PNNT 10-Q Quarterly Report March 31, 2022

PENNANTPARK INVESTMENT CORP

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10-Q 1 pnnt-10q-2022-03-31-no_x.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 814-00736

PENNANTPARK INVESTMENT CORPORATION

(Exact name of registrant as specified in its charter)



MARYLAND		20-8250744
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1691 Michigan Avenue, Miami Beach, Florida		33319
(Address of principal executive offices)		(Zip Code)

(212) 905-1000

(Registrant’s Telephone Number, Including Area Code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	PNNT	The New York Stock Exchange

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  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes  No 

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


Large accelerated filer		Accelerated filer	
Non-accelerated filer		Smaller reporting company	
Emerging growth company	

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No 

The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of May 4, 2022 was 66,131,651.

PENNANTPARK INVESTMENT CORPORATION

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS



PART I. CONSOLIDATED FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

Consolidated Statements of Assets and Liabilities as of March 31, 2022 (unaudited) and September 30, 2021		4

Consolidated Statements of Operations for the three and six months ended March 31, 2022 and 2021 (unaudited)		5

Consolidated Statements of Changes in Net Assets for the three and six months ended March 31, 2022 and 2021 (unaudited)		6

Consolidated Statements of Cash Flows for the six months ended March 31, 2022 and 2021 (unaudited)		7

Consolidated Schedules of Investments as of March 31, 2022 (unaudited) and September 30, 2021		8

Notes to Consolidated Financial Statements (unaudited)		18

Report of Independent Registered Public Accounting Firm		34

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		35

Item 3. Quantitative and Qualitative Disclosures About Market Risk		48

Item 4. Controls and Procedures		49

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		50

Item 1A. Risk Factors		50

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		51

Item 3. Defaults Upon Senior Securities		51

Item 4. Mine Safety Disclosures		51

Item 5. Other Information		51

Item 6. Exhibits		52

SIGNATURES		53

PART I—CONSOLIDATED F INANCIAL INFORMATION

We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule 13a-13 as promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In this Report, except where context suggest otherwise, the terms “Company,” “we,” “our” or “us” refers to PennantPark Investment Corporation and its consolidated subsidiaries; “PennantPark Investment” refers to only PennantPark Investment Corporation; “our SBIC Fund” refers collectively to our consolidated subsidiaries, PennantPark SBIC II LP, or SBIC II, and its general partner, PennantPark SBIC GP II, LLC; “Funding I” refers to PennantPark Investment Funding I, LLC, a wholly-owned subsidiary prior to deconsolidation on July 31, 2020; “Taxable Subsidiary” refers to PNNT Investment Holdings, LLC; “PSLF” refers to PennantPark Senior Loan Fund, LLC, an unconsolidated joint venture; “PTSF II” refers to PennantPark-TSO Senior Loan Fund II, LP, an unconsolidated limited partnership; “PennantPark Investment Advisers” or “Investment Adviser” refers to PennantPark Investment Advisers, LLC; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; “SBA” refers to the Small Business Administration; “SBIC” refers to a small business investment company under the Small Business Investment Act of 1958, as amended, or the “1958 Act”; “BNP Credit Facility” refers to our revolving credit facility with BNP Paribas prior to deconsolidation of Funding I; “Truist Credit Facility” refers to our multi-currency, senior secured revolving credit facility with Truist Bank (formerly SunTrust Bank), as amended and restated; “Credit Facilities” refers to the BNP Credit Facility and the Truist Credit Facility collectively; “2024 Notes” refers to our 5.50% Notes due 2024; “2026 Notes” refers to our 4.50% Notes due May 2026; “2026 Notes-2” refers to our 4.00% Notes due November 2026; “BDC” refers to a business development company under the Investment Company Act of 1940, as amended, or the “1940 Act”; “SBCAA” refers to the Small Business Credit Availability Act; “Code” refers to the Internal Revenue Code of 1986, as amended; and “RIC” refers to a regulated investment company under the Code. References to our portfolio, our investments and our business include investments we make through SBIC II and other consolidated subsidiaries.

Item 1. Consolidated Financial Statements

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS O F ASSETS AND LIABILITIES

(In thousands, except share data)


	March 31, 2022			September 30, 2021
	(unaudited)
Assets
Investments at fair value
Non-controlled, non-affiliated investments (cost—$875,230 and $729,811, respectively)	$	901,587		$	820,500
Non-controlled, affiliated investments (cost—$47,450 and $78,723, respectively)		36,730			50,161
Controlled, affiliated investments (cost—$361,809 and $412,587, respectively)		275,640			384,628
Total investments (cost—$1,284,490 and $1,221,121, respectively)		1,213,957			1,255,290
Cash and cash equivalents (cost—$26,259 and $20,383, respectively)		26,251			20,357
Interest receivable		3,394			4,958
Receivable for investments sold		—			12,793
Distribution receivable		2,420			1,694
Total assets		1,246,022			1,295,092
Liabilities
Distributions payable		9,386			8,045
Payable for investments purchased		9,620			8,407
Truist Credit Facility payable, at fair value (cost—$217,920 and $316,545, respectively) (See Notes 5 and 10)		215,899			314,813
2024 Notes payable, net (par— zero and $86,250, respectively) (See Notes 5 and 10)		—			84,503
2026 Notes payable, net (par— $150,000) (See Notes 5 and 10)		146,316			145,865
2026 Notes-2 payable, net (par— $165,000 and zero, respectively) (See Notes 5 and 10)		160,946			—
SBA debentures payable, net (par—$27,500 and $63,500, respectively) (See Notes 5 and 10)		27,026			62,159
Base-management fee payable, net (See Note 3)		4,981			4,580
Performance based-incentive fee payable (See Note 3)		—			575
Interest payable on debt		6,686			4,943
Accrued other expenses		837			1,058
Total liabilities		581,697			634,948
Commitments and contingencies (See Note 11)
Net assets
Common stock, 66,131,651 and 67,045,105, respectively, shares issued and outstanding Par value $0.001 per share and 100,000,000 shares authorized		66			67
Paid-in capital in excess of par value		779,938			786,993
Accumulated deficit		(115,679	)		(126,916	)
Total net assets	$	664,325		$	660,144
Total liabilities and net assets	$	1,246,022		$	1,295,092
Net asset value per share	$	10.05		$	9.85

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEM ENTS OF OPERATIONS (Unaudited)

(In thousands, except share and per share data)


	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
Investment income:
From non-controlled, non-affiliated investments:
Interest	$	14,543		$	11,669		$	30,083		$	23,101
Payment-in-kind		996			2,012			3,406			3,471
Other income		2,612			24			6,803			505
From non-controlled, affiliated investments:
Payment-in-kind		—			380			—			457
From controlled, affiliated investments:
Interest		2,343			2,177			4,609			4,454
Payment-in-kind		1,425			1,519			3,551			3,004
Dividend income		2,420			1,452			4,235			2,973
Total investment income		24,339			19,233			52,687			37,966
Expenses:
Base management fee (See Note 3)		4,981			4,282			10,090			8,397
Performance-based incentive fee (See Note 3)		—			—			2,657			—
Interest and expenses on debt (See Note 10)		6,498			4,890			13,385			9,894
Administrative services expenses (See Note 3)		250			505			500			1,010
Other general and administrative expenses		723			643			1,446			1,287
Expenses before provision for taxes		12,452			10,320			28,078			20,588
Provision for taxes on net investment income		200			150			400			300
Net expenses		12,652			10,470			28,478			20,888
Net investment income		11,687			8,763			24,209			17,078
Realized and unrealized gain (loss) on investments and debt:
Net realized gain (loss) on investments and debt:
Non-controlled, non-affiliated investments		1,889			319			7,090			2,450
Non-controlled and controlled, affiliated investments		140,898			—			109,624			(19,708	)
Debt extinguishment		(1,132	)		—			(2,801	)		—
Provision for taxes on realized gain on investments		(5,060	)					(5,060	)
Net realized gain (loss) on investments and debt		136,595			319			108,853			(17,258	)
Net change in unrealized appreciation (depreciation) on:
Non-controlled, non-affiliated investments		(158,062	)		11,207			(207,665	)		87,612
Non-controlled and controlled, affiliated investments		6,610			21,969			102,982			39,069
Provision for taxes on unrealized appreciation on investments		5,045			—			—			—
Debt (appreciation) depreciation (See Notes 5 and 10)		1,285			(3,763	)		289			(16,873	)
Net change in unrealized appreciation (depreciation) on investments and debt		(145,122	)		29,413			(104,394	)		109,809
Net realized and unrealized gain (loss) from investments and debt		(8,528	)		29,732			4,459			92,551
Net increase (decrease) in net assets resulting from operations		3,160			38,495		$	28,668			109,629
Net increase (decrease) in net assets resulting from operations per common share (See Note 7)	$	0.05		$	0.57		$	0.43		$	1.64
Net investment income per common share	$	0.18		$	0.13		$	0.36		$	0.25

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)

(In thousands, except share and per share data)


	Three Months Ended March 31,						Six Months Ended March 31,
	2022			2021			2022			2021
Net increase (decrease) in net assets resulting from operations:
Net investment income	$	11,687		$	8,763		$	24,209		$	17,078
Net realized gain (loss) on investments and debt		141,655			319			113,913			(17,258	)
Net change in unrealized (depreciation) appreciation on investments		(151,452	)		33,176			(104,683	)		126,681
Net change in provision for taxes on net realized gain (loss) on investments		(5,060	)		—			(5,060	)		—
Net change in provision for taxes on unrealized appreciation on investments		5,045			—			—			—
Net change in unrealized appreciation depreciation on debt		1,285			(3,763	)		289			(16,873	)
Net increase (decrease) in net assets resulting from operations		3,160			38,495			28,668			109,629
Distributions to stockholders:		(9,386	)		(8,045	)		(17,432	)		(16,091	)
Capital Transactions:
Repurchase of common stock (See Note 13)		(7,055	)		—			(7,055	)		—
Net increase in net assets		(13,281	)		30,450			4,181			93,538
Net assets:
Beginning of period		677,609			588,797			660,144			525,709
End of period	$	664,327		$	619,246		$	664,324		$	619,246
Capital share activity:
Shares of common stock repurchased		913,454			—			913,454			—

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEM ENTS OF CASH FLOWS (Unaudited)

(In thousands, except share and per share data)


	Six months ended March 31,
	2022			2021
Cash flows from operating activities:
Net increase in net assets resulting from operations	$	28,669		$	109,629
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash (used in) provided by operating activities:
Net change in net unrealized (appreciation) depreciation on investments		104,683			(126,681	)
Net change in unrealized appreciation (depreciation) on debt		(289	)		16,873
Net realized (gain) loss on investments		(116,714	)		17,258
Debt extinguishment realized loss		2,801			—
Net accretion of discount and amortization of premium		(3,515	)		(1,643	)
Purchases of investments		(473,128	)		(143,008	)
Payment-in-kind income		(7,688	)		(7,058	)
Proceeds from dispositions of investments		537,695			167,585
Amortization of deferred financing costs		1,049			689
Decrease in interest receivable		1,565			90
Decrease in receivables from investments sold		12,793			—
Increase in distribution receivable		(726	)		(58	)
Increase in prepaid expenses and other assets		—			(1	)
Increase in payable for investments purchased		1,213			13,120
Increase (decrease) in interest payable on debt		1,742			(15	)
Increase (decrease) in base management fee payable, net		401			(88	)
Decrease in performance-based incentive fee payable, net		(575	)		—
(Decrease) increase in accrued other expenses		(223	)		75
Net cash (used in) provided by operating activities		89,753			46,767
Cash flows from financing activities:
Repurchase of common stock		(7,055	)		—
Distributions paid to stockholders		(16,091	)		(16,091	)
Net repayments of the 2024 Notes issuance		(86,250	)		—
Proceeds from 2026 Notes-2 issuance		160,519			—
Repayments under SBA debentures		(36,358	)		(10,000	)
Borrowings under Truist Credit Facility		496,841			91,564
Repayments under Truist Credit Facility		(595,466	)		(104,271	)
Net cash provided by (used in) financing activities		(83,859	)		(38,798	)
Net increase (decrease) in cash equivalents		5,894			7,969
Effect of exchange rate changes on cash		-			81
Cash and cash equivalents, beginning of period		20,357			25,806
Cash and cash equivalents, end of period	$	26,251		$	33,855
Supplemental disclosure of cash flow information:
Interest paid	$	10,594		$	9,220
Taxes paid	$	5,055		$	656
Non-cash exchanges and conversions	$	(31,274	)	$	16,516

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDU LE OF INVESTMENTS (Unaudited)

MARCH 31, 2022

(In thousands, except share data)


Issuer Name	Maturity / Expiration	Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
Investments in Non-Controlled, Non-Affiliated Portfolio Companies—135.7% (1), (2)
First Lien Secured Debt—92.9%
Ad.net Acquisition, LLC (Revolver) (7)	05/06/2026	Media		—			—		444	$	—	$	—
Altamira Technologies, LLC (Revolver)	07/24/2025	Aerospace and Defense		9.00	%	3M L+800			50		50		48
Altamira Technologies, LLC (Revolver) (7)	07/24/2025	Aerospace and Defense		—			—		138		—		(6	)
American Insulated Glass, LLC	12/21/2023	Building Materials		6.50	%	3M L+550			10,815		10,730		10,815
Any Hour Services	07/21/2027	Personal, Food and Miscellaneous Services		6.75	%	3M L+575			3,510		3,477		3,510
Any Hour Services Term Loan (7)	07/21/2027	Personal, Food and Miscellaneous Services		—			—		314		—		3
Any Hour Services Term Loan II (7)	01/14/2024	Personal, Food and Miscellaneous Services		—			—		3,824		—		38
Any Hour Services (Revolver) (7)	07/21/2027	Personal, Food and Miscellaneous Services		—			—		1,147		—		—
Apex Service Partners, LLC	07/31/2025	Personal, Food and Miscellaneous Services		6.50	%	1M L+550			3,936		3,936		3,936
Apex Service Partners, LLC Term Loan C	07/31/2025	Personal, Food and Miscellaneous Services		6.50	%	1M L+550			6,895		6,837		6,895
Apex Service Partners, LLC (Revolver)	07/29/2024	Personal, Food and Miscellaneous Services		6.36	%	3M L+525			249		249		249
Apex Service Partners, LLC (Revolver) (7)	07/29/2024	Personal, Food and Miscellaneous Services		—			—		684		—		—
Applied Technical Services, LLC	12/29/2026	Environmental Services		6.76	%	3M L+575			1,306		1,292		1,290
Applied Technical Services, LLC (7)	06/29/2022	Environmental Services		—			—		3,175		—		(4	)
Applied Technical Services, LLC (Revolver)	12/29/2026	Environmental Services		8.25	%	3M P +475			150		150		148
Applied Technical Services, LLC (Revolver) (7)	12/29/2026	Environmental Services		—			—		850		—		(11	)
Arcfield Acquisition Corp.	03/07/2028	Aerospace and Defense		6.50	%	3M L+575			12,000		11,762		11,760
Arcfield Acquisition Corp. (7)	03/07/2028	Aerospace and Defense		—			—		2,263		—		—
Blackhawk Industrial Distribution, Inc.	09/17/2024	Distribution		6.00	%	3M L+500			16,433		16,192		16,186
Blackhawk Industrial Distribution, Inc. (7)	09/17/2024	Distribution		—			—		2,288		—		(17	)
Blackhawk Industrial Distribution, Inc. (Revolver)	09/17/2024	Distribution		6.00	%	3M L+500			229		229		225
Blackhawk Industrial Distribution, Inc. (Revolver) (7)	09/17/2024	Distribution		—			—		2,059		—		(31	)
Bottom Line Systems, LLC	02/13/2023	Healthcare, Education and Childcare		6.25	%	1M L+550			6,153		6,137		6,153
Broder Bros., Co.	12/02/2022	Consumer Products		8.00	%	3M L+700			21,375		21,375		21,375
CF512, Inc.	08/20/2026	Media		7.00	%	3M L+600			6,754		6,654		6,686
CF512, Inc.(Revolver) (7)	08/20/2026	Media		—			—		909		—		(9	)
Compex Legal Services, Inc.	02/09/2026	Business Services		6.75	%	3M L+575			809		797		809
Compex Legal Services, Inc. (Revolver)	02/07/2025	Business Services		6.26	%	3M L+525			393		393		393
Compex Legal Services, Inc. (Revolver) (7)	02/07/2025	Business Services		—			—		262		—		—
Connatix Buyer, Inc.	07/13/2027	Media		6.25	%	3M L+550			9,190		9,025		9,236
Connatix Buyer, Inc. (7)	01/13/2023	Media		—			—		3,158		—		47
Connatix Buyer, Inc. (Revolver) (7)	07/13/2027	Media		—			—		1,859		—		—
Crane 1 Services, Inc.	08/16/2027	Personal, Food and Miscellaneous Services		6.75	%	3M L+575			2,368		2,338		2,344
Crane 1 Services, Inc. (7)	08/16/2023	Personal, Food and Miscellaneous Services		—			—		253		—		(1	)
Crane 1 Services, Inc. (Revolver) (7)	08/16/2027	Personal, Food and Miscellaneous Services		—			—		292		—		(3	)
Crash Champions, LLC	08/05/2025	Auto Sector		6.00	%	3M L+500			25,007		24,577		24,382
Crash Champions, LLC (7)	08/05/2025	Auto Sector		—			—		111		—		(2	)
DermaRite Industries LLC	06/30/2023	Manufacturing / Basic Industries		8.00	%	1M L+700			8,383		8,336		6,941
Dr. Squatch, LLC	08/31/2026	Personal and Non-Durable Consumer Products		7.00	%	3M L+600			8,475		8,314		8,475
Dr. Squatch, LLC (7)	08/27/2026	Personal and Non-Durable Consumer Products		—			—		6,500		—		65
Dr. Squatch, LLC (Revolver) (7)	08/31/2026	Personal and Non-Durable Consumer Products		—			—		2,326		—		—
DRS Holdings III, Inc.	11/03/2025	Consumer Products		6.75	%	3M L+575			2,200		2,182		2,189
DRS Holdings III, Inc. (Revolver) (7)	11/03/2025	Consumer Products		—			—		1,783		—		(9	)
Duraco Specialty Tapes LLC	06/30/2024	Manufacturing / Basic Industries		6.50	%	3M L+550			4,200		4,135		4,129
ECL Entertainment, LLC	03/31/2028	Hotels, Motels, Inns and Gaming		8.25	%	1M L+750			8,703		8,626		8,740
ECM Industries, LLC (Revolver)	12/23/2025	Electronics		5.75	%	3M L+475			291		291		285
ECM Industries, LLC (Revolver) (7)	12/23/2025	Electronics		—			—		226		—		(5	)
Exigo Intermediate II, LLC	03/15/2027	Business Services		6.75	%	3M L+575			35,000		34,478		34,475
Exigo Intermediate II, LLC (7)	03/15/2024	Business Services		—			—		7,424		—		—
Exigo Intermediate II, LLC (Revolver)	03/15/2027	Business Services		6.75	%	3M L+575			371		371		371
Exigo Intermediate II, LLC (Revolver) (7)	03/15/2027	Business Services		—			—		1,485		—		—
Fairbanks Morse Defense	06/17/2028	Aerospace and Defense		5.50	%	3M L+475			750		748		739
Gantech Acquisition Corp.	05/14/2026	Business Services		7.25	%	1M L+625			16,981		16,689		16,812
Gantech Acquisition Corp. (Revolver)	05/14/2026	Business Services		7.25	%	1M L+625			332		332		329
Gantech Acquisition Corp. (Revolver) (7)	05/14/2026	Business Services		—			—		1,659		—		(17	)
Graffiti Buyer, Inc. (7)	08/10/2023	Distribution		—			—		893		—		(7	)
Graffiti Buyer, Inc. (Revolver)	08/10/2027	Distribution		6.75	%	3M L+575			243		243		237
Graffiti Buyer, Inc. (Revolver) (7)	08/10/2027	Distribution		—			—		525		—		(14	)
Hancock Roofing and Construction L.L.C.	12/31/2026	Insurance		6.25	%	3M L+525			1,097		1,097		1,097
Hancock Roofing and Construction L.L.C. (7)	12/31/2022	Insurance		—			—		400		—		—
Hancock Roofing and Construction L.L.C. (Revolver) (7)	12/31/2026	Insurance		—			—		750		—		—
Holdco Sands Intermediate, LLC	11/23/2028	Aerospace and Defense		7.01	%	1M L+600			17,955		17,608		17,596
Holdco Sands Intermediate, LLC (Revolver) (7)	11/23/2027	Aerospace and Defense		—			—		3,941		—		(79	)
HW Holdco, LLC	12/10/2024	Media		6.16	%	3M L+500			10,246		10,111		10,041
HW Holdco, LLC (7)	12/10/2024	Media		—			—		3,049		—		(30	)
HW Holdco, LLC (Revolver) (7)	12/10/2024	Media		—			—		3,387		—		(68	)
IDC Infusion Services, Inc.	12/30/2026	Healthcare, Education and Childcare		7.00	%	3M L+600			17,488		17,271		17,138
IDC Infusion Services, Inc. (Revolver) (7)	12/30/2026	Healthcare, Education and Childcare		—			—		4,167		—		(83	)
IG Investments Holdings, LLC (Revolver)	09/22/2027	Business Services		8.50	%	3M L+500			95		95		94
IG Investments Holdings, LLC (Revolver) (7)	09/22/2027	Business Services		—			—		382		—		(6	)
Imagine Acquisitionco, LLC	11/15/2027	Business Services		6.50	%	3M L+550			1,982		1,944		1,942
Imagine Acquisitionco, LLC (7)	11/15/2027	Business Services		—			—		2,341		—		(23	)
Imagine Acquisitionco, LLC (Revolver) (7)	11/15/2027	Business Services		—			—		1,685		—		(34	)
Inception Fertility Ventures, LLC	12/07/2023	Healthcare, Education and Childcare		6.50	%	3M L+550			4,909		4,807		4,786
Inception Fertility Ventures, LLC (7)	12/07/2023	Healthcare, Education and Childcare		—			—		12,980		—		(162	)
Infolinks Media Buyco, LLC	11/01/2026	Media		7.01	%	1M L+600			6,461		6,341		6,461
Infolinks Media Buyco, LLC (7)	11/01/2023	Media		—			—		2,372		—		24
Integrity Marketing Acquisition, LLC	08/27/2025	Insurance		6.76	%	3M L+550			21,270		21,144		21,066
Integrity Marketing Acquisition, LLC (7)	07/09/2023	Insurance		—			—		873		—		(2	)
ITI Holdings, Inc.	03/03/2028	Business Services		6.25	%	3M L+550			8,972		8,817		8,815
ITI Holdings, Inc. (Revolver) (7)	03/03/2028	Business Services		—			—		1,490		—		—
K2 Pure Solutions NoCal, L.P.	12/20/2023	Chemicals, Plastics and Rubber		9.00	%	1M L+800			11,739		11,670		11,622
K2 Pure Solutions NoCal, L.P. (Revolver)	12/20/2023	Chemicals, Plastics and Rubber		9.00	%	1M L+800			872		872		863
K2 Pure Solutions NoCal, L.P. (Revolver) (7)	12/20/2023	Chemicals, Plastics and Rubber		—			—		1,066		—		(11	)

