accrued and subsequently paid from Valley Holdings I to Prospect and recognized by Prospect as interest income: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 1,489 3,161 The following payment-in-kind interest was capitalized in the senior secured note to Valley Holdings I and recognized as interest income by Prospect: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 1,489 3,161 The following interest income was accrued by Prospect for interest due from Valley and recognized by Prospect as interest income: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 408 820 At June 30, 2014, $3 of interest recognized above had not yet been paid by Valley to Prospect and was included by Prospect within interest receivable. 192 The following payment-in-kind interest was capitalized in the senior secured note to Valley and recognized as interest income by Prospect: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 125 255 The following interest income was accrued and subsequently paid from Valley Electric to Prospect for interest due and recognized by Prospect as interest income: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 74 At June 30, 2014, $45 of interest recognized above had not yet been paid by Valley Electric to Prospect and was included by Prospect within interest receivable. The following payment-in-kind interest was capitalized in the senior secured note to Valley Electric and recognized as interest income by Prospect: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 29 The following royalty payments were paid from Valley Holdings I to Prospect and recognized by Prospect as other income: December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 98 148 The following managerial assistance payments were paid from Valley to Prospect and subsequently remitted to Prospect Administration (no income was recognized by Prospect): December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 150 300 The following payments were paid from Valley Holdings I to Prospect Administration as reimbursement for legal, tax and portfolio level accounting services provided directly to Valley Holdings I (no direct income was recognized by Prospect, but Prospect was given credit for these payments as a reduction of the administrative services costs payable to Prospect Administration resulting in a reduction of the overhead allocation from Prospect Administration): December 31, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ 345 91 The following amounts were due from Valley Holdings I to Prospect for reimbursement of expenses and included by Prospect within other receivables on the respective Consolidated Statement of Assets and Liabilities: June 30, 2013 June 30, 2014 $ 27 — At June 30, 2014, Prospect had a $6 payable to Valley Holdings I for reimbursement in excess of expenses which was subsequently utilized to pay other expenses by Prospect on behalf of Valley Holdings I. Wolf Energy Holdings Inc. Prospect owns 100% of the equity of Wolf Energy Holdings Inc. (“Wolf Energy Holdings”). Wolf Energy Holdings owns 100% of each of Appalachian Energy Holdings LLC (“AEH”), Coalbed, LLC (“Coalbed”) and Wolf Energy, LLC (“Wolf Energy”). AEH owns 100% of C&S Operating, LLC and Coalbed owns 100% of Coalbed Operator, 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 193 those operations. In addition, effective June 29, 2012, C&J Cladding Holding Company, Inc. (“C&J Holdings”) merged with and into Wolf Energy Holdings, with Wolf Energy Holdings as the surviving entity. At the time of the merger, C&J Holdings held the remaining undistributed proceeds in cash from the sale of its membership interests in C&J Cladding, LLC (“C&J”) (discussed below). The merger was effectuated in connection with the broader simplification of Prospect’s energy investment holdings. On June 1, 2012, Prospect sold the membership interests in C&J for $5,500. Proceeds from the sale were used to pay a $3,000 distribution to Prospect ($580 reduction in cost basis and $2,420 realized gain recognized by Prospect), an advisory fee of $1,500 from C&J to Prospect (which was recognized by Prospect as other income) and $978 was retained by C&J as working capital to pay $22 of legal services provided by attorneys at Prospect Administration and third-party expenses. On June 30, 2012, AEH and Coalbed loans with a cost basis of $7,991 were assigned by Prospect to Wolf Energy Holdings Inc. from Manx Energy, Inc. On February 27, 2013, Prospect made a $50 senior secured debt investment senior secured to East Cumberland, L.L.C. (“East Cumberland”), a former wholly-owned subsidiary of AEH with AEH as guarantor. Proceeds were used to pay off vendors. On April 15, 2013, Prospect foreclosed on the assets of H&M Oil & Glass, LLC (“H&M”). At the time of foreclosure, H&M was in default on loans receivables due to Prospect with a cost basis of $64,449. The assets previously held by H&M were assigned by Prospect to Wolf Energy in exchange for a $66,000 term loan secured by the assets. The cost basis in this loan of $44,632 was determined in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors , and was equal to the fair value of assets at the time of transfer resulting in a capital loss of $19,647 in connection with the foreclosure on the assets. On May 17, 2013, Wolf Energy sold the assets located in Martin County, which were previously held by H&M, for $66,000. Proceeds from the sale were primarily used to repay the loan and net profits interest receivable due to us resulting in a realized capital gain of $11,826 offsetting the previously recognized loss. Prospect received $3,960 of structuring and advisory fees from Wolf Energy during the year ended June 30, 2013 related to the sale and $991 under the net profits interest agreement which was recognized as other income during the fiscal year ended June 30, 2013. Effective June 6, 2014, Appalachian Energy Holdings LLC was renamed Appalachian Energy LLC (continues as “AEH”). The following interest income was paid to Prospect for interest due from Wolf Energy and recognized by Prospect as interest income: June 30, 2012 July 1, 2012 to June 30, 2013 July 1, 2013 to June 30, 2014 $ — 452 — 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 these matters as they 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. During the year ended June 30, 2014 , we received $5,825 of legal cost reimbursement from a litigation settlement, which had been expensed in prior quarters, and is recognized as other income on our consolidated financial statements. We are not aware of any other material litigation as of the date of this report. 194 Note 16. Financial Highlights The following is a schedule of financial highlights for each of the five years in the period ended June 30, 2014 : 2014 2013 2012 2011 2010 Year Ended June 30, Per Share Data Net asset value at beginning of year Net investment income(1) Net realized (loss) gain on investments(1) Net change in unrealized (depreciation) appreciation on investments(1) Dividends to shareholders Common stock transactions(2) Fair value of equity issued for Patriot acquisition Net asset value at end of year Per share market value at end of year Total return based on market value(3) Total return based on net asset value(3) $ $ $ $ $ $ 10.72 1.19 (0.01 ) (0.12 ) (1.32 ) 0.10 — 10.56 10.63 10.88 % 10.97 % $ $ $ 10.83 1.57 (0.13 ) (0.37 ) (1.28 ) 0.10 — 10.72 10.80 6.24 % 10.91 % $ $ $ 10.36 1.63 0.32 (0.28 ) (1.22 ) 0.02 — 10.83 11.39 27.21 % 18.03 % $ $ $ 10.30 1.10 0.19 0.09 (1.21 ) (0.11 ) — 10.36 10.11 17.22 % 12.54 % 12.40 1.13 (0.87 ) 0.07 (1.33 ) (1.22 ) 0.12 10.30 9.65 17.66 % (6.82 %) Shares of common stock outstanding at end of year Weighted average shares of common stock outstanding 342,626,637 300,283,941 247,836,965 207,069,971 139,633,870 114,394,554 107,606,690 85,978,757 69,086,862 59,429,222 Ratios/Supplemental Data Net assets at end of year Portfolio turnover rate Annualized ratio of operating expenses to average net assets Annualized ratio of net investment income to average net assets $ 3,618,182 $ 2,656,494 $ 1,511,974 $ 1,114,357 $ 711,424 15.21 % 29.24 % 29.06 % 27.63 % 21.61 % 11.11 % 11.50 % 10.73 % 8.47 % 7.54 % 11.18 % 14.86 % 14.92 % 10.60 % 10.69 % (1) Financial highlights are based on the weighted average number of common shares outstanding for the 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 and shares issued to acquire investments. The fair value of equity issued to acquire portfolio investments from Patriot has been presented separately for the year ended June 30, 2010. (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. 195 Note 17. Selected Quarterly Financial Data (Unaudited) The following table sets forth selected financial data for each quarter within the three years ended June 30, 2014 : Investment Income Net Investment Income Net Realized and Unrealized Gains (Losses) Net Increase 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, 2011 $ December 31, 2011 March 31, 2012 June 30, 2012 55,342 $ 67,263 95,623 102,682 0.51 $ 0.61 0.84 0.82 27,877 $ 36,508 58,072 64,227 0.26 $ 0.33 0.51 0.52 12,023 $ 27,984 (7,863 ) (27,924 ) 0.11 $ 0.26 (0.07 ) (0.22 ) 39,900 $ 64,492 50,209 36,303 September 30, 2012 December 31, 2012 March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013 March 31, 2014 June 30, 2014 123,636 166,035 120,195 166,470 161,034 178,090 190,327 182,840 0.76 0.85 0.53 0.68 0.62 0.62 0.60 0.54 74,027 99,216 59,585 92,096 82,337 92,215 98,523 84,148 0.46 0.51 0.26 0.38 0.32 0.32 0.31 0.25 (26,778 ) (52,727 ) (15,156 ) (9,407 ) (2,437 ) (6,853 ) (16,422 ) (12,491 ) (0.17 ) (0.27 ) (0.07 ) (0.04 ) (0.01 ) (0.02 ) (0.06 ) (0.04 ) 47,249 46,489 44,429 82,689 79,900 85,362 82,101 71,657 0.37 0.59 0.44 0.29 0.29 0.24 0.20 0.34 0.31 0.30 0.26 0.21 (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 July 11, 2014, we increased total commitments to our Revolving Credit Facility by $10,000 to $867,500 in the aggregate. On July 22, 2014, Injured Workers Pharmacy, LLC repaid the $22,678 loan receivable to us. On July 23, 2014, Correctional Healthcare Holding Company, Inc. repaid the $27,100 loan receivable to us. On July 23, 2014, we increased total commitments to our Revolving Credit Facility by $10,000 to $877,500 in the aggregate. On July 24, 2014, we issued 98,503 shares of our common stock in connection with the dividend reinvestment plan. On July 28, 2014, Tectum Holdings, Inc. repaid the $10,000 loan receivable to us. On August 1, 2014, we sold our investments in AMU Holdings Inc. and Airmall Inc. for net proceeds of $51,379. In addition, there is $6,000 being held in escrow, of which 98% is due to Prospect, which will be recognized if and when received. On August 5, 2014, we made an investment of $39,105 to purchase 70.94% of the subordinated notes in CIFC Funding 2014-IV, Ltd. On August 13, 2014, we provided $210,000 of senior secured financing, of which $200,000 was funded at closing, to support the recapitalization of Trinity Services Group, Inc., a leading food services company in the H.I.G. Capital portfolio. On August 14, 2014, we announced the then current conversion rate on the 2018 Notes as 83.6661 shares of common stock per $1 principal amount of the 2018 Notes converted, which is equivalent to a conversion price of approximately $11.95. On August 21, 2014, we issued 129,435 shares of our common stock in connection with the dividend reinvestment plan. On August 22, 2014, Byrider Systems Acquisition Corp. repaid the $11,177 loan receivable to us. On August 22, 2014, Capstone Logistics, LLC repaid the $189,941 loan receivable to us. On August 22, 2014, TriMark USA, LLC repaid the $10,000 loan receivable to us. 196 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of June 30, 2014 , 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. Report of Management on Internal Control Over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment of the effectiveness of internal control over financial reporting as of June 30, 2014 . Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (i) pertain to assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements. Management performed an assessment of the effectiveness of the Company's internal control over financial reporting as of June 30, 2014 based upon criteria in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on our assessment, management determined that the Company's internal control over financial reporting was effective as of June 30, 2014 based on the criteria on Internal Control—Integrated Framework (1992) issued by COSO. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2014 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting. Our management's assessment of the effectiveness of our internal control over financial reporting as of June 30, 2014 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report which appears herein. 197 Report of Independent Registered Public Accounting Firm Board of Directors and Shareholders Prospect Capital Corporation New York, New York We have audited Prospect Capital Corporation's internal control over financial reporting as of June 30, 2014 , based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Prospect Capital Corporation's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying "Item 9A, Report of Management on Internal Control Over Financial Reporting." Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Prospect Capital Corporation maintained, in all material respects, effective internal control over financial reporting as of June 30, 2014 , based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of assets and liabilities of Prospect Capital Corporation, including the consolidated schedules of investments, as of June 30, 2014 and 2013 , and the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended June 30, 2014 , and the financial highlights for each of the five years in the period ended June 30, 2014 , and our report dated August 25, 2014 expressed an unqualified opinion thereon. /s/ BDO USA, LLP BDO USA, LLP New York, New York August 25, 2014 198 Item 9B. Other Information Not applicable. Item 10. Directors, Executive Officers and Corporate Governance Section 16(a) Beneficial Ownership Reporting Compliance PART III Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's directors and executive officers, and persons who own more than 10% of the Company's common stock to file reports of ownership and changes in ownership with the Securities and Exchange Commission. To the Company's knowledge, during the fiscal year ended June 30, 2014 , the Company's officers, directors and greater than 10% stockholders had complied with all Section 16(a) filing requirements. The information required by Item 10 is hereby incorporated by reference from our 2014 Proxy Statement. Code of Ethics We, Prospect Capital Management and Prospect Administration have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code's requirements. For information on how to obtain a copy of each code of ethics, see "Available Information" in Part I of this Annual Report. Item 11. Executive Compensation The information required by Item 11 is hereby incorporated by reference from our 2014 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by Item 12 is hereby incorporated by reference from our 2014 Proxy Statement. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by Item 13 is hereby incorporated by reference from our 2014 Proxy Statement. Item 14. Principal Accounting Fees and Services The information required by Item 14 is hereby incorporated by reference from our 2014 Proxy Statement. Item 15. Exhibits, Financial Statement Schedules The following documents are filed as part of this Annual Report: PART IV 1. Financial Statements – See the Index to Consolidated Financial Statements in Item 8 of this report. 2. Financial Statement Schedules – The schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission ("SEC") are not required under the related instructions or are inapplicable and, therefore, have been omitted. 3. Exhibits – 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): 199 Exhibit No. 3.1 Articles of Amendment and Restatement, as amended(1) 3.2 Amended and Restated Bylaws(2) 4.1 Form of Share Certificate(3) 4.2 Indenture dated as of December 21, 2010 relating to the 6.25% Senior Convertible Notes, by and between the Registrant and American Stock Transfer & Trust Company, as Trustee (7) 4.3 Form of 6.25% Senior Convertible Note due 2015 (8) 4.4 Indenture dated as of February 18, 2011 relating to the 5.50% Senior Convertible Notes, by and between the Registrant and American Stock Transfer & Trust Company, as Trustee (9) 4.5 Form of 5.50% Senior Convertible Note due 2016 (10) 4.6 Indenture dated as of February 16, 2012, by and between the Registrant and American Stock Transfer & Trust Company, LLC, as Trustee (11) 4.7 First Supplemental Indenture dated as of March 1, 2012, to the Indenture dated as of February 16, 2012, by and between the Registrant and American Stock Transfer & Trust Company, LLC, as Trustee (11) 4.8 Form of 7.00% Prospect Capital InterNote® due 2022 (included as part of Exhibit 4.7)(11) 4.9 Second Supplemental Indenture dated as of March 8, 2012, to the Indenture dated as of February 16, 2012, by and between the Registrant and American Stock Transfer & Trust Company, LLC, as Trustee (12) 4.10 Form of 6.900% Prospect Capital InterNote® due 2022 (included as part of Exhibit 4.9)(12) 4.11 Joinder Supplemental Indenture dated as of March 8, 2012, to the Indenture dated as of February 16, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Original Trustee, and U.S. Bank National Association, as Series Trustee (12) 4.12 Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee (13) 4.13 Third Supplemental Indenture dated as of April 5, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (14) 4.14 Form of 6.850% Prospect Capital InterNote® due 2022 (included as part of Exhibit 4.13)(14) 4.15 Fourth Supplemental Indenture dated as of April 12, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (15) 4.16 Form of 6.700% Prospect Capital InterNote® due 2022 (included as part of Exhibit 4.15)(15) 4.17 Indenture dated as of April 16, 2012 relating to the 5.375% Senior Convertible Notes, by and between the Registrant and American Stock Transfer & Trust Company, as Trustee (16) 4.18 Form of 5.375% Senior Convertible Note due 2017 (17) 4.19 Fifth Supplemental Indenture dated as of April 26, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (18) 4.20 Form of 6.500% Prospect Capital InterNote® due 2022 (included as part of Exhibit 4.19)(18) 4.21 Supplemental Indenture dated as of May 1, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (19) 4.22 Form of Global Note 6.95% Senior Note due 2022 (20) 4.23 Sixth Supplemental Indenture dated as of June 14, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (21) 4.24 Form of 6.950% Prospect Capital InterNote® due 2022 (included as part of Exhibit 4.23)(21) 200 Exhibit No. 4.25 Seventh Supplemental Indenture dated as of June 28, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (22) 4.26 Form of 6.550% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.25)(22) 4.27 Eighth Supplemental Indenture dated as of July 6, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (23) 4.28 Form of 6.450% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.27)(23) 4.29 Ninth Supplemental Indenture dated as of July 12, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (24) 4.30 Form of 6.350% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.29)(24) 4.31 Tenth Supplemental Indenture dated as of July 19, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (25) 4.32 Form of 6.300% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.31)(25) 4.33 Eleventh Supplemental Indenture dated as of July 26, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (26) 4.34 Form of 6.200% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.33)(26) 4.35 Twelfth Supplemental Indenture dated as of August 2, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (27) 4.36 Form of 6.150% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.35)(27) 4.37 Thirteenth Supplemental Indenture dated as of August 9, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (28) 4.38 Form of 6.150% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.37)(28) 4.39 Indenture dated as of August 14, 2012 relating to the 5.75% Senior Convertible Notes, by and between the Registrant and American Stock Transfer & Trust Company, as Trustee (29) 4.40 Form of 5.75% Senior Convertible Note due 2018 (30) 4.41 Fourteenth Supplemental Indenture dated as of August 16, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (31) 4.42 Form of 6.100% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.41)(31) 4.43 Fifteenth Supplemental Indenture dated as of August 23, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (32) 4.44 Form of 6.050% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.43)(32) 4.45 Sixteenth Supplemental Indenture dated as of September 7, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (33) 4.46 Form of 6.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.45)(33) 201 Exhibit No. 4.47 Seventeenth Supplemental Indenture dated as of September 13, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (34) 4.48 Form of 5.950% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.47)(34) 4.49 Eighteenth Supplemental Indenture dated as of September 20, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (35) 4.50 Form of 5.900% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.49)(35) 4.51 Nineteenth Supplemental Indenture dated as of September 27, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (36) 4.52 Form of 5.850% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.51)(36) 4.53 Twentieth Supplemental Indenture dated as of October 4, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (37) 4.54 Form of 5.700% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.53)(37) 4.55 Twenty-First Supplemental Indenture dated as of November 23, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (38) 4.56 Form of 5.125% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.55)(38) 4.57 Twenty-Second Supplemental Indenture dated as of November 23, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (38) 4.58 Form of 6.625% Prospect Capital InterNote® due 2042 (included as part of Exhibit 4.57)(38) 4.59 Twenty-Third Supplemental Indenture dated as of November 29, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (39) 4.60 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.59)(39) 4.61 Twenty-Fourth Supplemental Indenture dated as of November 29, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (39) 4.62 Form of 5.750% Prospect Capital InterNote® due 2032 (included as part of Exhibit 4.61)(39) 4.63 Twenty-Fifth Supplemental Indenture dated as of November 29, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (39) 4.64 Form of 6.500% Prospect Capital InterNote® due 2042 (included as part of Exhibit 4.63)(39) 4.65 Twenty-Sixth Supplemental Indenture dated as of December 6, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (40) 4.66 Form of 4.875% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.65)(40) 4.67 Twenty-Seventh Supplemental Indenture dated as of December 6, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (40) 4.68 Form of 5.625% Prospect Capital InterNote® due 2032 (included as part of Exhibit 4.67)(40) 202 Exhibit No. 4.69 Twenty-Eighth Supplemental Indenture dated as of December 6, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (40) 4.70 Form of 6.375% Prospect Capital InterNote® due 2042 (included as part of Exhibit 4.69)(40) 4.71 Twenty-Ninth Supplemental Indenture dated as of December 13, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (41) 4.72 Form of 4.750% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.71)(41) 4.73 Thirtieth Supplemental Indenture dated as of December 13, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (41) 4.74 Form of 5.250% Prospect Capital InterNote® due 2030 (included as part of Exhibit 4.73)(41) 4.75 Thirty-First Supplemental Indenture dated as of December 13, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (41) 4.76 Form of 6.250% Prospect Capital InterNote® due 2042 (included as part of Exhibit 4.75)(41) 4.77 Thirty-Second Supplemental Indenture dated as of December 20, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (42) 4.78 Form of 4.625% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.77)(42) 4.79 Thirty-Third Supplemental Indenture dated as of December 20, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (42) 4.80 Form of 5.125% Prospect Capital InterNote® due 2030 (included as part of Exhibit 4.79)(42) 4.81 Thirty-Fourth Supplemental Indenture dated as of December 20, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (42) 4.82 Form of 6.125% Prospect Capital InterNote® due 2042 (included as part of Exhibit 4.81)(42) 4.83 Indenture dated as of December 21, 2012, by and between the Registrant and American Stock Transfer & Trust Company, as Trustee (43) 4.84 Form of Global Note 5.875% Convertible Senior Note Due 2019 (44) 4.85 Thirty-Fifth Supplemental Indenture dated as of December 28, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (45) 4.86 Form of 4.500% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.85)(45) 4.87 Thirty-Sixth Supplemental Indenture dated as of December 28, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (45) 4.88 Form of 5.000% Prospect Capital InterNote® due 2030 (included as part of Exhibit 4.87)(45) 4.89 Thirty-Seventh Supplemental Indenture dated as of December 28, 2012, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (45) 4.90 Form of 6.000% Prospect Capital InterNote® due 2042 (included as part of Exhibit 4.89)(45) 203 Exhibit No. 4.91 Thirty-Eighth Supplemental Indenture dated as of January 4, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (46) 4.92 Form of 4.375% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.91)(46) 4.93 Thirty-Ninth Supplemental Indenture dated as of January 4, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (46) 4.94 Form of 4.875% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.93)(46) 4.95 Fortieth Supplemental Indenture dated as of January 4, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (46) 4.96 Form of 5.875% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.95)(46) 4.97 Forty-First Supplemental Indenture dated as of January 10, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (47) 4.98 Form of 4.250% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.97)(47) 4.99 Forty-Second Supplemental Indenture dated as of January 10, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (47) 4.100 Form of 4.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.99)(47) 4.101 Forty-Third Supplemental Indenture dated as of January 10, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (47) 4.102 Form of 5.750% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.101)(47) 4.103 Forty-Fourth Supplemental Indenture dated as of January 17, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (48) 4.104 Form of 4.125% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.103)(48) 4.105 Forty-Fifth Supplemental Indenture dated as of January 17, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (48) 4.106 Form of 4.625% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.105)(48) 4.107 Forty-Sixth Supplemental Indenture dated as of January 17, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (48) 4.108 Form of 5.625% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.107)(48) 4.109 Forty-Seventh Supplemental Indenture dated as of January 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (49) 4.110 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.109)(49) 4.111 Forty-Eighth Supplemental Indenture dated as of January 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (49) 4.112 Form of 4.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.111)(49) 204 Exhibit No. 4.113 Forty-Ninth Supplemental Indenture dated as of January 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (49) 4.114 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.113)(49) 4.115 Fiftieth Supplemental Indenture dated as of January 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (50) 4.116 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.115)(50) 4.117 Fifty-First Supplemental Indenture dated as of January 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (50) 4.118 Form of 4.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.117)(50) 4.119 Fifty-Second Supplemental Indenture dated as of January 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (50) 4.120 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.119)(50) 4.121 Fifty-Third Supplemental Indenture dated as of February 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (51) 4.122 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.121)(51) 4.123 Fifty-Fourth Supplemental Indenture dated as of February 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (51) 4.124 Form of 4.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.123)(51) 4.125 Fifty-Fifth Supplemental Indenture dated as of February 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (51) 4.126 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.125)(51) 4.127 Fifty-Sixth Supplemental Indenture dated as of February 22, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (52) 4.128 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.127)(52) 4.129 Fifty-Seventh Supplemental Indenture dated as of February 22, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (52) 4.130 Form of 4.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.129)(52) 4.131 Fifty-Eighth Supplemental Indenture dated as of February 22, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (52) 4.132 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.131)(52) 4.133 Fifty-Ninth Supplemental Indenture dated as of February 28, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (53) 4.134 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.133)(53) 205 Exhibit No. 4.135 Sixtieth Supplemental Indenture dated as of February 28, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (53) 4.136 Form of 4.