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) —(Continued)

MARCH 31, 2022

(In thousands, except share data)


Issuer Name	Maturity / Expiration	Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
Kinetic Purchaser, LLC	11/10/2027	Consumer Products		7.00	%	3M L+600			19,451		19,082		19,257
Kinetic Purchaser, LLC (Revolver) (7)	11/10/2026	Consumer Products		—			—		4,854		—		(49	)
Lash OpCo, LLC	02/18/2027	Consumer Products		8.01	%	1M L+700			12,893		12,625		12,893
Lash OpCo, LLC (Revolver) (7)	08/16/2026	Consumer Products		—			—		1,820		—		—
LAV Gear Holdings, Inc.	10/31/2024	Leisure, Amusement, Motion Pictures, Entertainment		8.51	%	1M L+750			795		790		776
			(PIK 5.00%)
Ledge Lounger, Inc.	11/09/2026	Consumer Products		7.25	%	3M L+625			9,224	$	9,051	$	9,131
Ledge Lounger, Inc. (Revolver)	11/09/2026	Consumer Products		7.25	%	3M L+625			1,288		1,288		1,276
Ledge Lounger, Inc. (Revolver) (7)	11/09/2026	Consumer Products		—			—		644		—		(6	)
Lightspeed Buyer Inc.	02/03/2026	Healthcare, Education and Childcare		6.50	%	1M L+550			2,232		2,214		2,209
Lightspeed Buyer Inc. (Revolver)	02/03/2026	Healthcare, Education and Childcare		6.50	%	1M L+550			311		311		308
Lightspeed Buyer Inc. (Revolver) (7)	02/03/2026	Healthcare, Education and Childcare		—			—		855		—		(9	)
Lombart Brothers, Inc.	04/13/2023	Healthcare, Education and Childcare		7.25	%	1M L+625			2,046		2,035		2,046
Lombart Brothers, Inc. (Revolver)	04/13/2023	Healthcare, Education and Childcare		7.25	%	1M L+625			737		737		737
LSF9 Atlantis Holdings, LLC	03/31/2029	Retail		8.00	%	3M L+725			6,000		5,760		5,880
Mars Acquisition Holdings Corp. (Revolver) (7)	5/14/2026	Media		—			—		806		—		(6	)
MBS Holdings, Inc. (Revolver) (7)	04/16/2027	Telecommunications		—			—		694		—		(7	)
Meadowlark Acquirer, LLC	12/10/2027	Business Services		6.51	%	3M L+550			3,080		3,043		3,019
Meadowlark Acquirer, LLC Term Loan I (7)	12/10/2027	Business Services		—			—		2,920		—		(29	)
Meadowlark Acquirer, LLC Term Loan II (7)	12/10/2027	Business Services		—			—		8,922		—		(89	)
Meadowlark Acquirer, LLC (Revolver) (7)	12/10/2027	Business Services		—			—		1,685		—		(34	)
MeritDirect, LLC	05/23/2024	Media		6.50	%	3M L+550			2,444		2,427		2,444
MeritDirect, LLC (Revolver) (7)	05/23/2024	Media		—			—		1,612		—		—
Municipal Emergency Services, Inc.	09/28/2027	Distribution		6.00	%	3M L+500			547		542		529
Municipal Emergency Services, Inc. (7)	09/28/2027	Distribution		—			—		1,333		—		(31	)
Municipal Emergency Services, Inc. (Revolver)	09/28/2027	Distribution		6.00	%	3M L+500			282		282		273
Municipal Emergency Services, Inc. (Revolver) (7)	09/28/2027	Distribution		—			—		1,598		—		(53	)
NBH Group LLC (Revolver) (7)	08/19/2026	Healthcare, Education and Childcare		—			—		1,163		—		(6	)
Neptune Flood Incorporated	10/14/2026	Financial Services		7.00	%	3M L+600			4,821		4,787		4,821
OIS Management Services, LLC	07/09/2026	Healthcare, Education and Childcare		5.56	%	3M L+475			1,433		1,423		1,419
OIS Management Services, LLC (Revolver)	07/09/2026	Healthcare, Education and Childcare		5.75	%	3M L+475			333		333		330
One Stop Mailing, LLC	05/07/2027	Cargo Transport		7.25	%	3M L+625			7,127		6,997		7,055
ORL Acquisition, Inc.	09/03/2027	Business Services		6.26	%	3M L+525			4,476		4,394		4,476
ORL Acquisition, Inc. (Revolver) (7)	09/03/2027	Business Services		—			—		597		—		—
Owl Acquisition, LLC	2/4/2028	Education		6.75	%	3M L+575			4,000		3,922		3,900
Ox Two, LLC	05/18/2026	Building Materials		8.00	%	1M L+700			12,849		12,676		12,592
Ox Two, LLC (Revolver)	05/18/2026	Building Materials		8.00	%	1M L+700			2,097		2,097		2,055
Ox Two, LLC (Revolver) (7)	05/18/2026	Building Materials		—			—		323		—		(6	)
PL Acquisitionco, LLC	11/09/2027	Retail		7.50	%	3M L+650			8,678		8,535		8,526
PL Acquisitionco, LLC - (Revolver)	11/09/2027	Retail		7.50	%	3M L+650			1,294		1,294		1,272
PL Acquisitionco, LLC (Revolver) (7)	11/09/2027	Retail		—					1,941		—		(34	)
PRA Events, Inc.	08/07/2025	Business Services		11.50	%	3M L+1,050			24,868		21,623		24,868
			(PIK 11.50%)
PRA Events, Inc. (Revolver)	08/07/2025	Business Services		11.50	%	3M L+1,050			2,606		2,268		2,606
			(PIK 11.50%)
Quantic Electronics, LLC (7)	11/19/2026	Aerospace and Defense		—			—		2,094		—		(21	)
Quantic Electronics, LLC (Revolver) (7)	11/19/2026	Aerospace and Defense		—			—		528		—		(11	)
Questex, LLC	09/09/2024	Media		6.00	%	3M L+500			21,713		21,509		20,627
Questex, LLC (Revolver)	09/09/2024	Media		6.00	%	3M L+500			1,436		1,436		1,364
Questex, LLC (Revolver) (7)	09/09/2024	Media		—			—		2,154		—		(108	)
Radius Aerospace, Inc. (Revolver) (7)	03/31/2025	Aerospace and Defense		—			—		2,227		—		(22	)
Rancho Health MSO, Inc. (7)	12/18/2025	Healthcare, Education and Childcare		—			—		1,050		—		—
Rancho Health MSO, Inc. (Revolver) (7)	12/18/2025	Healthcare, Education and Childcare		—			—		525		—		—
Recteq, LLC (Revolver) (7)	01/29/2026	Consumer Products		—			—		1,127		—		(17	)
Research Now Group, Inc. and Dynata, LLC	12/20/2024	Business Services		6.50	%	3M L+550			126		126		124
Riverpoint Medical, LLC (Revolver) (7)	06/20/2025	Healthcare, Education and Childcare		—			—		364		—		(1	)
Riverside Assessments, LLC	03/10/2025	Education		6.50	%	3M L+550			12,692		12,542		12,692
Sales Benchmark Index LLC (Revolver) (7)	01/03/2025	Business Services		—			—		732		—		—
Sargent & Greenleaf Inc. (Revolver)	12/20/2024	Electronics		7.00	%	3M L+550			598		598		598
Schlesinger Global, Inc.	07/14/2025	Business Services		8.00	%	3M L+700			4,513		4,455		4,468
			(PIK 1.00%)
Schlesinger Global, Inc. (Revolver)	07/14/2025	Business Services		7.00	%	3M L+600			30		30		30
			(PIK 1.00%)
Schlesinger Global, Inc. (Revolver) (7)	07/14/2025	Business Services		—			—		8		—		(0	)
Sigma Defense Systems, LLC	12/18/2025	Telecommunications		9.50	%	3M L+850			20,665		20,189		20,355
Sigma Defense Systems, LLC (Revolver) (7)	12/18/2025	Telecommunications		—			—		2,976		—		(45	)
Signature Systems Holding Company (Revolver)	05/03/2024	Chemicals, Plastics and Rubber		7.50	%	3M L+650			484		484		484
Signature Systems Holding Company (Revolver) (7)	05/03/2024	Chemicals, Plastics and Rubber		—			—		1,532		—		—
Solutionreach, Inc. (Revolver) (7)	01/17/2024	Communications		—			—		1,665		—		(73	)
Spear Education, LLC	02/26/2025	Education		6.26	%	3M L+525			12,110		12,026		12,110
Spendmend Holdings LLC	03/01/2028	Business Services		6.75	%	3M L+575			7,861		7,744		7,735
Spendmend Holdings LLC - Unfunded Term Loan	03/01/2023	Business Services							4,671		—		(40	)
Spendmend Holdings LLC - Funded Revolver	03/01/2028	Business Services		6.75	%	3M L+575			187		187		184
Spendmend Holdings LLC - Unfunded Revolver	03/01/2028	Business Services							1,215		—		(19	)
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC)	08/16/2027	Aerospace and Defense		7.00	%	3M L+600			11,250		11,038		10,879
System Planning and Analysis, Inc. - (Revolver) (7) (f/k/a Management Consulting & Research, LLC)	08/16/2027	Aerospace and Defense		—			—		2,925		—		(97	)
TAC LifePort Purchaser, LLC (Revolver) (7)	03/01/2026	Aerospace and Defense		—			—		620		—		—
The Aegis Technologies Group, LLC	10/31/2025	Aerospace and Defense		7.01	%	3M L+600			11,265		11,163		11,152

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited)—(Continued)

MARCH 31, 2022

(In thousands, except share data)


Issuer Name	Maturity / Expiration		Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
The Bluebird Group LLC	07/27/2026		Business Services		7.50	%	3M L+650			7,511	$	7,367	$	7,661
The Bluebird Group LLC (Revolver) (7)	07/27/2026		Business Services		—			—		734		—		15
The Vertex Companies, LLC (7)	08/30/2027		Business Services		—			—		2,221		—		(7	)
The Vertex Companies, LLC (Revolver) (7)	08/30/2027		Business Services		—			—		740		—		(10	)
TVC Enterprises, LLC	03/26/2026		Transportation		7.00	%	1M L+600			17,688		17,485		17,335
TVC Enterprises, LLC (Revolver) (7)	03/26/2026		Transportation		—			—		1,370		—		(27	)
TWS Acquisition Corporation	06/16/2025		Education		7.25	%	1M L+625			1,314		1,314		1,314
TWS Acquisition Corporation (Revolver) (7)	06/16/2025		Education		—			—		1,644		—		—
Tyto Athene, LLC	04/01/2028		Aerospace and Defense		6.25	%	3M L+550			2,232		2,211		2,176
Tyto Athene, LLC (Revolver) (7)	04/01/2026		Aerospace and Defense		—			—		364		—		(9	)
Walker Edison Furniture Company LLC	03/31/2027		Home and Office Furnishings		9.76	%	3M L+875			25,110		24,574		24,733
Wildcat Buyerco, Inc.	02/27/2026		Electronics		6.76	%	3M L+575			1,885		1,867		1,885
Wildcat Buyerco, Inc. Term Loan C (7)	05/11/2023		Electronics		—			—		1,578		—		18
Wildcat Buyerco, Inc. (Revolver) (7)	02/27/2026		Electronics		—			—		551		—		—
Zips Car Wash, LLC	03/01/2024		Auto Sector		8.18	%	3M L+700			14,002		13,868		13,862
Zips Car Wash, LLC (Revolver) (7)	03/01/2024		Auto Sector		—			—		1,140		—		—
Total First Lien Secured Debt												615,472		616,862
Second Lien Secured Debt—19.6%
Atlas Purchaser, Inc	05/07/2029		Telecommunications		9.75	%	3M L+900			17,000		16,527		16,725
Best Practice Associates LLC	06/29/2027		Aerospace and Defense		10.00	%	3M L+900			17,176		16,845		16,833
Data Axle, Inc.	04/03/2024		Other Media		10.25	%	3M L+925			20,400		20,253		20,400
ENC Parent Corporation	08/19/2029		Business Services		8.51	%	3M L+750			7,500		7,428		7,350
Halo Buyer, Inc.	07/06/2026		Consumer Products		9.25	%	1M L+825			32,500		32,134		31,119
Inventus Power, Inc.	09/29/2024		Electronics		9.50	%	3M L+850			16,593		16,340		16,178
QuantiTech LLC	02/04/2027		Aerospace and Defense		11.00	%	3M L+1,000			150		147		150
VT Topco, Inc.	08/17/2026		Business Services		7.76	%	3M L+675			15,000		14,926		14,700
Total Second Lien Secured Debt												124,602		123,455
Subordinated Debt/Corporate Notes—5.1%
Cascade Environmental LLC (6)	12/30/2023		Environmental Services		—			—		45,265		43,561		33,782
				(PIK 13.00%)
Total Subordinated Debt/Corporate Notes												43,561		33,782
Preferred Equity/Partnership Interests—1.0% (6)
Ad.net Holdings, Inc. (9)		—	Media		—			—		2,400		240		240
AH Newco Equityholdings, LLC		—	Healthcare, Education and Childcare		6.00	%		—		211		500		1,109
Cascade Environmental LLC (9)		—	Environmental Services		16.00	%		—		178,304		17,607		—
Imagine Topco, LP		—	Business Services		8.00	%		—		743,826		744		744
Mars Intermediate Holdings II, Inc (9)		—	Media		—			—		414		414		457
MeritDirect Holdings, LP (9)		—	Media		—			—		1,135		1,135		1,359
NXOF Holdings, Inc. (Tyto Athene, LLC)		—	Aerospace and Defense		—			—		160		160		214
ORL Holdco, Inc.		—	Business Services		—			—		575		57		60
Signature CR Intermediate Holdco, Inc.		—	Chemicals, Plastics and Rubber		12.00	%		—		1,527		1,527		1,932
TPC Holding Company, LP (8),(11)		—	Food		—			—		219		219		223
TWD Parent Holdings, LLC		—	Business Services		—			—		30		30		33
(The Vertex Companies, LLC)
Total Preferred Equity/Partnership Interests												22,634		6,372
Common Equity/Partnership Interests/Warrants—18.2% (6)
Ad.net Holdings, Inc. (9)		—	Media		—			—		2,667		27		78
Affinion Group Holdings, Inc. (Warrants)	04/10/2024		Consumer Products		—			—		77,190		2,126		—
AG Investco LP (9)		—	Business Services		—			—		805,164		805		1,203
AG Investco LP (7), (9)		—	Business Services		—			—		194,836		—		—
Altamira Intermediate Company II, Inc.		—	Aerospace and Defense		—			—		125,000		125		50
Athletico Holdings, LLC		—	Healthcare, Education and Childcare		—			—		9,357		10,000		10,023
Atlas Investment Aggregator, LLC (9)		—	Telecomunications		—			—		1,700,000		1,700		1,632
Cascade Environmental Holdings, LLC (9)		—	Environmental Services		—			—		33,901		2,852		—
CI (Allied) Investment Holdings, LLC		—	Business Services		—			—		120,962		1,243		863
(PRA Events, Inc.) (9)
Connatix Parent, LLC		—	Media		—			—		57,416		632		837
Cowboy Parent LLC		—	Distribution		—			—		26,360		2,782		3,632
(Blackhawk Industrial Distribution, Inc.)
Crane 1 Acquisition Parent Holdings, L.P.		—	Personal, Food and Miscellaneous Services		—			—		113		104		118
Crash Champion Holdings, LLC (9)		—	Auto Sector		—			—		36		328		740
Delta InvestCo LP		—	Telecommunications		—			—		698,889		699		1,250
(Sigma Defense Systems, LLC) (9)												—		—
Delta InvestCo LP		—	Telecommunications		—			—		442,155		—		—
(Sigma Defense Systems, LLC) (7), (9)
ECM Investors, LLC (9)		—	Electronics		—			—		167,537		41		434
eCommission Holding Corporation (11)		—	Financial Services		—			—		80		1,005		1,269
Exigo, LLC (9)		—	Business Services							1,458,333		1,458		1,458
FedHC InvestCo LP (9)		—	Aerospace and Defense		—			—		14,186		511		1,149
FedHC InvestCo LP (7),(9)		—	Aerospace and Defense		—			—		6,384		—		—
FedHC InvestCo II LP (9)		—	Aerospace and Defense							20,357		2,290		3,338
Gauge Lash Coinvest LLC		—	Consumer Products		—			—		889,376		136		4,515
Gauge Schlesinger Coinvest, LLC		—	Business Services		—			—		9		9		14
Gauge TVC Coinvest, LLC		—	Transportation		—			—		810,645		—		2,710
(TVC Enterprises, LLC)
GCOM InvestCo LP (9)		—	Business Services		—			—		2,434		1,003		588
Go Dawgs Capital III, LP		—	Building Materials		—			—		675,325		675		783
(American Insulated Glass, LLC) (9)
Green Veracity Holdings, LP - Class A		—	Business Services		—			—		15,000		1,500		5,078
(VT Topco, Inc.)
Hancock Claims Consultants Investors, LLC (9)		—	Insurance		—			—		450,000		450		608