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.135)(53) 4.137 Sixty-First Supplemental Indenture dated as of February 28, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (53) 4.138 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.137)(53) 4.139 Sixty-Second Supplemental Indenture dated as of March 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (54) 4.140 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.139)(54) 4.141 Sixty-Third Supplemental Indenture dated as of March 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (54) 4.142 Form of 4.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.141)(54) 4.143 Sixty-Fourth Supplemental Indenture dated as of March 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (54) 4.144 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.143)(54) 4.145 Sixty-Fifth Supplemental Indenture dated as of March 14, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (55) 4.146 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.145)(55) 4.147 Sixty-Sixth Supplemental Indenture dated as of March 14, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (55) 4.148 Form of 4.125% to 6.000% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.147)(55) 4.149 Sixty-Seventh Supplemental Indenture dated as of March 14, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (55) 4.150 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.149)(55) 4.151 Sixty-Eighth Supplemental Indenture dated as of March 14, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (55) 4.152 Form of Floating Prospect Capital InterNote® due 2023 (included as part of Exhibit 4.151)(55) 4.153 Supplemental Indenture dated as of March 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (56) 4.154 Form of Global Note 5.875% Senior Note due 2023 (57) 4.155 Sixty-Ninth Supplemental Indenture dated as of March 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (58) 4.156 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.155)(58) 206 Exhibit No. 4.157 Seventieth Supplemental Indenture dated as of March 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (58) 4.158 Form of 4.125% to 6.000% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.157)(58) 4.159 Seventy-First Supplemental Indenture dated as of March 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (58) 4.160 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.159)(58) 4.161 Seventy-Second Supplemental Indenture dated as of March 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (58) 4.162 Form of Floating Prospect Capital InterNote® due 2023 (included as part of Exhibit 4.161)(58) 4.163 Seventy-Third Supplemental Indenture dated as of March 28, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (59) 4.164 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.163)(59) 4.165 Seventy-Fourth Supplemental Indenture dated as of March 28, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (59) 4.166 Form of 4.125% to 6.000% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.165)(59) 4.167 Seventy-Fifth Supplemental Indenture dated as of March 28, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (59) 4.168 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.167)(59) 4.169 Seventy-Sixth Supplemental Indenture dated as of March 28, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (59) 4.170 Form of Floating Prospect Capital InterNote® due 2023 (included as part of Exhibit 4.169)(59) 4.171 Seventy-Seventh Supplemental Indenture dated as of April 4, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (61) 4.172 Form of 4.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.171)(61) 4.173 Seventy-Eighth Supplemental Indenture dated as of April 4, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (61) 4.174 Form of 4.625% to 6.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.173)(61) 4.175 Seventy-Ninth Supplemental Indenture dated as of April 4, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (61) 4.176 Form of 5.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.175)(61) 4.177 Eightieth Supplemental Indenture dated as of April 4, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (61) 4.178 Form of Floating Prospect Capital InterNote® due 2023 (included as part of Exhibit 4.177)(61) 207 Exhibit No. 4.179 Eighty-First Supplemental Indenture dated as of April 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (62) 4.180 Form of 4.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.179)(62) 4.181 Eighty-Second Supplemental Indenture dated as of April 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (62) 4.182 Form of 5.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.181)(62) 4.183 Eighty-Third Supplemental Indenture dated as of April 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (62) 4.184 Form of 6.000% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.183)(62) 4.185 Eighty-Fourth Supplemental Indenture dated as of April 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (62) 4.186 Form of Floating Prospect Capital InterNote® due 2023 (included as part of Exhibit 4.185)(62) 4.187 Eighty-Fifth Supplemental Indenture dated as of April 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (63) 4.188 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.187)(63) 4.189 Eighty-Sixth Supplemental Indenture dated as of April 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (63) 4.190 Form of 5.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.189)(63) 4.191 Eighty-Seventh Supplemental Indenture dated as of April 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (63) 4.192 Form of 6.000% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.191)(63) 4.193 Eighty-Eighth Supplemental Indenture dated as of April 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (64) 4.194 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.193)(64) 4.195 Eighty-Ninth Supplemental Indenture dated as of April 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (64) 4.196 Form of 5.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.195)(64) 4.197 Ninetieth Supplemental Indenture dated as of April 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (64) 4.198 Form of 6.000% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.197)(64) 4.199 Ninety-First Supplemental Indenture dated as of May 2, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (65) 4.200 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.199)(65) 208 Exhibit No. 4.201 Ninety-Second Supplemental Indenture dated as of May 2, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (65) 4.202 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.201)(65) 4.203 Ninety-Third Supplemental Indenture dated as of May 2, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (65) 4.204 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.203)(65) 4.205 Ninety-Fourth Supplemental Indenture dated as of May 9, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (66) 4.206 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.205)(66) 4.207 Ninety-Fifth Supplemental Indenture dated as of May 9, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (66) 4.208 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.207)(66) 4.209 Ninety-Sixth Supplemental Indenture dated as of May 9, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (66) 4.210 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.209)(66) 4.211 Ninety-Seventh Supplemental Indenture dated as of May 23, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (67) 4.212 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.211)(67) 4.213 Ninety-Eighth Supplemental Indenture dated as of May 23, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (67) 4.214 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.213)(67) 4.215 Ninety-Ninth Supplemental Indenture dated as of May 23, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (67) 4.216 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.215)(67) 4.217 One Hundredth Supplemental Indenture dated as of May 23, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (67) 4.218 Form of 5.000% to 7.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.217)(67) 4.219 One Hundred-First Supplemental Indenture dated as of May 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (68) 4.220 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.219)(68) 4.221 One Hundred-Second Supplemental Indenture dated as of May 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (68) 4.222 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.221)(68) 209 Exhibit No. 4.223 One Hundred-Third Supplemental Indenture dated as of May 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (68) 4.224 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.223)(68) 4.225 One Hundred-Fourth Supplemental Indenture dated as of June 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (69) 4.226 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.225)(69) 4.227 One Hundred-Fifth Supplemental Indenture dated as of June 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (69) 4.228 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.227)(69) 4.229 One Hundred-Sixth Supplemental Indenture dated as of June 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (69) 4.230 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.229)(69) 4.231 One Hundred-Seventh Supplemental Indenture dated as of June 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (69) 4.232 Form of 5.000% to 7.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.231)(69) 4.233 One Hundred-Eighth Supplemental Indenture dated as of June 13, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (70) 4.234 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.233)(70) 4.235 One Hundred-Ninth Supplemental Indenture dated as of June 13, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (70) 4.236 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.235)(70) 4.237 One Hundred-Tenth Supplemental Indenture dated as of June 13, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (70) 4.238 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.237)(70) 4.239 One Hundred-Eleventh Supplemental Indenture dated as of June 20, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (71) 4.240 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.239)(71) 4.241 One Hundred-Twelfth Supplemental Indenture dated as of June 20, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (71) 4.242 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.241)(71) 4.243 One Hundred-Thirteenth Supplemental Indenture dated as of June 20, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (71) 4.244 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.243)(71) 210 Exhibit No. 4.245 One Hundred-Fourteenth Supplemental Indenture dated as of June 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (72) 4.246 Form of 5.250% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.245)(72) 4.247 One Hundred-Fifteenth Supplemental Indenture dated as of June 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (72) 4.248 Form of 6.000% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.247)(72) 4.249 One Hundred-Sixteenth Supplemental Indenture dated as of June 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee (72) 4.250 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.249)(72) 4.251 One Hundred-Seventeenth Supplemental Indenture dated as of July 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(73) 4.252 Form of 4.750% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.251)(73) 4.253 One Hundred-Eighteenth Supplemental Indenture dated as of July 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(73) 4.254 Form of 5.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.253)(73) 4.255 One Hundred-Nineteenth Supplemental Indenture dated as of July 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(73) 4.256 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.255)(73) 4.257 One Hundred-Twentieth Supplemental Indenture dated as of July 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(73) 4.258 Form of 6.750% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.257)(73) 4.259 One Hundred Twenty-First Supplemental Indenture dated as of July 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(74) 4.260 Form of 4.750% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.259)(74) 4.261 One Hundred Twenty-Second Supplemental Indenture dated as of July 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(74) 4.262 Form of 5.500% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.261)(74) 4.263 One Hundred Twenty-Third Supplemental Indenture dated as of July 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(74) 4.264 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.263)(74) 4.265 One Hundred Twenty-Fourth Supplemental Indenture dated as of July 11, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(74) 4.266 Form of 6.750% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.265)(74) 211 Exhibit No. 4.267 One Hundred Twenty-Fifth Supplemental Indenture dated as of July 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(75) 4.268 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.267)(75) 4.269 One Hundred Twenty-Sixth Supplemental Indenture dated as of July 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(75) 4.270 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.269)(75) 4.271 One Hundred Twenty-Seventh Supplemental Indenture dated as of July 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(75) 4.272 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.271)(75) 4.273 One Hundred Twenty-Eighth Supplemental Indenture dated as of July 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(75) 4.274 Form of 6.750% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.273)(75) 4.275 One Hundred Twenty-Ninth Supplemental Indenture dated as of July 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(76) 4.276 Form of 5.000% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.275)(76) 4.277 One Hundred Thirtieth Supplemental Indenture dated as of July 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(76) 4.278 Form of 5.750% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.277)(76) 4.279 One Hundred Thirty-First Supplemental Indenture dated as of July 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(76) 4.280 Form of 6.250% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.279)(76) 4.281 One Hundred Thirty-Second Supplemental Indenture dated as of July 25, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(76) 4.282 Form of 6.750% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.281)(76) 4.283 One Hundred Thirty-Third Supplemental Indenture dated as of August 1, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(77) 4.284 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.283)(77) 4.285 One Hundred Thirty-Fourth Supplemental Indenture dated as of August 1, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(77) 4.286 Form of 5.750% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.285)(77) 4.287 One Hundred Thirty-Fifth Supplemental Indenture dated as of August 1, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(77) 4.288 Form of 6.125% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.287)(77) 212 Exhibit No. 4.289 One Hundred Thirty-Sixth Supplemental Indenture dated as of August 1, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(77) 4.290 Form of 6.625% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.289)(77) 4.291 One Hundred Thirty-Seventh Supplemental Indenture dated as of August 8, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(78) 4.292 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.291)(78) 4.293 One Hundred Thirty-Eighth Supplemental Indenture dated as of August 8, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(78) 4.294 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.293)(78) 4.295 One Hundred Thirty-Ninth Supplemental Indenture dated as of August 8, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(78) 4.296 Form of 6.000% Prospect Capital InterNote® due 2031 (included as part of Exhibit 4.295)(78) 4.297 One Hundred Fortieth Supplemental Indenture dated as of August 8, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(78) 4.298 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.297)(78) 4.299 One Hundred Forty-First Supplemental Indenture dated as of August 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(79) 4.300 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.299)(79) 4.301 One Hundred Forty-Second Supplemental Indenture dated as of August 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(79) 4.302 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.301)(79) 4.303 One Hundred Forty-Third Supplemental Indenture dated as of August 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(79) 4.304 Form of 6.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.303)(79) 4.305 One Hundred Forty-Fourth Supplemental Indenture dated as of August 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(79) 4.306 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.305)(79) 4.307 One Hundred Forty-Fifth Supplemental Indenture dated as of August 22, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(80) 4.308 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.307)(80) 4.309 One Hundred Forty-Sixth Supplemental Indenture dated as of August 22, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(80) 4.310 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.309)(80) 213 Exhibit No. 4.311 One Hundred Forty-Seventh Supplemental Indenture dated as of August 22, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(80) 4.312 Form of 6.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.311)(80) 4.313 One Hundred Forty-Eighth Supplemental Indenture dated as of August 22, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(80) 4.314 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.313)(80) 4.315 One Hundred Forty-Ninth Supplemental Indenture dated as of September 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(81) 4.316 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.315)(81) 4.317 One Hundred Fiftieth Supplemental Indenture dated as of September 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(81) 4.318 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.317)(81) 4.319 One Hundred Fifty-First Supplemental Indenture dated as of September 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(81) 4.320 Form of 6.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.319)(81) 4.321 One Hundred Fifty-Second Supplemental Indenture dated as of September 6, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(81) 4.322 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.321)(81) 4.323 One Hundred Fifty-Third Supplemental Indenture dated as of September 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(82) 4.324 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.323)(82) 4.325 One Hundred Fifty-Fourth Supplemental Indenture dated as of September 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(82) 4.326 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.325)(82) 4.327 One Hundred Fifty-Fifth Supplemental Indenture dated as of September 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(82) 4.328 Form of 6.000% Prospect Capital InterNote® due 2033 (included as part of Exhibit 4.327)(82) 4.329 One Hundred Fifty-Sixth Supplemental Indenture dated as of September 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(82) 4.330 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.329)(82) 4.331 One Hundred Fifty-Seventh Supplemental Indenture dated as of September 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(83) 4.332 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.331)(83) 214 Exhibit No. 4.333 One Hundred Fifty-Eighth Supplemental Indenture dated as of September 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(83) 4.334 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.333)(83) 4.335 One Hundred Fifty-Ninth Supplemental Indenture dated as of September 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(83) 4.336 Form of 6.000% Prospect Capital InterNote® due 2033 (included as part of Exhibit 4.335)(83) 4.337 One Hundred Sixtieth Supplemental Indenture dated as of September 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(83) 4.338 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.337)(83) 4.339 One Hundred Sixty-First Supplemental Indenture dated as of September 26, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(84) 4.340 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.339)(84) 4.341 One Hundred Sixty-Second Supplemental Indenture dated as of September 26, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(84) 4.342 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.341)(84) 4.343 One Hundred Sixty-Third Supplemental Indenture dated as of September 26, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(84) 4.344 Form of 6.000% Prospect Capital InterNote® due 2033 (included as part of Exhibit 4.343)(84) 4.345 One Hundred Sixty-Fourth Supplemental Indenture dated as of September 26, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(84) 4.346 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.345)(84) 4.347 One Hundred Sixty-Fifth Supplemental Indenture dated as of October 3, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(85) 4.348 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.347)(85) 4.349 One Hundred Sixty-Sixth Supplemental Indenture dated as of October 3, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(85) 4.350 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.349)(85) 4.351 One Hundred Sixty-Seventh Supplemental Indenture dated as of October 3, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(85) 4.352 Form of 6.000% Prospect Capital InterNote® due 2033 (included as part of Exhibit 4.351)(85) 4.353 One Hundred Sixty-Eighth Supplemental Indenture dated as of October 3, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(85) 4.354 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.353)(85) 215 Exhibit No. 4.355 One Hundred Sixty-Ninth Supplemental Indenture dated as of October 10, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(86) 4.356 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.355)(86) 4.357 One Hundred Seventieth Supplemental Indenture dated as of October 10, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(86) 4.358 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.357)(86) 4.359 One Hundred Seventy-First Supplemental Indenture dated as of October 10, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(86) 4.360 Form of 6.000% Prospect Capital InterNote® due 2033 (included as part of Exhibit 4.359)(86) 4.361 One Hundred Seventy-Second Supplemental Indenture dated as of October 10, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(86) 4.362 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.361)(86) 4.363 One Hundred Seventy-Third Supplemental Indenture dated as of October 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(87) 4.364 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.363)(87) 4.365 One Hundred Seventy-Fourth Supplemental Indenture dated as of October 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(87) 4.366 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.365)(87) 4.367 One Hundred Seventy-Fifth Supplemental Indenture dated as of October 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(87) 4.368 Form of 6.000% Prospect Capital InterNote® due 2033 (included as part of Exhibit 4.367)(87) 4.369 One Hundred Seventy-Sixth Supplemental Indenture dated as of October 18, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(87) 4.370 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.369)(87) 4.371 One Hundred Seventy-Seventh Supplemental Indenture dated as of October 24, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(88) 4.372 Form of 4.000% Prospect Capital InterNote® due 2016 (included as part of Exhibit 4.371)(88) 4.373 One Hundred Seventy-Eighth Supplemental Indenture dated as of October 24, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(88) 4.374 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.373)(88) One Hundred Seventy-Ninth Supplemental Indenture dated as of October 24, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(88) 4.375 4.376 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.375)(88) 216 Exhibit No. 4.377 One Hundred Eightieth Supplemental Indenture dated as of October 24, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(88) 4.378 Form of 6.000% Prospect Capital InterNote® due 2033 (included as part of Exhibit 4.377)(88) 4.379 One Hundred Eighty-First Supplemental Indenture dated as of October 24, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(88) 4.380 Form of 6.500% Prospect Capital InterNote® due 2043 (included as part of Exhibit 4.379)(88) 4.381 One Hundred Eighty-Second Supplemental Indenture dated as of October 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(89) 4.382 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.381)(89) 4.383 One Hundred Eighty-Third Supplemental Indenture dated as of October 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(89) 4.384 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.383)(89) 4.385 One Hundred Eighty-Fourth Supplemental Indenture dated as of October 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(89) 4.386 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.385)(89) 4.387 One Hundred Eighty-Fifth Supplemental Indenture dated as of October 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(89) 4.388 Form of 6.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.387)(89) 4.389 One Hundred Eighty-Sixth Supplemental Indenture dated as of October 31, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(89) 4.390 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.389)(89) 4.391 One Hundred Eighty-Seventh Supplemental Indenture dated as of November 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(90) 4.392 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.391)(90) 4.393 One Hundred Eighty-Eighth Supplemental Indenture dated as of November 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(90) 4.394 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.393)(90) 4.395 One Hundred Eighty-Ninth Supplemental Indenture dated as of November 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(90) 4.396 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.395)(90) 4.397 One Hundred Ninetieth Supplemental Indenture dated as of November 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(90) 4.398 Form of 6.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.397)(90) 217 Exhibit No. 4.399 One Hundred Ninety-First Supplemental Indenture dated as of November 7, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(90) 4.400 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.399)(90) 4.401 One Hundred Ninety-Second Supplemental Indenture dated as of November 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(91) 4.402 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.401)(91) 4.403 One Hundred Ninety-Third Supplemental Indenture dated as of November 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(91) 4.404 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.403)(91) 4.405 One Hundred Ninety-Fourth Supplemental Indenture dated as of November 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(91) 4.406 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.405)(91) 4.407 One Hundred Ninety-Fifth Supplemental Indenture dated as of November 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(91) 4.408 Form of 6.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.407)(91) 4.409 One Hundred Ninety-Sixth Supplemental Indenture dated as of November 15, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(91) 4.410 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.409)(91) 4.411 One Hundred Ninety-Seventh Supplemental Indenture dated as of November 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(92) 4.412 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.411)(92) 4.413 One Hundred Ninety-Eighth Supplemental Indenture dated as of November 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(92) 4.414 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.413)(92) 4.415 One Hundred Ninety-Ninth Supplemental Indenture dated as of November 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(92) 4.416 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.415)(92) 4.417 Two Hundredth Supplemental Indenture dated as of November 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(92) 4.418 Form of 6.000% Prospect Capital InterNote® due 2028 (included as part of Exhibit 4.417)(92) 4.419 Two Hundred First Supplemental Indenture dated as of November 21, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(92) 4.420 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.419)(92) 218 Exhibit No. 4.421 Two Hundred Second Supplemental Indenture dated as of November 29, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(93) 4.422 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.421)(93) 4.423 Two Hundred Third Supplemental Indenture dated as of November 29, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(93) 4.424 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.423)(93) 4.425 Two Hundred Fourth Supplemental Indenture dated as of November 29, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(93) 4.426 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.425)(93) 4.427 Two Hundred Fifth Supplemental Indenture dated as of November 29, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(93) 4.428 Form of 6.000% Prospect Capital InterNote® due 2025 (included as part of Exhibit 4.427)(93) 4.429 Two Hundred Sixth Supplemental Indenture dated as of November 29, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(93) 4.430 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.429)(93) 4.431 Two Hundred Seventh Supplemental Indenture dated as of December 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(94) 4.432 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.431)(94) 4.433 Two Hundred Eighth Supplemental Indenture dated as of December 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(94) 4.434 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.433)(94) 4.435 Two Hundred Ninth Supplemental Indenture dated as of December 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(94) 4.436 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.435)(94) 4.437 Two Hundred Tenth Supplemental Indenture dated as of December 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(94) 4.438 Form of 6.000% Prospect Capital InterNote® due 2025 (included as part of Exhibit 4.437)(94) 4.439 Two Hundred Eleventh Supplemental Indenture dated as of December 5, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(94) 4.440 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.439)(94) 4.441 Two Hundred Twelfth Supplemental Indenture dated as of December 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(95) 4.442 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.441)(95) 219 Exhibit No. 4.443 Two Hundred Thirteenth Supplemental Indenture dated as of December 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(95) 4.444 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.443)(95) 4.445 Two Hundred Fourteenth Supplemental Indenture dated as of December 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(95) 4.446 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.445)(95) 4.447 Two Hundred Fifteenth Supplemental Indenture dated as of December 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(95) 4.448 Form of 6.000% Prospect Capital InterNote® due 2025 (included as part of Exhibit 4.447)(95) 4.449 Two Hundred Sixteenth Supplemental Indenture dated as of December 12, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(95) 4.450 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.449)(95) 4.451 Two Hundred Seventeenth Supplemental Indenture dated as of December 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(96) 4.452 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.451)(96) 4.453 Two Hundred Eighteenth Supplemental Indenture dated as of December 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(96) 4.454 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.453)(96) 4.455 Two Hundred Nineteenth Supplemental Indenture dated as of December 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(96) 4.456 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.455)(96) 4.457 Two Hundred Twentieth Supplemental Indenture dated as of December 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(96) 4.458 Form of 6.000% Prospect Capital InterNote® due 2025 (included as part of Exhibit 4.457)(96) 4.459 Two Hundred Twenty-First Supplemental Indenture dated as of December 19, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(96) 4.460 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.459)(96) 4.461 Two Hundred Twenty-Second Supplemental Indenture dated as of December 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(97) 4.462 Form of 4.000% Prospect Capital InterNote® due 2017 (included as part of Exhibit 4.461)(97) 4.463 Two Hundred Twenty-Third Supplemental Indenture dated as of December 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(97) 4.464 Form of 5.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.463)(97) 220 Exhibit No. 4.465 Two Hundred Twenty-Fourth Supplemental Indenture dated as of December 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(97) 4.466 Form of 5.500% Prospect Capital InterNote® due 2020 (included as part of Exhibit 4.465)(97) 4.467 Two Hundred Twenty-Fifth Supplemental Indenture dated as of December 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(97) 4.468 Form of 6.000% Prospect Capital InterNote® due 2025 (included as part of Exhibit 4.467)(97) 4.469 Two Hundred Twenty-Sixth Supplemental Indenture dated as of December 27, 2013, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(97) 4.470 Form of 6.500% Prospect Capital InterNote® due 2038 (included as part of Exhibit 4.469)(97) 4.471 Two Hundred Twenty-Seventh Supplemental Indenture dated as of January 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(98) 4.472 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.471)(98) 4.473 Two Hundred Twenty-Eighth Supplemental Indenture dated as of January 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(98) 4.474 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.473)(98) 4.475 Two Hundred Twenty-Ninth Supplemental Indenture dated as of January 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(98) 4.476 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.475)(98) 4.477 Two Hundred Thirtieth Supplemental Indenture dated as of January 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(98) 4.478 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.477)(98) 4.479 Two Hundred Thirty-First Supplemental Indenture dated as of January 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(98) 4.480 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.479)(98) 4.481 Two Hundred Thirty-Second Supplemental Indenture dated as of January 9, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(99) 4.482 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.481)(99) 4.483 Two Hundred Thirty-Third Supplemental Indenture dated as of January 9, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(99) 4.484 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.483)(99) 4.485 Two Hundred Thirty-Fourth Supplemental Indenture dated as of January 9, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(99) 4.486 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.485)(99) 221 Exhibit No. 4.487 Two Hundred Thirty-Fifth Supplemental Indenture dated as of January 9, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(99) 4.488 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.487)(99) 4.489 Two Hundred Thirty-Sixth Supplemental Indenture dated as of January 9, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(99) 4.490 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.489)(99) 4.491 Two Hundred Thirty-Seventh Supplemental Indenture dated as of January 16, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(100) 4.492 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.491)(100) 4.493 Two Hundred Thirty-Eighth Supplemental Indenture dated as of January 16, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(100) 4.494 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.493)(100) 4.495 Two Hundred Thirty-Ninth Supplemental Indenture dated as of January 16, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(100) 4.496 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.495)(100) 4.497 Two Hundred Fortieth Supplemental Indenture dated as of January 16, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(100) 4.498 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.497)(100) 4.499 Two Hundred Forty-First Supplemental Indenture dated as of January 16, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(100) 4.500 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.499)(100) 4.501 Two Hundred Forty-Second Supplemental Indenture dated as of January 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(101) 4.502 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.501)(101) 4.503 Two Hundred Forty-Third Supplemental Indenture dated as of January 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(101) 4.504 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.503)(101) 4.505 Two Hundred Forty-Fourth Supplemental Indenture dated as of January 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(101) 4.506 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.505)(101) 4.507 Two Hundred Forty-Fifth Supplemental Indenture dated as of January 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(101) 4.508 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.507)(101) 222 Exhibit No. 4.509 Two Hundred Forty-Sixth Supplemental Indenture dated as of January 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(101) 4.510 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.509)(101) 4.511 Two Hundred Forty-Seventh Supplemental Indenture dated as of January 30, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(102) 4.512 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.511)(102) 4.513 Two Hundred Forty-Eighth Supplemental Indenture dated as of January 30, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(102) 4.514 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.513)(102) 4.515 Two Hundred Forty-Ninth Supplemental Indenture dated as of January 30, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(102) 4.516 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.515)(102) 4.517 Two Hundred Fiftieth Supplemental Indenture dated as of January 30, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(102) 4.518 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.517)(102) 4.519 Two Hundred Fifty-First Supplemental Indenture dated as of January 30, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(102) 4.520 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.519)(102) 4.521 Two Hundred Fifty-Second Supplemental Indenture dated as of February 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(103) 4.522 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.521)(103) 4.523 Two Hundred Fifty-Third Supplemental Indenture dated as of February 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(103) 4.524 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.523)(103) 4.525 Two Hundred Fifty-Fourth Supplemental Indenture dated as of February 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(103) 4.526 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.525)(103) 4.527 Two Hundred Fifty-Fifth Supplemental Indenture dated as of February 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(103) 4.528 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.527)(103) 4.529 Two Hundred Fifty-Sixth Supplemental Indenture dated as of February 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(103) 4.530 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.529)(103) 223 Exhibit No. 4.531 Two Hundred Fifty-Seventh Supplemental Indenture dated as of February 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(104) 4.532 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.531)(104) 4.533 Two Hundred Fifty-Eighth Supplemental Indenture dated as of February 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(104) 4.534 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.533)(104) 4.535 Two Hundred Fifty-Ninth Supplemental Indenture dated as of February 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(104) 4.536 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.535)(104) 4.537 Two Hundred Sixtieth Supplemental Indenture dated as of February 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(104) 4.538 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.537)(104) 4.539 Two Hundred Sixty-First Supplemental Indenture dated as of February 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(104) 4.540 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.539)(104) 4.541 Two Hundred Sixty-Seventh Supplemental Indenture dated as of February 19, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(105) 4.542 Form of 4.75% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.541)(105) 4.543 Two Hundred Sixty-Second Supplemental Indenture dated as of February 21, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(106) 4.544 Form of 4.000% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.543)(106) 4.545 Two Hundred Sixty-Third Supplemental Indenture dated as of February 21, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(106) 4.546 Form of 5.000% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.545)(106) 4.547 Two Hundred Sixty-Fourth Supplemental Indenture dated as of February 21, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(106) 4.548 Form of 5.500% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.547)(106) 4.549 Two Hundred Sixty-Fifth Supplemental Indenture dated as of February 21, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(106) 4.550 Form of 6.000% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.549)(106) 4.551 Two Hundred Sixty-Sixth Supplemental Indenture dated as of February 21, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(106) 4.552 Form of 6.500% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.551)(106) 224 Exhibit No. 4.553 Two Hundred Sixty-Eighth Supplemental Indenture dated as of February 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(107) 4.554 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.553)(107) 4.555 Two Hundred Sixty-Ninth Supplemental Indenture dated as of February 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(107) 4.556 Form of 4.750% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.555)(107) 4.557 Two Hundred Seventieth Supplemental Indenture dated as of February 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(107) 4.558 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.557)(107) 4.559 Two Hundred Seventy-First Supplemental Indenture dated as of February 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(107) 4.560 Form of 5.750% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.559)(107) 4.561 Two Hundred Seventy-Second Supplemental Indenture dated as of February 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(107) 4.562 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.561)(107) 4.563 Two Hundred Seventy-Third Supplemental Indenture dated as March 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(108) 4.564 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.563)(108) 4.565 Two Hundred Seventy-Fourth Supplemental Indenture dated as of March 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(108) 4.566 Form of 4.750% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.565)(108) 4.567 Two Hundred Seventy-Fifth Supplemental Indenture dated as of March 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(108) 4.568 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.567)(108) 4.569 Two Hundred Seventy-Sixth Supplemental Indenture dated as of March 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(108) 4.570 Form of 5.750% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.569)(108) 4.571 Two Hundred Seventy-Seventh Supplemental Indenture dated as of March 6, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(108) 4.572 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.571)(108) 4.573 Supplement No. 1 to the Two Hundred Sixty-Seventh Supplemental Indenture dated as of March 11, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(109) 225 Exhibit No. 4.574 Form of 4.75% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.573)(109) 4.575 Two Hundred Seventy-Eighth Supplemental Indenture dated as March 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(110) 4.576 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.575)(110) 4.577 Two Hundred Seventy-Ninth Supplemental Indenture dated as of March 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(110) 4.578 Form of 4.750% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.577)(110) 4.579 Two Hundred Eightieth Supplemental Indenture dated as of March 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(110) 4.580 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.579)(110) 4.581 Two Hundred Eighty-First Supplemental Indenture dated as of March 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(110) 4.582 Form of 5.750% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.581)(110) 4.583 Two Hundred Eighty-Second Supplemental Indenture dated as of March 13, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(110) 4.584 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.583)(110) 4.585 Two Hundred Eighty-Fourth Supplemental Indenture dated as March 20, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(111) 4.586 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.585)(111) 4.587 Two Hundred Eighty-Fifth Supplemental Indenture dated as of March 20, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(111) 4.588 Form of 4.750% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.587)(111) 4.589 Two Hundred Eighty-Sixth Supplemental Indenture dated as of March 20, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(111) 4.590 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.589)(111) 4.591 Two Hundred Eighty-Seventh Supplemental Indenture dated as of March 20, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(111) 4.592 Form of 5.750% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.591)(111) 4.593 Two Hundred Eighty-Eighth Supplemental Indenture dated as of March 20, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(111) 4.594 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.593)(111) 4.595 Two Hundred Eighty-Ninth Supplemental Indenture dated as March 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(112) 226 Exhibit No. 4.596 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.595)(112) 4.597 Two Hundred Ninetieth Supplemental Indenture dated as of March 20, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(112) 4.598 Form of 4.750% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.597)(112) 4.599 Two Hundred Ninety-First Supplemental Indenture dated as of March 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(112) 4.600 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.599)(112) 4.601 Two Hundred Ninety-Second Supplemental Indenture dated as of March 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(112) 4.602 Form of 5.750% Prospect Capital InterNote® due 2026 (included as part of Exhibit 4.601)(112) 4.603 Two Hundred Ninety-Third Supplemental Indenture dated as of March 27, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(112) 4.604 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.603)(112) 4.605 Two Hundred Ninety-Fourth Supplemental Indenture dated as of April 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(113) 4.606 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.605)(113) 4.607 Two Hundred Ninety-Fifth Supplemental Indenture dated as of April 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(113) 4.608 Form of 4.500% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.607)(113) 4.609 Two Hundred Ninety-Sixth Supplemental Indenture dated as of April 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(113) 4.610 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.609)(113) 4.611 Two Hundred Ninety-Seventh Supplemental Indenture dated as of April 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(113) 4.612 Form of 5.750% Prospect Capital InterNote® due 2024 (included as part of Exhibit 4.611)(113) 4.613 Two Hundred Ninety-Eighth Supplemental Indenture dated as of April 3, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(113) 4.614 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.613)(113) 4.615 Supplemental Indenture dated as of April 7, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(114) 4.616 Form of 5.000% Senior Notes due 2019 (included as part of Exhibit 4.615)(114) 4.617 Two Hundred Ninety-Ninth Supplemental Indenture dated as of April 10, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(115) 227 Exhibit No. 4.618 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.617)(115) 4.619 Three Hundredth Supplemental Indenture dated as of April 10, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(115) 4.620 Form of 4.250% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.619)(115) 4.621 Three Hundred First Supplemental Indenture dated as of April 10, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(115) 4.622 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.621)(115) 4.623 Three Hundred Second Supplemental Indenture dated as of April 10, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(115) 4.624 Form of 5.750% Prospect Capital InterNote® due 2024 (included as part of Exhibit 4.623)(115) 4.625 Three Hundred Third Supplemental Indenture dated as of April 10, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(115) 4.626 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.625)(115) 4.627 Indenture dated as of April 11, 2014, by and between Prospect Capital Corporation and American Stock Transfer & Trust Company, as Trustee(116) 4.628 Form of Global Note of 4.75% Senior Convertible Notes Due 2020 (included as part of Exhibit 4.627)(116) 4.629 Three Hundred Fourth Supplemental Indenture dated as of April 17, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(117) 4.630 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.629)(117) 4.631 Three Hundred Fifth Supplemental Indenture dated as of April 17, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(117) 4.632 Form of 4.250% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.631)(117) 4.633 Three Hundred Sixth Supplemental Indenture dated as of April 17, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(117) 4.634 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.633)(117) 4.635 Three Hundred Seventh Supplemental Indenture dated as of April 17, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(117) 4.636 Form of 5.750% Prospect Capital InterNote® due 2024 (included as part of Exhibit 4.635)(117) 4.637 Three Hundred Eighth Supplemental Indenture dated as of April 17, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(117) 4.638 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.637)(117) 4.639 Three Hundred Ninth Supplemental Indenture dated as of April 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(118) 4.640 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.639)(118) 228 Exhibit No. 4.641 Three Hundred Tenth Supplemental Indenture dated as of April 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(118) 4.642 Form of 4.500% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.641)(118) 4.643 Three Hundred Eleventh Supplemental Indenture dated as of April 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(118) 4.644 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.643)(118) 4.645 Three Hundred Twelfth Supplemental Indenture dated as of April 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(118) 4.646 Form of 5.750% Prospect Capital InterNote® due 2024 (included as part of Exhibit 4.645)(118) 4.647 Three Hundred Thirteenth Supplemental Indenture dated as of April 24, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(118) 4.648 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.647)(118) 4.649 Three Hundred Fourteenth Supplemental Indenture dated as of May 1, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(119) 4.650 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.649)(119) 4.651 Three Hundred Fifteenth Supplemental Indenture dated as of May 1, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(119) 4.652 Form of 4.500% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.651)(119) 4.653 Three Hundred Sixteenth Supplemental Indenture dated as of May 1, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(119) 4.654 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.653)(119) 4.655 Three Hundred Seventeenth Supplemental Indenture dated as of May 1, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(119) 4.656 Form of 5.750% Prospect Capital InterNote® due 2024 (included as part of Exhibit 4.655)(119) 4.657 Three Hundred Eighteenth Supplemental Indenture dated as of May 1, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(119) 4.658 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.657)(119) 4.659 Three Hundred Nineteenth Supplemental Indenture dated as of May 8, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(120) 4.660 Form of 3.750% Prospect Capital InterNote® due 2018 (included as part of Exhibit 4.659)(120) 4.661 Three Hundred Twentieth Supplemental Indenture dated as of May 8, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(120) 4.662 Form of 4.500% Prospect Capital InterNote® due 2019 (included as part of Exhibit 4.661)(120) 229 Exhibit No. 4.663 Three Hundred Twenty-First Supplemental Indenture dated as of May 8, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(120) 4.664 Form of 5.250% Prospect Capital InterNote® due 2021 (included as part of Exhibit 4.663)(120) 4.665 Three Hundred Twenty-Second Supplemental Indenture dated as of May 8, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(120) 4.666 Form of 5.750% Prospect Capital InterNote® due 2024 (included as part of Exhibit 4.665)(120) 4.667 Three Hundred Twenty-Third Supplemental Indenture dated as of May 8, 2014, to the Indenture dated as of February 16, 2012, as amended by that certain Agreement of Resignation, Appointment and Acceptance dated as of March 12, 2012, by and among the Registrant, American Stock Transfer & Trust Company, LLC, as Retiring Trustee, and U.S. Bank National Association, as Successor Trustee, by and between the Registrant and U.S. Bank National Association, as Trustee(120) 4.668 Form of 6.250% Prospect Capital InterNote® due 2039 (included as part of Exhibit 4.667)(120) 10.1 Investment Advisory Agreement between Registrant and Prospect Capital Management LLC(3) 10.2 Administration Agreement between Registrant and Prospect Administration LLC(3) 10.3 Dividend Reinvestment Plan(3) 10.4 Trademark License Agreement between the Registrant and Prospect Capital Management(3) 10.5 Transfer Agency and Registrar Services Agreement(4) 10.6 Master Purchase and Sale and Contribution Agreement, dated as of March 19, 2012, by and among Prospect Capital Corporation, First Tower Corp., certain other entities related to Prospect Capital Corporation and certain shareholders of First Tower Corp.(5) 10.7 Fourth Amended and Restated Loan and Servicing Agreement, dated March 27, 2012, among Prospect Capital Funding LLC, Prospect Capital Corporation, the lenders from time to time party thereto, the managing agents from time to time party thereto, Key Equipment Finance Inc. and Royal Bank of Canada as Syndication Agents, U.S. Bank National Association as Calculation Agent, Paying Agent and Documentation Agent, Key Equipment Finance Inc. as Facility Agent, and Key Equipment Finance Inc. as Structuring Agent, Sole Lead Arranger and Sole Bookrunner(6) 10.8 Third Amended and Restated Selling Agent Agreement, dated October 15, 2013, by and among, the Registrant, Prospect Capital Management LLC, Prospect Administration LLC, Incapital LLC and the Agents named therein and added from time to time(122) 10.9 Custody Agreement, dated as of January 23, 2013, by and between the Registrant and U.S. Bank National Association(60) 10.10 Custody Agreement, dated as of April 24, 2013, by and between the Registrant and Israeli Discount Bank of New York Ltd. (121) 10.11 Custody Agreement, dated as of October 28, 2013, by and between the Registrant and Fifth Third Bank(99) 10.12 Custody Agreement, dated as of May 9, 2014, by and between the Registrant and Customers Bank* 10.13 Custody Agreement, dated as of May 9, 2014, by and between the Registrant and Peapack-Gladstone Bank* 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) 14 Code of Ethics(121) 21 Subsidiaries of the Registrant (included in the notes to the consolidated financial statements contained in this annual report) 22.1 Proxy Statement(123) 22.2 Published report regarding matters submitted to vote of security holders(124) 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 from the Registrant's Form 8-K filed on May 9, 2014. (2) Incorporated by reference from the Registrant's Form 8-K filed on August 26, 2011. 230 (3) Incorporated by reference from Pre-Effective Amendment No. 2 to the Registrant's Registration Statement, filed on July 6, 2004. (4) Incorporated by reference from Pre-Effective Amendment No. 3 to the Registrant's Registration Statement, filed on July 23, 2004. (5) Incorporated by reference from the Registrant's Form 8-K filed on March 21, 2012. (6) Incorporated by reference from the Registrant's Form 8-K filed on April 2, 2012. (7) Incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-K filed on December 21, 2010. (8) Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on December 21, 2010. (9) Incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on February 18, 2011. (10) Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on February 18, 2011. (11) Incorporated by reference from Post-Effective Amendment No. 1 to the Registrant’s Registration Statement, filed on March 1, 2012. (12) Incorporated by reference from Post-Effective Amendment No. 2 to the Registrant’s Registration Statement, filed on March 8, 2012. (13) Incorporated by reference from Post-Effective Amendment No. 3 to the Registrant’s Registration Statement, filed on March 14, 2012. (14) Incorporated by reference from Post-Effective Amendment No. 5 to the Registrant’s Registration Statement, filed on April 5, 2012. Incorporated by reference from Post-Effective Amendment No. 6 to the Registrant’s Registration Statement, filed on April 12, 2012. (15) (16) Incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-K filed on April 16, 2012. (17) Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on April 16, 2012. (18) Incorporated by reference from Post-Effective Amendment No. 8 to the Registrant’s Registration Statement, filed on April 26, 2012. (19) Incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on May 7, 2012. (20) Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on May 7, 2012. (21) Incorporated by reference from Post-Effective Amendment No. 10 to the Registrant’s Registration Statement, filed on June 14, 2012. (22) Incorporated by reference from Post-Effective Amendment No. 11 to the Registrant’s Registration Statement, filed on June 28, 2012. (23) Incorporated by reference from Post-Effective Amendment No. 12 to the Registrant’s Registration Statement, filed on July 6, 2012. (24) Incorporated by reference from Post-Effective Amendment No. 13 to the Registrant’s Registration Statement, filed on July 12, 2012. (25) Incorporated by reference from Post-Effective Amendment No. 15 to the Registrant’s Registration Statement, filed on July 19, 2012. (26) Incorporated by reference from Post-Effective Amendment No. 16 to the Registrant’s Registration Statement, filed on July 26, 2012. Incorporated by reference from Post-Effective Amendment No. 17 to the Registrant’s Registration Statement, filed on August 2, 2012. (27) (28) Incorporated by reference from Post-Effective Amendment No. 18 to the Registrant’s Registration Statement, filed on August 9, 2012. (29) Incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on August 14, 2012. (30) Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on August 14, 2012. (31) Incorporated by reference from Post-Effective Amendment No. 19 to the Registrant’s Registration Statement, filed on August 16, 2012. (32) Incorporated by reference from Post-Effective Amendment No. 20 to the Registrant’s Registration Statement, filed on August 23, 2012. (33) Incorporated by reference from Post-Effective Amendment No. 22 to the Registrant’s Registration Statement, filed on September 7, 2012. (34) Incorporated by reference from Post-Effective Amendment No. 24 to the Registrant’s Registration Statement, filed on September 13, 2012. 