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) —(Continued)

MARCH 31, 2022

(In thousands, except share data)


Issuer Name	Maturity / Expiration		Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
Icon Partners V C, L.P.		—	Business Services		—			—		1,111,111	$	1,111	$	1,111
Icon Partners V C, L.P. (7),(9)		—	Business Services		—			—		388,889		—		—
Imagine Topco, LP		—	Business Services		—			—		743,826		—		—
Infogroup Parent Holdings, Inc.		—	Other Media		—			—		181,495		2,040		4,510
(Data Axle, Inc.)
Ironclad Holdco, LLC		—	Environmental Services		—			—		4,566		450		590
(Applied Technical Services, LLC) (9)
ITC Infusion Co-invest, LP		—	Healthcare, Education and Childcare		—			—		82,895		829		829
ITC Rumba, LLC		—	Healthcare, Education and Childcare		—			—		375,675		8		30,965
(Cano Health, LLC) (9)
JWC-WE Holdings, L.P.		—	Home and Office Furnishings		—			—		2,688		783		2,688
(Walker Edison Furniture Company LLC) (9)
Kentucky Racing Holdco, LLC (Warrants)		—	Hotels, Motels, Inns and Gaming		—			—		161,252		—		1,315
Kinetic Purchaser, LLC		—	Consumer Products		—			—		1,308,814		1,309		1,660
KL Stockton Co-Invest LP		—	Personal, Food and Miscellaneous Services		—			—		382,353		382		485
(Any Hour Services) (9)
Lariat ecoserv Co-Invest Holdings, LLC (9)		—	Environmental Services		—			—		363,656		364		1,262
Lightspeed Investment Holdco LLC		—	Healthcare, Education and Childcare		—			—		273,143		273		468
Mars Intermidiate Holdings II, Inc. (9)		—	Media		—			—		414		—		123
Meadowlark Title, LLC (9)		—	Business Services		—			—		815,385		815		815
MeritDirect Holdings, LP (9)		—	Media		—			—		1,135		—		178
Municipal Emergency Services, Inc.		—	Distribution		—			—		3,920,145		3,984		3,763
NEPRT Parent Holdings, LLC		—	Consumer Products		—			—		1,299		1,261		1,112
(Recteq, LLC) (9)
North Haven Saints Equity Holdings, LP		—	Business Services		—			—		351,553		352		362
NXOF Holdings, Inc.		—	Aerospace and Defense		—			—		3,261		3		276
(Tyto Athene, LLC)
OceanSound Discovery Equity, LP		—	Aerospace and Defense		—			—		98,286		979		1,708
(Holdco Sands Intermediate, LLC) (9)
OHCP V BC COI, L.P.		—	Distribution		—			—		446,250		446		446
OHCP V BC COI, L.P. (7),(9)		—	Distribution		—			—		303,750		—		—
Oral Surgery (ITC) Holdings, LLC (9)		—	Healthcare, Education and Childcare		—			—		2,904		63		72
ORL Holdco, Inc.		—	Business Services		—			—		638		6		92
PennantPark-TSO Senior Loan Fund II, LP		—	Financial Services		—			—		11,418,675		11,419		11,678
Pink Lily Holdco, LLC (9)		—	Retail		—			—		1,044		1,044		857
QuantiTech InvestCo LP (9)		—	Aerospace and Defense		—			—		700		66		340
QuantiTech InvestCo LP (7),(9)		—	Aerospace and Defense		—			—		967		—		—
QuantiTech InvestCo II LP (9)		—	Aerospace and Defense		—			—		40		24		41
RFMG Parent, LP		—	Healthcare, Education and Childcare		—			—		1,050,000		1,050		1,173
(Rancho Health MSO, Inc.)
SBI Holdings Investments LLC		—	Business Services		—			—		36,585		366		383
(Sales Benchmark Index LLC)												—		—
Signature CR Intermediate Holdco, Inc.		—	Chemicals, Plastics and Rubber		—			—		80		80		—
SP L2 Holdings, LLC		—	Consumer Products		—			—		881,966		882		883
SSC Dominion Holdings, LLC		—	Electronics		—			—		1,500		1,500		1,890
Class A (US Dominion, Inc.)
SSC Dominion Holdings, LLC		—	Electronics		—			—		1,500		—		4,120
Class B (US Dominion, Inc.)												—		—
StellPen Holdings, LLC		—	Media		—			—		153,846		154		178
(CF512, Inc.)
TAC LifePort Holdings, LLC (9)		—	Aerospace and Defense		—			—		232,558		233		274
Tower Arch Infolinks Media, LP (9)		—	Media		—			—		528,683		529		650
Tower Arch Infolinks Media, LP (7), (9)		—	Media		—			—		366,761		—		—
TPC Holding Company, LP (8). (11)		—	Food		—			—		11,527		12		—
TWD Parent Holdings, LLC		—	Business Services		—			—		608		1		1
(The Vertex Companies, LLC)
U.S. Well Services, Inc. - Class A (5), (11)		—	Oil and Gas		—			—		360,343		3,022		396
UniVista Insurance (9)		—	Business Services		—			—		400		393		484
Wildcat Parent, LP		—	Electronics		—			—		2,314		231		563
(Wildcat Buyerco, Inc.)
Total Common Equity/Partnership Interests/Warrants												68,962		121,115
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies												875,230		901,587
Investments in Non-Controlled, Affiliated Portfolio Companies—5.5% (1), (2)
Preferred Equity/Partnership Interests—4.8% (6)
ETX Energy, LLC (9)		—	Oil and Gas		—			—		61,732		6,173		—
ETX Energy, LLC - Series X (9)		—	Oil and Gas		—			—		10,944		1,094		—
MidOcean JF Holdings Corp.		—	Distribution		—			—		153,922		15,392		31,619
Total Preferred Equity/Partnership Interests												22,660		31,619
Common Equity/Partnership Interests/Warrants—0.8% (6)
MidOcean JF Holdings Corp.		—	Distribution		—			—		65,933		24,790		5,111
Total Common Equity/Partnership Interests/Warrants												24,790		5,111
Total Investments in Non-Controlled, Affiliated Portfolio Companies												47,450		36,730
Investments in Controlled, Affiliated Portfolio Companies—41.5% (1), (2)
First Lien Secured Debt—7.6%
AKW Holdings Limited (8), (10), (11)	03/13/2024		Healthcare, Education and Childcare		7.56	%	3M L+700		£	38,250		52,792		50,362
Total First Lien Secured Debt												52,792		50,362

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) —(Continued)

MARCH 31, 2022

(In thousands, except share data)


Issuer Name	Maturity / Expiration		Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
Second Lien Secured Debt—1.7%
Mailsouth Inc.	04/23/2025		Printing and Publishing		15.00	%		—		11,950,604	$	11,951	$	11,353
				(PIK 15.00%)
Total Second Lien Secured Debt												11,951		11,353
Subordinated Debt—11.5%
PennantPark Senior Loan Fund, LLC (11)	07/31/2027		Financial Services		9.00	%	3M L+800			76,082,678		76,083		76,083
Total Subordinated Debt												76,083		76,083
Common Equity—20.7% (6)
AKW Holdings Limited (8), (10), (11)		—	Healthcare, Education and Childcare		—			—	£	950		132		851
MSpark, LLC		—	Printing and Publishing		—			—		51,151		16,516		—
PennantPark Senior Loan Fund, LLC (11)		—	Financial Services		—			—		41,564,397		41,627		48,129
RAM Energy Holdings LLC (9)		—	Energy and Utilities		—			—		180,805		162,708		88,862
Total Common Equity												220,984		137,842
Total Investments in Controlled, Affiliated Portfolio Companies												361,809		275,640
Total Investments—182.7%												1,284,489		1,213,957
Cash and Cash Equivalents—4.0%
BlackRock Federal FD Institutional 30												13,663		13,663
BNY Mellon Cash Reserve and Cash												12,596		12,587
Total Cash and Cash Equivalents												26,259		26,251
Total Investments and Cash Equivalents—186.7%											$	1,310,748	$	1,240,208
Liabilities in Excess of Other Assets—(86.7%)														(575,882	)
Net Assets—100.0%													$	664,325


(1)	The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities (See Note 6).
(2)	The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities (See Note 6).
(3)	Valued based on our accounting policy (See Note 2).
(4)	Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable London Interbank Offered Rate, or LIBOR or “L,” the Euro Interbank Offered Rate, or EURIBOR or “E,” or Prime rate, or “P.” The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 90-day or 180-day LIBOR rate (1M L, 3M L, or 6M L, respectively), and EURIBOR loans are typically indexed to a 90-day EURIBOR rate (3M E), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes payment-in-kind, or PIK, interest and other fee rates, if any.
(5)	The security was not valued using significant unobservable inputs. The value of all other securities was determined using significant unobservable inputs (See Note 5).
(6)	Non-income producing securities.
(7)	Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.
(8)	Non-U.S. company or principal place of business outside the United States.
(9)	Investment is held through our Taxable Subsidiary (See Note 1).
(10)	Par / Shares amount is denominated in British Pounds (£) as denoted.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS

September 30, 2021

(In thousands, except share data)


Issuer Name	Maturity / Expiration	Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
Investments in Non-Controlled, Non-Affiliated Portfolio Companies—124.3% (1), (2)
First Lien Secured Debt—77.5%
18 Freemont Street Acquisition, LLC	08/11/2025	Hotels, Motels, Inns and Gaming		9.50	%	1M L+800			7,433	$	6,815	$	7,563
Ad.net Acquisition, LLC (Revolver)	05/06/2026	Media		7.00	%	3M L+600			76		76		74
Ad.net Acquisition, LLC (Revolver) (7)	05/06/2026	Media		—			—		369		—		(6	)
Altamira Technologies, LLC (Revolver)	07/24/2025	Aerospace and Defense		8.00	%	3M L+700			50		50		47
Altamira Technologies, LLC (Revolver) (7)	07/24/2025	Aerospace and Defense		—			—		138		—		(9	)
American Insulated Glass, LLC	12/21/2023	Building Materials		6.50	%	3M L+550			15,795		15,639		15,637
Any Hour Services (7)	07/21/2027	Personal, Food and Miscellaneous Services		—			—		3,824		—		(38	)
Any Hour Services (Revolver) (7)	07/21/2027	Personal, Food and Miscellaneous Services		—			—		1,147		—		(23	)
Apex Service Partners, LLC	07/31/2025	Personal, Food and Miscellaneous Services		6.25	%	1M L+525			1,331		1,331		1,317
Apex Service Partners, LLC Term Loan C	07/31/2025	Personal, Food and Miscellaneous Services		6.25	%	1M L+525			5,592		5,509		5,536
Apex Service Partners, LLC Term Loan C (7)	01/31/2022	Personal, Food and Miscellaneous Services		—			—		6,658		—		(8	)
Apex Service Partners, LLC (Revolver)	07/29/2024	Personal, Food and Miscellaneous Services		6.25	%	3M L+525			239		239		235
Apex Service Partners, LLC (Revolver) (7)	07/29/2024	Personal, Food and Miscellaneous Services		—			—		693		—		(12	)
Applied Technical Services, LLC (7)	06/29/2022	Environmental Services		—			—		6,235		—		(55	)
Applied Technical Services, LLC (Revolver) (7)	12/29/2026	Environmental Services		—			—		1,000		—		(20	)
Bottom Line Systems, LLC	02/13/2023	Healthcare, Education and Childcare		6.25	%	1M L+550			6,153		6,128		6,153
Broder Bros., Co.	12/02/2022	Consumer Products		9.75	%	3M L+850			25,333		25,333		25,333
CF512, Inc.	08/20/2026	Media		7.00	%	3M L+600			10,000		9,802		9,800
CF512, Inc. (7)	08/20/2026	Media		—			—		2,727		—		(27	)
CF512, Inc.(Revolver) (7)	08/20/2026	Media		—			—		909		—		(18	)
Compex Legal Services, Inc.	02/09/2026	Business Services		6.75	%	3M L+575			3,570		3,514		3,529
Compex Legal Services, Inc. (Revolver)	02/07/2025	Business Services		6.75	%	3M L+575			459		459		454
Compex Legal Services, Inc. (Revolver) (7)	02/07/2025	Business Services		—			—		197		—		(2	)
Connatix Buyer, Inc.	07/13/2027	Media		6.25	%	3M L+550			12,000		11,766		11,760
Connatix Buyer, Inc. (7)	01/13/2023	Media		—			—		3,158		—		(32	)
Connatix Buyer, Inc. (Revolver)	07/13/2027	Media		6.25	%	3M L+550			186		186		182
Connatix Buyer, Inc. (Revolver) (7)	07/13/2027	Media		—			—		1,673		—		(33	)
Crane 1 Services, Inc.	08/16/2027	Personal, Food and Miscellaneous Services		6.75	%	3M L+575			1,847		1,820		1,829
Crane 1 Services, Inc. (7)	08/16/2023	Personal, Food and Miscellaneous Services		—			—		778		—		(2	)
Crane 1 Services, Inc. (Revolver) (7)	08/16/2027	Personal, Food and Miscellaneous Services		—			—		292		—		(3	)
Crash Champions, LLC	08/05/2025	Auto Sector		6.00	%	3M L+500			4,751		4,704		4,656
Crash Champions, LLC (7)	05/14/2022	Auto Sector		—			—		6,749		—		(67	)
DermaRite Industries LLC	03/03/2022	Manufacturing / Basic Industries		8.00	%	1M L+700			8,055		8,041		7,720
Dr. Squatch, LLC	08/27/2026	Personal and Non-Durable Consumer Products		7.00	%	3M L+600			13,515		13,247		13,244
Dr. Squatch, LLC (Revolver)	08/27/2026	Personal and Non-Durable Consumer Products		7.00	%	3M L+600			1,706		1,706		1,671
Dr. Squatch, LLC (Revolver) (7)	08/27/2026	Personal and Non-Durable Consumer Products		—			—		620		—		(12	)
DRS Holdings III, Inc.	11/03/2025	Consumer Products		7.25	%	3M L+625			9,975		9,882		9,905
DRS Holdings III, Inc. (Revolver) (7)	11/03/2025	Consumer Products		—			—		1,783		—		(12	)
ECL Entertainment, LLC	03/31/2028	Hotels, Motels, Inns and Gaming		8.25	%	1M L+750			8,747		8,664		8,944
ECM Industries, LLC (Revolver) (7)	12/23/2025	Electronics		—			—		518		—		(3	)
Fairbanks Morse Defense	06/17/2028	Aerospace and Defense		5.50	%	3M L+475			3,500		3,487		3,500
Gantech Acquisition Corp.	05/14/2026	Business Services		7.25	%	1M L+625			19,900		19,522		19,502
Gantech Acquisition Corp. (Revolver)	05/14/2026	Business Services		7.25	%	1M L+625			498		498		488
Gantech Acquisition Corp. (Revolver) (7)	05/14/2026	Business Services		—			—		1,493		—		(30	)
Graffiti Buyer, Inc.	08/10/2027	Distribution		6.75	%	3M L+575			1,994		1,955		1,964
Graffiti Buyer, Inc. (7)	08/10/2023	Distribution		—			—		893		—		(4	)
Graffiti Buyer, Inc. (Revolver) (7)	08/10/2027	Distribution		—			—		769		—		(18	)
Hancock Roofing and Construction L.L.C. (7)	12/31/2022	Insurance		—			—		1,500		—		(15	)
Hancock Roofing and Construction L.L.C. (Revolver) (7)	12/31/2026	Insurance		—			—		750		—		(8	)
HW Holdco, LLC	12/10/2024	Media		5.50	%	3M L+450			2,541		2,526		2,516
HW Holdco, LLC (Revolver)	12/10/2024	Media		5.50	%	3M L+450			1,219		1,219		1,207
HW Holdco, LLC (Revolver) (7)	12/10/2024	Media		—			—		2,168		—		(22	)
IG Investments Holdings, LLC	09/22/2028	Business Services		6.75	%	3M L+600			4,518		4,428		4,428
IG Investments Holdings, LLC (Revolver) (7)	09/22/2027	Business Services		—			—		477		—		—
IMIA Holdings, Inc.	04/09/2027	Aerospace and Defense		6.75	%	3M L+575			13,589		13,341		13,317
IMIA Holdings, Inc. (Revolver) (7)	04/09/2027	Aerospace and Defense		—			—		1,674		—		(33	)
Integrity Marketing Acquisition, LLC	08/27/2025	Insurance		6.49	%	3M L+550			17,220		17,116		17,134
Integrity Marketing Acquisition, LLC (7)	07/09/2023	Insurance		—			—		4,278		—		11
Juniper Landscaping of Florida, LLC	12/22/2021	Personal, Food and Miscellaneous Services		6.50	%	1M L+550			2,615		2,611		2,615
K2 Pure Solutions NoCal, L.P.	12/20/2023	Chemicals, Plastics and Rubber		8.00	%	1M L+700			11,800		11,712		11,486
K2 Pure Solutions NoCal, L.P. (Revolver)	12/20/2023	Chemicals, Plastics and Rubber		8.00	%	1M L+700			872		872		849
K2 Pure Solutions NoCal, L.P. (Revolver) (7)	12/20/2023	Chemicals, Plastics and Rubber		—			—		1,066		—		(28	)
Lash OpCo, LLC	02/18/2027	Consumer Products		8.00	%	1M L+700			30,000		29,335		29,400
Lash OpCo, LLC (Revolver)	08/16/2026	Consumer Products		8.00	%	1M L+700			291		291		285
Lash OpCo, LLC (Revolver) (7)	08/19/2026	Consumer Products		—			—		1,528		—		(31	)
LAV Gear Holdings, Inc.	10/31/2024	Leisure, Amusement, Motion Pictures, Entertainment		8.50	%	1M L+750			790		785		741
			(PIK 5.00%)
Lightspeed Buyer Inc.	02/03/2026	Healthcare, Education and Childcare		6.75	%	1M L+575			4,994		4,922		4,994
Lightspeed Buyer Inc. (Revolver) (7)	02/03/2026	Healthcare, Education and Childcare		—			—		1,166		—		—
Lombart Brothers, Inc.	04/13/2023	Healthcare, Education and Childcare		7.25	%	1M L+625			1,036		1,036		1,036
Lombart Brothers, Inc. (Revolver)	04/13/2023	Healthcare, Education and Childcare		7.25	%	1M L+625			737		737		737