231 (35) Incorporated by reference from Post-Effective Amendment No. 25 to the Registrant’s Registration Statement, filed on September 20, 2012. (36) Incorporated by reference from Post-Effective Amendment No. 26 to the Registrant’s Registration Statement, filed on September 27, 2012. (37) Incorporated by reference from Post-Effective Amendment No. 27 to the Registrant’s Registration Statement, filed on October 4, 2012. (38) Incorporated by reference from Post-Effective Amendment No. 2 to the Registrant’s Registration Statement, filed on November 23, 2012. (39) Incorporated by reference from Post-Effective Amendment No. 3 to the Registrant’s Registration Statement, filed on November 29, 2012. (40) Incorporated by reference from Post-Effective Amendment No. 4 to the Registrant’s Registration Statement, filed on December 6, 2012. (41) Incorporated by reference from Post-Effective Amendment No. 5 to the Registrant’s Registration Statement, filed on December 13, 2012. (42) Incorporated by reference from Post-Effective Amendment No. 6 to the Registrant’s Registration Statement, filed on December 20, 2012. (43) Incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on December 21, 2012. (44) Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on December 21, 2012. (45) Incorporated by reference from Post-Effective Amendment No. 8 to the Registrant’s Registration Statement, filed on December 28, 2012. (46) Incorporated by reference from Post-Effective Amendment No. 9 to the Registrant’s Registration Statement, filed on January 4, 2013. (47) Incorporated by reference from Post-Effective Amendment No. 10 to the Registrant’s Registration Statement, filed on January 10, 2013. (48) Incorporated by reference from Post-Effective Amendment No. 11 to the Registrant’s Registration Statement, filed on January 17, 2013. (49) Incorporated by reference from Post-Effective Amendment No. 12 to the Registrant’s Registration Statement, filed on January 25, 2013. (50) Incorporated by reference from Post-Effective Amendment No. 13 to the Registrant’s Registration Statement, filed on January 31, 2013. (51) Incorporated by reference from Post-Effective Amendment No. 14 to the Registrant’s Registration Statement, filed on February 7, 2013. (52) Incorporated by reference from Post-Effective Amendment No. 16 to the Registrant’s Registration Statement, filed on February 22, 2013. (53) Incorporated by reference from Post-Effective Amendment No. 17 to the Registrant’s Registration Statement, filed on February 28, 2013. (54) Incorporated by reference from Post-Effective Amendment No. 18 to the Registrant’s Registration Statement, filed on March 7, 2013. (55) Incorporated by reference from Post-Effective Amendment No. 19 to the Registrant’s Registration Statement, filed on March 14, 2013. (56) Incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on March 15, 2013. (57) Incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on March 15, 2013. (58) Incorporated by reference from Post-Effective Amendment No. 21 to the Registrant’s Registration Statement, filed on March 21, 2013. (59) Incorporated by reference from Post-Effective Amendment No. 22 to the Registrant’s Registration Statement, filed on March 28, 2013. (60) Incorporated by reference from the Registrant’s Form 10-Q filed on May 6, 2013. (61) Incorporated by reference from Post-Effective Amendment No. 23 to the Registrant’s Registration Statement, filed on April 4, 2013. (62) Incorporated by reference from Post-Effective Amendment No. 24 to the Registrant’s Registration Statement, filed on April 11, 2013. (63) Incorporated by reference from Post-Effective Amendment No. 25 to the Registrant’s Registration Statement, filed on April 18, 2013. (64) Incorporated by reference from Post-Effective Amendment No. 26 to the Registrant’s Registration Statement, filed on April 25, 2013. 232 (65) Incorporated by reference from Post-Effective Amendment No. 27 to the Registrant’s Registration Statement, filed on May 2, 2013. (66) Incorporated by reference from Post-Effective Amendment No. 29 to the Registrant’s Registration Statement, filed on May 9, 2013. (67) Incorporated by reference from Post-Effective Amendment No. 30 to the Registrant’s Registration Statement, filed on May 23, 2013. (68) Incorporated by reference from Post-Effective Amendment No. 31 to the Registrant’s Registration Statement, filed on May 31, 2013. (69) Incorporated by reference from Post-Effective Amendment No. 32 to the Registrant’s Registration Statement, filed on June 6, 2013. (70) Incorporated by reference from Post-Effective Amendment No. 33 to the Registrant’s Registration Statement, filed on June 13, 2013. (71) Incorporated by reference from Post-Effective Amendment No. 34 to the Registrant’s Registration Statement, filed on June 20, 2013. (72) Incorporated by reference from Post-Effective Amendment No. 35 to the Registrant’s Registration Statement, filed on June 27, 2013. (73) Incorporated by reference from Post-Effective Amendment No. 36 to the Registrant’s Registration Statement, filed on July 5, 2013. (74) Incorporated by reference from Post-Effective Amendment No. 37 to the Registrant’s Registration Statement, filed on July 11, 2013. (75) Incorporated by reference from Post-Effective Amendment No. 38 to the Registrant’s Registration Statement, filed on July 18, 2013. Incorporated by reference from Post-Effective Amendment No. 39 to the Registrant’s Registration Statement, filed on July 25, 2013. (76) (77) Incorporated by reference from Post-Effective Amendment No. 40 to the Registrant’s Registration Statement, filed on August 1, 2013. (78) Incorporated by reference from Post-Effective Amendment No. 41 to the Registrant’s Registration Statement, filed on August 8, 2013. (79) Incorporated by reference from Post-Effective Amendment No. 42 to the Registrant’s Registration Statement, filed on August 15, 2013. (80) Incorporated by reference from Post-Effective Amendment No. 43 to the Registrant’s Registration Statement, filed on August 22, 2013. (81) Incorporated by reference from Post-Effective Amendment No. 45 to the Registrant’s Registration Statement, filed on September 6, 2013. (82) Incorporated by reference from Post-Effective Amendment No. 46 to the Registrant’s Registration Statement, filed on September 12, 2013. (83) Incorporated by reference from Post-Effective Amendment No. 47 to the Registrant’s Registration Statement, filed on September 19, 2013. (84) Incorporated by reference from Post-Effective Amendment No. 48 to the Registrant's Registration Statement, filed on September 26, 2013. (85) Incorporated by reference from Post-Effective Amendment No. 49 to the Registrant's Registration Statement, filed on October 3, 2013. (86) Incorporated by reference from Post-Effective Amendment No. 50 to the Registrant's Registration Statement, filed on October 10, 2013. (87) Incorporated by reference from Post-Effective Amendment No. 51 to the Registrant's Registration Statement, filed on October 18, 2013. (88) Incorporated by reference from Post-Effective Amendment No. 3 to the Registrant's Registration Statement, filed on October 24, 2013. (89) Incorporated by reference from Post-Effective Amendment No. 4 to the Registrant's Registration Statement, filed on October 31, 2013. (90) Incorporated by reference from Post-Effective Amendment No. 6 to the Registrant's Registration Statement, filed on November 7, 2013. (91) Incorporated by reference from Post-Effective Amendment No. 7 to the Registrant's Registration Statement, filed on November 15, 2013. (92) Incorporated by reference from Post-Effective Amendment No. 8 to the Registrant's Registration Statement, filed on November 21, 2013. 233 (93) Incorporated by reference from Post-Effective Amendment No. 9 to the Registrant's Registration Statement, filed on November 29, 2013. (94) Incorporated by reference from Post-Effective Amendment No. 10 to the Registrant's Registration Statement, filed on December 5, 2013. (95) Incorporated by reference from Post-Effective Amendment No. 11 to the Registrant's Registration Statement, filed on December 12, 2013. (96) Incorporated by reference from Post-Effective Amendment No. 12 to the Registrant's Registration Statement, filed on December 19, 2013. (97) Incorporated by reference from Post-Effective Amendment No. 13 to the Registrant's Registration Statement, filed on December 27, 2013. (98) Incorporated by reference from Post-Effective Amendment No. 14 to the Registrant's Registration Statement, filed on January 3, 2014. (99) Incorporated by reference from Post-Effective Amendment No. 15 to the Registrant's Registration Statement, filed on January 9, 2014. (100) Incorporated by reference from Post-Effective Amendment No. 16 to the Registrant's Registration Statement , filed on January 16, 2014. (101) Incorporated by reference from Post-Effective Amendment No. 17 to the Registrant's Registration Statement, filed on January 24, 2014. (102) Incorporated by reference from Post-Effective Amendment No. 18 to the Registrant's Registration Statement, filed on January 30, 2014. (103) Incorporated by reference from Post-Effective Amendment No. 19 to the Registrant's Registration Statement, filed on February 6, 2014. Incorporated by reference from Post-Effective Amendment No. 20 to the Registrant's Registration Statement, filed on February 13, 2014. (104) (105) Incorporated by reference from Post-Effective Amendment No. 21 to the Registrant's Registration Statement, filed on February 19, 2014. (106) Incorporated by reference from Post-Effective Amendment No. 22 to the Registrant's Registration Statement, filed on February 21, 2014. (107) Incorporated by reference from Post-Effective Amendment No. 23 to the Registrant's Registration Statement, filed on February 27, 2014. (108) Incorporated by reference from Post-Effective Amendment No. 24 to the Registrant's Registration Statement, filed on March 6, 2014. (109) Incorporated by reference from Post-Effective Amendment No. 25 to the Registrant's Registration Statement, filed on March 11, 2014. (110) Incorporated by reference from Post-Effective Amendment No. 26 to the Registrant's Registration Statement, filed on March 13, 2014. (111) Incorporated by reference from Post-Effective Amendment No. 27 to the Registrant's Registration Statement, filed on March 20, 2014. (112) Incorporated by reference from Post-Effective Amendment No. 28 to the Registrant's Registration Statement, filed on March 27, 2014. (113) Incorporated by reference from Post-Effective Amendment No. 29 to the Registrant's Registration Statement, filed on April 3, 2014. (114) Incorporated by reference from Post-Effective Amendment No. 30 to the Registrant's Registration Statement, filed on April 7, 2014. (115) Incorporated by reference from Post-Effective Amendment No. 31 to the Registrant's Registration Statement, filed on April 10, 2014. (116) Incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on April 16, 2014. (117) Incorporated by reference from Post-Effective Amendment No. 32 to the Registrant's Registration Statement, filed on April 17, 2014. (118) Incorporated by reference from Post-Effective Amendment No. 33 to the Registrant's Registration Statement, filed on April 24, 2014. (119) Incorporated by reference from Post-Effective Amendment No. 34 to the Registrant's Registration Statement, filed on May 1, 2014. (120) Incorporated by reference from Post-Effective Amendment No. 35 to the Registrant's Registration Statement, filed on May 8, 2014. 234 (121) Incorporated by reference from the Registrant’s Form 10-K filed on August 21, 2013. (122) Incorporated by reference from Post-Effective Amendment No. 1 to the Registrant's Registration Statement, filed on October 15, 2013. (123) Incorporated by reference from the Registrant’s Proxy Statement filed on September 10, 2013. (124) Incorporated by reference from the Registrant’s Form 8-K filed on December 11, 2013. 235 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 August 25, 2014 . 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 John F. Barry III Chairman of the Board, Chief Executive Officer and Director August 25, 2014 /s/ ANDREW C. COOPER Andrew C. Cooper Director August 25, 2014 /s/ BRIAN H. OSWALD Brian H. Oswald Chief Financial Officer August 25, 2014 /s/ M. GRIER ELIASEK M. Grier Eliasek President, Chief Operating Officer and Director August 25, 2014 /s/ WILLIAM J. GREMP William J. Gremp Director August 25, 2014 /s/ EUGENE S. STARK Eugene S. Stark Director August 25, 2014 236 _____________________ CUSTODY AGREEMENT _____________________ dated as of May 9, 2014 by and between PROSPECT CAPITAL CORPORATION (“Company”) and CUSTOMERS BANK (“Custodian”) TABLE OF CONTENTS Page 1. DEFINITIONS 1 2. APPOINTMENT OF CUSTODIAN 6 3. DUTIES OF CUSTODIAN 7 4. REPORTING 15 5. DEPOSIT IN U.S. SECURITIES SYSTEMS 15 6. FOREIGN SUB-CUSTODIANS 16 7. CERTAIN GENERAL TERMS 16 8. RESPONSIBILITY OF CUSTODIAN 17 9. SECURITY CODES 21 10. TAX LAW 21 11. EFFECTIVE PERIOD, TERMINATION 21 12. REPRESENTATIONS AND WARRANTIES 22 13. PARTIES IN INTEREST; NO THIRD PARTY BENEFIT 23 14. NOTICES 23 15. CHOICE OF LAW AND JURISDICTION 24 16. ENTIRE AGREEMENT; COUNTERPARTS 24 17. AMENDMENT; WAIVER 24 18. SUCCESSOR AND ASSIGNS 25 19. SEVERABILITY 25 20. REQUEST FOR INSTRUCTIONS 25 21. OTHER BUSINESS 25 22. REPRODUCTION OF DOCUMENTS 26 23. MISCELLANEOUS 26 SCHEDULES SCHEDULE A – CERTIFICATE OF AUTHORIZED PERSONS i This CUSTODY AGREEMENT (this “ Agreement ”) is dated as of May 9, 2014, and is by and between Prospect Capital Corporation (and any successor or permitted assign, the “ Company ”), a corporation organized under the laws of the State of Maryland, having its principal place of business at 10 East 40 th Street, 42 nd Floor, New York, NY 10016, and Customers Bank (and any successor or permitted assign acting as custodian hereunder, the “ Custodian ”), a Pennsylvania state-chartered bank having a place of business at 99 Park Avenue, New York, New York 10016. RECITALS WHEREAS, the Company is a closed-end management investment company that has registered as an investment company under the Investment Company Act of 1940, as amended (the “ 1940 Act ”); WHEREAS, the Company desires to retain the Custodian to act as custodian for the Company; and WHEREAS, the Company desires that the Company’s Securities (as defined below) and cash be held and administered by the Custodian pursuant to this Agreement in compliance with Section 17(f) of the 1940 Act. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. DEFINITIONS 1.1 Defined Terms . In addition to terms expressly defined elsewhere herein, the following words shall have the following meanings as used in this Agreement: “ Account ” means the Cash Account and the Securities Account, collectively. “ Agreement ” means this Custody Agreement (as the same may be amended from time to time in accordance with the terms hereof). “ Asset File ” means, with respect to each Security for which documents are delivered to the Document Custodian, each of the Required Documents identified on the related Document Checklist. “ Authorized Person ” has the meaning set forth in Section 7.4. “ Business Day ” means a day on which the Custodian or the relevant sub-custodian is open for business in the market or country in which a transaction is to take place. “ Cash Account ” means the segregated custodial account to be established at the Custodian to which the Custodian shall deposit or credit and hold any cash or Proceeds received by it from time to time from or with respect to the Securities or the sale of the Securities of the Company, as applicable, which account shall be designated the “Prospect Capital Corporation Cash Proceeds Account.” “ Certificated Security ” shall have the meaning ascribed to such term in Section 8-102(4) of the UCC. “ Company ” has the meaning set forth in the first paragraph of this Agreement . “ Confidential Information ” means any databases, computer programs, screen formats, screen designs, report formats, interactive design techniques, and other similar or related information that may be furnished to the Company by the Custodian from time to time pursuant to this Agreement. “ Custodian ” has the meaning set forth in the first paragraph of this Agreement. “ Document Custodian ” means the Custodian when acting in the role of a document custodian hereunder. “ Document Checklist ” means a list delivered to the Document Custodian by the Company in connection with delivery of each Asset File to the Custodian that identifies (i) whether a Security is a Certificated Security or an Uncertificated Security, and (ii) the documents, instruments and certificates contained in the related Asset File. “ Eligible Investment ” means any investment that at the time of its acquisition is one or more of the following: (a) United States government and agency obligations; (b) commercial paper having a rating assigned to such commercial paper by Standard & Poor’s Rating Services or Moody’s Investor Service, Inc. (or, if neither such organization shall rate such commercial paper at such time, by any nationally recognized rating organization in the United States of America) equal to one of the two highest ratings assigned by such organization, it being understood that as of the date hereof such ratings by Standard & Poor’s Rating Services are “A1+” and “A1” and such ratings by Moody’s Investor Service, Inc. are “P1” and “P2”; (c) interest bearing deposits in United States dollars in United States banks maturing within one year; and (d) money market funds (including funds of the bank serving as Custodian or its affiliates) or United States government securities funds designed to maintain a fixed share price and high liquidity. “ Eligible Securities Depository ” has the meaning set forth in Section (b)(1) of Rule 17f-7 under the 1940 Act. 2 “ Federal Reserve Bank Book-Entry System ” means a depository and securities transfer system operated by the Federal Reserve Bank of the United States on which are eligible to be held all United States Government direct obligation bills, notes and bonds. “ Financing Documents ” has the meaning set forth in Section 3.3(b)(ii). “ Foreign Sub-custodian ” means and includes (i) any branch of a “U.S. Bank,” as that term is defined in Rule 17f-5 under the 1940 Act, or (ii) any “Eligible Foreign Custodian,” as that term is defined in Rule 17f-5 under the 1940 Act. “ Participation ” means an interest in a Security that is acquired indirectly by way of a participation from a selling institution. “ Person ” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization, or any government or agency or political subdivision thereof. “ Proceeds ” means, collectively, (i) the net cash proceeds to the Company of the initial public offering by the Company and any subsequent offering by the Company of any class of securities issued by the Company, (ii) all cash distributions, earnings, dividends, fees and other cash payments paid on the Securities by or on behalf of the issuer or obligor thereof, or applicable paying agent, (iii) the net cash proceeds of the sale or other disposition of the Securities pursuant to the terms of this Agreement and (iv) the net cash proceeds to the Company of any borrowing or other financing by the Company (and any Reinvestment Earnings from investment of any of the foregoing). “ Proper Instructions ” means instructions (including Trade Confirmations) received by the Custodian in form acceptable to it, from the Company, or any Person duly authorized by the Company, by any of the following means: (a) in writing signed by any two (2) Authorized Persons (and delivered by hand, by mail, by overnight courier or by telecopier); (b) by electronic mail from an Authorized Person; (c) in tested communication; (d) in a communication utilizing access codes effected between electro mechanical or electronic devices; or (e) such other means as may be agreed upon from time to time by the Custodian and the party giving such instructions, including oral instructions. “ Reinvestment Earnings ” has the meaning set forth in Section 3.6(b). 3 “ Required Documents ” means, for each Security as to which an Asset File is delivered to the Document Custodian: (a) the related Document Checklist; and (b) such documents identified in the Document Checklist that may include any Underlying Documents (but excluding any physical certificates evidencing ownership of a Certificated Security). “ Securities ” means, collectively, (i) the equity investments, including investments in partnership and limited liability companies, acquired by the Company and delivered to the Custodian by the Company from time to time during the term of, and pursuant to the terms of, this Agreement and (ii) all dividends in kind ( e.g. , non-cash dividends) from the investments described in clause (i). “ Securities Account ” means the segregated trust account to be established at the Custodian to which the Custodian shall deposit or credit and hold the Securities (other than Uncertificated Securities) received by it pursuant to this Agreement, which account shall be designated the “Prospect Capital Corporation Securities Account.” “ Securities Custodian ” means the Custodian when acting in the role of a securities custodian hereunder. “ Securities Depository ” means The Depository Trust Company and any other clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), which acts as a system for the central handling of securities where all securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the securities. “ Securities System ” means the Federal Reserve Book-Entry System, a clearing agency which acts as a Securities Depository, or another book entry system for the central handling of securities (including an Eligible Securities Depository). “ Street Delivery Custom ” means a custom of the United States securities market to deliver securities which are being sold to the buying broker for examination to determine that the securities are in proper form. “ Street Name ” means the form of registration in which the securities are held by a broker who is delivering the securities to another broker for the purposes of sale, it being an accepted custom in the United States securities industry that a security in Street Name is in proper form for delivery to a buyer and that a security may be re- registered by a buyer in the ordinary course. “ Trade Confirmation ” means a confirmation to the Custodian from the Company of the Company’s acquisition of a Security setting forth applicable information with respect to 4 such Security in any form as may be agreed to by, the Custodian and the Company from time to time. “ UCC ” shall have the meaning set forth in Section 3.3(a). “ Underlying Agreement ” means, with respect to any Security, the limited liability company agreement, subscription agreement or other document or documents evidencing the Company’s investment in the related issuer. “ Underlying Documents ” means, with respect to any Security for which the Company delivers an Asset File to the Custodian, the documents listed on the Document Checklist that may include the related Underlying Agreement together with any other offering memorandums, purchase agreements, security documents, other agreements, other ancillary documents, and instruments (including any Certificated Security) executed or delivered in connection with the Company’s investment in the issuer thereof, including a copy of the register evidencing registration of the membership or equity interest of the Company on the books and records of the applicable issuer. “ Uncertificated Security ” means a Security that is not represented by a physical certificate. 1.2 Construction . In this Agreement unless the contrary intention appears: (a) any reference to this Agreement or another agreement or instrument refers to such agreement or instrument as the same may be amended, modified or otherwise rewritten from time to time; (b) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them; (c) any term defined in the singular form may be used in, and shall include, the plural with the same meaning, and vice versa; (d) a reference to a Person includes a reference to the Person’s executors, successors and permitted assigns; (e) an agreement, representation or warranty in favor of two or more Persons is for the benefit of them jointly and severally; (f) an agreement, representation or warranty on the part of two or more Persons binds them jointly and severally; (g) a reference to the term “including” means “including, without limitation,”; and 5 (h) a reference to any accounting term is to be interpreted in accordance with generally accepted principles and practices in the United States, consistently applied, unless otherwise instructed by the Company. 1.3 Headings . Headings are inserted for convenience and do not affect the interpretation of this Agreement. 2. APPOINTMENT OF CUSTODIAN 2.1 Appointment and Acceptance . The Company hereby appoints the Custodian as custodian of certain Securities and cash owned by the Company and delivered to the Custodian by the Company from time to time during the period of this Agreement, on the terms and conditions set forth in this Agreement (which shall include any addendum hereto which is hereby incorporated herein and made a part of this Agreement), and the Custodian hereby accepts such appointment and agrees to perform the services and duties set forth in this Agreement with respect to it, subject to and in accordance with the provisions hereof; provided, however, that the Custodian shall only be required to act as a Custodian for Securities of or owned by the Company, or as Document Custodian or Securities Custodian, if the Company and the Custodian each agree in writing (any such written agreement herein called a “Custodial Consent”). Notwithstanding anything to the contrary contained herein, any provisions of this Agreement that govern the duties and obligations of the Custodian when acting as Custodian for Securities of or owned by the Company, or when acting in the role of a securities custodian or a document custodian, shall apply to the Custodian only after it has executed a Custodial Consent. All Required Documents and Securities in certificated form shall be maintained and held on behalf of the Company by the Custodian in its vaults in accordance with customary standards for such custody. 2.2 Instructions . The Company agrees that it shall from time to time provide, or cause to be provided, to the Custodian all necessary instructions and information, and shall respond promptly to all inquiries and requests of the Custodian, as may reasonably be necessary to enable the Custodian to perform its duties hereunder. 2.3 Company Responsible For Directions . The Company is solely responsible for directing the Custodian with respect to deposits to, withdrawals from and transfers to or from the Account. Without limiting the generality of the foregoing, the Custodian has no responsibility for the Company’s compliance with the 1940 Act, any restrictions, covenants, limitations or obligations to which the Company may be subject or for which it may have obligations to third-parties in respect of the Account, and the Custodian shall have no liability for the application of any funds made at the direction of the Company. The Company shall be solely responsible for properly instructing all applicable payors to make all appropriate payments to the Custodian for deposit to the Account, and for properly instructing the Custodian with respect to the allocation or application of all such deposits. 6 3. DUTIES OF CUSTODIAN 3.1 Segregation . All Securities and non-cash property held by the Custodian, as applicable, for the account of the Company (other than Securities maintained in a Securities Depository or Securities System) shall be physically segregated from other Securities and non-cash property in the possession of the Custodian and shall be identified as subject to this Agreement. 3.2 Securities Custody Account . The Custodian shall open and maintain in its trust department a segregated trust account in the name of the Company, subject only to order of the Custodian, in which the Custodian shall enter and carry, subject to Section 3.3(b), all Securities (other than Uncertificated Securities) and other investment Uncertificated Securities of the Company which are delivered to it in accordance with this Agreement. For avoidance of doubt, the Custodian shall not be required to credit or deposit Uncertificated Securities in the Securities Account but shall instead maintain a register (in book-entry form or in such other form as it shall deem necessary or desirable) of such Uncertificated Securities, containing such information as the Company and the Custodian may reasonably agree; provided that, with respect to such Uncertificated Securities, all Required Documents shall be held in safekeeping by the Document Custodian, individually segregated from the securities and investments of any other person and marked so as to clearly identify them as the property of the Company in a manner consistent with Rule 17f-1 under the 1940 Act and as set forth in this Agreement. The Custodian shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such Securities and investments except pursuant to the direction of the Company under terms of the Agreement. 3.3 Delivery of Cash and Securities to Custodian . (a) The Company shall deliver, or cause to be delivered, to the Custodian certain of the Company’s Securities, cash and other investment assets. Required Documents shall be delivered to the Custodian in its role as, and at the address identified for, the Document Custodian; provided that physical certificates representing a Security shall be delivered to the Securities Custodian. Except to the extent otherwise expressly provided herein, delivery of Securities constituting Certificated Securities to the Custodian shall be in Street Name or the name of the Company or its nominee (or other good delivery form). The Custodian shall not be responsible for such Securities, cash or other assets until actually delivered to, and received by it. With respect to Securities (other than Uncertificated Securities and assets in the nature of “general intangibles” (as hereinafter defined)) held by the Custodian in its capacity as a “securities intermediary” (as defined in Section 8-102 of the Uniform Commercial Code as in effect in the State of New York (the “ UCC ”)), the Custodian shall be obligated to exercise due care in accordance with reasonable commercial standards in discharging its duties as a securities intermediary to obtain and maintain such 7 Securities. A Security will be deemed to be “delivered” to the Custodian when the Company delivers such Security in the following manner: (i) if such Security is a Certificated Security or an instrument (other than a Security held in a Securities System), then in physical certificated form in the name of the Company or its nominee, (ii) if such Security is an Uncertificated Security or in the form of uncertificated share(s) or other interest (other than a Security held in a Securities System), then delivery of confirmation statements which identify such shares or interests as being recorded in the name of the Company or its nominee, (iii) if such Security is held in a Securities System or maintained in one or more omnibus accounts at the Custodian, its agents or sub-custodians, then delivery of confirmation that such Security is held in the Securities System or maintained through one or more omnibus accounts in the name of the Custodian (or its nominee) who shall identify the same on its books and records as held for the account of the Company, or (iv) in such other good delivery form that may be agreed to by the Custodian from time to time. (b) (i) In connection with its acquisition of a Security constituting an Uncertificated Security, the Company shall deliver or cause to be delivered to the Custodian (in its roles as, and at the address identified for, the Custodian and Document Custodian) a properly completed Trade Confirmation containing such information in respect of such Security as the Custodian may reasonably require in order to enable the Custodian to perform its duties hereunder in respect of such Security and on which the Custodian may conclusively rely without further inquiry or investigation, in such form and format as the Custodian reasonably may require, and shall deliver to the Document Custodian (in its role as, and at the address identified for, the Document Custodian) the Required Documents, including the Document Checklist. (ii) Notwithstanding anything herein to the contrary, delivery of Securities acquired by the Company in the form of Uncertificated Securities or Participations or which are otherwise not evidenced by a “security” or “instrument” as defined in Section 8-102 and Section 9-102(a)(47) of the UCC), respectively, shall be made by delivery to the Document Custodian of (i) in the case of an Uncertificated Security, a copy of the register of the underlying issuer of such interest evidencing registration of such equity interest on the books and records of the applicable issuer to the name of the Company (or its nominee) or a copy (which may be a facsimile copy) of an assignment agreement in favor of the Company as assignee, as identified on the Document Checklist and (ii) in the case of a Participation, a copy of the related participation agreement or limited liability agreement identifying the Company as participant or owner of such interest. Any duty on the part of the Custodian with respect to the custody of such Securities shall be limited to the exercise of reasonable care by the Custodian in the physical custody of any such Required 8 Documents delivered to it, and any related instrument, security, participation agreement, assignment agreement and/or other agreements or documents, if any (collectively, “ Financing Documents ”), that may be delivered to it. Nothing herein shall require the Custodian to credit to the Securities Account or to treat as a financial asset (within the meaning of Section 8-102(a)(9) of the UCC) any Security that is not represented by a physical share certificate or an asset in the nature of a general intangible (as defined in Section 9-102(a)(42) of the UCC) or uncertificated security (within the meaning of Section 8-102(18) of the UCC) or to “maintain” a sufficient quantity thereof. (iii) The Custodian may assume the genuineness of any such Financing Document it may receive and the genuineness and due authority of any signatures appearing thereon, and shall be entitled to assume that each such Financing Document it may receive is what it purports to be. If an original “security” or “instrument” as defined in Section 8-102 and Section 9-102(a)(47) of the UCC, respectively, is or shall be or become available with respect to any Security to be held by the Custodian under this Agreement, it shall be the sole responsibility of the Company to make or cause delivery thereof to the Document Custodian, and the Custodian shall not be under any obligation at any time to determine whether any such original security or instrument has been or is required to be issued or made available in respect of any Security or to compel or cause delivery thereof to the Custodian. (iv) Contemporaneously with the acquisition of any Security, the Company shall (A) take all actions necessary for the Company to acquire good title to such Security; and (B) take all actions as may be necessary (including appropriate payment notices and instructions to issuers, agents or other applicable paying agents) to cause (x) all payments in respect of the Security to be made to the Custodian and (y) all notices, solicitations and other communications in respect of such Security to be directed to the Company. The Custodian shall have no liability for any delay or failure on the part of the Company to provide necessary information to the Custodian, or for any inaccuracy therein or incompleteness thereof, or for any delay or failure on the part of the Company to give such effective payment instruction to the applicable issuer, its agents and other paying agents. With respect to each such Security, the Custodian shall be entitled to rely on any information and notices it may receive from time to time from the related issuer, agent, obligor or similar party with respect to the related Security, or from the Company, and shall be entitled to update its records (as it may deem necessary or appropriate) on the basis of such information or notices received, without any obligation on its part independently to verify, investigate or recalculate such information. 9 3.4 Release of Securities . (a) The Custodian shall release and deliver, or direct its agents or sub-custodian to release and deliver, as the case may be, Securities or Required Documents of the Company held by the Custodian, its agents or its sub-custodian from time to time upon receipt of Proper Instructions (which shall, among other things, specify the Securities or Required Documents to be released, with such delivery and other information as may be necessary to enable the Custodian to perform), which may be standing instructions (in form acceptable to the Custodian), in the following cases: (i) upon sale of such Securities by or on behalf of the Company, and such sale may, unless and except to the extent otherwise directed by Proper Instructions, be carried out by the Custodian: (A) in accordance with the customary or established practices and procedures in the jurisdiction or market where the transactions occur, including delivery to the purchaser thereof or to a dealer therefor (or an agent of such purchaser or dealer) against expectation of receiving later payment; or (B) in the case of a sale effected through a Securities System, in accordance with the rules governing the operations of the Securities System; (ii) upon the receipt of payment in connection with any repurchase agreement related to such Securities; (iii) to a depositary agent in connection with tender or other similar offers for such Securities; (iv) to the issuer thereof, or its agent, when such Securities are called, redeemed, retired or otherwise become payable (unless otherwise directed by Proper Instructions, the cash or other consideration is to be delivered to the Custodian, its agents or its sub- custodian); (v) to an issuer thereof, or its agent, for transfer into the name of the Custodian or of any nominee of the Custodian or into the name of any of its agents or sub-custodian or their nominees, or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination in accordance with the Street Delivery Custom; 10 (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such Securities, or pursuant to any deposit agreement (unless otherwise directed by Proper Instructions, the new securities and cash, if any, are to be delivered to the Custodian, its agents or its sub-custodian); (viii) in the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities (unless otherwise directed by Proper Instructions, the new securities and cash, if any, are to be delivered to the Custodian, its agents or its sub-custodian); and/or (ix) for any other purpose, but only upon receipt of Proper Instructions and an officer’s certificate signed by an officer of the Company (which officer shall not have been any Authorized Person providing the Proper Instructions) stating (i) the specified securities to be delivered, (ii) the purpose for such delivery, (iii) that such purpose is a proper corporate purpose and (iv) naming the person or persons to whom delivery of such Securities shall be made, and attaching a certified copy of a resolution of the board of directors of the Company or an authorized committee thereof approving the delivery of such Proper Instructions. 3.5 Registration of Securities . Securities held by the Custodian, its agents or its sub-custodian (other than bearer securities, securities held in a Securities System or Securities that are Uncertificated Securities or Participations) shall be registered in the name of the Company or its nominee; or, at the option of the Custodian (if the Custodian determines it cannot hold such security in the name of the Company), in the name of the Custodian or in the name of any nominee of the Custodian, or in the name of its agents or its sub-custodian or their nominees; or, if directed by the Company by Proper Instruction, may be maintained in Street Name. The Custodian, its agents and its sub-custodian shall not be obliged to accept Securities on behalf of the Company under the terms of this Agreement unless such Securities are in Street Name or other good deliverable form. 3.6 Bank Accounts, and Management of Cash . (a) Proceeds and other cash received by the Custodian from time to time shall be deposited or credited to the Cash Account. All amounts deposited or credited to the Cash Account shall be subject to clearance and receipt of final payment by the Custodian. (b) Amounts held in the Cash Account from time to time may be invested in Eligible Investments generally offered by the Custodian at such time to its commercial customers, pursuant to specific written Proper Instructions (which may be standing instructions) received by the Custodian from any two (2) Authorized Persons acting on behalf of the Company. Such investments shall be subject to 11 availability and the Custodian’s then applicable transaction charges (which shall be at the Company’s expense). The Custodian shall have no liability for any loss incurred on any such investment. Absent receipt of such written instruction from the Company, the Custodian shall have no obligation to invest (or otherwise pay interest on) amounts on deposit in the Cash Account. In no instance will the Custodian have any obligation to provide investment advice to the Company. Any earnings from such investment of amounts held in the Cash Account from time to time (collectively, “ Reinvestment Earnings ”) shall be redeposited in the Cash Account (and may be reinvested at the written direction of the Company). (c) In the event that the Company shall at any time request a withdrawal of amounts from the Cash Account, the Custodian shall be entitled to liquidate, and shall have no liability for any loss incurred as a result of the liquidation of, any investment of the funds credited to such account as needed to provide necessary liquidity. (d) The Company acknowledges that cash deposited or invested with any bank (including the bank acting as Custodian) may make a margin or generate banking income for which such bank shall not be required to account to the Company. 3.7 Foreign Exchange . (a) Upon the receipt of Proper Instructions, the Custodian, its agents or its sub-custodian may (but shall not be obligated to) enter into all types of contracts for foreign exchange on behalf of the Company, upon terms acceptable to the Custodian and the Company (in each case at the Company’s expense), including transactions entered into with the Custodian, its sub-custodian or any affiliates of the Custodian or the sub-custodian. The Custodian shall have no liability for any losses incurred in or resulting from the rates obtained in such foreign exchange transactions; and absent specific Proper Instructions, the Custodian shall not be deemed to have any duty to carry out any foreign exchange on behalf of the Company. The Custodian shall be entitled at all times to comply with any legal or regulatory requirements applicable to currency or foreign exchange transactions. (b) The Company acknowledges that the Custodian, any sub-custodian or any affiliates of the Custodian or any sub-custodian, involved in any such foreign exchange transactions may make a margin or generate banking income from foreign exchange transactions entered into pursuant to this Section 3.7 for which they shall not be required to account to the Company. 3.8 Collection of Income . The Custodian, its agents or its sub-custodian shall use reasonable efforts to collect on a timely basis all income and other payments with respect to the Securities held hereunder to which the Company shall be entitled, to the extent consistent with usual custom in the securities custodian business in the United States. Such efforts shall include collection of interest income, dividends and other payments 12 with respect to registered domestic securities if, on the record date with respect to the date of payment by the issuer, the Security is registered in the name of the Custodian or its nominee (or in the name of its agent or sub- custodian, or their nominees); and interest income, dividends and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such Securities are held by the Custodian or its sub-custodian or agent; provided, however, that in the case of Securities held in Street Name, the Custodian shall use commercially reasonable efforts only to timely collect income. In no event shall the Custodian’s agreement herein to collect income be construed to obligate the Custodian to commence, undertake or prosecute any legal proceedings. 3.9 Payment of Moneys . Upon receipt of Proper Instructions, which may be standing instructions, the Custodian shall pay out from the Cash Account (or remit to its agents or its sub-custodian, and direct them to pay out) moneys of the Company on deposit therein in the following cases: (a) upon the purchase of Securities for the Company pursuant to such Proper Instruction; and such purchase may, unless and except to the extent otherwise directed by Proper Instructions, be carried out by the Custodian: (i) in accordance with the customary or established practices and procedures in the jurisdiction or market where the transactions occur, including delivering money to the seller thereof or to a dealer therefor (or any agent for such seller or dealer) against expectation of receiving later delivery of such securities; or (ii) in the case of a purchase effected through a Securities System, in accordance with the rules governing the operation of such Securities System; (b) for the purchase or sale of foreign exchange or foreign exchange agreements for the account of the Company, including transactions executed with or through the Custodian, its agents or its sub-custodian, as contemplated by Section 3.7 above; (i) in payment of the price of securities of the Company repurchased in open market purchases, tender offers or any other Company repurchase program; and (ii) for any other purpose directed by the Company, but only upon receipt of Proper Instructions specifying the amount of such payment, and naming the Person or Persons to whom such payment is to be made. 3.10 Proxies . The Custodian will, with respect to the Securities held hereunder, use reasonable efforts to cause to be promptly executed by the registered holder of such Securities proxies received by the Custodian from its agents or its sub-custodian or from issuers of the Securities being held for the Company, without indication of the manner in which such proxies are to be voted, and upon receipt of Proper Instructions shall promptly deliver to the applicable issuer such proxies relating to such Securities. In the absence of such Proper Instructions, or in the event that such Proper Instructions are not 13 received in a timely fashion, except to the extent otherwise expressly provided herein, the Custodian shall be under no duty to act with regard to such proxies. Notwithstanding the above, neither Custodian nor any nominee of Custodian shall vote any of the Securities held hereunder by or for the account of the Company, except in accordance with Proper Instructions. 3.11 Communications Relating to Securities . The Custodian shall transmit promptly to the Company all written information (including proxies, proxy soliciting materials, notices, pendency of calls and maturities of Securities and expirations of rights in connection therewith) received by the Custodian, from its agents or its sub- custodian or from issuers of the Securities being held for the Company. The Custodian shall have no obligation or duty to exercise any right or power, or otherwise to preserve rights, in or under any Securities unless and except to the extent it has received timely Proper Instruction from the Company in accordance with the next sentence. The Custodian will not be liable for any untimely exercise of any right or power in connection with Securities at any time held by the Custodian, its agents or sub-custodian unless: (i) the Custodian has received Proper Instructions with regard to the exercise of any such right or power; and (ii) the Custodian, or its agents or sub-custodian are in actual possession of such Securities, in each case, at least three (3) Business Days prior to the date on which such right or power is to be exercised. It will be the responsibility of the Company to notify the Custodian of the Person to whom such communications must be forwarded under this Section. 3.12 Records . The Custodian shall create and maintain complete and accurate records relating to its activities under this Agreement with respect to the Securities, cash or other property held for the Company under this Agreement, with particular attention to Section 31 of the 1940 Act, and Rules 31a-1 and 31a-2 thereunder. To the extent that the Custodian, in its sole opinion, is able to do so, the Custodian shall provide assistance to the Company (at the Company’s reasonable request made from time to time) by providing sub-certifications regarding certain of its services performed hereunder to the Company in connection with the Company’s certification requirements pursuant to the Sarbanes-Oxley Act of 2002, as amended. All such records shall be the property of the Company and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Company (including its independent public accountants) and employees and agents of the Securities and Exchange Commission, upon reasonable request and prior notice and at the Company’s expense. The Custodian shall, at the Company’s request, supply the Company with a tabulation of Securities owned by the Company and held by the Custodian and shall, when requested to do so by the Company and for such compensation as shall be agreed upon between the Company and the Custodian, include, to the extent 14 applicable, the certificate numbers in such tabulations, to the extent such information is available to the Custodian. 4. REPORTING (a) The Custodian shall render to the Company a monthly report of (i) all deposits to and withdrawals from the Cash Account during the month, and the outstanding balance (as of the last day of the preceding monthly report and as of the last day of the subject month), (ii) an itemized statement of the Securities held pursuant to this Agreement as of the end of each month, all transactions in the Securities during the month, as well as a list of all Securities transactions that remain unsettled at that time, and (iii) such other matters as the parties may agree from time to time. (b) For each Business Day, the Custodian shall render to the Company a daily report of (i) all deposits to and withdrawals from the Cash Account for such Business Day and the outstanding balance as of the end of such Business Day, and (ii) a report of settled trades of Securities for such Business Day. (c) The Custodian shall have no duty or obligation to undertake any market valuation of the Securities under any circumstance. (d) The Custodian shall provide the Company, promptly upon request, with such reports as are reasonably available to it and as the Company may reasonably request from time to time, concerning (i) the internal accounting controls, including procedures for safeguarding securities, which are employed by the Custodian and (ii) the financial strength of the Custodian. 5. DEPOSIT IN U.S. SECURITIES SYSTEMS The Custodian may deposit and/or maintain Securities in a Securities System within the United States in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, including Rule 17f-4 under the 1940 Act, and subject to the following provisions: (c) The Custodian may keep domestic Securities in a U.S. Securities System; provided that such Securities are represented in an account of the Custodian in the U.S. Securities System which shall not include any assets of the Custodian other than assets held by it as a fiduciary, custodian or otherwise for customers; (d) The records of the Custodian with respect to Securities which are maintained in a U.S. Securities System shall identify by book-entry those Securities belonging to the Company; 15 (e) The Custodian shall provide to the Company copies of all notices received from a U.S. Securities System of transfers of Securities for the account of the Company; and (f) Anything to the contrary in this Agreement notwithstanding, the Custodian shall not be liable to the Company for any direct loss, damage, cost, expense, liability or claim to the Company resulting from use of any U.S. Securities System (other than to the extent resulting from the gross negligence, misfeasance or misconduct of the Custodian itself, or from failure of the Custodian to enforce effectively such rights as it may have against a U.S. Securities System). 6. FOREIGN SUB-CUSTODIANS 6.1 Foreign Sub-custodians . The Custodian may not appoint or employ any Foreign Sub-custodians. 7. CERTAIN GENERAL TERMS 7.1 No Duty to Examine Underlying Instruments . Nothing herein shall obligate the Custodian to review or examine the terms of any underlying limited liability company agreement, stock or share certificate, share registrar, instrument, subscription agreement, limited partnership agreement or other similar agreement or document evidencing or governing any Security to determine the validity, sufficiency, marketability or enforceability of any Security (and shall have no responsibility for the genuineness or completeness thereof), or otherwise. 7.2 Resolution of Discrepancies . In the event of any discrepancy between the information set forth in any report provided by the Custodian to the Company and any information contained in the books or records of the Company, the Company shall promptly notify the Custodian thereof and the parties shall cooperate to diligently resolve the discrepancy. 7.3 Improper Instructions . Notwithstanding anything herein to the contrary, the Custodian shall not be obligated to take any action (or forebear from taking any action), which it reasonably determines to be contrary to the terms of this Agreement or applicable law. In no instance shall the Custodian be obligated to provide services on any day that is not a Business Day. 7.4 Proper Instructions . (a) The Company will give a notice to the Custodian, in form acceptable to the Custodian, specifying the names and specimen signatures of persons authorized to give Proper Instructions (collectively, “ Authorized Persons ” and each is an “ Authorized Person ”), which notice shall be signed by any two (2) Authorized Persons previously certified to the Custodian. The Custodian shall be entitled to rely upon the identity and authority of such persons until it receives written 16 notice from any two (2) Authorized Persons of the Company to the contrary. The initial Authorized Persons are set forth on Schedule A attached hereto and made a part hereof (as such Schedule A may be modified from time to time by written notice from the Company to the Custodian); and the Company hereby represents and warrants that the true and accurate specimen signatures of such initial Authorized Persons are set forth on Schedule A . (b) The Custodian shall have no responsibility or liability to the Company (or any other person or entity), and shall be indemnified and held harmless by the Company, in the event that a subsequent written confirmation of an oral instruction fails to conform to the oral instructions received by the Custodian. The Custodian shall not have an obligation to act in accordance with purported instructions to the extent that they conflict with applicable law or regulations, local market practice or the Custodian’s operating policies and practices. The Custodian shall not be liable for any loss resulting from a delay while it obtains clarification of any Proper Instructions. 7.5 Actions Permitted Without Express Authority . The Custodian may, at its discretion, without express authority from the Company: (c) surrender Securities in temporary form for Securities in definitive form; (d) endorse for collection cheques, drafts and other negotiable instruments; and (e) in general attend to all nondiscretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Company. 7.6 Evidence of Authority . The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate, instrument or paper reasonably believed by it to be genuine and to have been properly executed or otherwise given by or on behalf of the Company by any two (2) Authorized Persons. The Custodian may receive and accept a certificate signed by any two (2) Authorized Persons as conclusive evidence of: (a) the authority of any person to act in accordance with such certificate; or (b) any determination or action by the Company as described in such certificate, and such certificate may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary from any two (2) Authorized Persons of the Company. 7.7 Receipt of Communications . Any communication received by the Custodian on a day which is not a Business Day or after 3:30 p.m., Eastern time (or such other time as is agreed by the Company and the Custodian from time to time), on a Business Day will be deemed to have been received on the next Business Day (but in the case of 17 communications so received after 3:30 p.m., Eastern time, on a Business Day the Custodian will use its best efforts to process such communications as soon as possible after receipt). 8. RESPONSIBILITY OF CUSTODIAN 8.1 General Duties . The Custodian shall have no duties, obligations or responsibilities under this Agreement or with respect to the Securities or Proceeds except for such duties as are expressly and specifically set forth in this Agreement, and the duties and obligations of the Custodian shall be determined solely by the express provisions of this Agreement. No implied duties, obligations or responsibilities shall be read into this Agreement against, or on the part of, the Custodian. 8.2 Instructions . (c) The Custodian shall be entitled to refrain from taking any action unless it has such instruction (in the form of Proper Instructions) from the Company as it reasonably deems necessary, and shall be entitled to require, upon notice to the Company, that Proper Instructions to it be in writing. The Custodian shall have no liability for any action (or forbearance from action) taken pursuant to the Proper Instruction of the Company. (d) Whenever the Custodian is entitled or required to receive or obtain any communications or information pursuant to or as contemplated by this Agreement, it shall be entitled to receive the same in writing, in form, content and medium reasonably acceptable to it and otherwise in accordance with any applicable terms of this Agreement; and whenever any report or other information is required to be produced or distributed by the Custodian it shall be in form, content and medium reasonably acceptable to it and the Company and otherwise in accordance with any applicable terms of this Agreement. 