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

September 30, 2021

(In thousands, except share data)


Issuer Name	Maturity / Expiration	Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
Mars Acquisition Holdings Corp. (Revolver) (7)	5/14/2026	Media		—			—		806	$	-	$	(8	)
MBS Holdings, Inc. (Revolver) (7)	04/16/2027	Telecommunications		—			—		694		—		(14	)
MeritDirect, LLC	05/23/2024	Media		6.50	%	3M L+550			2,759		2,736		2,732
MeritDirect, LLC (Revolver) (7)	05/23/2024	Media		—			—		2,518		—		(25	)
Municipal Emergency Services, Inc.	09/28/2027	Distribution		6.00	%	3M L+500			6,953		6,814		6,814
Municipal Emergency Services, Inc. (7)	09/28/2027	Distribution		—			—		1,880		—		—
Municipal Emergency Services, Inc. (Revolver) (7)	09/28/2027	Distribution		—			—		1,880		—		—
NBH Group LLC	08/19/2026	Healthcare, Education and Childcare		6.50	%	1M L+550			7,561		7,413		7,410
NBH Group LLC (Revolver) (7)	08/19/2026	Healthcare, Education and Childcare		—			—		1,163		—		(23	)
OIS Management Services, LLC	07/09/2026	Healthcare, Education and Childcare		5.75	%	3M L+475			3,893		3,843		3,834
OIS Management Services, LLC (7)	07/09/2023	Healthcare, Education and Childcare		—			—		1,433		—		(11	)
OIS Management Services, LLC (Revolver) (7)	07/09/2026	Healthcare, Education and Childcare		—			—		333		—		(5	)
One Stop Mailing, LLC	05/07/2027	Cargo Transport		7.25	%	3M L+625			14,920		14,631		14,659
ORL Acquisition, Inc.	09/03/2027	Business Services		6.25	%	3M L+525			5,041		4,941		4,940
ORL Acquisition, Inc. (Revolver) (7)	09/03/2027	Business Services		—			—		597		—		—
Ox Two, LLC	05/18/2026	Building Materials		7.00	%	1M L+600			15,671		15,435		15,358
Ox Two, LLC (Revolver)	05/18/2026	Building Materials		7.00	%	1M L+600			645		645		632
Ox Two, LLC (Revolver) (7)	05/18/2026	Building Materials		—			—		1,774		—		(35	)
PRA Events, Inc.	08/07/2025	Business Services		11.50	%	3M L+1,050			23,675		20,421		22,373
			(PIK 11.50%)
PRA Events, Inc. (Revolver)	08/07/2025	Business Services		11.50	%	3M L+1,050			2,461		2,123		2,326
			(PIK 11.50%)
Quantic Electronics, LLC	11/19/2026	Aerospace and Defense		7.25	%	1M L+625			6,188		6,095		6,064
Quantic Electronics, LLC (7)	11/19/2026	Aerospace and Defense		—			—		2,094		—		(21	)
Quantic Electronics, LLC (Revolver) (7)	11/19/2026	Aerospace and Defense		—			—		528		—		(11	)
Questex, LLC	09/09/2024	Media		6.00	%	3M L+500			21,825		21,584		20,516
Questex, LLC (Revolver)	09/09/2024	Media		6.00	%	3M L+500			2,154		2,154		2,025
Questex, LLC (Revolver) (7)	09/09/2024	Media		—			—		1,436		—		(86	)
Radius Aerospace, Inc. (Revolver) (7)	03/31/2025	Aerospace and Defense		—			—		2,227		—		(63	)
Rancho Health MSO, Inc. (7)	12/18/2025	Healthcare, Education and Childcare		—			—		1,050		—		—
Rancho Health MSO, Inc. (Revolver) (7)	12/18/2025	Healthcare, Education and Childcare		—			—		525		—		—
Recteq, LLC (Revolver) (7)	01/29/2026	Consumer Products		—			—		1,127		—		(11	)
Research Horizons, LLC	06/28/2022	Media		7.25	%	1M L+625			28,796		28,682		28,508
Research Now Group, Inc. and Dynata, LLC	12/20/2024	Business Services		6.50	%	3M L+550			2,884		2,884		2,847
Riverpoint Medical, LLC (Revolver) (7)	06/20/2025	Healthcare, Education and Childcare		—			—		364		—		(4	)
Riverside Assessments, LLC	03/10/2025	Education		6.75	%	3M L+575			16,174		15,952		15,769
Sales Benchmark Index LLC (Revolver) (7)	01/03/2025	Business Services		—			—		732		—		(18	)
Sargent & Greenleaf Inc. (Revolver)	12/20/2024	Electronics		7.00	%	3M L+550			299		299		299
Sargent & Greenleaf Inc. (Revolver) (7)	12/20/2024	Electronics		—			—		299		—		—
Schlesinger Global, Inc.	07/14/2025	Business Services		8.00	%	3M L+700			512		507		489
			(PIK 1.00%)
Schlesinger Global, Inc. (Revolver)	07/14/2025	Business Services		8.00	%	3M L+700			24		24		23
			(PIK 1.00%)
Schlesinger Global, Inc. (Revolver) (7)	07/14/2025	Business Services		—			—		14		—		(1	)
Sigma Defense Systems, LLC	12/18/2025	Telecommunications		9.75	%	3M L+875			6,520		6,378		6,406
Sigma Defense Systems, LLC (Revolver) (7)	12/18/2025	Telecommunications		—			—		951		—		(17	)
Signature Systems Holding Company - Term Loan II	12/31/2021	Chemicals, Plastics and Rubber		8.50	%	3M L+750			806		802		798
Signature Systems Holding Company (Revolver)	05/03/2024	Chemicals, Plastics and Rubber		8.50	%	3M L+750			484		484		479
Signature Systems Holding Company (Revolver) (7)	05/03/2024	Chemicals, Plastics and Rubber		—			—		1,532		—		(15	)
Solutionreach, Inc. (Revolver) (7)	01/17/2024	Communications		—			—		1,665		—		—
Spear Education, LLC	02/26/2025	Education		6.00	%	3M L+500			14,898		14,781		14,898
Spear Education, LLC (7)	02/26/2022	Education		—			—		6,875		—		—
Spectacle Gary Holdings, LLC	12/23/2025	Hotels, Motels, Inns and Gaming		11.00	%	1M L+900			21,546		20,972		23,391
TAC LifePort Purchaser, LLC (Revolver) (7)	03/01/2026	Aerospace and Defense		—			—		620		—		(0	)
The Bluebird Group LLC	07/27/2026	Business Services		8.00	%	3M L+700			5,606		5,496		5,570
The Bluebird Group LLC (Revolver) (7)	07/27/2026	Business Services		—			—		734		—		(5	)
The Vertex Companies, LLC	08/30/2027	Business Services		6.50	%	1M L+550			4,577		4,486		4,491
The Vertex Companies, LLC (7)	08/30/2027	Business Services		—			—		2,221		—		(19	)
The Vertex Companies, LLC (Revolver) (7)	08/30/2027	Business Services		—			—		740		—		(14	)
TPC Canada Parent, Inc. and TPC US Parent, LLC (8),(11)	11/24/2025	Food		6.25	%	3M L+525			1,771		1,771		1,718
TVC Enterprises, LLC	03/26/2026	Transportation		6.75	%	1M L+575			15,506		15,347		15,506
TVC Enterprises, LLC (Revolver) (7)	03/26/2026	Transportation		—			—		2,702		—		—
TWS Acquisition Corporation	06/16/2025	Education		7.25	%	1M L+625			4,137		4,137		4,137
TWS Acquisition Corporation (Revolver) (7)	06/16/2025	Education		—			—		1,644		—		—
Tyto Athene, LLC (Revolver) (7)	04/01/2026	Aerospace and Defense		—			—		364		—		—
Walker Edison Furniture Company LLC	03/31/2027	Home and Office Furnishings		6.75	%	3M L+575			24,875		24,293		23,942
Wildcat Buyerco, Inc.	02/27/2026	Electronics		6.00	%	3M L+500			1,629		1,612		1,621
Wildcat Buyerco, Inc. (7)	02/27/2022	Electronics		—			—		2,574		—		16
Wildcat Buyerco, Inc. (Revolver) (7)	02/27/2026	Electronics		—			—		551		—		(7	)
Total First Lien Secured Debt											509,046		511,405
Second Lien Secured Debt—16.2%
Atlas Purchaser, Inc	05/07/2029	Telecommunications		9.75	%	3M L+900			17,000		16,506		16,873
Data Axle, Inc.	04/03/2024	Other Media		10.25	%	3M L+925			20,400		20,220		20,400
ENC Parent Corporation	08/19/2029	Business Services		8.25	%	3M L+750			7,500		7,426		7,425
Halo Buyer, Inc.	07/06/2026	Consumer Products		9.25	%	1M L+825			32,500		32,106		31,119
Inventus Power, Inc.	09/29/2024	Electronics		9.50	%	3M L+850			16,593		16,292		16,261
QuantiTech LLC	02/04/2027	Aerospace and Defense		11.00	%	3M L+1,000			150		147		147
VT Topco, Inc.	08/17/2026	Business Services		7.06	%	3M L+675			15,000		14,922		15,000
Total Second Lien Secured Debt										$	107,620	$	107,225

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

September 30, 2021

(In thousands, except share data)


Issuer Name	Maturity / Expiration		Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
Subordinated Debt/Corporate Notes—8.6%
Blackhawk Industrial Distribution, Inc.	03/17/2025		Distribution		12.00	%		—		14,335	$	14,165	$	14,335
				(PIK 2.00%)
Cascade Environmental LLC	12/30/2023		Environmental Services		13.00	%		—		42,468		42,150		42,680
				(PIK 13.00%)
Total Subordinated Debt/Corporate Notes												56,315		57,015
Preferred Equity/Partnership Interests—3.9% (6)
Ad.net Holdings, Inc. (9)		—	Media		—			—		2,400		240		240
AH Newco Equityholdings, LLC		—	Healthcare, Education and Childcare		6.00	%		—		211		500		944
Cascade Environmental LLC		—	Environmental Services		16.00	%		—		178,304		17,607		21,133
Mars Intermediate Holdings II, Inc			Media		—			—		414		414		432
MeritDirect Holdings, LP (9)		—	Media		—			—		540		540		693
NXOF Holdings, Inc. (Tyto Athene, LLC)		—	Aerospace and Defense		—			—		160		160		202
ORL Holdco, Inc.		—	Business Services		—			—		575		57		57
Signature CR Intermediate Holdco, Inc.		—	Chemicals, Plastics and Rubber		12.00	%		—		1,527		1,527		1,879
TPC Holding Company, LP (8),(11)		—	Food		—			—		219		219		262
TWD Parent Holdings, LLC (The Vertex Companies, LLC)		—	Business Services		—			—		30		30		30
Total Preferred Equity/Partnership Interests												21,295		25,873
Common Equity/Partnership Interests/Warrants—18.0% (6)
Ad.net Holdings, Inc. (9)		—	Media		—			—		2,667		27		49
Affinion Group Holdings, Inc. (Warrants)	04/10/2024		Consumer Products		—			—		77,190		2,126		—
AG Investco LP (9)		—	Business Services		—			—		805,164		805		1,192
AG Investco LP (7), (9)		—	Business Services		—			—		194,836		—		—
Altamira Intermediate Company II, Inc.		—	Aerospace and Defense		—			—		125,000		125		33
Atlas Investment Aggregator, LLC (9)		—	Telecomunications		—			—		1,700,000		1,700		1,710
Cascade Environmental Holdings, LLC (9)		—	Environmental Services		—			—		33,901		2,852		478
CI (Allied) Investment Holdings, LLC		—	Business Services		—			—		120,962		1,243		475
(PRA Events, Inc.) (9)
Connatix Parent, LLC		—	Media		—			—		57,416		632		635
Cowboy Parent LLC		—	Distribution		—			—		22,500		2,250		1,902
(Blackhawk Industrial Distribution, Inc.)
Crane 1 Acquisition Parent Holdings, L.P.		—	Personal, Food and Miscellaneous Services		—			—		113		104		104
Crash Champion Holdings, LLC (9)		—	Auto Sector		—			—		36		328		369
Delta InvestCo LP (Sigma Defense Systems, LLC) (9)		—	Telecommunications		—			—		570,522		571		488
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (9)		—	Telecommunications		—			—		570,522		—		(82	)
ECM Investors, LLC (9)		—	Electronics		—			—		167,537		41		565
eCommission Holding Corporation (11)		—	Financial Services		—			—		80		1,005		1,153
FedHC InvestCo LP (9)		—	Aerospace and Defense		—			—		3,331		333		339
FedHC InvestCo LP (7),(9)		—	Aerospace and Defense		—			—		4,072		—		—
Gauge Lash Coinvest LLC		—	Consumer Products		—			—		889,376		136		3,558
Gauge Schlesinger Coinvest, LLC		—	Business Services		—			—		9		9		9
Gauge TVC Coinvest, LLC		—	Transportation		—			—		810,645		—		2,663
(TVC Enterprises, LLC)												—		—
GCOM InvestCo LP (9)		—	Business Services		—			—		1,855		809		352
GCOM InvestCo LP (7),(9)		—	Business Services		—			—		965		—		—
Go Dawgs Capital III, LP		—	Building Materials		—			—		675,325		675		844
(American Insulated Glass, LLC) (9)
Green Veracity Holdings, LP - Class A		—	Business Services		—			—		15,000		1,500		5,320
(VT Topco, Inc.)
Hancock Claims Consultants Investors, LLC (9)		—	Insurance		—			—		450,000		450		613
Infogroup Parent Holdings, Inc. (Data Axle, Inc.)		—	Other Media		—			—		181,495		2,040		3,221
Ironclad Holdco, LLC (Applied Technical Services, LLC) (9)		—	Environmental Services		—			—		3,960		390		434
ITC Rumba, LLC (Cano Health, LLC) (9)		—	Healthcare, Education and Childcare		—			—		375,675		—		60,808
JWC-WE Holdings, L.P.		—	Home and Office Furnishings		—			—		1,906,433		—		6,616
(Walker Edison Furniture Company LLC) (9)
Kadmon Holdings, Inc. (5)		—	Healthcare, Education and Childcare		—			—		252,014		2,266		2,195
Kentucky Racing Holdco, LLC (Warrants) (9)		—	Hotels, Motels, Inns and Gaming		—			—		161,252		—		1,147
KL Stockton Co-Invest LP (Any Hour Services) (9)		—	Personal, Food and Miscellaneous Services		—			—		382,353		382		382
Lariat ecoserv Co-Invest Holdings, LLC (9)		—	Environmental Services		—			—		363,656		364		1,044
Lightspeed Investment Holdco LLC		—	Healthcare, Education and Childcare		—			—		273,143		273		315
Mars Intermidiate Holdings II, Inc.		—	Media		—			—		414		—		169
MeritDirect Holdings, LP (9)		—	Media		—			—		540		—		126
Municipal Emergency Services, Inc.		—	Distribution		—			—		1,593,514		1,594		1,594
NEPRT Parent Holdings, LLC (Recteq, LLC) (9)		—	Consumer Products		—			—		1,299		1,262		1,537
NXOF Holdings, Inc.		—	Aerospace and Defense		—			—		3,261		3		186
(Tyto Athene, LLC)
OceanSound Discovery Equity, LP		—	Aerospace and Defense		—			—		98,286		979		1,625
(Holdco Sands Intermediate, LLC) (9)
Oral Surgery (ITC) Holdings, LLC (9)		—	Healthcare, Education and Childcare		—			—		2,904		63		63
ORL Holdco, Inc.		—	Business Services		—			—		638		6		6
QuantiTech InvestCo LP (9)		—	Aerospace and Defense		—			—		700		66		365
QuantiTech InvestCo LP (7),(9)		—	Aerospace and Defense		—			—		967		—		—
QuantiTech InvestCo II LP (9)		—	Aerospace and Defense		—			—		40		24		21

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS – (Continued)

September 30, 2021

(In thousands, except share data)


Issuer Name	Maturity / Expiration		Industry	Current Coupon			Basis Point Spread Above Index (4)		Par / Shares		Cost		Fair Value (3)
RFMG Parent, LP (Rancho Health MSO, Inc.)		—	Healthcare, Education and Childcare		—			—		1,050,000	$	1,050	$	1,253
SBI Holdings Investments LLC		—	Business Services		—			—		36,585		366		278
(Sales Benchmark Index LLC)												—		—
Signature CR Intermediate Holdco, Inc.		—	Chemicals, Plastics and Rubber		—			—		80		80		—
SSC Dominion Holdings, LLC		—	Electronics		—			—		1,500		1,500		1,890
Class A (US Dominion, Inc.)												—		—
SSC Dominion Holdings, LLC		—	Electronics		—			—		1,500		—		3,534
Class B (US Dominion, Inc.)												—		—
StellPen Holdings, LLC (CF512, Inc.)		—	Media		—			—		153,846		154		154
TAC LifePort Holdings, LLC (9)		—	Aerospace and Defense		—			—		232,558		233		260
TPC Holding Company, LP (8). (11)		—	Food		—			—		11,527		12		33
TWD Parent Holdings, LLC (The Vertex Companies, LLC)		—	Business Services		—			—		608		1		1
U.S. Well Services, Inc. - Class A (5), (11)		—	Oil and Gas		—			—		1,261,201		3,022		914
UniVista Insurance		—	Business Services		—			—		400		400		405
Wildcat Parent, LP (Wildcat Buyerco, Inc.)		—	Electronics		—			—		2,314		231		411
ZS Juniper L.P.		—	Personal, Food and Miscellaneous Services		—			—		1,056		1,056		5,227
(Juniper Landscaping of Florida, LLC) (9)
Total Common Equity/Partnership Interests/Warrants												35,536		118,982
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies												729,811		820,500
Investments in Non-Controlled, Affiliated Portfolio Companies—7.6% (1), (2)
Preferred Equity/Partnership Interests—6.2% (6)
ETX Energy, LLC (9)		—	Oil and Gas		—			—		61,732		6,173		—
ETX Energy, LLC - Series X (9)		—	Oil and Gas		—			—		10,944		1,094		—
MidOcean JF Holdings Corp.		—	Distribution		—			—		153,922		15,392		41,023
Total Preferred Equity/Partnership Interests												22,660		41,023
Common Equity/Partnership Interests/Warrants—1.4% (6)
ETX Energy, LLC (9)		—	Oil and Gas		—			—		1,658,389		29,712		—
ETX Energy Management Company, LLC		—	Oil and Gas		—			—		1,754,104		1,562		—
MidOcean JF Holdings Corp.		—	Distribution		—			—		65,933		24,790		9,139
Total Common Equity/Partnership Interests/Warrants												56,064		9,139
Total Investments in Non-Controlled, Affiliated Portfolio Companies												78,723		50,161
Investments in Controlled, Affiliated Portfolio Companies—58.3% (1), (2)
First Lien Secured Debt—6.2%
AKW Holdings Limited (8), (10), (11)	03/13/2024		Healthcare, Education and Childcare		7.50	%	3M L+700		£	30,500		42,389		41,125
Total First Lien Secured Debt												42,389		41,125
Second Lien Secured Debt—10.6%
Mailsouth Inc.	04/23/2025		Printing and Publishing		15.00	%		—		11,087		11,087		11,087
				(PIK 15.00%)
PT Network Intermediate Holdings, LLC	11/30/2024		Healthcare, Education and Childcare		11.00	%	3M L+1,000			58,582		58,276		58,582
				(PIK 11.00%)
Total Second Lien Secured Debt												69,363		69,668
Subordinated Debt—9.7%
PennantPark Senior Loan Fund, LLC (11)	07/31/2027		Financial Services		9.00	%	3M L+800			64,155		64,155		64,155
Total Subordinated Debt												64,155		64,155
Preferred Equity—2.0% (6)
CI (PTN) Investment Holdings II, LLC		—	Healthcare, Education and Childcare		—			—		36,450		547		—