8.3 General Standards of Care . Notwithstanding any terms herein contained to the contrary, the acceptance by the Custodian of its appointment hereunder is expressly subject to the following terms, which shall govern and apply to each of the terms and provisions of this Agreement (whether or not so stated therein): (c) The Custodian may rely on (and shall be protected in acting or refraining from acting in reliance upon) any written notice, instruction, statement, certificate, request, waiver, consent, opinion, report, receipt or other paper or document furnished to it (including any of the foregoing provided to it by telecopier or electronic means), not only as to its due execution and validity, but also as to the truth and accuracy of any information therein contained, which it in good faith believes to be genuine and signed or presented by the proper person (which in the case of any instruction from or on behalf of the Company shall be any two (2) Authorized Persons); and the Custodian shall be entitled to presume the genuineness and due authority of any signature appearing thereon. The 18 Custodian shall not be bound to make any independent investigation into the facts or matters stated in any such notice, instruction, statement, certificate, request, waiver, consent, opinion, report, receipt or other paper or document; provided, however, that, if the form thereof is specifically prescribed by the terms of this Agreement, the Custodian shall examine the same to determine whether it substantially conforms on its face to such requirements hereof. (d) Neither the Custodian nor any of its directors, officers or employees shall be liable to anyone for any error of judgment, or for any act done or step taken or omitted to be taken by it (or any of its directors, officers of employees), or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, unless such action or inaction constitutes gross negligence, willful misconduct or bad faith on its part and in breach of the terms of this Agreement. The Custodian shall not be liable for any action taken by it in good faith and reasonably believed by it to be within powers conferred upon it, or taken by it pursuant to any direction or instruction by which it is governed hereunder, or omitted to be taken by it by reason of the lack of direction or instruction required hereby for such action. Except as otherwise expressly provided herein, the Custodian shall not be under any obligation at any time to ascertain whether the Company is in compliance with the 1940 Act, the regulations thereunder, or the Company’s investment objectives and policies then in effect. (e) In no event shall the Custodian be liable for any indirect, special or consequential damages (including lost profits) whether or not it has been advised of the likelihood of such damages. (f) The Custodian may consult with, and obtain advice from, legal counsel selected in good faith with respect to any question as to any of the provisions hereof or its duties hereunder, or any matter relating hereto, and the written opinion or advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Custodian in good faith in accordance with the opinion and directions of such counsel. (g) The Custodian shall not be deemed to have notice of any fact, claim or demand with respect hereto unless actually known by an employee working in its Corporate Trust Services group and charged with responsibility for administering this Agreement or unless received (and then only to the extent received) in writing by the Custodian at the applicable address(es) as set forth in Section 14 and specifically referencing this Agreement. (h) No provision of this Agreement shall require the Custodian to expend or risk its own funds, or to take any action (or forbear from action) hereunder which might in its judgment involve any expense or any financial or other liability unless it shall be furnished with acceptable indemnification. Nothing herein shall obligate the Custodian to commence, prosecute or defend legal proceedings in any 19 instance, whether on behalf of the Company or on its own behalf or otherwise, with respect to any matter arising hereunder, or relating to this Agreement or the services contemplated hereby. (i) The permissive right of the Custodian to take any action hereunder shall not be construed as duty. (j) The Custodian may act or exercise its duties or powers hereunder through agents, subcustodians, or attorneys, and the Custodian shall not be liable or responsible for the actions or omissions of any such agent, subcustodian or attorney (i) appointed with the Company’s prior written consent specifically acknowledging such limitation of liability and (ii) maintained with reasonable due care. (k) All indemnifications contained in this Agreement in favor of the Custodian shall survive the termination of this Agreement. 8.4 Indemnification; Custodian’s Lien . (f) The Company shall and does hereby indemnify and hold harmless each of the Custodian for and from any and all costs and expenses (including reasonable attorney’s fees and expenses), and any and all losses, damages, claims and liabilities, that may arise, be brought against or incurred by the Custodian, and any advances or disbursements made by the Custodian (including in respect of any Account overdraft, returned deposit item, chargeback, provisional credit, settlement or assumed settlement, reclaimed payment, claw-back or the like), as a result of, relating to, or arising out of this Agreement, or the administration or performance of the Custodian’s duties hereunder, or the relationship between the Company (including, for the avoidance of doubt, any subsidiary) and the Custodian created hereby, other than such liabilities, losses, damages, claims, costs and expenses as are directly caused by the Custodian’s action or inaction constituting gross negligence, fraud or willful misconduct. (g) If the Company requests that the Custodian, its affiliates, subsidiaries or agents, advance cash or securities for any purpose (including but not limited to securities settlements, foreign exchange contracts and assumed settlement) (it being understood and agreed that the Custodian may approve or reject any such request in its sole discretion) or in the event that the Custodian or its nominee shall incur or be assessed any taxes, charges, expenses, assessments, claims or liabilities in connection with the performance of this Agreement, except such as may arise from the Custodian’s or its nominee’s own gross negligent action, gross negligent failure to act, fraud or willful misconduct, or if the Company fails to compensate the Custodian pursuant to Section 8.4 hereof, any cash at any time held for the account of the Company shall be security therefor and should the Company fail to repay the Custodian promptly (or, if specified, within the time 20 frame provided herein), the Custodian shall be entitled to utilize available cash to the extent necessary to obtain reimbursement. 8.5 Force Majeure . Without prejudice to the generality of the foregoing, the Custodian shall be without liability to the Company for any damage or loss resulting from or caused by events or circumstances beyond the Custodian’s reasonable control, including nationalization, expropriation, currency restrictions, the interruption, disruption or suspension of the normal procedures and practices of any securities market, power, mechanical, communications or other technological failures or interruptions, computer viruses or the like, fires, floods, earthquakes or other natural disasters, civil and military disturbance, acts of war or terrorism, riots, revolution, acts of God, work stoppages, strikes, national disasters of any kind, or other similar events or acts; errors by the Company (including any Authorized Person) in its instructions to the Custodian; or changes in applicable law, regulation or orders. 9. SECURITY CODES If the Custodian issues to the Company security codes, passwords or test keys in order that it may verify that certain transmissions of information, including Proper Instructions, have been originated by the Company, the Company shall take all commercially reasonable steps to safeguard any security codes, passwords, test keys or other security devices which the Custodian shall make available. 10. TAX LAW 10.1 Domestic Tax Law . The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Company, or the Custodian as custodian of the Securities or the Proceeds, by the tax law of the United States or any state or political subdivision thereof. The Custodian shall be kept indemnified by and be without liability to the Company for such obligations including taxes (but excluding any income taxes assessable in respect of compensation paid to the Custodian pursuant to this Agreement), withholding, certification and reporting requirements, claims for exemption or refund, additions for late payment interest, penalties and other expenses (including legal expenses) that may be assessed against the Company, or the Custodian as custodian of the Securities or Proceeds. 10.2 Foreign Tax Law . It shall be the responsibility of the Company to notify the Custodian of the obligations imposed on the Company by the tax law of foreign ( i.e. , non-U.S.) jurisdictions, including responsibility for withholding and other taxes, assessments or other government charges, certifications and government reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to cooperate with the Company with respect to any claims for exemption or refund under the tax law of the jurisdictions for which the Company has provided such information. 21 11. EFFECTIVE PERIOD, TERMINATION 11.1 Effective Date . This Agreement shall become effective as of its due execution and delivery by each of the parties. This Agreement shall continue in full force and effect until terminated as hereinafter provided. This Agreement may be terminated by the Custodian or the Company pursuant to Section 11.2. 11.2 Termination . This Agreement shall terminate upon the earliest of (a) occurrence of the effective date of termination specified in any written notice of termination given by either party to the other not later than sixty (60) days prior to the effective date of termination specified therein, and (b) such other date of termination as may be mutually agreed upon by the parties in writing. If a successor custodian shall have been appointed by the Company, the Custodian shall, upon receipt of a notice of acceptance by the successor custodian, on such specified date of termination (a) deliver directly to the successor custodian all Securities (other than Securities held in a Securities System) and cash then owned by the Fund and held by the Custodian as custodian, and (b) transfer any Securities held in a Securities System to an account of or for the benefit of the Fund at the successor custodian. In the event of the appointment of a successor custodian, it is agreed that all Securities held by the Custodian, any sub-custodian or nominee shall be delivered to the successor custodian; and the Custodian agrees to cooperate with the Company in the execution of documents and performance of other actions necessary or desirable in order to substitute the successor custodian for the Custodian under this Agreement. The Company may at any time immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by regulatory authorities or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Termination shall not affect any of the liabilities either party owes to the other arising under this Agreement prior to such termination. 11.3 Resignation . The Custodian may at any time resign under this Agreement by giving not less than sixty (60) days advance written notice thereof to the Company. The Company may at any time remove the Custodian under this Agreement by giving not less than sixty (60) days advance written notice thereof to the Custodian. 11.4 Successor . Prior to the effective date of termination of this Agreement, or the effective date of the resignation or removal of the Custodian, as the case may be, the Company shall give Proper Instruction to the Custodian designating a successor Custodian, if applicable. 11.5 Final Report . In the event of any resignation or removal of the Custodian, the Custodian shall provide to the Company a complete final report or data file transfer of any Confidential Information as of the date of such resignation or removal. 22 12. REPRESENTATIONS AND WARRANTIES 12.1 Representations of the Company . The Company represents and warrants to the Custodian that: (c) it has the power and authority to enter into and perform its obligations under this Agreement, and it has duly authorized, executed and delivered this Agreement so as to constitute its valid and binding obligation; and (d) in giving any instructions which purport to be “Proper Instructions” under this Agreement, the Company will act in accordance with the provisions of its articles of incorporation and bylaws and any applicable laws and regulations. 12.2 Representations of the Custodian . The Custodian hereby represents and warrants to the Company that: (b) it is qualified to act as a custodian pursuant to Section 26(a)(1) of the 1940 Act; (c) it has the power and authority to enter into and perform its obligations under this Agreement; (d) it has duly authorized, executed and delivered this Agreement so as to constitute its valid and binding obligations; and (e) it maintains business continuity policies and standards that include data file backup and recovery procedures that comply with all applicable regulatory requirements. 13. PARTIES IN INTEREST; NO THIRD PARTY BENEFIT This Agreement is not intended for, and shall not be construed to be intended for, the benefit of any third parties and may not be relied upon or enforced by any third parties (other than successors and permitted assigns pursuant to Section 18). 14. NOTICES Any Proper Instructions (to the extent given by hand, mail, courier or telecopier) shall be given to the following address (or such other address as either party may designate by written notice to the other party), and otherwise any notices, approvals and other communications hereunder shall be sufficient if made in writing and given to the parties at the following address (or such other address as either of them may subsequently designate by notice to the other), given by (i) hand, (ii) certified or registered mail, postage prepaid, (iii) recognized courier or delivery service, or (iv) confirmed telecopier or telex, with a duplicate sent on the same day by first class mail, postage prepaid: (a) if to the Company, to 23 Prospect Capital Corporation 10 East 40 th Street, 42 nd Floor New York, New York 10016 Attention: Prospect Accounting Fax No.: (212) 448-9652 Email: fax@prospectstreet.com pacct@prospectstreet.com pl@prospectstreet.com (b) if to the Custodian, to Customers Bank 99 Park Avenue New York, New York 10016 Ref: Prospect Capital Corporation Attention: Eugene M. Kennedy III Fax: Email: ekennedy@cbpcb.com 15. CHOICE OF LAW AND JURISDICTION This Agreement shall be construed, and the provisions thereof interpreted under and in accordance with and governed by the laws of the State of New York for all purposes (without regard to its choice of law provisions); except to the extent such laws are inconsistent with federal securities laws, including the 1940 Act, in which case such federal securities laws shall govern. 16. ENTIRE AGREEMENT; COUNTERPARTS 16.1 Complete Agreement . This Agreement constitutes the complete and exclusive agreement of the parties with regard to the matters addressed herein and supersedes and terminates, as of the date hereof, all prior agreements or understandings, oral or written, between the parties to this Agreement relating to such matters. 16.2 Counterparts . This Agreement may be executed in any number of counterparts and all counterparts taken together shall constitute one and the same instrument. 16.3 Facsimile Signatures . The exchange of copies of this Agreement and of signature pages by facsimile transmission or pdf shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or pdf shall be deemed to be their original signatures for all purposes. 24 17. AMENDMENT; WAIVER 17.1 Amendment . This Agreement may not be amended except by an express written instrument duly executed by each of the Company and the Custodian (and not by an email or series of emails); provided, that in the case of the Company, such amendment must be signed in blue ink by the Chief Executive Officer or President of the Company or their successors. 17.2 Waiver . In no instance shall any delay or failure to act be deemed to be or effective as a waiver of any right, power or term hereunder, unless and except to the extent such waiver is set forth in an express written instrument signed by the party against whom it is to be charged (and not by an email or series of emails); provided, that in the case of the Company, such waiver must be signed in blue ink by the Chief Executive Officer or President of the Company or their successors. 18. SUCCESSOR AND ASSIGNS 18.1 Successors Bound . The covenants and agreements set forth herein shall be binding upon and inure to the benefit of each of the parties and their respective successors and permitted assigns. Neither party shall be permitted to assign their rights under this Agreement without the written consent of the other party; provided, however, that the foregoing shall not limit the ability of the Custodian to delegate certain duties or services to or perform them through agents or attorneys appointed with due care as expressly provided in this Agreement. 18.2 Merger and Consolidation . Any corporation or association into which the Custodian may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any corporation or association to which the Custodian transfers all or substantially all of its corporate trust business, shall be the successor of the Custodian hereunder, and shall succeed to all of the rights, powers and duties of the Custodian hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto. 19. SEVERABILITY The terms of this Agreement are hereby declared to be severable, such that if any term hereof is determined to be invalid or unenforceable, such determination shall not affect the remaining terms. Should any part of this Agreement be held invalid or unenforceable in any jurisdiction, the invalid or unenforceable portion or portions shall be removed (and no more) only in that jurisdiction, and the remainder shall be enforced as fully as possible (removing the minimum amount possible) in that jurisdiction. In lieu of such invalid or unenforceable provision, the parties hereto will negotiate in good faith to add automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. 25 20. REQUEST FOR INSTRUCTIONS If, in performing its duties under this Agreement, the Custodian is required to decide between alternative courses of action, the Custodian may (but shall not be obliged to) request written instructions from the Company as to the course of action desired by it. If the Custodian does not receive such instructions within two (2) Business Days after it has requested them, the Custodian may, but shall be under no duty to, take or refrain from taking any such courses of action. The Custodian shall act in accordance with instructions received from the Company in response to such request after such two-Business Day period except to the extent it has already taken, or committed itself to take, action inconsistent with such instructions. 21. OTHER BUSINESS Nothing herein shall prevent the Custodian or any of its affiliates from engaging in other business, or from entering into any other transaction or financial or other relationship with, or receiving fees from or from rendering services of any kind to the Company or any other Person. Nothing contained in this Agreement shall constitute the Company and/or the Custodian (and/or any other Person) as members of any partnership, joint venture, association, syndicate, unincorporated business or similar assignment as a result of or by virtue of the engagement or relationship established by this Agreement. 22. REPRODUCTION OF DOCUMENTS This Agreement and all schedules, exhibits, attachments and amendment hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further production shall likewise be admissible in evidence. 23. MISCELLANEOUS The Company acknowledges receipt of the following notice: “ IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT . To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non-individual person such as a business entity, a charity, a trust or other legal entity the Custodian will ask for documentation to verify its formation and existence as a legal entity. The Custodian may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation.” 26 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered by a duly authorized officer, intending the same to take effect as of the date first written above. Witness: PROSPECT CAPITAL CORPORATION _/s/ Eric F. Colandrea___________ By: /s/ M. Grier Eliasek Name: Eric F. Colandrea Name: M. Grier Eliasek Title: Deputy General Counsel Title: President and COO Witness: CUSTOMERS BANK _/s/ Jake Danielski _______________ By: /s/ Eugene Kennedy Name: Jake Danielski Name: Eugene Kennedy Title: Vice President Title: Managing Director 27 SCHEDULE A CERTIFICATE OF AUTHORIZED PERSONS The undersigned hereby certifies that he/she is the duly elected and acting Secretary of Prospect Capital Corporation (the “Client”), and further certifies that the following officers or employees of the Client have been duly authorized to deliver Instructions to the Custodian pursuant to the Agreement between the Client and Custodian, dated May 9, 2014, and that the signatures appearing opposite their names are true and correct: John F. Barry III Name Chairman and CEO Title M. Grier Eliasek Name President and COO Title Signature Signature Brian H. Oswald Name CFO, Secretary and Treasurer Title Signature This certificate supersedes any certificate of Authorized Persons you may currently have on file. By:_______________________________ Name: Brian H. Oswald Title: CFO, Secretary and Treasurer Date: May 9, 2014 _____________________ CUSTODY AGREEMENT _____________________ dated as of May 9, 2014 by and between PROSPECT CAPITAL CORPORATION (“Company”) and PEAPACK-GLADSTONE BANK (“Custodian”) TABLE OF CONTENTS Page 1. DEFINITIONS 1 2. APPOINTMENT OF CUSTODIAN 6 3. DUTIES OF CUSTODIAN 6 4. REPORTING 14 5. DEPOSIT IN U.S. SECURITIES SYSTEMS 15 6. FOREIGN SUB-CUSTODIANS 15 7. CERTAIN GENERAL TERMS 15 8. RESPONSIBILITY OF CUSTODIAN 17 9. SECURITY CODES 20 10. TAX LAW 20 11. EFFECTIVE PERIOD, TERMINATION 21 12. REPRESENTATIONS AND WARRANTIES 22 13. PARTIES IN INTEREST; NO THIRD PARTY BENEFIT 22 14. NOTICES 22 15. CHOICE OF LAW AND JURISDICTION 23 16. ENTIRE AGREEMENT; COUNTERPARTS 23 17. AMENDMENT; WAIVER 24 18. SUCCESSOR AND ASSIGNS 24 19. SEVERABILITY 24 20. REQUEST FOR INSTRUCTIONS 25 21. OTHER BUSINESS 25 22. REPRODUCTION OF DOCUMENTS 25 23. MISCELLANEOUS 25 SCHEDULES SCHEDULE A – CERTIFICATE OF AUTHORIZED PERSONS i THIS CUSTODY AGREEMENT ( as amended, modified and/or supplemented and in effect, from time to time, this “ Agreement ”) is dated as of May 9, 2014, and is by and between Prospect Capital Corporation (and any successor or permitted assign, the “ Company ”), a corporation organized under the laws of the State of Maryland, having its principal place of business at 10 East 40 th Street, 42 nd Floor, New York, NY 10016, and Peapack-Gladstone Bank (and any successor or permitted assign acting as custodian hereunder, the “ Custodian ”), a New Jersey state chartered banking institution having a place of business at 500 Hills Drive, Bedminster, New jersey 07921. RECITALS WHEREAS, the Company is a closed-end management investment company that has registered as an investment company under the Investment Company Act of 1940, as amended (the “ 1940 Act ”); WHEREAS, the Company desires to retain the Custodian to act as custodian for the Company; and WHEREAS, the Company desires that the Company’s Securities (as defined below) and cash be held and administered by the Custodian pursuant to this Agreement in compliance with Section 17(f) of the 1940 Act. NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows: 1. DEFINITIONS 1.1 Defined Terms . In addition to terms expressly defined elsewhere herein, the following words shall have the following meanings as used in this Agreement: “ Account ” means the Cash Account and the Securities Account, collectively. “ Agreement ” means this Custody Agreement (as the same may be amended from time to time in accordance with the terms hereof). “ Asset File ” means, with respect to each Security for which documents are delivered to the Document Custodian, each of the Required Documents identified on the related Document Checklist. “ Authorized Person ” has the meaning set forth in Section 7.4. “ Business Day ” means a day on which the Custodian or the relevant sub-custodian is open for business in the market or country in which a transaction is to take place. “ Cash Account ” means the segregated demand deposit account to be established at the Custodian to which the Custodian shall deposit or credit and hold any cash or Proceeds received by it, from time to time, from the Company, which demand deposit account shall be designated the “Prospect Capital Corporation Cash Account.” “ Certificated Security ” shall have the meaning ascribed to such term in Section 8-102(4) of the UCC. “ Company ” has the meaning set forth in the first paragraph of this Agreement . “ Confidential Information ” means any databases, computer programs, screen formats, screen designs, report formats, interactive design techniques, and other similar or related information that may be furnished to the Company by the Custodian from time to time pursuant to this Agreement. “ Custodian ” has the meaning set forth in the first paragraph of this Agreement. “ Document Custodian ” means the Custodian when acting in the role of a document custodian hereunder. “ Document Checklist ” means a list delivered to the Document Custodian by the Company in connection with delivery of each Asset File to the Custodian that identifies (i) whether a Security is a Certificated Security or an Uncertificated Security, and (ii) the documents, instruments and certificates contained in the related Asset File. “ Eligible Investment ” means any investment that at the time of its acquisition is one or more of the following: (a) United States government and agency obligations; (b) commercial paper having a rating assigned to such commercial paper by Standard & Poor’s Rating Services or Moody’s Investor Service, Inc. (or, if neither such organization shall rate such commercial paper at such time, by any nationally recognized rating organization in the United States of America) equal to one of the two highest ratings assigned by such organization, it being understood that as of the date hereof such ratings by Standard & Poor’s Rating Services are “A1+” and “A1” and such ratings by Moody’s Investor Service, Inc. are “P1” and “P2”; (c) interest bearing deposits in United States dollars in United States banks maturing within one year; and (d) money market funds (including funds of the bank serving as Custodian or its affiliates) or United States government securities funds designed to maintain a fixed share price and high liquidity. “ Eligible Securities Depository ” has the meaning set forth in Section (b)(1) of Rule 17f-7 under the 1940 Act. “ Federal Reserve Bank Book-Entry System ” means a depository and securities transfer system operated by the Federal Reserve Bank of the United States on which are eligible to be held all United States Government direct obligation bills, notes and bonds. -2- 1675380v1 “ Financing Documents ” has the meaning set forth in Section 3.3(b)(ii). “ Foreign Sub-custodian ” means and includes (i) any branch of a “U.S. Bank,” as that term is defined in Rule 17f-5 under the 1940 Act, or (ii) any “Eligible Foreign Custodian,” as that term is defined in Rule 17f-5 under the 1940 Act. “ Participation ” means an interest in a Security that is acquired indirectly by way of a participation from a selling institution. “ Person ” means any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization, or any government or agency or political subdivision thereof. “ Proceeds ” means, collectively, (i) the net cash proceeds to the Company of the initial public offering by the Company and any subsequent offering by the Company of any class of securities issued by the Company, (ii) all cash distributions, earnings, dividends, fees and other cash payments paid on the Securities by or on behalf of the issuer or obligor thereof, or applicable paying agent, (iii) the net cash proceeds of the sale or other disposition of the Securities pursuant to the terms of this Agreement and (iv) the net cash proceeds to the Company of any borrowing or other financing by the Company (and any Reinvestment Earnings from investment of any of the foregoing). “ Proper Instructions ” means instructions (including Trade Confirmations) received by the Custodian in form acceptable to it, from the Company, or any Person duly authorized by the Company, by any of the following means: (a) in writing signed by any two (2) Authorized Persons (and delivered by hand, by mail, by overnight courier or by telecopier); (b) by electronic mail from an Authorized Person; (c) in tested communication; (d) in a communication utilizing access codes effected between electro mechanical or electronic devices; or (e) such other means as may be agreed upon from time to time by the Custodian and the party giving such instructions, including oral instructions. “ Reinvestment Earnings ” has the meaning set forth in Section 3.6(b). “ Required Documents ” means, for each Security as to which an Asset File is delivered to the Document Custodian: (a) the related Document Checklist; and -3- 1675380v1 (b) such documents identified in the Document Checklist that may include any Underlying Documents (but excluding any physical certificates evidencing ownership of a Certificated Security). “ Securities ” means, collectively, (i) the equity investments, including investments in partnership and limited liability companies, acquired by the Company and delivered to the Custodian by the Company from time to time during the term of, and pursuant to the terms of, this Agreement and (ii) all dividends in kind ( e.g. , non-cash dividends) from the investments described in clause (i). “ Securities Account ” means the segregated trust account to be established at the Custodian to which the Custodian shall deposit or credit and hold the Securities (other than Uncertificated Securities) received by it pursuant to this Agreement, which account shall be designated the “Prospect Capital Corporation Securities Account.” “ Securities Custodian ” means the Custodian when acting in the role of a securities custodian hereunder. “ Securities Depository ” means The Depository Trust Company and any other clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, as amended (the “ 1934 Act ”), which acts as a system for the central handling of securities where all securities of any particular class or series of an issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the securities. “ Securities System ” means the Federal Reserve Book-Entry System, a clearing agency which acts as a Securities Depository, or another book entry system for the central handling of securities (including an Eligible Securities Depository). “ Street Delivery Custom ” means a custom of the United States securities market to deliver securities which are being sold to the buying broker for examination to determine that the securities are in proper form. “ Street Name ” means the form of registration in which the securities are held by a broker who is delivering the securities to another broker for the purposes of sale, it being an accepted custom in the United States securities industry that a security in Street Name is in proper form for delivery to a buyer and that a security may be re- registered by a buyer in the ordinary course. “ Trade Confirmation ” means a confirmation to the Custodian from the Company of the Company’s acquisition of a Security setting forth applicable information with respect to such Security in any form as may be agreed to by, the Custodian and the Company from time to time. “ UCC ” shall have the meaning set forth in Section 3.3(a). -4- 1675380v1 “ Underlying Agreement ” means, with respect to any Security, the limited liability company agreement, subscription agreement or other document or documents evidencing the Company’s investment in the related issuer. “ Underlying Documents ” means, with respect to any Security for which the Company delivers an Asset File to the Custodian, the documents listed on the Document Checklist that may include the related Underlying Agreement together with any other offering memorandums, purchase agreements, security documents, other agreements, other ancillary documents, and instruments (including any Certificated Security) executed or delivered in connection with the Company’s investment in the issuer thereof, including a copy of the register evidencing registration of the membership or equity interest of the Company on the books and records of the applicable issuer. “ Uncertificated Security ” means a Security that is not represented by a physical certificate. 