(PT Network, LLC) (9)
PT Network Intermediate Holdings, LLC (9)			Healthcare, Education and Childcare		11.00	%	3M L+1,000			833		10,725		13,412
Total Preferred Equity												11,272		13,412
Common Equity—29.7% (6)
AKW Holdings Limited (8), (10), (11)		—	Healthcare, Education and Childcare		—			—	£	950		132		254
CI (PTN) Investment Holdings II, LLC		—	Healthcare, Education and Childcare		—			—		333,333		5,000		—

(PT Network, LLC) (9)
MSpark, LLC		—	Printing and Publishing		—			—		51,151		16,516		11,013
PennantPark Senior Loan Fund, LLC (11)		—	Financial Services		—			—		33,830,005		33,893		41,160
PT Network Intermediate Holdings, LLC (9)			Healthcare, Education and Childcare		—			—		621		7,159		62,131
RAM Energy Holdings LLC		—	Energy and Utilities		—			—		180,805		162,708		81,710
Total Common Equity												225,408		196,269
Total Investments in Controlled, Affiliated Portfolio Companies												412,587		384,628
Total Investments—190.2%												1,221,121		1,255,289
Cash and Cash Equivalents—3.1%
BlackRock Federal FD Institutional 30												18,220		18,220
BNY Mellon Cash Reserve and Cash												2,163		2,137
Total Cash and Cash Equivalents												20,383		20,357
Total Investments and Cash Equivalents—193.2%											$	1,241,504	$	1,275,646
Liabilities in Excess of Other Assets—(93.2%)														(615,502	)
Net Assets—100.0%													$	660,144

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)	The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities.
(2)	The provisions of the 1940 Act classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities (See Note 6).
(3)	Valued based on our accounting policy (See Note 2).
(4)	Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable London Interbank Offered Rate, or LIBOR or “L,” the Euro Interbank Offered Rate, or EURIBOR or “E,” or Prime rate, or “P.” The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 90-day or 180-day LIBOR rate (1M L, 3M L, or 6M L, respectively), and EURIBOR loans are typically indexed to a 90-day EURIBOR rate (3M E), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.
(5)	The security was not valued using significant unobservable inputs. The value of all other securities was determined using significant unobservable inputs (See Note 5).
(6)	Non-income producing securities.
(7)	Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.
(8)	Non-U.S. company or principal place of business outside the United States.
(9)	Investment is held through our Taxable Subsidiary (See Note 1).
(10)	Par / Shares amount is denominated in British Pounds (£) as denoted.
(11)	The investment is treated as a non-qualifying asset under Section 55(a) of the 1940 Act. Under the 1940 Act, we may not acquire any non-qualifying asset unless, at the time the acquisition is made, qualifying assets represent at least 70% of our total assets. As of September 30, 2021, qualifying assets represent 88% of the Company’s total assets and non-qualifying assets represent 12% of the Company’s total assets.

SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

MARCH 31, 2022

1. ORGANIZATION

PennantPark Investment Corporation was organized as a Maryland corporation in January 2007. We are a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. Our investment objective is to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments. We invest primarily in U.S. middle-market companies in the form of first lien secured debt, second lien secured debt, subordinated debt and, to a lesser extent, equity investments. On April 24, 2007, we closed our initial public offering. Our common stock trades on the New York Stock Exchange under the symbol “PNNT.”

We have entered into an investment management agreement, or the Investment Management Agreement, with the Investment Adviser, an external adviser that manages our day-to-day operations. PennantPark Investment, through the Investment Adviser, manages the day-to-day operations of, and provides investment advisory services to, SBIC II under a separate investment management agreement. We have also entered into an administration agreement, or the Administration Agreement, with the Administrator, which provides the administrative services necessary for us to operate. PennantPark Investment, through the Administrator, also provides similar services to SBIC II under a separate administration agreement. See Note 3.

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

On July 31, 2020, we and certain entities and managed accounts of the private credit investment manager of Pantheon Ventures (UK) LLP, or Pantheon, entered into a limited liability company agreement to co-manage PSLF, a newly-formed unconsolidated joint venture. In connection with this transaction, we contributed in-kind our formerly wholly-owned subsidiary, Funding I. As a result of this transaction, Funding I became a wholly-owned subsidiary of PSLF and has been deconsolidated from our financial statements. PSLF invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSLF was formed as a Delaware limited liability company. See Note 4.

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

In October 2021, we issued $165.0 million in aggregate principal amount of our 2026 Notes-2 at a public offering price per note of 99.436%. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1 of each year, at a rate of 4.00% per year, commencing May 1, 2022. The 2026 Notes-2 mature on November 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes-2 are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes-2 are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes-2 on any securities exchange or automated dealer quotation system.

We have formed the Taxable Subsidiary, which is subject to tax as a corporation. The Taxable Subsidiary allows us to hold equity securities of certain portfolio companies treated as pass-through entities for federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

In January 2022, we formed PennantPark-TSO Senior Loan Fund II LP, ("PTSF II"), an unconsolidated limited partnership, organized as a Delaware limited liability partnership. We sold $82.3 million in investments to a wholly-owned subsidiary of PTSF II in exchange for cash in the amount of $75.7 million and an $6.6 million equity interest in PTSF II representing 23.1% of the total outstanding Class A Units of PTSF II. We recognized $0.2 million of realized gain upon the formation of PTSF II. As of March 31, 2022, our capital commitment of $15.0 million is 93.1% funded and we hold 23.1% of the total outstanding Class A Units of PTSF II and a 4.99% voting interest in the general partner which manages PTSF II.

We are operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and the Investment Adviser intends to continue to affirm the exclusion on an annual basis, and therefore, is not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.

2. SIGNIFICANT ACCOUNTING POLICIES

The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Changes in the economic and regulatory environment, financial markets, the credit worthiness of our portfolio companies, the global outbreak of the novel coronavirus (“COVID-19”) and any other parameters used in determining these estimates and assumptions could cause actual results to differ from such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions in consolidation. References to the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification, as amended, or ASC, serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued.

Our Consolidated Financial Statements are prepared in accordance with GAAP, consistent with ASC Topic 946, Financial Services – Investment Companies, and pursuant to the requirements for reporting on Form 10-K/Q and Articles 6, 10 and 12 of Regulation S-X, as appropriate. In accordance with Article 6-09 of Regulation S-X, we have provided a Consolidated Statement of Changes in Net Assets in lieu of a Consolidated Statement of Changes in Stockholders’ Equity.

Our significant accounting policies consistently applied are as follows:

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

(a)

Investment Valuations

We expect that there may not be readily available market values for many of the investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that our board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 5.

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

(1)

Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Investment Adviser responsible for the portfolio investment;

(2)

Preliminary valuation conclusions are then documented and discussed with the management of the Investment Adviser;

(3)

Our board of directors also engages independent valuation firms to conduct independent appraisals of our investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment. The independent valuation firms review management’s preliminary valuations in light of their own independent assessment and also in light of any market quotations obtained from an independent pricing service, broker, dealer or market maker;

(4)

The audit committee of our board of directors reviews the preliminary valuations of the Investment Adviser and those of the independent valuation firms on a quarterly basis, periodically assesses the valuation methodologies of the independent valuation firms, and responds to and supplements the valuation recommendations of the independent valuation firms to reflect any comments; and

(5)

Our board of directors discusses these valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of our Investment Adviser, the respective independent valuation firms and the audit committee.

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

(b)

Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses

Security transactions are recorded on a trade-date basis. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects, as applicable, the change in the fair values of our portfolio investments and the Credit Facilities during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

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

Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if there is reasonable doubt that principal or interest will be collected. 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 March 31, 2022, we had one portfolio company on non-accrual, representing 3.5% and 2.8% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2021, we had no portfolio companies on non-accrual.

(c)

Income Taxes

We have complied with the requirements of Subchapter M of the Code and have qualified to be treated as a RIC for federal income tax purposes. In this regard, we account for income taxes using the asset and liability method prescribed by ASC Topic 740, Income Taxes, or ASC 740. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Based upon our qualification and election to be treated as a RIC for U.S. federal income tax purposes, we typically do not incur material federal income taxes. However, we may choose to retain a portion of our calendar year income, which may result in the imposition of an excise tax. Additionally, certain of the Company’s consolidated subsidiaries are subject to federal, state and local income taxes. For the three and six months ended March 31, 2022, we recorded a provision for taxes on net investment income of $0.2 million and $0.4 million respectively, all of which pertains to U.S. federal excise tax. For the three and six months ended March 31, 2021, we recorded a provision for taxes on net investment income of $0.2 million and $0.3 million respectively, all of which pertains to U.S. federal excise tax.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

We recognize the effect of a tax position in our Consolidated Financial Statements in accordance with ASC 740 when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not considered to satisfy the “more-likely-than-not” threshold would be recorded as a tax expense or benefit. Penalties or interest, if applicable, that may be assessed relating to income taxes would be classified as other operating expenses in the financial statements. There were no tax accruals relating to uncertain tax positions and no amounts accrued for any related interest or penalties with respect to the periods presented herein. The Company’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 the Company files both federal and state income tax returns, the Company’s major tax jurisdiction is federal.

PNNT Investment Holdings, LLC, a wholly-owned subsidiary of the Company, is subject to U.S. federal, state and local corporate income taxes. The income tax expense and related tax liabilities of the Taxable Subsidiary are reflected in the Company’s consolidated financial statements.

For the three and six months ended March 31, 2022, the Company recognized a provision for taxes of $5.1 million and $5.1 million, respectively, on net realized gain on investments by the Taxable Subsidiary. The provision for taxes on net realized gain on investments is the result of netting (i) the expected tax liability on the gains from the sales of investments which were realized during fiscal year ending September 30, 2022 and (ii) the expected tax benefit resulting from the use of loss carryforwards to offset such gains. For the three and six months ended March 31, 2021, the Company recognized a provision for taxes of zero on net realized gain on investments by the Taxable Subsidiary.

For the three and six months ended March 31, 2022, the Company recognized a provision for taxes of $(5.1) million and zero, respectively, on unrealized appreciation on investments by the Taxable Subsidiary. For the three and six months ended March 31, 2021, the Company recognized a provision for taxes of zero on unrealized appreciation on investments by the Taxable Subsidiary. During the three and six months ended March 31, 2022, the Company paid $4.0 million in taxes on realized gains on the sale of investments held by the Taxable Subsidiary, resulting in remaining tax liability of $1.1 million as of March 31, 2022 included under accrued other expenses in the consolidated statement of assets and liabilities.

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

(d)

Distributions and Capital Transactions

Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid, if any, as a distribution is determined by our board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are distributed at least annually. The tax attributes for distributions will generally include ordinary income and capital gains, but may also include certain tax-qualified dividends and/or a return of capital.

Capital transactions, in connection with our dividend reinvestment plan or through offerings of our common stock, are recorded when issued and offering costs are charged as a reduction of capital upon issuance of our common stock.

(e)

Foreign Currency Translation

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

Fair value of investment securities, other assets and liabilities – at the exchange rates prevailing at the end of the applicable period; and

Purchases and sales of investment securities, income and expenses – at the exchange rates prevailing on the respective dates of such transactions.

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

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

(f)

Consolidation

As permitted under Regulation S-X and as explained by ASC paragraph 946-810-45-3, PennantPark Investment will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we have consolidated the results of our SBIC Funds and our Taxable Subsidiary in our Consolidated Financial Statements. We do not consolidate our non-controlling interest in PSLF or PTSF II. See further description of our investment in PSLF in Note 4.

(g)

Asset Transfers and Servicing

Asset transfers that do not meet ASC Topic 860, Transfers and Servicing, requirements for sale accounting treatment are reflected in the Consolidated Statements of Assets and Liabilities and the Consolidated Schedules of Investments as investments.

(h) Recent Accounting Pronouncements

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

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

3. AGREEMENTS AND RELATED PARTY TRANSACTIONS

(a) Investment Management Agreement

Base Management Fee

The Investment Management Agreement with the Investment Adviser was reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in February 2022 Under the Investment Management Agreement, 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. The Investment Adviser serves as the servicer to Funding I and has irrevocably directed that the management fee owed to it with respect to such services be paid to the Company so long as the Investment Adviser remains the servicer. SBIC II’s investment management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. For providing these services, the Investment Adviser receives a fee from us, consisting of two components— a base management fee and an incentive fee or, collectively, Management Fees.

The base management fee is calculated at an annual rate of 1.50% of our “average adjusted gross assets,” which equals our gross assets (exclusive of U.S. Treasury Bills, temporary draws under any credit facility, cash and cash equivalents, repurchase agreements or other balance sheet transactions undertaken at the end of a fiscal quarter for purposes of preserving investment flexibility for the next quarter and unfunded commitments, if any) and is payable quarterly in arrears. In addition, on November 13, 2018, in connection with our board of directors’ approval of the application of the modified asset coverage requirements under the 1940 Act to the Company, our board of directors also approved an amendment to the Investment Management Agreement reducing the Investment Adviser’s annual base management fee from 1.50% to 1.00% on gross assets that exceed 200% of the Company’s total net assets as of the immediately preceding quarter-end. This amendment became effective on February 5, 2019 with the amendment and restatement of the Investment Management Agreement on April 12, 2019. The base management fee is calculated based on the average adjusted 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. For example, if we sold shares on the 45th day of a quarter and did not use the proceeds from the sale to repay outstanding indebtedness, our gross assets for such quarter would give effect to the net proceeds of the issuance for only 45 days of the quarter during which the additional shares were outstanding. For the three and six months ended March 31, 2022, the Investment Adviser earned a base management fee of $5.0 million and $10.1 million, respectively, from us. For the three and six months ended March 31, 2021, the Investment Adviser earned a base management fee of $4.3 million and $8.4 million, respectively, from us.

Incentive Fee

The incentive fee has two parts, as follows:

One part 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 amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense or amendment fees under any credit facility and distribution 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 OID, debt instruments with PIK interest and zero coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a percentage of the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7.00% annualized). We pay the Investment Adviser an incentive fee with respect to our Pre- Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.75%, (2) 100% 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 2.1212% in any calendar quarter (8.4848% annualized), and (3) 17.5% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.1212% in any calendar quarter. These calculations are pro-rated for any share issuances or repurchases during the relevant quarter, if applicable.

Beginning April 1, 2020 and through June 30, 2021, the Investment Adviser has voluntarily agreed, in consultation with our board of directors, to irrevocably waive the performance-based incentive fees. For the three and six months ended March 31, 2022, the Investment Adviser earned an incentive fee of zero and $2.7 million, respectively, on net investment income from us. For the three and six months ended March 31, 2021, the Investment Adviser did not earn an incentive fee on net investment income from us.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date) and, effective January 1, 2018, equals 17.5% of our realized capital gains , (20.0% for periods prior to January 1, 2018), if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. For each of three and six months ended March 31, 2022 and 2021, the Investment Adviser did not accrue an incentive fee on capital gains as calculated under the Investment Management Agreement (as described above).

Under GAAP, we are required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, we considered the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to 17.5% of such amount, less the aggregate amount of actual capital gains related to incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such year. There can be no assurance that such unrealized capital appreciation will be realized in the future. For each of the three and six months ended March 31, 2022 and 2021, the Investment Adviser did not accrue an incentive fee on capital gains as calculated under GAAP.

(b) Administration Agreement

The Administration Agreement with the Administrator was reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in February 2022. Under the Administration Agreement, the Administrator provides administrative services and office facilities to us. The Administrator provides similar services to SBIC II under its administration agreement with PennantPark Investment. For providing these services, facilities and personnel, we have agreed to

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs. The Administrator also offers, on our behalf, significant managerial assistance to portfolio companies to which we are required to offer such assistance. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statements of Operations. For the three and six months ended March 31, 2022,we reimbursed the Investment Adviser approximately $0.6 million and $0.9 million, respectively, including expenses the Investment Adviser incurred on behalf of the Administrator, for the services described above. For the three and six months ended March 31, 2021, we reimbursed the Investment Adviser approximately $0.5 million and $0.7 million, respectively, including expenses the Investment Adviser incurred on behalf of the Administrator, for the services described above.

There were no transactions subject to Rule 17a-7 under the 1940 Act during each of the three and six months ended March 31, 2022 and 2021.

For the three and six months ended March 31, 2022 we sold $11.5 million and $59.6 million in investments to PSLF at fair value, respectively, and recognized zero and $0.1 million of net realized gains, respectively. For the three and six months ended March 31, 2021, we sold $15.5 million $37.8 million in investments to PSLF at fair value, respectively, and recognized $0.1 million and $0.5 million of net realized gains, respectively.

For the three months ended March 31, 2022, we sold $82.3 million in investments to PTSF II at fair value and recognized $0.2 million of net realized gains.

4. INVESTMENTS

Purchases of investments, including PIK interest, for the three and six months ended March 31, 2022 totaled $185.7 million and $480.8 million, respectively. For the same periods in the prior year, purchases of investments, including PIK interest, totaled $78.4 million and $150.1 million, respectively. Sales and repayments of investments for the three and six months ended March 31, 2022 totaled $405.5 million and $537.7 million, respectively. For the same periods in the prior year, sales and repayments of investments totaled $65.0 million and $167.6 million, respectively.

Investments and cash and cash equivalents consisted of the following:


	March 31, 2022				September 30, 2021
Investment Classification ($ in thousands)	Cost		Fair Value		Cost		Fair Value
First lien	$	668,265	$	667,224	$	551,435	$	552,530
Second lien		136,552		134,808		176,983		176,894
Subordinated debt / corporate notes		43,561		33,782		56,315		57,015
Subordinated notes in PSLF		76,083		76,083		64,155		64,155
Equity		318,402		253,931		338,341		363,537
Equity in PSLF		41,627		48,129		33,893		41,160
Total investments		1,284,490		1,213,957		1,221,121		1,255,290
Cash and cash equivalents		26,259		26,251		20,383		20,357
Total investments and cash and cash equivalents	$	1,310,749	$	1,240,207	$	1,241,504	$	1,275,647

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets (excluding cash and cash equivalents) in such industries as of:


Industry Classification	March 31, 2022 (1)			September 30, 2021 (1)
Business Services		14	%		9	%
Healthcare, Education and Childcare		12			23
Consumer Products		10			9
Energy and Utilities		8			7
Aerospace and Defense		7			2
Distribution		6			7
Media		6			7
Auto Sector		4			—
Telecommunications		4			2
Education		3			3
Environmental Services		3			6
Home and Office Furnishings		3			3
Building Materials		2			3
Electronics		2			2
Financial Services		2			—
Insurance		2			2
Other Media		2			2
Personal, Food and Miscellaneous Services		2			1
Retail		2			—
Transportation		2			2
Chemicals, Plastics and Rubber		1			1
Manufacturing / Basic Industries		1			1
Printing and Publishing		1			2
Cargo Transport		—			1
Hotels, Motels, Inns and Gaming		—			4
Personal and Non-Durable Consumer Products		—			1
Other		1			—
Total		100	%		100	%

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

(1)

Excludes investments in PSLF.

PennantPark Senior Loan Fund, LLC

In July 2020, we and Pantheon formed PSLF, an unconsolidated joint venture. PSLF invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSLF was formed as a Delaware limited liability company. As of March 31, 2022 and September 30, 2021, PSLF had total assets of $468.6 million and $417.4 million, respectively. PSLF’s portfolio consisted of debt investments in 60 and 47 portfolio companies as of March 31, 2022 and September 30, 2021, respectively. As of the same dates, we and Pantheon had remaining commitments to fund first lien secured debt and equity interests in PSLF in an aggregate amount of $19.7 and $12.8 million, respectively. As of March 31, 2022, at fair value, the largest investment in a single portfolio company in PSLF was $16.7 million and the five largest investments totaled $73.9 million. As of September 30, 2021, at fair value, the largest investment in a single portfolio company in PSLF was $16.8 million and the five largest investments totaled $74.4 million. PSLF invests in portfolio companies in the same industries in which we may directly invest.

We provide capital to PSLF in the form of subordinated notes and equity interests. As of March 31, 2022 and September 30, 2021, we and Pantheon owned 60.5% and 39.5%, respectively, of each of the outstanding subordinated notes and equity interests of PSLF. As of March 31, 2022 and September 30, 2021 our investment in PSLF consisted of subordinated notes of $76.1 million (additional $11.9 million unfunded) and $64.2 million, respectively, and equity interests of $48.1 million (additional $7.7 million unfunded) and $41.2 million, respectively.

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

Additionally, PSLF, through its wholly-owned subsidiary, or PSLF Subsidiary, has entered into a $225.0 million (reduced from $275.0 million on March 2, 2022) senior secured revolving credit facility which bears interest at SOFR (or an alternative risk-free interest rate index) plus 255 basis points during the investment period, or the PSLF Credit Facility, with BNP Paribas, subject to leverage and borrowing base restrictions.

In March 2022, PSLF completed a $304.0 million debt securitization in the form of a collateralized loan obligation, or the “2034 Asset-Backed Debt”. The 2034 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO IV, Ltd., a wholly-owned and consolidated subsidiary of PSLF, consisting primarily of middle market loans and participation interests in middle market loans. The 2034 Asset-Backed Debt is scheduled to mature in April 2034. On the closing date of the transaction, in consideration of PSLF’s transfer to PennantPark CLO IV, Ltd. of the initial closing date loan portfolio, which included loans distributed to PSLF by certain of its wholly owned subsidiaries and us, PennantPark CLO IV, Ltd. transferred to PSLF 100% of the Preferred Shares of PennantPark CLO IV, Ltd. and 100% of the Subordinated Notes issued by PennantPark CLO IV, Ltd.

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


($ in thousands)	March 31, 2022			September 30, 2021
Total investments	$	446,088		$	405,232
Weighted average cost yield on income producing investments		7.2	%		7.1	%
Number of portfolio companies in PSLF		60			47
Largest portfolio company investment	$	16,727		$	16,817
Total of five largest portfolio company investments	$	73,858		$	74,445

Below is a listing of PSLF’s individual investments as of March 31, 2022:


Issuer Name	Maturity	Industry	Current Coupon			Basis Point Spread Above Index (1)		Par		Cost		Fair Value (2)
First Lien Secured Debt - 560.7%
Ad.net Acquisition, LLC	5/6/2026	Media		7.00	%	3M L+600			4,963	$	4,963	$	4,963
Altamira Technologies, LLC	7/24/2025	Aerospace and Defense		9.00	%	3M L+800			896		888		860
American Insulated Glass, LLC	12/21/2023	Building Materials		6.50	%	3M L+550			12,560		12,508		12,560
Any Hour Services	7/21/2027	Personal, Food and Miscellaneous Services		6.75	%	3M L+575			6,484		6,475		6,484
Apex Service Partners, LLC	7/31/2025	Personal, Food and Miscellaneous Services		6.27	%	1M L+550			6,569		6,492		6,569
Apex Service Partners, LLC Term Loan B	7/31/2025	Personal, Food and Miscellaneous Services		6.55	%		—		3,323		3,294		3,323
Applied Technical Services, LLC	12/29/2026	Environmental Services		6.75	%	3M L+575			7,406		7,313		7,314
Bottom Line Systems, LLC	2/13/2023	Healthcare, Education and Childcare		6.25	%	3M L+550			13,729		13,710		13,729
CF512, Inc.	8/20/2026	Media		7.00	%	3M L+600			2,992		2,963		2,963
Crash Champions, LLC	8/5/2025	Auto Sector		6.00	%	3M L+500			5,955		5,839		5,806
Dr. Squatch, LLC	8/27/2026	Personal and Non-Durable Consumer Products		7.00	%	3M L+600			6,484		6,357		6,484
DRS Holdings III, Inc.	11/3/2025	Consumer Products		6.75	%	3M L+575			13,360		13,280		13,293
Duraco Specialty Tapes, LLC	6/30/2024	Containers and Packaging		6.50	%	1M L+550			4,000		3,938		3,932
ECL Entertainment, LLC	3/31/2028	Hotels, Motels, Inns and Gaming		8.25	%	3M L+750			4,581		4,581		4,600
ECM Industries, LLC	12/23/2025	Electronics		5.75	%	3M L+475			2,827		2,758		2,770
Global Holdings InterCo LLC	3/16/2026	Banking, Finance, Insurance & Real Estate		7.00	%	3M L+600			7,425		7,392		7,351
Graffiti Buyer, Inc.	8/10/2027	Distribution		6.75	%	3M L+575			1,984		1,946		1,930
Hancock Roofing and Construction L.L.C.	12/31/2026	Insurance		6.26	%	3M L+500			5,925		5,925		5,925
Holdco Sands Intermediate, LLC	11/23/2028	Aerospace and Defense		7.00	%	3M L+600			4,000		3,926		3,920
HW Holdco, LLC	12/10/2024	Media		6.44	%	1M L+575			14,513		14,350		14,222
IG Investments Holdings, LLC	9/22/2028	Business Services		7.01	%	3M L+600			4,496		4,406		4,428
Imagine Acquisitionco, Inc.	11/15/2027	Software		6.50	%	3M L+550			3,678		3,610		3,605
Integrity Marketing Acquisition, LLC	8/27/2025	Insurance		6.75	%	1M L+575			7,828		7,785		7,753
K2 Pure Solutions NoCal, L.P.	12/20/2023	Chemicals, Plastics and Rubber		9.00	%	1M L+800			14,513		14,347		14,367
Lash OpCo, LLC	2/18/2027	Consumer Products		8.01	%	3M L+700			9,975		9,840		9,975
LAV Gear Holdings, Inc.	10/31/2024	Leisure, Amusement, Motion Pictures, Entertainment		8.50	%	3M L+750			2,131		2,120		2,082
Lightspeed Buyer Inc.	2/3/2026	Healthcare, Education and Childcare		6.50	%	1M L+575			12,408		12,153		12,284
Lombart Brothers, Inc.	4/13/2023	Healthcare, Education and Childcare		7.25	%	3M L+625			16,727		16,689		16,727
MAG DS Corp.	4/1/2027	Aerospace and Defense		6.50	%	3M L+550			5,600		5,117		5,040
Mars Acquisition Holdings Corp.	5/14/2026	Media		6.50	%	1M L+550			7,960		7,897		7,900
MBS Holdings, Inc.	4/16/2027	Telecommunications		6.75	%	3M L+575			7,444		7,359		7,369
MeritDirect, LLC	5/23/2024	Media		6.50	%	3M L+550			13,130		13,022		13,130

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022


Municipal Emergency Services, Inc.	9/28/2027	Distribution	6.00	%	3M L+500	4,175		4,108		4,037
NBH Group LLC	8/19/2026	Healthcare, Education and Childcare	6.50	%	1M L+650	7,542		7,456		7,505
OIS Management Services, LLC	7/9/2026	Healthcare, Education and Childcare	5.75	%	3M L+475	3,883		3,845		3,844
PlayPower, Inc.	5/8/2026	Consumer Products	6.50	%	3M L+550	2,594		2,491		2,447
Quantic Electronics, LLC	11/19/2026	Aerospace and Defense	7.25	%	1M L+625	3,429		3,362		3,361
Radius Aerospace, Inc.	3/31/2025	Aerospace and Defense	6.75	%	3M L+575	12,784		12,665		12,656
Rancho Health MSO, Inc.	12/18/2025	Healthcare, Education and Childcare	6.75	%	3M L+575	5,207		5,207		5,207
Recteq, LLC	1/29/2026	Consumer Products	7.00	%	3M L+600	9,900		9,750		9,752
Research Now Group, LLC and Dynata, LLC	12/20/2024	Business Services	6.50	%	3M L+550	14,618		14,495		14,329
Riverpoint Medical, LLC	6/20/2025	Healthcare, Education and Childcare	6.75	%	3M L+575	3,229		3,207		3,220
Sales Benchmark Index LLC	1/3/2025	Business Services	7.75	%	3M L+600	7,267		7,164		7,267
Sargent & Greenleaf Inc.	12/20/2024	Electronics	7.00	%	3M L+550	5,137		5,137		5,137
Signature Systems Holding Company	5/3/2024	Chemicals, Plastics and Rubber	7.50	%	1M L+650	13,125		13,024		13,125
Solutionreach, Inc.	1/17/2024	Communications	6.75	%	1M L+575	11,815		11,767		11,295
STV Group Incorporated	12/11/2026	Transportation	5.71	%	1M L+525	12,099		12,024		11,736
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC)	8/16/2027	Aerospace and Defense	7.01	%	1M L+600	4,988		4,889		4,823
TAC LifePort Purchaser, LLC	3/1/2026	Aerospace and Defense	7.00	%	3M L+600	4,646		4,646		4,646
TeleGuam Holdings, LLC	11/20/2025	Telecommunications	5.50	%	1M L+450	4,566		4,544		4,521
Teneo Holdings LLC	7/18/2025	Financial Services	6.25	%	1M L+525	2,981		2,967		2,946
The Bluebird Group LLC	7/27/2026	Business Services	8.00	%	3M L+700	3,000		3,000		3,060
The Vertex Companies, LLC	8/30/2027	Business Services	6.50	%	1M L+550	4,554		4,505		4,495
TPC Canada Parent, Inc. and TPC US Parent, LLC	11/24/2025	Food	6.25	%	3M L+525	5,565		5,401		5,398
TVC Enterprises, LLC	3/26/2026	Transportation	7.00	%	1M L+575	12,709		12,654		12,455
TWS Acquisition Corporation	6/16/2025	Education	7.25	%	3M L+625	9,145		9,101		9,145
Tyto Athene, LLC	4/3/2028	Aerospace and Defense	6.25	%	3M L+550	9,925		9,846		9,677
UBEO, LLC	4/3/2024	Printing and Publishing	5.51	%	1M L+450	4,686		4,664		4,592
Vision Purchaser Corporation	6/10/2025	Media	7.75	%	6M L+675	14,212		14,054		14,212
Wildcat Buyerco, Inc.	2/27/2026	Electronics	6.76	%	3M L+575	10,120		10,023		10,120
Zips Car Wash, LLC	3/1/2024	Business Services	7.75	%	3M L+675	7,498		7,356		7,423

Total First Lien Secured Debt								446,592		446,088
Total Investments - 560.7%
Cash and Cash Equivalents - 22.5%
BlackRock Federal FD Institutional 30								17,862		17,862
Total Cash and Cash Equivalents								17,862		17,862
Total Investments and Cash Equivalents - 583.2%							$	464,454	$	463,950
Liabilities in Excess of Other Assets — (483.2)%										(384,398	)
Members' Equity—100.0%									$	79,552

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

(2)

Valued based on PSLF’s accounting policy.

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

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022


Issuer Name	Maturity	Industry	Current Coupon	Basis Point Spread Above Index (1)		Par		Cost		Fair Value (2)
First Lien Secured Debt - 570.7%
Ad.net Acquisition, LLC	05/06/26	Media	7.00%	3M L + 600		$	4,988	$	4,920	$	4,913
Altamira Technologies, LLC	07/24/25	Aerospace and Defense	8.00%	3M L+700			921		912		864
American Insulated Glass, LLC	12/21/23	Building Materials	6.50%	3M L+550			14,625		14,481		14,479
Any Hour Services	07/21/27	Personal, Food and Miscellaneous Services	6.75%	1M L+525			6,500		6,378		6,370
Apex Service Partners, LLC	07/31/25	Personal, Food and Miscellaneous Services	6.25%	1M L+550			6,569		6,518		6,504
Apex Service Partners, LLC Term Loan B	07/31/25	Personal, Food and Miscellaneous Services	6.55%		—		3,347		3,313		3,313
Applied Technical Services, LLC	12/29/26	Environmental Services	6.75%	3M L+575			7,444		7,336		7,295
Bottom Line Systems, LLC	02/13/23	Healthcare, Education and Childcare	6.25%	1M L+550			13,729		13,674		13,729
Crash Champions, LLC	08/05/25	Auto Sector	6.00%	1M L+525			5,985		5,873		5,865
DRS Holdings III, Inc.	11/03/25	Consumer Products	7.25%	1M L+625			13,428		13,335		13,334
ECL Entertainment, LLC	03/31/28	Hotels, Motels, Inns and Gaming	8.25%	3M L+750			4,604		4,560		4,707
ECM Industries, LLC	12/23/25	Electronics	5.50%	3M L+450			2,827		2,805		2,770
Global Holdings InterCo LLC	03/16/26	Banking, Finance, Insurance & Real Estate	7.00%	3M L+600			7,463		7,360		7,425
Hancock Roofing and Construction L.L.C.	12/31/26	Insurance	6.00%	3M L+500			5,955		5,819		5,895
Holdco Sands Intermediate, LLC	12/19/25	Aerospace and Defense	7.50%	3M L+600			12,071		11,934		12,010
HW Holdco, LLC	12/10/24	Media	5.50%	3M L+450			14,588		14,499		14,442
IMIA Holdings, Inc.	04/09/27	Aerospace and Defense	6.75%	3M L+600			9,059		8,890		8,878
Integrity Marketing Acquisition, LLC	08/27/25	Insurance	6.50%	3M L+550			7,868		7,803		7,829
Juniper Landscaping of Florida, LLC	12/22/21	Personal, Food and Miscellaneous Services	6.50%	3M L+550			9,420		9,420		9,420
K2 Pure Solutions NoCal, L.P.	12/20/23	Chemicals, Plastics and Rubber	8.00%	1M L+700			14,588		14,479		14,199
LAV Gear Holdings, Inc.	10/31/24	Leisure, Amusement, Motion Pictures, Entertainment	8.50%	3M L+750			2,120		2,107		1,987
Lightspeed Buyer Inc.	02/03/26	Healthcare, Education and Childcare	6.75%	1M L+550			12,472		12,273		12,472
Lombart Brothers, Inc.	04/13/23	Healthcare, Education and Childcare	7.25%	1M L+825			16,817		16,729		16,817
MAG DS Corp.	04/01/27	Aerospace and Defense	6.50%	1M L+550			5,837		5,581		5,253
Mars Acquisition Holdings Corp.	05/14/26	Media	6.50%	1M L+575			8,000		7,852		7,920
MBS Holdings, Inc.	04/16/27	Telecommunications	6.75%	3M L+550			7,481		7,338		7,332
MeritDirect, LLC	05/23/24	Media	6.50%	3M L+550			13,386		13,272		13,252
PlayPower, Inc.	05/08/26	Consumer Products	5.65%	3M L+575			3,805		3,778		3,736
Radius Aerospace, Inc.	03/31/25	Aerospace and Defense	6.75%	3M L+600			13,335		13,202		13,068
Rancho Health MSO, Inc.	12/18/25	Healthcare, Education and Childcare	6.75%	3M L+550			5,232		5,140		5,232
Recteq, LLC	01/29/26	Consumer Products	7.00%	3M L+450			9,950		9,775		9,851
Research Now Group, LLC and Dynata, LLC	12/20/24	Business Services	6.50%	3M L+600			14,695		14,602		14,508
Riverpoint Medical, LLC	06/20/25	Healthcare, Education and Childcare	5.50%	1M L+550			3,246		3,217		3,206
Sales Benchmark Index LLC	01/03/25	Business Services	7.75%	3M L+750			7,632		7,526		7,442
Sargent & Greenleaf Inc.	12/20/24	Electronics	7.00%	3M L+575			5,232		5,181		5,232
Signature Systems Holding Company	05/03/24	Chemicals, Plastics and Rubber	8.50%	1M L+525			13,500		13,397		13,365
Solutionreach, Inc.	01/17/24	Communications	6.75%	1M L+600			11,882		11,758		11,882
STV Group Incorporated	12/11/26	Transportation	5.33%	1M L+450			12,099		12,003		12,038
TAC LifePort Purchaser, LLC	03/01/26	Aerospace and Defense	7.00%	1M L+525			4,967		4,891		4,966
TeleGuam Holdings, LLC	11/20/25	Telecommunications	5.50%	3M L+525			4,593		4,558		4,547
Teneo Holdings LLC	07/18/25	Financial Services	6.25%	1M L+575			2,997		2,884		2,981
TPC Canada Parent, Inc. and TPC US Parent, LLC	11/24/25	Food	6.25%	1M L+625			5,593		5,537		5,425
TVC Enterprises, LLC	03/26/26	Transportation	6.75%	3M L+550			12,773		12,643		12,773
TWS Acquisition Corporation	06/16/25	Education	7.25%	3M L+450			9,648		9,515		9,648
Tyto Athene, LLC	04/03/28	Aerospace and Defense	6.25%	1M L+675			9,950		9,853		9,950
UBEO, LLC	04/03/24	Printing and Publishing	5.50%	1M L+500			4,710		4,676		4,687
Vision Purchaser Corporation	06/10/25	Media	7.75%				14,249		14,056		14,035
Wildcat Buyerco, Inc.	02/27/26	Electronics	6.00%				7,425		7,360		7,388
									—		—
Total First Lien Secured Debt							409,602		405,009		405,232
Cash and Cash Equivalents—18.9%									-		-
BlackRock Federal FD Institutional 30									11,013		11,013
US Bank Cash									—		—
Total Cash and Cash Equivalents									11,013		11,013
Total Investments and Cash Equivalents—592.7%								$	416,023	$	416,246
Liabilities in Excess of Other Assets—(492.7)%											(348,213	)
Members' Equity—100.0%										$	68,032

(1)

(2)

Valued based on PSLF’s accounting policy.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

Below is the financial information for PSLF:


Consolidated Statements of Assets and Liabilities
($ In thousands)

	March 31, 2022
	(Unaudited)		September 30, 2021
Assets
Investments at fair value (cost—$446,592 and $405,009, respectively)	$	446,088	$	405,232
Cash and cash equivalents (cost—$17,862 and $11,013, respectively)		17,862		11,013
Interest receivable		1,415		1,175
Prepaid expenses and other assets		921		—
Total assets		466,286		417,421
Liabilities
Distribution payable to Members		4,000		2,800
Payable for investments purchased		—		12,793
Credit facility payable		9,000		224,000
2034 Asset-backed debt, net (par—$246,000)		243,702		—
Notes payable to members		125,756		106,041
Interest payable on credit facility		1,995		1,499
Interest payable on notes to members		1,635		1,644
Accrued other expenses		645		612
Total liabilities		386,733		349,389
Members' equity		79,552		68,032
Total liabilities and members' equity	$	466,286	$	417,421

———————————

(1)

As of March 31, 2022 and September 30, 2021, PSLF did not have any unfunded commitments to fund investments.