1.2 Construction . In this Agreement unless the contrary intention appears: (a) any reference to this Agreement or another agreement or instrument refers to such agreement or instrument as the same may be amended, modified or otherwise rewritten from time to time; (b) a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them; (c) any term defined in the singular form may be used in, and shall include, the plural with the same meaning, and vice versa; (d) a reference to a Person includes a reference to the Person’s executors, successors and permitted assigns; (e) an agreement, representation or warranty in favor of two or more Persons is for the benefit of them jointly and severally; (f) an agreement, representation or warranty on the part of two or more Persons binds them jointly and severally; (g) a reference to the term “including” means “including, without limitation,”; and (h) a reference to any accounting term is to be interpreted in accordance with generally accepted principles and practices in the United States, consistently applied, unless otherwise instructed by the Company. 1.3 Headings . Headings are inserted for convenience and do not affect the interpretation of this Agreement. -5- 1675380v1 2. APPOINTMENT OF CUSTODIAN 2.1 Appointment and Acceptance . The Company hereby appoints the Custodian as custodian of certain Securities and cash owned by the Company and delivered to the Custodian by the Company from time to time during the period of this Agreement, on the terms and conditions set forth in this Agreement (which shall include any addendum hereto which is hereby incorporated herein and made a part of this Agreement), and the Custodian hereby accepts such appointment and agrees to perform the services and duties set forth in this Agreement with respect to it, subject to and in accordance with the provisions hereof. All Required Documents and Securities in certificated form shall be maintained and held on behalf of the Company by the Custodian in its vaults in accordance with customary standards for such custody. 2.2 Instructions . The Company agrees that it shall from time to time provide, or cause to be provided, to the Custodian all necessary instructions and information, and shall respond promptly to all inquiries and requests of the Custodian, as may reasonably be necessary to enable the Custodian to perform its duties hereunder. 2.3 Company Responsible For Directions . The Company is solely responsible for directing the Custodian with respect to deposits to, withdrawals from and transfers to or from the Account. Without limiting the generality of the foregoing, the Custodian has no responsibility for the Company’s compliance with the 1940 Act, any restrictions, covenants, limitations or obligations to which the Company may be subject or for which it may have obligations to third-parties in respect of the Account, and the Custodian shall have no liability for the application of any funds made at the direction of the Company. The Company shall be solely responsible for properly instructing all applicable payors to make all appropriate payments to the Custodian for deposit to the Account, and for properly instructing the Custodian with respect to the allocation or application of all such deposits. 3. DUTIES OF CUSTODIAN 3.1 Segregation . All Securities and non-cash property held by the Custodian, as applicable, for the account of the Company (other than Securities maintained in a Securities Depository or Securities System) shall be physically segregated from other Securities and non-cash property in the possession of the Custodian and shall be identified as subject to this Agreement. 3.2 Securities Custody Account . The Custodian shall open and maintain in its trust department a segregated trust account in the name of the Company, subject only to order of the Custodian, in which the Custodian shall enter and carry, subject to Section 3.3(b), all Securities (other than Uncertificated Securities) and other investment Uncertificated Securities of the Company which are delivered to it in accordance with this Agreement. For avoidance of doubt, the Custodian shall not be required to credit or deposit Uncertificated Securities in the Securities Account but shall instead maintain a register (in book-entry form or in such other form as it shall deem necessary or desirable) of such -6- 1675380v1 Uncertificated Securities, containing such information as the Company and the Custodian may reasonably agree; provided that, with respect to such Uncertificated Securities, all Required Documents shall be held in safekeeping by the Document Custodian, individually segregated from the securities and investments of any other person and marked so as to clearly identify them as the property of the Company in a manner consistent with Rule 17f-1 under the 1940 Act and as set forth in this Agreement. The Custodian shall have no power or authority to assign, hypothecate, pledge or otherwise dispose of any such Securities and investments except pursuant to the direction of the Company under terms of the Agreement. 3.3 Delivery of Cash and Securities to Custodian. (a) The Company shall deliver, or cause to be delivered, to the Custodian certain of the Company’s Securities, cash and other investment assets. Required Documents shall be delivered to the Custodian in its role as, and at the address identified for, the Document Custodian; provided that physical certificates representing a Security shall be delivered to the Securities Custodian. Except to the extent otherwise expressly provided herein, delivery of Securities constituting Certificated Securities to the Custodian shall be in Street Name or the name of the Company or its nominee (or other good delivery form). The Custodian shall not be responsible for such Securities, cash or other assets until actually delivered to, and received by it. With respect to Securities (other than Uncertificated Securities and assets in the nature of “general intangibles” (as hereinafter defined)) held by the Custodian in its capacity as a “securities intermediary” (as defined in Section 8-102 of the Uniform Commercial Code as in effect in the State of New York (the “ UCC ”)), the Custodian shall be obligated to exercise due care in accordance with reasonable commercial standards in discharging its duties as a securities intermediary to obtain and maintain such Securities. A Security will be deemed to be “delivered” to the Custodian when the Company delivers such Security in the following manner: (i) if such Security is a Certificated Security or an instrument (other than a Security held in a Securities System), then in physical certificated form in the name of the Company or its nominee, (ii) if such Security is an Uncertificated Security or in the form of uncertificated share(s) or other interest (other than a Security held in a Securities System), then delivery of confirmation statements which identify such shares or interests as being recorded in the name of the Company or its nominee, (iii) if such Security is held in a Securities System or maintained in one or more omnibus accounts at the Custodian, its agents or sub-custodians, then delivery of confirmation that such Security is held in the Securities System or maintained through one or more omnibus accounts in the name of the Custodian (or its nominee) who shall identify the same on its books and records as held for the account of the Company, or (iv) in such other good delivery form that may be agreed to by the Custodian from time to time. -7- 1675380v1 (b) (i) In connection with its acquisition of a Security constituting an Uncertificated Security, the Company shall deliver or cause to be delivered to the Custodian (in its roles as, and at the address identified for, the Custodian and Document Custodian) a properly completed Trade Confirmation containing such information in respect of such Security as the Custodian may reasonably require in order to enable the Custodian to perform its duties hereunder in respect of such Security and on which the Custodian may conclusively rely without further inquiry or investigation, in such form and format as the Custodian reasonably may require, and shall deliver to the Document Custodian (in its role as, and at the address identified for, the Document Custodian) the Required Documents, including the Document Checklist. (ii) Notwithstanding anything herein to the contrary, delivery of Securities acquired by the Company in the form of Uncertificated Securities or Participations or which are otherwise not evidenced by a “security” or “instrument” as defined in Section 8-102 and Section 9-102(a)(47) of the UCC), respectively, shall be made by delivery to the Document Custodian of (i) in the case of an Uncertificated Security, a copy of the register of the underlying issuer of such interest evidencing registration of such equity interest on the books and records of the applicable issuer to the name of the Company (or its nominee) or a copy (which may be a facsimile copy) of an assignment agreement in favor of the Company as assignee, as identified on the Document Checklist and (ii) in the case of a Participation, a copy of the related participation agreement or limited liability agreement identifying the Company as participant or owner of such interest. Any duty on the part of the Custodian with respect to the custody of such Securities shall be limited to the exercise of reasonable care by the Custodian in the physical custody of any such Required Documents delivered to it, and any related instrument, security, participation agreement, assignment agreement and/or other agreements or documents, if any (collectively, “ Financing Documents ”), that may be delivered to it. Nothing herein shall require the Custodian to credit to the Securities Account or to treat as a financial asset (within the meaning of Section 8-102(a)(9) of the UCC) any Security that is not represented by a physical share certificate or an asset in the nature of a general intangible (as defined in Section 9-102(a)(42) of the UCC) or uncertificated security (within the meaning of Section 8-102(18) of the UCC) or to “maintain” a sufficient quantity thereof. (iii) The Custodian may assume the genuineness of any such Financing Document it may receive and the genuineness and due authority of any signatures appearing thereon, and shall be entitled to assume that each such Financing Document it may receive is what it purports to be. If an original “security” or “instrument” as defined in Section 8-102 and Section 9-102(a)(47) of the UCC, respectively, is or shall be or become available with respect to any -8- 1675380v1 Security to be held by the Custodian under this Agreement, it shall be the sole responsibility of the Company to make or cause delivery thereof to the Document Custodian, and the Custodian shall not be under any obligation at any time to determine whether any such original security or instrument has been or is required to be issued or made available in respect of any Security or to compel or cause delivery thereof to the Custodian. (iv) Contemporaneously with the acquisition of any Security, the Company shall (A) take all actions necessary for the Company to acquire good title to such Security; and (B) take all actions as may be necessary (including appropriate payment notices and instructions to issuers, agents or other applicable paying agents) to cause (x) all payments in respect of the Security to be made to the Custodian and (y) all notices, solicitations and other communications in respect of such Security to be directed to the Company. The Custodian shall have no liability for any delay or failure on the part of the Company to provide necessary information to the Custodian, or for any inaccuracy therein or incompleteness thereof, or for any delay or failure on the part of the Company to give such effective payment instruction to the applicable issuer, its agents and other paying agents. With respect to each such Security, the Custodian shall be entitled to rely on any information and notices it may receive from time to time from the related issuer, agent, obligor or similar party with respect to the related Security, or from the Company, and shall be entitled to update its records (as it may deem necessa ry or appropria te) on the basis of such information or notices received, without any obligation on its part independently to verify, investigate or recalculate such information. 3.4 Release of Securities. (a) The Custodian shall release and deliver, or direct its agents or sub-custodian to release and deliver, as the case may be, Securities or Required Documents of the Company held by the Custodian, its agents or its sub-custodian from time to t i me upon receipt of Proper Instructions (which shall, among other things, specify the Securities or Required Documents to be released , with such delivery and other information as may be necessary to enable the Custodian to perform), which may be standing instructions (in form acceptable to the Custodian), in the following cases: (i) upon sale of such Securities by or on behalf of the Company, and such sale may, unless and except to the extent otherwise directed by Proper Instructions, be carried out by the Custodian: (A) in accordance with the customary or established practices and procedures in the jurisdiction or market where the transactions occur, including delivery to the purchaser thereof or to a dealer therefor (or an agent of such purchaser or dealer) against expectation of receiving later payment; or -9- 1675380v1 (B) in the case of a sale effected through a Securities System, in accordance with the rules governing the operations of the Securities System; (ii) upon the receipt of payment in connection with any repurchase agreement related to such Securities; (iii) to a depositary agent in connection with tender or other similar offers for such Securities; (iv) to the issuer thereof, or its agent, when such Securities are called, redeemed, retired or otherwise become payable (unless otherwise directed by Proper Instructions, the cash or other consideration is to be delivered to the Custodian, its agents or its sub- custodian); (v) to an issuer thereof, or its agent, for transfer into the name of the Custodian or of any nominee of the Custodian or into the name of any of its agents or sub-custodian or their nominees, or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination in accordance with the Street Delivery Custom; (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such Securities, or pursuant to any deposit agreement (unless otherwise directed by Proper Instructions, the new securities and cash, if any, are to be delivered to the Custodian, its agents or its sub-custodian); (viii) in the case of warrants, rights or similar securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities (unless otherwise directed by Proper Instructions, the new securities and cash, if any, are to be delivered to the Custodian, its agents or its sub-custodian); and/or (ix) for any other purpose, but only upon receipt of Proper Instructions and an officer’s certificate signed by an officer of the Company (which officer shall not have been any Authorized Person providing the Proper Instructions) stating (i) the specified securities to be delivered, (ii) the purpose for such delivery, (iii) that such purpose is a proper corporate purpose and (iv) naming the person or persons to whom delivery of such Securities shall be made, and attaching a certified copy of a resolution of the board of directors of the Company or an authorized committee thereof approving the delivery of such Proper Instructions. -10- 1675380v1 3.5 Registration of Securities . Securities held by the Custodian, its agents or its sub-custodian (other than bearer securities, securities held in a Securities System or Securities that are Uncertificated Securities or Participations) shall be registered in the name of the Company or its nominee; or, at the option of the Custodian (if the Custodian determines it cannot hold such security in the name of the Company), in the name of the Custodian or in the name of any nominee of the Custodian, or in the name of its agents or its sub-custodian or their nominees; or, if directed by the Company by Proper Instruction, may be maintained in Street Name. The Custodian, its agents and its sub-custodian shall not be obliged to accept Securities on behalf of the Company under the terms of this Agreement unless such Securities are in Street Name or other good deliverable form. 3.6 Bank Accounts, and Management of Cash. (a) Proceeds and other cash received by the Custodian from time to time shall be deposited or credited to the Cash Account. All amounts deposited or credited to the Cash Account shall be subject to clearance and receipt of final payment by the Custodian. (b) Amounts held in the Cash Account from time to time may be invested in Eligible Investments pursuant to specific written Proper Instructions (which may be standing instructions) received by the Custodian from any two (2) Authorized Persons acting on behalf of the Company. Such investments shall be subject to availability and the Custodian’s then applicable transaction charges (which shall be at the Company’s expense). The Custodian shall have no liability for any loss incurred on any such investment. Absent receipt of such written instruction from the Company, the Custodian shall have no obligation to invest (or otherwise pay interest on) amounts on deposit in the Cash Account. In no instance will the Custodian have any obligation to provide investment advice to the Company. Any earnings from such investment of amounts held in the Cash Account from time to time (collectively, “ Reinvestment Earnings ”) shall be redeposited in the Cash Account (and may be reinvested at the written direction of the Company). (c) In the event that the Company shall at any time request a withdrawal of amounts from the Cash Account, the Custodian shall be entitled to liquidate, and shall have no liability for any loss incurred as a result of the liquidation of, any investment of the funds credited to such account as needed to provide necessary liquidity. (d) The Company acknowledges that cash deposited or invested with any bank (including the bank acting as Custodian) may make a margin or generate banking income for which such bank shall not be required to account to the Company. 3.7 Collection of Income . The Custodian, its agents or its sub-custodian shall use reasonable efforts to collect on a timely basis all income and other payments with respect to the Securities held hereunder to which the Company shall be entitled, to the extent consistent with usual custom in the securities custodian business in the United -11- 1675380v1 States. Such efforts shall include collection of interest income, dividends and other payments with respect to registered domestic securities if, on the record date with respect to the date of payment by the issuer, the Security is registered in the name of the Custodian or its nominee (or in the name of its agent or sub-custodian, or their nominees); and interest income, dividends and other payments with respect to bearer domestic securities if, on the date of payment by the issuer, such Securities are held by the Custodian or its sub-custodian or agent; provided, however, that in the case of Securities held in Street Name, the Custodian shall use commercially reasonable efforts only to timely collect income. In no event shall the Custodian’s agreement herein to collect income be construed to obligate the Custodian to commence, undertake or prosecute any legal proceedings. 3.8 Payment of Moneys . Upon receipt of Proper Instructions, which may be standing instructions, the Custodian shall pay out from the Cash Account (or remit to its agents or its sub-custodian, and direct them to pay out) moneys of the Company on deposit therein in the following cases: (a) upon the purchase of Securities for the Company pursuant to such Proper Instruction; and such purchase may, unless and except to the extent otherwise directed by Proper Instructions, be carried out by the Custodian: (i) in accordance with the customary or established practices and procedures in the jurisdiction or market where the transactions occur, including delivering money to the seller thereof or to a dealer therefor (or any agent for such seller or dealer) against expectation of receiving later delivery of such securities; or (ii) in the case of a purchase effected through a Securities System, in accordance with the rules governing the operation of such Securities System; (b) for the purchase or sale of foreign exchange or foreign exchange agreements for the account of the Company; (i) in payment of the price of securities of by the Company repurchased in open market purchases, tender offers or any other Company repurchase program; and (ii) for any other purpose directed by the Company, but only upon receipt of Proper Instructions specifying the amount of such payment, and naming the Person or Persons to whom such payment is to be made. 3.9 Proxies . The Custodian will, with respect to the Securities held hereunder, use reasonable efforts to cause to be promptly executed by the registered holder of such Securities proxies received by the Custodian from its agents or its sub-custodian or from issuers of the Securities being held for the Company, without indication of the manner in which such proxies are to be voted, and upon receipt of Proper Instructions shall promptly deliver to the applicable issuer such proxies relating to such Securities. In the -12- 1675380v1 absence of such Proper Instructions, or in the event that such Proper Instructions are not received in a timely fashion, except to the extent otherwise expressly provided herein, the Custodian shall be under no duty to act with regard to such proxies. Notwithstanding the above, neither Custodian nor any nominee of Custodian shall vote any of the Securities held hereunder by or for the account of the Company, except in accordance with Proper Instructions. 3.10 Communications Relating to Securities . The Custodian shall transmit promptly to the Company all written information (including proxies, proxy soliciting materials, notices, pendency of calls and maturities of Securities and expirations of rights in connection therewith) received by the Custodian, from its agents or its sub-custodian or from issuers of the Securities being held for the Company. The Custodian shall have no obligation or duty to exercise any right or power, or otherwise to preserve rights, in or under any Securities unless and except to the extent it has received timely Proper Instruction from the Company in accordance with the next sentence. The Custodian will not be liable for any untimely exercise of any right or power in connection with Securities at any time held by the Custodian, its agents or sub-custodian unless: (i) the Custodian has received Proper Instructions with regard to the exercise of any such right or power; and (ii) the Custodian, or its agents or sub-custodian are in actual possession of such Securities, in each case, at least three (3) Business Days prior to the date on which such right or power is to be exercised. It will be the responsibility of the Company to notify the Custodian of the Person to whom such communications must be forwarded under this Section. 3.11 Records . The Custodian shall create and maintain complete and accurate records relating to its activities under this Agreement with respect to the Securities, cash or other property held for the Company under this Agreement, with particular attention to Section 31 of the 1940 Act, and Rules 31a-1 and 31a-2 thereunder. To the extent that the Custodian, in its sole opinion, is able to do so, the Custodian shall provide assistance to the Company (at the Company’s reasonable request made from time to time) by providing sub-certifications regarding certain of its services performed hereunder to the Company in connection with the Company’s certification requirements pursuant to the Sarbanes-Oxley Act of 2002, as amended. All such records shall be the property of the Company and shall at all times during the regular business hours of the Custodian be open for inspection by duly authorized officers, employees or agents of the Company (including its independent public accountants) and employees and agents of the Securities and Exchange Commission, upon reasonable request and prior notice and at the Company’s expense. The Custodian shall, at the Company’s request, supply the Company with a tabulation of Securities owned by the Company and held by the Custodian and shall, when requested to do so by the Company and for such compensation as shall be agreed upon between the Company and the Custodian, include, -13- 1675380v1 to the extent applicable, the certificate numbers in such tabulations, to the extent such information is available to the Custodian. 4. REPORTING (a) The Custodian shall render to the Company a monthly report of (i) all deposits to and withdrawals from the Cash Account during the month, and the outstanding balance (as of the last day of the preceding monthly report and as of the last day of the subject month), (ii) an itemized statement of the Securities held pursuant to this Agreement as of the end of each month, all transactions in the Securities during the month, as well as a list of all Securities transactions that remain unsettled at that time, and (iii) such other matters as the parties may agree from time to time. (b) For each Business Day, the Custodian shall render to the Company a daily report of (i) all deposits to and withdrawals from the Cash Account for such Business Day and the outstanding balance as of the end of such Business Day, and (ii) a report of settled trades of Securities for such Business Day. (c) The Custodian shall have no duty or obligation to undertake any market valuation of the Securities under any circumstance. (d) The Custodian shall provide the Company, promptly upon request, with such reports as are reasonably available to it and as the Company may reasonably request from time to time, concerning (i) the internal accounting controls, including procedures for safeguarding securities, which are employed by the Custodian and (ii) the financial strength of the Custodian. 5. DEPOSIT IN U.S. SECURITIES SYSTEMS The Custodian may deposit and/or maintain Securities in a Securities System within the United States in accordance with applicable Federal Reserve Board and Securities and Exchange Commission rules and regulations, including Rule 17f-4 under the 1940 Act, and subject to the following provisions: (c) The Custodian may keep domestic Securities in a U.S. Securities System; provided that such Securities are represented in an account of the Custodian in the U.S. Securities System which shall not include any assets of the Custodian other than assets held by it as a fiduciary, custodian or otherwise for customers; (d) The records of the Custodian with respect to Securities which are maintained in a U.S. Securities System shall identify by book-entry those Securities belonging to the Company; (e) The Custodian shall provide to the Company copies of all notices received from a U.S. Securities System of transfers of Securities for the account of the Company; and -14- 1675380v1 (f) Anything to the contrary in this Agreement notwithstanding, the Custodian shall not be liable to the Company for any direct loss, damage, cost, expense, liability or claim to the Company resulting from use of any U.S. Securities System (other than to the extent resulting from the gross negligence, misfeasance or misconduct of the Custodian itself, or from failure of the Custodian to enforce effectively such rights as it may have against a U.S. Securities System). 6. FOREIGN SUB-CUSTODIANS 6.1 Foreign Sub-custodians . The Custodian may not appoint or employ any Foreign Sub-custodians. 7. CERTAIN GENERAL TERMS 7.1 No Duty to Examine Underlying Instruments . Nothing herein shall obligate the Custodian to review or examine the terms of any underlying limited liability company agreement, stock or share certificate, share registrar, instrument, subscription agreement, limited partnership agreement or other similar agreement or document evidencing or governing any Security to determine the validity, sufficiency, marketability or enforceability of any Security (and shall have no responsibility for the genuineness or completeness thereof), or otherwise. 