Consolidated Statements of Operations
(Unaudited)
($ In thousands)

	Three Months Ended March 31,					Six Months Ended March 31,
	2022			2021		2022			2021
Investment income:
Interest	$	7,698		$	6,696	$	15,269		$	13,258
Other income		39			290		142			727
Total investment income		7,737			6,986		15,410			13,985
Expenses:
Interest expense on credit facility and asset-backed debt		2,046			1,498		3,654			3,250
Interest expense on notes to members		2,430			2,381		4,869			4,683
Administrative services expenses		293			293		586			586
Other general and administrative expenses		112			112		223			223
Total expenses		4,881			4,283		9,333			8,742
Net investment income		2,856			2,702		6,077			5,242
Realized and unrealized (loss) gain on investments and credit facility foreign currency translations:
Net realized (loss) gain on investments		387			—		386			464
Net change in unrealized (depreciation) appreciation on:
Investments		(1,233	)		1,744		(727	)		4,454
Net change in unrealized (depreciation) appreciation on investments		(1,233	)		1,744		(727	)		4,454
Net realized and unrealized (loss) gain from investments		(846	)		1,744		(341	)		4,919
Net increase in members' equity resulting from operations	$	2,010		$	4,446	$	5,736		$	10,161

———————————

(1)

No management or incentive fees are payable by PSLF.

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022


Level 1:	Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2:	Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3:	Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our Credit Facilities and our SBA debentures are classified as Level 3. Our 2024 Notes are classified as Level 1 and our 2026 Notes and 2026 Notes-2 are classified as Level 2, as they are financial instruments with readily observable market inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable orderly market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.

Our investments are generally structured as debt and equity investments in the form of first lien secured debt, second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by our Investment Adviser and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments valued using unobservable inputs are included in Level 3 of the fair value hierarchy.

A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.

In addition to using the above inputs to value cash equivalents, investments, our SBA debentures, our 2024 Notes, our 2026 Notes, our 2026 Notes -2 and our Credit Facilities, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.

As outlined in the table below, some of our Level 3 investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such bids do not reflect the fair value of an investment, it may independently value such investment by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available. In accordance with ASC 820, we do not categorize any investments for which fair value is measured using the net asset value per share within the fair value hierarchy.

The remainder of our investment portfolio and our long-term Credit Facilities are valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that our board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an earnings before interest, taxes, depreciation and amortization, or EBITDA, multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA multiple will have the opposite effect.

Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes:


Asset Category ($ in thousands)	Fair value at March 31, 2022		Valuation Technique	Unobservable Input	Range of Input (Weighted Average) (1)
First lien	$	45,522	Market Comparable	Broker/Dealer bids or quotes	N/A
First lien		621,702	Market Comparable	Market yield	7.0% - 18.1% (9.1%)
Second lien		22,050	Market Comparable	Broker/Dealer bids or quotes	N/A
Second lien		101,405	Market Comparable	Market yield	11.4% - 12.5% (12.0%)
Second lien		11,353	Enterprise Market Value	EBITDA multiple	5.8x
Subordinated debt / corporate notes		109,865	Market Comparable	Market yield	9.0% - 34.7% (16.9%)
Equity		210,890	Enterprise Market Value	EBITDA multiple	2.8x - 23.3x (7.2x)
Equity		30,965	Enterprise Market Value	DLOM (2)	16.6%
Total Level 3 investments	$	1,153,753
Debt Category ($ in thousands)
Truist Credit Facility	$	215,899	Market Comparable	Market yield	2.3%

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

(1)

The weighted averages disclosed in the table above were weighted by their relative fair value.

(2)

DLOM is defined as discount for lack of marketability.


Asset Category ($ in thousands)	Fair value at September 30, 2021		Valuation Technique	Unobservable Input	Range of Input (Weighted Average) (1)
First lien	$	90,266	Market Comparable	Broker/Dealer bids or quotes	N/A
First lien		462,264	Market Comparable	Market yield	6.1% – 13.1% (8.1%)
Second lien		39,298	Market Comparable	Broker/Dealer bids or quotes	N/A
Second lien		126,509	Market Comparable	Market yield	10.3% – 11.5% (10.7%)
Second lien		11,087	Enterprise Market Value	EBITDA multiple	5.4x
Subordinated debt / corporate notes		121,170	Market Comparable	Market yield	9.6% – 17.1% (12.5%)
Equity		278,486	Enterprise Market Value	EBITDA multiple	2.6x – 18.5x (8.5x)
Equity		60,808	Enterprise Market Value	DLOM (2)	9.3%
Equity		21,133	Market Comparable	Market yield	20.4%
Total Level 3 investments	$	1,211,021
Debt Category ($ in thousands)
Truist Credit Facility	$	314,813	Market Comparable	Market yield	2.4%

The weighted averages disclosed in the table above were weighted by their relative fair value.

DLOM is defined as discount for lack of marketability.

Our investments, cash and cash equivalents, Truist Credit Facility, SBA debentures, 2024 Notes, 2026 Notes and 2026 Notes-2 were categorized as follows in the fair value hierarchy:


	Fair Value at March 31, 2022
Description ($ in thousands)	Fair Value		Level 1		Level 2		Level 3		Measured at Net Asset Value (1)
Debt investments	$	911,897	$	—	$	—	$	911,897	$	—
Equity investments		302,060		396		—		241,856		59,808
Total investments		1,213,957		396		—		1,153,753		59,808
Cash and cash equivalents		26,251		26,251		—		—		—
Total investments and cash and cash equivalents	$	1,240,208	$	26,647	$	—	$	1,153,753	$	59,808
Truist Credit Facility	$	215,899	$	—	$	—	$	215,899	$	—
SBA Debentures (2)		27,026		—		—		27,026		—
2026 Notes (2)		146,316		—		146,316		—		—
2026 Notes-2 (2)		160,946		—		160,946		—		—
Total debt	$	550,187	$	—	$	307,262	$	242,925	$	—


(1)	In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in PSLF is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, and thus has not been classified in the fair value hierarchy.
(2)	We elected not to apply ASC 825-10 to the SBA debentures, the 2026 Notes and the 2026 Notes-2, and thus the balance reported in the Consolidated Statement of Assets and Liabilities represents the carrying value. As of March 31, 2022, the carrying value of the SBA debentures approximates the fair value.


	Fair Value at September 30, 2021
Description ($ in thousands)	Fair Value		Level 1		Level 2		Level 3		Measured at Net Asset Value (1)
Debt investments	$	850,593	$	—	$	—	$	850,593	$	—
Equity investments		404,697		3,110		—		360,428		41,160
Total investments		1,255,290		3,110		—		1,211,021		41,160
Cash and cash equivalents		20,357		20,357		—		—		—
Total investments and cash and cash equivalents	$	1,275,647	$	23,467	$	—	$	1,211,021	$	41,160
Truist Credit Facility	$	314,813	$	—	$	—	$	314,813		—
SBA Debentures (2)		62,159		—		—		62,159		—
2024 Notes (2)		84,503		84,503		—		—		—
2026 Notes (2)		145,865		—		145,865		—		—
Total debt	$	607,340	$	84,503	$	145,865	$	376,972	$	—


(1)	In accordance with ASC Subtopic 820-10, Fair Value Measurements and Disclosures, or ASC 820-10, our equity investment in PSLF is measured using the net asset value per share (or its equivalent) as a practical expedient for fair value, and thus has not been classified in the fair value hierarchy.
(2)	We elected not to apply ASC 825-10 to the SBA debentures or the 2024 Notes and the 2026 Notes and thus the balance reported in the Consolidated Statement of Assets and Liabilities represents the carrying value. As of September 30, 2021, the carrying value of the SBA debentures approximates the fair value.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

The tables below show a reconciliation of the beginning and ending balances for investments measured at fair value using significant unobservable inputs (Level 3):


	Six Months Ended March 31, 2022
Description ($ in thousands)	Debt investments			Equity investments			Totals
Beginning Balance	$	850,593		$	360,428		$	1,211,021
Net realized (loss) gain		421			116,163			116,584
Net change in unrealized appreciation		(14,269	)		(89,480	)		(103,749	)
Purchases, PIK interest, net discount accretion and non-cash exchanges		441,570			29,813			471,382
Sales, repayments and non-cash exchanges		(366,418	)		(175,067	)		(541,485	)
Transfers in/out of Level 3		—			—			—
Ending Balance	$	911,897		$	241,856		$	1,153,753
Net change in unrealized appreciation reported within the net change in unrealized appreciation on investments in our Consolidated Statements of Operations attributable to our Level 3 assets still held at the reporting date	$	(12,650	)	$	(90,848	)	$	(103,498	)


	Six Months Ended March 31, 2021
Description ($ in thousands)	Debt investments			Equity investments			Totals
Beginning Balance	$	773,426		$	270,754		$	1,044,180
Net realized gain (loss)		(19,629	)		2,306			(17,323	)
Net change in unrealized depreciation		30,412			91,986			122,398
Purchases, PIK interest, net discount accretion and non-cash exchanges		129,950			21,087			151,037
Sales, repayments and non-cash exchanges		(157,984	)		(9,602	)		(167,585	)
Transfers in/out of Level 3		—			—			—
Ending Balance	$	756,175		$	376,531		$	1,132,706
Net change in unrealized depreciation reported within the net change in unrealized depreciation on investments in our Consolidated Statements of Operations attributable to our Level 3 assets still held at the reporting date	$	30,710		$	92,810		$	123,520

The table below shows a reconciliation of the beginning and ending balances for liabilities measured at fair value using significant unobservable inputs (Level 3):


	Six months ended March 31,
Long-Term Credit Facility	2022			2021
Beginning Balance (cost – $316,545 and $380,252, respectively)	$	314,813		$	360,702
Net change in unrealized (depreciation) appreciation included in earnings		(289	)		16,873
Borrowings (1)		496,841			49,564
Repayments (1)		(595,466	)		(77,271	)
Transfers in and/or out of Level 3		—			—
Ending Balance (cost – $217,920 and $352,545, respectively)	$	215,899		$	349,867
Temporary draws outstanding, at cost		—			23,000
Ending Balance (cost – $217,920 and $375,545, respectively)	$	215,899		$	372,867

(1)

Excludes temporary draws.

As of March 31, 2022, we had outstanding non-U.S. dollar borrowings on our Credit Facility. Net change in fair value on foreign currency translation on outstanding borrowings is listed below ($ in thousands):


Foreign Currency	Amount Borrowed		Borrowing Cost		Current Value		Reset Date	Change in Fair Value
British Pound	£	5,000	$	6,696	$	6,738	April 29, 2022	$	42
British Pound	£	31,000	$	42,724	$	40,393	June 18, 2022	$	(2,331	)

As of September 30, 2021, we had outstanding non-U.S. dollar borrowings on our Truist Credit Facility. Net change in fair value on foreign currency translation on outstanding borrowings is listed below ($ in thousands):


Foreign Currency	Amount Borrowed		Borrowing Cost		Current Value		Reset Date	Change in Fair Value
British Pound	£	29,000	$	40,045	$	39,102	December 17, 2021	$	(943	)

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Credit Facilities. We elected to use the fair value option for the Credit Facilities to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Credit Facilities during the three and six months ended March 31, 2022 and 2021. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires us to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facilities are reported in our Consolidated Statements of Operations. We did not elect to apply ASC 825-10 to any other financial assets or liabilities, including the 2024 Notes, the 2026 Notes, 2026 Notes-2, and the SBA debentures.

For the three and six months ended March 31, 2022, the Credit Facility had a net change in unrealized depreciation of $1.3 million and $0.3 million, respectively. For the three and six months ended March 31, 2021, the Credit Facility and the 2023 Notes had a net change in unrealized appreciation of $3.8 million and $16.9 million,

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

respectively. As of March 31, 2022 and September 30, 2021, the net unrealized depreciation on the Credit Facility totaled $2.0 million and $2.7 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Credit Facilities in a manner consistent with the valuation process that our board of directors uses to value our investments.

6. TRANSACTIONS WITH AFFILIATED COMPANIES

An affiliated portfolio company is a company in which we have ownership of 5% or more of its voting securities. A portfolio company is generally presumed to be a non-controlled affiliate when we own at least 5% but 25% or less of its voting securities and a controlled affiliate when we own more than 25% of its voting securities. Transactions related to our funded investments with both controlled and non-controlled affiliates for the six months ended March 31, 2022 were as follows:


Name of Investment	Fair Value at September 30, 2021		Gross Additions (1)		Gross Reductions			Net Change in Appreciation / (Depreciation)			Fair Value at March 31, 2022		Interest Income		PIK Income		Dividend Income		Net Realized Gains (Losses)
Controlled Affiliates
AKW Holdings Limited	$	41,379	$	10,403	$	—		$	(570	)	$	51,212	$	1,664	$	—	$	—	$	—
Mailsouth Inc.		22,100		864		—			(11,611	)		11,353		—		877		—		—
PennantPark Senior Loan Fund, LLC *		105,314		19,662		—			(765	)		124,212		2,946		—		4,235		—
PT Networks, LLC		134,125		9,917		(234,974	)		90,933			0		—		2,674		—		140,898
RAM Energy LLC		81,710		—		—			7,152			88,862		—		—		—		—
Total Controlled Affiliates	$	384,628	$	40,846	$	(234,974	)	$	85,139		$	275,640	$	4,609	$	3,551	$	4,235	$	140,898
Non-Controlled Affiliates
ETX Energy, LLC	$	—	$	—	$	(31,274	)	$	31,274		$	—	$	—	$	—	$	—	$	(31,274	)
MidOcean JF Holdings Corp.		50,161		—		—			(13,431	)		36,730		—		—		—		—
Total Non-Controlled Affiliates	$	50,161	$	—	$	(31,274	)	$	17,842		$	36,730	$	—	$	—	$	—	$	(31,274	)
Total Controlled and Non-Controlled Affiliates	$	434,790	$	40,846	$	(266,248	)	$	102,982		$	312,370	$	4,609	$	3,551	$	4,235	$	109,624

(1)

Includes PIK.

•

We and Pantheon are the members of PSLF, a joint venture formed as a Delaware limited liability company that is not consolidated by us for financial reporting purposes. The members of PSLF make investments in the PSLF in the form of subordinated debt and equity interests, and all portfolio and other material decisions regarding PSLF must be submitted to PSLF’s four-person Member Designees’ Committee, which is comprised of two members appointed by each of us and Pantheon. Because management of PSLF is shared equally between us and Pantheon, we do not believe we control PSLF for purposes of the 1940 Act or otherwise.

7. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE

The following information sets forth the computation of basic and diluted per share net increase in net assets resulting from operations:


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Numerator for net increase (decrease) in net assets resulting from operations	$	3,160	$	38,495	$	28,668	$	109,629
Denominator for basic and diluted weighted average shares		66,747,256		67,045,105		66,897,817		67,045,105
Basic and diluted net increase (decrease) in net assets per share resulting from operations	$	0.05	$	0.57	$	0.43	$	1.64

8. CASH AND CASH EQUIVALENTS

Cash equivalents represent cash in money market funds pending investment in longer-term portfolio holdings. Our portfolio may consist of temporary investments in U.S. Treasury Bills (of varying maturities), repurchase agreements, money market funds or repurchase agreement-like treasury securities. These temporary investments with original maturities of 90 days or less are deemed cash equivalents and are included in the Consolidated Schedule of Investments. At the end of each fiscal quarter, we may take proactive steps to preserve investment flexibility for the next quarter by investing in cash equivalents, which is dependent upon the composition of our total assets at quarter-end. We may accomplish this in several ways, including purchasing U.S. Treasury Bills and closing out positions on a net cash basis after quarter-end, temporarily drawing down on the Credit Facilities, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from average adjusted gross assets for purposes of computing the Investment Adviser’s management fee. U.S. Treasury Bills with maturities greater than 60 days from the time of purchase are valued consistent with our valuation policy. As of March 31, 2022 and September 30, 2021, cash and cash equivalents consisted of money market funds in the amounts of $26.3 million and $20.4 million at fair value, respectively.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

9. FINANCIAL HIGHLIGHTS

Below are the financial highlights ($ in thousands, except share and per share data):


	Six Months Ended March 31,
	2022			2021
Per Share Data:
Net asset value, beginning of period	$	9.85		$	7.84
Net investment income (1)		0.36			0.25
Net change in realized and unrealized (loss) gain (1)		0.07			1.39
Net increase in net assets resulting from operations (1)		0.43			1.64
Distributions to stockholders (1), (2)		(0.26	)		(0.24	)
Repurchase of common stock (1)		0.03			—
Net asset value, end of period	$	10.05		$	9.24
Per share market value, end of period	$	7.78		$	5.65
Total return * (3)		24.09	%		85.65	%
Shares outstanding at end of period		66,131,651			67,045,105
Ratios ** / Supplemental Data:
Ratio of operating expenses to average net assets (4)		4.55	%		3.86	%
Ratio of debt related expenses to average net assets (5)		4.03	%		3.47	%
Ratio of total expenses to average net assets (5)		8.58	%		7.33	%
Ratio of net investment income to average net assets (5)		7.30	%		5.99	%
Net assets at end of period	$	664,325		$	619,247
Weighted average debt outstanding	$	558,399		$	569,210
Weighted average debt per share (1)	$	8.37		$	0.01
Asset coverage per unit (6)	$	2,271		$	2,335
Portfolio turnover ratio		35.66	%		25.88	%

* Not annualized for periods less than one year.

** Annualized for periods less than one year.

(1)

Based on the weighted average shares outstanding for the respective periods.

(2)

The tax status of distributions is calculated in accordance with income tax regulations, which may differ from amounts determined under GAAP, and reported on Form 1099-DIV each calendar year.

(3)

Based on the change in market price per share during the periods and assumes distributions, if any, are reinvested.

(4)

Excludes debt-related costs.

(5)

Includes interest and expenses on debt (annualized) as well as Credit Facility amendment, debt issuance costs and excludes debt extinguishment cost, if any, (not annualized).

(6)

Includes SBA debentures outstanding.