7.2 Resolution of Discrepancies . In the event of any discrepancy between the information set forth in any report provided by the Custodian to the Company and any information contained in the books or records of the Company, the Company shall promptly notify the Custodian thereof and the parties shall cooperate to diligently resolve the discrepancy. 7.3 Improper Instructions . Notwithstanding anything herein to the contrary, the Custodian shall not be obligated to take any action (or forebear from taking any action), which it reasonably determines to be contrary to the terms of this Agreement or applicable law. In no instance shall the Custodian be obligated to provide services on any day that is not a Business Day. 7.4 Proper Instructions. (c) The Company will give a notice to the Custodian, in form acceptable to the Custodian, specifying the names and specimen signatures of persons authorized to give Proper Instructions (collectively, “ Authorized Persons ” and each is an “ Authorized Person ”), which notice shall be signed by any two (2) Authorized Persons previously certified to the Custodian. The Custodian shall be entitled to rely upon the identity and authority of such persons until it receives written notice from any two (2) Authorized Persons of the Company to the contrary. The initial Authorized Persons are set forth on Schedule A attached hereto and made a part hereof (as such Schedule A may be modified from time to time by written notice from the Company to the Custodian); and the Company hereby represents and -15- 1675380v1 warrants that the true and accurate specimen signatures of such initial Authorized Persons are set forth on Schedule A . (d) The Custodian shall have no responsibility or liability to the Company (or any other person or entity), and shall be indemnified and held harmless by the Company, in the event that a subsequent written confirmation of an oral instruction fails to conform to the oral instructions received by the Custodian. The Custodian shall not have an obligation to act in accordance with purported instructions to the extent that they conflict with applicable law or regulations, local market practice or the Custodian’s operating policies and practices. The Custodian shall not be liable for any loss resulting from a delay while it obtains clarification of any Proper Instructions. 7.5 Actions Permitted Without Express Authority . The Custodian may, at its discretion, without express authority from the Company: (a) surrender Securities in temporary form for Securities in definitive form; (b) endorse for collection cheques, drafts and other negotiable instruments; and (c) in general attend to all nondiscretionary details in connection with the sale, exchange, substitution, purchase, transfer and other dealings with the securities and property of the Company. 7.6 Evidence of Authority . The Custodian shall be protected in acting upon any instructions, notice, request, consent, certificate, instrument or paper reasonably believed by it to be genuine and to have been properly executed or otherwise given by or on behalf of the Company by any two (2) Authorized Persons. The Custodian may receive and accept a certificate signed by any two (2) Authorized Persons as conclusive evidence of: (b) the authority of any person to act in accordance with such certificate; or (c) any determination or action by the Company as described in such certificate, and such certificate may be considered as in full force and effect until receipt by the Custodian of written notice to the contrary from any two (2) Authorized Persons of the Company. 7.7 Receipt of Communications . Any communication received by the Custodian on a day which is not a Business Day or after 3:30 p.m., Eastern time (or such other time as is agreed by the Company and the Custodian from time to time), on a Business Day will be deemed to have been received on the next Business Day (but in the case of communications so received after 3:30 p.m., Eastern time, on a Business Day the Custodian will use its best efforts to process such communications as soon as possible after receipt). -16- 1675380v1 8. RESPONSIBILITY OF CUSTODIAN 8.1 General Duties . The Custodian shall have no duties, obligations or responsibilities under this Agreement or with respect to the Securities, cash or Proceeds except for such duties as are expressly and specifically set forth in this Agreement, and the duties and obligations of the Custodian shall be determined solely by the express provisions of this Agreement. No implied duties, obligations or responsibilities shall be read into this Agreement against, or on the part of, the Custodian. 8.2 Instructions. (a) The Custodian shall be entitled to refrain from taking any action unless it has such instruction (in the form of Proper Instructions) from the Company as it reasonably deems necessary, and shall be entitled to require, upon notice to the Company, that Proper Instructions to it be in writing. The Custodian shall have no liability for any action (or forbearance from action) taken pursuant to the Proper Instruction of the Company. (b) Whenever the Custodian is entitled or required to receive or obtain any communications or information pursuant to or as contemplated by this Agreement, it shall be entitled to receive the same in writing, in form, content and medium reasonably acceptable to it and otherwise in accordance with any applicable terms of this Agreement; and whenever any report or other information is required to be produced or distributed by the Custodian it shall be in form, content and medium reasonably acceptable to it and the Company and otherwise in accordance with any applicable terms of this Agreement. 8.3 General Standards of Care . Notwithstanding any terms herein contained to the contrary, the acceptance by the Custodian of its appointment hereunder is expressly subject to the following terms, which shall govern and apply to each of the terms and provisions of this Agreement (whether or not so stated therein): (e) The Custodian may rely on (and shall be protected in acting or refraining from acting in reliance upon) any written notice, instruction, statement, certificate, request, waiver, consent, opinion, report, receipt or other paper or document furnished to it (including any of the foregoing provided to it by telecopier or electronic means), not only as to its due execution and validity, but also as to the truth and accuracy of any information therein contained, which it in good faith believes to be genuine and signed or presented by the proper person (which in the case of any instruction from or on behalf of the Company shall be any two (2) Authorized Persons); and the Custodian shall be entitled to presume the genuineness and due authority of any signature appearing thereon. The Custodian shall not be bound to make any independent investigation into the facts or matters stated in any such notice, instruction, statement, certificate, request, waiver, consent, opinion, report, receipt or other paper or document; provided, however, that, if the form thereof is specifically prescribed by the terms of this Agreement, the Custodian -17- 1675380v1 shall examine the same to determine whether it substantially conforms on its face to such requirements hereof. (f) Neither the Custodian nor any of its directors, officers, agents, attorneys, shareholders or employees shall be liable to anyone for any error of judgment, or for any act done or step taken or omitted to be taken by it (or any of its directors, officers, agents, attorneys, shareholders of employees), or for any mistake of fact or law, or for anything which it may do or refrain from doing in connection herewith, unless such action or inaction constitutes gross negligence, willful misconduct or bad faith on its part and in breach of the terms of this Agreement. The Custodian shall not be liable for any action taken by it in good faith and reasonably believed by it to be within powers conferred upon it, or taken by it pursuant to any direction or instruction by which it is governed hereunder, or omitted to be taken by it by reason of the lack of direction or instruction required hereby for such action. Except as otherwise expressly provided herein, the Custodian shall not be under any obligation at any time to ascertain whether the Company is in compliance with the 1940 Act, the regulations thereunder, or the Company’s investment objectives and policies then in effect. (g) In no event shall the Custodian be liable for any indirect, special or consequential damages (including lost profits) whether or not it has been advised of the likelihood of such damages. (h) The Custodian may consult with, and obtain advice from, legal counsel selected in good faith with respect to any question as to any of the provisions hereof or its duties hereunder, or any matter relating hereto, and the written opinion or advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by the Custodian in good faith in accordance with the opinion and directions of such counsel. (i) The Custodian shall not be deemed to have notice of any fact, claim or demand with respect hereto unless actually known by an employee working in its Corporate Trust Services group and charged with responsibility for administering this Agreement or unless received (and then only to the extent received) in writing by the Custodian at the applicable address(es) as set forth in Section 14 and specifically referencing this Agreement. (j) No provision of this Agreement shall require the Custodian to expend or risk its own funds, or to take any action (or forbear from action) hereunder which might in its judgment involve any expense or any financial or other liability unless it shall be furnished with acceptable indemnification. Nothing herein shall obligate the Custodian to commence, prosecute or defend legal proceedings in any instance, whether on behalf of the Company or on its own behalf or otherwise, with respect to any matter arising hereunder, or relating to this Agreement or the services contemplated hereby. -18- 1675380v1 (k) The permissive right of the Custodian to take any action hereunder shall not be construed as duty. (l) The Custodian may act or exercise its duties or powers hereunder through agents, subcustodians, or attorneys, and the Custodian shall not be liable or responsible for the actions or omissions of any such agent, subcustodian or attorney (i) appointed with the Company’s prior written consent specifically acknowledging such limitation of liability and (ii) maintained with reasonable due care. (m) All indemnifications contained in this Agreement in favor of the Custodian shall survive the termination of this Agreement. 8.4 Indemnification; Custodian’s Lien . The Company shall and does hereby indemnify and hold harmless each of the Custodian, agents, attorneys, shareholders, and their respective successors and/or assigns, for and from any and all costs and expenses (including reasonable attorney’s fees and expenses), and any and all losses, damages, claims and liabilities, that may arise, be brought against or incurred by the Custodian, and any advances or disbursements made by the Custodian (including in respect of any Account overdraft, returned deposit item, chargeback, provisional credit, settlement or assumed settlement, reclaimed payment, claw-back or the like), as a result of, relating to, or arising out of this Agreement, or the administration or performance of the Custodian’s duties hereunder, or the relationship between the Company (including, for the avoidance of doubt, any subsidiary) and the Custodian created hereby, other than such liabilities, losses, damages, claims, costs and expenses as are directly caused by the Custodian’s action or inaction constituting gross negligence, fraud or willful misconduct. 8.5 Set-Off . Notwithstanding any provision of this Agreement to the contrary, it is hereby acknowledged by the Custodian that in no event shall the terms and conditions of this Agreement hereby grant to the Custodian, a continuing lien, security interest and right of setoff as security for all liabilities and obligations that may be due and owing to the Custodian by the Customer, whether now existing or hereafter arising, upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of the Custodian or any entity under the control of Peapack-Gladstone Financial Corporation and its successors and assigns or in transit to any of them. 8.5 Force Majeure . Without prejudice to the generality of the foregoing, the Custodian shall be without liability to the Company for any damage or loss resulting from or caused by events or circumstances beyond the Custodian’s reasonable control, including nationalization, expropriation, currency restrictions, the interruption, disruption or suspension of the normal procedures and practices of any securities market, power, mechanical, communications or other technological failures or interruptions, computer viruses or the like, fires, floods, earthquakes or other natural disasters, civil and military disturbance, acts of war or terrorism, riots, revolution, acts of God, work stoppages, strikes, national disasters of any kind, or other similar events or acts; errors -19- 1675380v1 by the Company (including any Authorized Person) in its instructions to the Custodian; or changes in applicable law, regulation or orders. 9. SECURITY CODES If the Custodian issues to the Company security codes, passwords or test keys in order that it may verify that certain transmissions of information, including Proper Instructions, have been originated by the Company, the Company shall take all commercially reasonable steps to safeguard any security codes, passwords, test keys or other security devices which the Custodian shall make available. 10. TAX LAW 10.1 Domestic Tax Law . The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Company, or the Custodian as custodian of the Securities or the Proceeds, by the tax law of the United States or any state or political subdivision thereof. The Custodian shall be kept indemnified by and be without liability to the Company for such obligations including taxes (but excluding any income taxes assessable in respect of compensation paid to the Custodian pursuant to this Agreement), withholding, certification and reporting requirements, claims for exemption or refund, additions for late payment interest, penalties and other expenses (including legal expenses) that may be assessed against the Company, or the Custodian as custodian of the Securities or Proceeds. 10.2 Foreign Tax Law . It shall be the responsibility of the Company to notify the Custodian of the obligations imposed on the Company by the tax law of foreign ( i.e. , non-U.S.) jurisdictions, including responsibility for withholding and other taxes, assessments or other government charges, certifications and government reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to cooperate with the Company with respect to any claims for exemption or refund under the tax law of the jurisdictions for which the Company has provided such information. 11. EFFECTIVE PERIOD, TERMINATION 11.1 Effective Date . This Agreement shall become effective as of its due execution and delivery by each of the parties. This Agreement shall continue in full force and effect until terminated as hereinafter provided. This Agreement may be terminated by the Custodian or the Company pursuant to Section 11.2 . 11.2 Termination . This Agreement shall terminate upon the earliest of (a) occurrence of the effective date of termination specified in any written notice of termination given by either party to the other not later than sixty (60) days prior to the effective date of termination specified, and (b) such other date of termination as may be mutually agreed upon by the parties in writing. If a successor custodian shall have been appointed by the Company, the Custodian shall, upon receipt of a notice of acceptance by the successor -20- 1675380v1 custodian, on such specified date of termination (a) deliver directly to the successor custodian all Securities (other than Securities held in a Securities System) and cash then owned by the Fund and held by the Custodian as custodian, and (b) transfer any Securities held in a Securities System to an account of or for the benefit of the Fund at the successor custodian. In the event of the appointment of a successor custodian, it is agreed that all Securities held by the Custodian, any sub-custodian or nominee shall be delivered to the successor custodian; and the Custodian agrees to cooperate with the Company in the execution of documents and performance of other actions necessary or desirable in order to substitute the successor custodian for the Custodian under this Agreement. The Company may at any time immediately terminate this Agreement in the event of the appointment of a conservator or receiver for the Custodian by regulatory authorities or upon the happening of a like event at the direction of an appropriate regulatory agency or court of competent jurisdiction. Termination shall not affect any of the liabilities either party owes to the other arising under this Agreement prior to such termination. 11.3 Resignation . The Custodian may at any time resign under this Agreement by giving not less than sixty (60) days advance written notice thereof to the Company. The Company may at any time remove the Custodian under this Agreement by giving not less than sixty (60) days advance written notice thereof to the Custodian. 11.4 Successor . Prior to the effective date of termination of this Agreement, or the effective date of the resignation or removal of the Custodian, as the case may be, the Company shall give Proper Instruction to the Custodian designating a successor Custodian, if applicable. 11.5 Final Report . In the event of any resignation or removal of the Custodian, the Custodian shall provide to the Company a complete final report or data file transfer of any Confidential Information as of the date of such resignation or removal. 12. REPRESENTATIONS AND WARRANTIES 12.1 Representations of the Company . The Company represents and warrants to the Custodian that: (d) it has the power and authority to enter into and perform its obligations under this Agreement, and it has duly authorized, executed and delivered this Agreement so as to constitute its valid and binding obligation; and (e) in giving any instructions which purport to be “Proper Instructions” under this Agreement, the Company will act in accordance with the provisions of its articles of incorporation and bylaws and any applicable laws and regulations. 12.2 Representations of the Custodian . The Custodian hereby represents and warrants to the Company that: -21- 1675380v1 (a) it has the power and authority to enter into and perform its obligations under this Agreement; (b) it has duly authorized, executed and delivered this Agreement so as to constitute its valid and binding obligations; and (c) it maintains business continuity policies and standards that include data file backup and recovery procedures that comply with all applicable regulatory requirements. 13. PARTIES IN INTEREST; NO THIRD PARTY BENEFIT This Agreement is not intended for, and shall not be construed to be intended for, the benefit of any third parties and may not be relied upon or enforced by any third parties (other than successors and permitted assigns pursuant to Section 18). 14. NOTICES Any Proper Instructions (to the extent given by hand, mail, courier or telecopier) shall be given to the following address (or such other address as either party may designate by written notice to the other party), and otherwise any notices, approvals and other communications hereunder shall be sufficient if made in writing and given to the parties at the following address (or such other address as either of them may subsequently designate by notice to the other), given by (i) hand, (ii) certified or registered mail, postage prepaid, (iii) recognized courier or delivery service, or (iv) confirmed telecopier or telex, with a duplicate sent on the same day by first class mail, postage prepaid: (a) if to the Company, to Prospect Capital Corporation 10 East 40 th Street, 42 nd Floor New York, New York 10016 Attention: Prospect Accounting Fax No.: (212) 448-9652 Email: fax@prospectstreet.com pacct@prospectstreet.com pl@prospectstreet.com (b) if to the Custodian, to Peapack-Gladstone Bank 500 Hills Drive Bedminster, New Jersey 07921 Ref: Prospect Capital Corporation Attention: Mr. Orest Temnycky Managing Director Fax: (908) 375-3075 Email: otemnycky@pgbank.com -22- 1675380v1 15. CHOICE OF LAW AND JURISDICTION This Agreement shall be construed, and the provisions thereof interpreted under and in accordance with and governed by the laws of the State of New York for all purposes (without regard to its choice of law provisions); except to the extent such laws are inconsistent with federal securities laws, including the 1940 Act, in which case such federal securities laws shall govern. 16. ENTIRE AGREEMENT; COUNTERPARTS 16.1 Complete Agreement . This Agreement constitutes the complete and exclusive agreement of the parties with regard to the matters addressed herein and supersedes and terminates, as of the date hereof, all prior agreements or understandings, oral or written, between the parties to this Agreement relating to such matters. 16.2 Counterparts . This Agreement may be executed in any number of counterparts and all counterparts taken together shall constitute one and the same instrument. 16.3 Facsimile Signatures . The exchange of copies of this Agreement and of signature pages by facsimile transmission or pdf shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile or pdf shall be deemed to be their original signatures for all purposes. 17. AMENDMENT; WAIVER 17.1 Amendment . This Agreement may not be amended except by an express written instrument duly executed by each of the Company and the Custodian (and not by an email or series of emails); provided, that in the case of the Company, such amendment must be signed in blue ink by the Chief Executive Officer or President of the Company or their successors. 17.2 Waiver . In no instance shall any delay or failure to act be deemed to be or effective as a waiver of any right, power or term hereunder, unless and except to the extent such waiver is set forth in an express written instrument signed by the party against whom it is to be charged (and not by an email or series of emails); provided, that in the case of the Company, such waiver must be signed in blue ink by the Chief Executive Officer or President of the Company or their successors. 18. SUCCESSOR AND ASSIGNS 18.1 Successors Bound . The covenants and agreements set forth herein shall be binding upon and inure to the benefit of each of the parties and their respective successors and permitted assigns. Neither party shall be permitted to assign their rights under this Agreement without the written consent of the other party; provided, however, that the foregoing shall not limit the ability of the Custodian to delegate certain duties or services to or perform them through agents or attorneys appointed with due care as expressly provided in this Agreement. 18.2 Merger and Consolidation . Any corporation or association into which the Custodian may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Custodian shall be a party, or any corporation or association to which the Custodian transfers all or substantially all of its corporate trust business, shall be the -23- 1675380v1 successor of the Custodian hereunder, and shall succeed to all of the rights, powers and duties of the Custodian hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto. 19. SEVERABILITY The terms of this Agreement are hereby declared to be severable, such that if any term hereof is determined to be invalid or unenforceable, such determination shall not affect the remaining terms. Should any part of this Agreement be held invalid or unenforceable in any jurisdiction, the invalid or unenforceable portion or portions shall be removed (and no more) only in that jurisdiction, and the remainder shall be enforced as fully as possible (removing the minimum amount possible) in that jurisdiction. In lieu of such invalid or unenforceable provision, the parties hereto will negotiate in good faith to add automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible. 20. REQUEST FOR INSTRUCTIONS If, in performing its duties under this Agreement, the Custodian is required to decide between alternative courses of action, the Custodian may (but shall not be obliged to) request written instructions from the Company as to the course of action desired by it. If the Custodian does not receive such instructions within two (2) Business Days after it has requested them, the Custodian may, but shall be under no duty to, take or refrain from taking any such courses of action. The Custodian shall act in accordance with instructions received from the Company in response to such request after such two-Business Day period except to the extent it has already taken, or committed itself to take, action inconsistent with such instructions. 21. OTHER BUSINESS Nothing herein shall prevent the Custodian or any of its affiliates from engaging in other business, or from entering into any other transaction or financial or other relationship with, or receiving fees from or from rendering services of any kind to the Company or any other Person. Nothing contained in this Agreement shall constitute the Company and/or the Custodian (and/or any other Person) as members of any partnership, joint venture, association, syndicate, unincorporated business or similar assignment as a result of or by virtue of the engagement or relationship established by this Agreement. 22. REPRODUCTION OF DOCUMENTS This Agreement and all schedules, exhibits, attachments and amendment hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The parties hereto each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further production shall likewise be admissible in evidence. -24- 1675380v1 23. MISCELLANEOUS The Company acknowledges receipt of the following notice: “ IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT . To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account. For a non-individual person such as a business entity, a charity, a trust or other legal entity the Custodian will ask for documentation to verify its formation and existence as a legal entity. The Custodian may also ask to see financial statements, licenses, identification and authorization documents from individuals claiming authority to represent the entity or other relevant documentation.” IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed and delivered by a duly authorized officer, intending the same to take effect as of the date first written above. Witness: PROSPECT CAPITAL CORPORATION _ /s/ Eric F. Colandrea _______________ By: /s/ M. Grier Eliasek Name: Eric F. Colandrea Name: M. Grier Eliasek Title: Deputy General Counsel Title: President and COO Witness: PEAPACK-GLADSTONE BANK _/s/ Ana Ribeiro_________________ By: /s/ Orest Temnycky Name: Anan Ribeiro Name: Orest Temnycky Title: Assistant Vice President Title: Senior Managing Director -25- 1675380v1 SCHEDULE A CERTIFICATE OF AUTHORIZED PERSONS The undersigned hereby certifies that he/she is the duly elected and acting Secretary of Prospect Capital Corporation (the “Client”), and further certifies that the following officers or employees of the Client have been duly authorized to deliver Instructions to the Custodian pursuant to the Agreement between the Client and Custodian, dated May 9, 2014, and that the signatures appearing opposite their names are true and correct: John F. Barry III Name Chairman and CEO Title M. Grier Eliasek Name President and COO Title Signature Signature Brian H. Oswald Name CFO, Secretary and Treasurer Title Signature This certificate supersedes any certificate of Authorized Persons you may currently have on file. By:_______________________________ Name: Brian H. Oswald Title: CFO, Secretary and Treasurer Date: May 9, 2014  CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a) I, John F. Barry III, Chairman of the Board and Chief Executive Officer of Prospect Capital Corporation, certify that: 1. I have reviewed this annual report on Form 10-K of Prospect Capital Corporation; EXHIBIT 31.1 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over the financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: August 25, 2014 /s/ JOHN F. BARRY III John F. Barry III Chairman of the Board and Chief Executive Officer  CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a)/15d-14(a) I, Brian H. Oswald, Chief Financial Officer and Treasurer of Prospect Capital Corporation, certify that: 1. I have reviewed this annual report on Form 10-K of Prospect Capital Corporation; EXHIBIT 31.2 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over the financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: August 25, 2014 /s/ BRIAN H. OSWALD Brian H. Oswald Chief Financial Officer CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350) In connection with the annual report on Form 10-K for the period ended June 30, 2014 (the “Report”) of Prospect Capital Corporation (the “Registrant”), as filed with the Securities and Commission on the date hereof, I, John F. Barry III, Chairman of the Board and Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. EXHIBIT 32.1 Date: August 25, 2014 /s/ JOHN F. BARRY III John F. Barry III Chairman of the Board and Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Prospect Capital Corporation and will be retained by Prospect Capital Corporation and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. ss. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350) In connection with the annual report on Form 10-K for the period ended June 30, 2014 (the “Report”) of Prospect Capital Corporation (the “Registrant”), as filed with the Securities and Commission on the date hereof, I, Brian H. Oswald, Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. EXHIBIT 32.2 Date: August 25, 2014 /s/ BRIAN H. OSWALD Brian H. Oswald Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Prospect Capital Corporation and will be retained by Prospect Capital Corporation and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. ss. 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. 

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