(7)

The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by the senior securities representing indebtedness at par (changed from fair value). This asset coverage ratio is multiplied by $1,000 to determine the asset coverage per unit. These amounts exclude SBA debentures from our asset coverage per unit computation pursuant to exemptive relief received from the SEC in June 2011.

10. DEBT

The annualized weighted average cost of debt for the six months ended March 31, 2022 and 2021, inclusive of the fee on the undrawn commitment under the Truist Credit Facility and amortized upfront fees on SBA debentures, 2024 Notes, 2026 Notes and 2026 Notes-2, was 4.8% and 3.5%, respectively. As of March 31, 2022, in accordance with the 1940 Act, with certain limited exceptions, we were only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing, excluding SBA debentures, pursuant to exemptive relief from the SEC received in June 2011.

On February 5, 2019, our stockholders approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the Small Business Credit Availability Act, or SBCAA) as approved by our board of directors on November 13, 2018. As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), subject to compliance with certain disclosure requirements. As of March 31, 2022 and September 30, 2021, our asset coverage ratio, as computed in accordance with the 1940 Act, was 227% and 221%, respectively.

Truist Credit Facility

As of March 31, 2022, we had the multi-currency Truist Credit Facility for up to $465.0 million (increased from $435.0 million in December 2021) in borrowings with certain lenders and Truist Bank (formerly SunTrust Bank), acting as administrative agent, and JPMorgan Chase Bank, N.A., acting as syndication agent for the lenders. As of March 31, 2022 and September 30, 2021, we had $217.9 million and $316.5 million, respectively, in outstanding borrowings under the Truist Credit Facility. The Truist Credit Facility had a weighted average interest rate of 2.8% and 2.4%, respectively, exclusive of the fee on undrawn commitment, as of March 31, 2022 and September 30, 2021. The Truist Credit Facility is a revolving facility with a stated maturity date of September 4, 2024, a one-year term-out period on September 4, 2023 and pricing set at 225 basis points over LIBOR (or an alternative risk-free floating interest rate index). As of March 31, 2022 and September 30, 2021, we had $247.1 million and $118.5 million of unused borrowing capacity under the Truist Credit Facility, respectively, subject to leverage and borrowing base restrictions. The Truist Credit Facility is secured by substantially all of our assets, excluding assets held by SBIC II. As of March 31, 2022, we were in compliance with the terms of the Truist Credit Facility.

SBA Debentures

SBIC II is able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid-in and is subject to customary regulatory requirements including an examination by the SBA. We have funded SBIC II with $75.0 million of equity capital and it had SBA debentures outstanding of $27.5 million as of March 31, 2022 and September 30, 2021, respectively. SBA debentures are non-recourse to us and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. Under current SBA regulations, a SBIC may individually borrow to a maximum of $175.0 million, which is up to twice its potential regulatory capital, and as part of a group of SBICs under common control may borrow a maximum of $350 million in the aggregate.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

As of both March 31, 2022 and September 30, 2021, SBIC II had an initial $150.0 million in debt commitments, all of which were drawn. During the three and six months ended March 31, 2022, $36.0 million in SBA debentures were repaid, respectively. During both the three and six months ended March 31, 2021, there was $20.0 million in SBA debentures were repaid, respectively. As of both March 31, 2022 and September 30, 2021, the unamortized fees on the SBA debentures was $1.3 million, respectively. The SBA debentures’ upfront fees of 3.4% consist of a commitment fee of 1.0% and an issuance discount of 2.4%, which are being amortized.

Our fixed-rate SBA debentures were as follows ($ in thousands):


Issuance Dates	Maturity	Fixed All-in Coupon Rate (1)			As of March 31, 2022 Principal Balance
September 20, 2017	September 1, 2027		2.9	%		27,500

Issuance Dates	Maturity	Fixed All-in Coupon Rate (1)			As of September 30, 2021 Principal Balance
September 20, 2017	September 1, 2027		2.9	%	$	27,500
March 21, 2018	March 1, 2028		3.5			36,000
Weighted Average Rate / Total			3.2	%	$	63,500

(1)

Excluding 3.4% of upfront fees.

The SBIC program is designed to stimulate the flow of capital into eligible businesses. Under SBA regulations, SBIC II is subject to regulatory requirements, including making investments in SBA eligible businesses, investing at least 25% of regulatory capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, prohibiting investment in certain industries and requiring capitalization thresholds that limit distributions to us, and is subject to periodic audits and examinations of its financial statements that are prepared on a basis of accounting other than GAAP (for example, fair value, as defined under ASC 820, is not required to be used for assets or liabilities for such compliance reporting). As of March 31, 2022, SBIC II was in compliance with its regulatory requirements.

2024 Notes

As of March 31, 2022 and September 30, 2021, we had zero and $86.3 million in aggregate principal amount of 2024 Notes outstanding, respectively. The 2024 Notes were redeemed on November 13, 2021 at a redemption price of $25.00 per 2024 Note, plus accrued and unpaid interest to November 13, 2021, pursuant to the indenture governing the 2024 Notes. Interest on the 2024 Notes was paid quarterly on January 15, April 15, July 15 and October 15, at a rate of 5.5% per year.

2026 Notes

2026 Notes-2

In October 2021, we issued $165.0 million in aggregate principal amount of our 2026 Notes-2 at a public offering price per note of 99.4%. Interest on the 2026 Notes-2 is paid semi-annually on May 1 and November 1 of each year, at a rate of 4.00% per year, commencing May 1, 2022. The 2026 Notes-2 mature on November 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes-2 are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes-2 are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes-2 on any securities exchange or automated dealer quotation system.

11. COMMITMENTS AND CONTINGENCIES

From time to time, we, the Investment Adviser or the Administrator may be a party to legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Unfunded debt and equity investments, if any, are disclosed in the Consolidated Schedules of Investments. Under these arrangements, we may be required to supply a letter of credit to a third party if the portfolio company were to request a letter of credit. As of March 31, 2022 and September 30, 2021, we had $155.9 million and $104.8 million, respectively, in commitments to fund investments. For the same periods, there were no letters of credit issued.

PENNANTPARK INVESTMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)

March 31, 2022

12. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES

We must determine which, if any, of our unconsolidated controlled portfolio companies is a "significant subsidiary" within the meaning of Regulation S-X. We have determined that, as of September 30, 2021, PennantPark Senior Loan Fund, LLC, PT Networks, LLC and RAM Energy Holdings LLC triggered at least one of the significance tests. As a result and in accordance with Rule 3-09 of Regulation S-X, presented below is summarized unaudited financial information for RAM Energy Holdings LLC for the three and six months ended March 31, 2022 and 2021. Similarly, in accordance with Rule 4-08(g) of Regulation S-X, which requires summarized financial information to be included in the notes to the Company’s financial statements, please refer to Note 4 to review the Statement of Assets and Liabilities as well as the Statement of Operations for PennantPark Senior Loan Fund, LLC. PennantPark Senior Loan Fund, LLC did not meet the significance threshold under Rule 3-09 which requires separate audited financial statements. Our investment in PT Networks, LLC was realized on February 14, 2022.

RAM Energy Holdings LLC:


	Three Months Ended March 31,						Six Months Ended March 31,
Income Statement	2022			2021			2022			2021
Total revenue	$	5,062		$	21,121		$	17,796		$	27,090
Total expenses		(7,523	)		(10,357	)		(16,838	)		(17,697	)
Net income (loss)	$	(2,460	)	$	10,764		$	958		$	9,393

13. STOCK REPURCHASE PROGRAM

On February 9, 2022, we announced a share repurchase program which allows us to repurchase up to $25 million of our outstanding common stock in the open market at prices below our net asset value as reported in our then most recently published consolidated financial statements. The shares may be purchased from time to time at prevailing market prices, through open market transactions, including block transactions. Unless extended by our board of directors, the program, which may be implemented at the discretion of management, will expire on the earlier of March 31, 2023 and the repurchase of $25 million of common stock. During the three months ended March 31, 2022, we repurchased 913,454 shares of common stock in open market transactions for an aggregate cost (including transaction costs) of $7.1 million. During the three months ended March 31, 2021, we did not make any repurchases of shares of our common stock.

14. SUBSEQUENT EVENTS

On April 14, 2022, listing and trading of the Company's common stock commenced on the New York Stock Exchange after the Company voluntarily withdrew the principal listing of its common stock from The Nasdaq Stock Market LLC ("Nasdaq") effective at market close on April 13, 2022.

[•]

Report of Independent Regis tered Public Accounting Firm

To the Stockholders and Board of Directors of PennantPark Investment Corporation and its Subsidiaries

Results of Review of Interim Financial Statements

We have reviewed the accompanying consolidated statement of assets and liabilities of PennantPark Investment Corporation and its Subsidiaries (collectively referred to as the Company), including the consolidated schedule of investments, as of March 31, 2022, and the related consolidated statements of operations and changes in net assets for the three-month and six-month periods ended March 31, 2022 and 2021, and cash flows for the six-month periods ended March 31, 2022 and 2021, and the related notes to the consolidated financial statements (collectively, the interim financial information or financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of September 30, 2021, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended (not presented herein), and in our report dated November 17, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities as of September 30, 2021, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities from which it has been derived.

Basis for Review Results

These interim financial statements are the responsibility of the Company’s management. We conducted our reviews in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

/s/ RSM US LLP

New York, New York

May 4, 2022

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS O F FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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

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our future operating results;

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our business prospects and the prospects of our prospective portfolio companies, including as a result of the current pandemic caused by COVID-19 or any worsening there of;

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changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets that could result in changes to the value of our assets, including changes from the impact of the current COVID-19 pandemic or any worsening there of;

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

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the dependence of our future success on the general economy and its impact on the industries in which we invest;

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the impact of a protracted decline in the liquidity of credit markets on our business;

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the impact of investments that we expect to make;

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the impact of fluctuations in interest rates and foreign exchange rates on our business and our portfolio companies;

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our contractual arrangements and relationships with third parties;

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the valuation of our investments in portfolio companies, particularly those having no liquid trading market;

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the ability of our prospective portfolio companies to achieve their objectives;

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our expected financings and investments;

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the adequacy of our cash resources and working capital;

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the timing of cash flows, if any, from the operations of our prospective portfolio companies;

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

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the ability of our Investment Adviser to locate suitable investments for us and to monitor and administer our investments;

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the impact of future legislation and regulation on our business and our portfolio companies; and

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the impact of the United Kingdom’s withdrawal from the European Union and other world economic and political issues.

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

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

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

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

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

Overview

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

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

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

Organization and Structure of PennantPark Investment Corporation

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

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

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

COVID-19 Developments

COVID-19 was first detected in December 2019 and has since been identified as a global pandemic by the World Health Organization. The effect of the ongoing COVID-19 pandemic or any worsening thereof, uncertainty relating to more contagious strains of the virus, the length of recovery of certain economic sectors in the U.S. and globally and the speed and efficiency of the vaccination process, including the extent to which the available vaccines are ineffective against any new COVID- 19 variants may create stress on the market and may affect some of our portfolio companies. We cannot predict the full impact of the COVID-19 pandemic, including any worsening thereof or its duration in the United States and globally and any impact to our business operations or the business operations of our portfolio companies.

Due to the nature of these governmental restrictions and their potentially long-lasting duration, some portfolio companies, especially those in vulnerable industries such as retail, food and beverage and travel, have experienced significant financial distress and may default on their financial obligations to us and their other capital providers. Moreover, certain of our portfolio companies that remain subject to prolonged and severe financial distress, have substantially curtailed their operations, deferred capital expenditures, furloughed or laid off workers and/or terminated relationships with their service providers. Depending on the length and magnitude of the disruption to the operations of our portfolio companies, certain portfolio companies may experience financial distress and possibly default on their financial obligations to us and their other capital providers in the future. These developments could impact the value of our investments in such portfolio companies.

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

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U.S. and global economic recovery;

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changes in interest rates, including LIBOR;

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

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disruptions to supply-chains and price volatility;

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

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uncertainty regarding future governmental and regulatory policies.

The business disruption and financial harm resulting from the COVID-19 pandemic experienced by some of our portfolio companies may reduce, over time, the amount of interest and dividend income that we receive from such investments and may require us to provide an increase of capital to such companies in the form of follow on investments. In connection with the adverse effects of the COVID-19 pandemic, we may also need to restructure the capitalization of some of our portfolio companies, which could result in reduced interest payments, an increase in the amount of PIK interest we receive or a permanent reduction in the value of our investments. If our net investment income decreases, the percentage of our cash flows dedicated to debt servicing and distribution payments to stockholders would subsequently increase. This has required us to reduce the amount of our distributions to stockholders as compared to distributions in previous years. As of March 31, 2022, we had one portfolio company on non-accrual status, and the continuing impact of the COVID-19 pandemic, or any worsening thereof, may result in portfolio investments being placed on non-accrual status in the future.

Additionally, as of March 31, 2022 and September 30, 2021, our asset coverage ratio, as computed in accordance with the 1940 Act, was 227% and 221%, respectively. The Truist Credit Facility includes standard covenants and events of default provisions. If we fail to make the required payments or breach the covenants therein, it could result in a default under the Truist Credit Facility. Failure to cure such default or obtain a waiver from the appropriate party would result in an event of default, and the lenders may accelerate the repayment of our indebtedness under the Truist Credit Facility, such that all amounts owed are due immediately at the time of default. Such an action would negatively affect our liquidity, business, financial condition, results of operations, cash flows and ability to pay distributions to our stockholders.

We are also subject to financial risks, including changes in market interest rates. As of March 31, 2022, our interest bearing debt portfolio consisted of 99% variable-rate investments. The variable-rate loans are usually based on a floating interest rate index such as LIBOR and typically have durations of three months after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In addition, the Truist Credit Facility also has floating rate interest provisions, with pricing set at 225 basis points over LIBOR (or an alternative risk-free floating interest rate index). In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced interest rates, which has caused LIBOR to decrease. Due to such rates, our gross investment income may decrease, which could result in a decrease in our net investment income if such decreases in LIBOR are not offset by, among other things, a corresponding increase in the spread over LIBOR that we earn on such loans or a decrease in the interest rate of our floating interest rate liabilities tied to LIBOR. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” below.

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

LIBOR Developments

In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021. As of December 31, 2021, all non-U.S. dollar LIBOR publications have been phased out. The phase out of a majority of the U.S. dollar publications is currently delayed until June 30, 2023. The Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by the U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. Although SOFR appears to be the preferred replacement rate for U.S. dollar LIBOR, it is not possible at this time to predict the effect of any such changes, any establishment of alternative reference rates, whether the COVID-19 pandemic will have further effect on LIBOR transition timelines, or other reforms to LIBOR that may be enacted.

The effect of the establishment of alternative reference rates or other reforms to LIBOR or other reference rates is complex and could have a material adverse effect on our business, financial condition and results of operations. Given the inherent differences between LIBOR and SOFR, or any other alternative benchmark rate that may be established, there are continuing uncertainties regarding the transition from LIBOR, including, but not limited to, the need to amend all contracts with LIBOR as the referenced rate and how this will impact the cost of variable rate debt and certain derivative financial instruments. In addition, SOFR or other replacement rates may fail to gain market acceptance. Any failure of SOFR or alternative reference rates to gain market acceptance could adversely affect the return on, value of and market for securities linked to such rates.

Factors such as the pace of the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rate, prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates could also have a material adverse effect on our business, financial condition and results of operations.

Revenues

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

Expenses

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

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the cost of calculating our net asset value, including the cost of any third-party valuation services;

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the cost of effecting sales and repurchases of shares of our common stock and other securities;

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fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence and reviews of prospective investments or complementary businesses;

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expenses incurred by the Investment Adviser in performing due diligence and reviews of investments;

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transfer agent and custodial fees;

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fees and expenses associated with marketing efforts;

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federal and state registration fees and any exchange listing fees;

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federal, state, local and foreign taxes;

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independent directors’ fees and expenses;

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brokerage commissions;

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fidelity bond, directors and officers, errors and omissions liability insurance and other insurance premiums;

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

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

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costs associated with our reporting and compliance obligations under the 1940 Act, the 1958 Act and applicable federal and state securities laws; and

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all other expenses incurred by either the Administrator or us in connection with administering our business, including payments under our Administration Agreement that will be based upon our allocable portion of overhead, and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer and their respective staffs.

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

PORTFOLIO AND INVESTMENT ACTIVITY

As of March 31, 2022, our portfolio totaled $1,214.0 million, which consisted of $667.2 million of first lien secured debt, $134.8 million of second lien secured debt, $109.9 million of subordinated debt (including $76.1 million in PSLF) and $302.1 million of preferred and common equity (including $48.1 million in PSLF). Our debt portfolio consisted of 99% variable-rate investments and 1% fixed-rate investments. As of March 31, 2022, we had one portfolio company on non-accrual, representing 3.5% and 2.8% of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $70.5 million as of March 31, 2022. Our overall portfolio consisted of 113 companies with an average investment size of $10.7 million, had a weighted average yield on interest bearing debt investments of 8.4% and was invested 55% in first lien secured debt, 11% in second lien secured debt, 9% in subordinated debt (including 6% in PSLF) and 25% in preferred and common equity (including 4% in PSLF). As of March 31, 2022, all of the investments held by PSLF were first lien secured debt.

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

For the three months ended March 31, 2022, we invested $178.0 million in eight new and 29 existing portfolio companies with a weighted average yield on debt investments of 7.2%. Sales and repayments of investments for the three months ended March 31, 2022 totaled $405.5 million. For the six months ended March 31, 2022, we invested $473.1 million in 24 new and 59 existing portfolio companies with a weighted average yield on debt investments of 7.8%. Sales and repayments of investments for the six months ended March 31, 2022 totaled $537.7 million.

For the three months ended March 31, 2021, we invested $74.8 million in three new and eight existing portfolio companies with a weighted average yield on debt investments of 7.9%. Sales and repayments of investments for the three months ended March 31, 2021 totaled $65.0 million. For the six months ended March 31, 2021, we invested $143.0 million in seven new and 23 existing portfolio companies with a weighted average yield on debt investments of 8.8%. Sales and repayments of investments for the six months ended March 31, 2021 totaled $167.6 million.

PennantPark Senior Loan Fund, LLC

As of March 31, 2022, PSLF’s portfolio totaled $446.1 million, consisted of 60 companies with an average investment size of $7.4 million and had a weighted average yield on debt investments of 7.2%.

As of September 30, 2021, PSLF’s portfolio totaled $405.2 million, consisted of 47 companies with an average investment size of $8.6 million and had a weighted average yield on debt investments of 7.2%.

For the three months ended March 31, 2022, PSLF invested $27.4 million (of which $11.5 million was purchased from the Company) in six new portfolio companies with a weighted average yield on debt investments of 7.5%. PSLF’s sales and repayments of investments for the same period totaled $2.3 million. For the six months ended March 31, 2022, PSLF invested $78.1 million (of which $59.6 million was purchased from the Company) in 15 new and two existing portfolio companies with a weighted average yield on debt investments of 7.5%. PSLF’s sales and repayments of investments for the same period totaled $37.9 million.

For the three months ended March 31, 2021, PSLF invested $32.5 million (of which $15.5 million was purchased from the Company) in four new and two existing portfolio companies with a weighted average yield on debt investments of 8.0%. PSLF’s sales and repayments of investments for the same period totaled $4.9 million. For the six months ended March 31, 2021, PSLF invested $63.3 million (of which $37.8 million was purchased from the Company) in six new and six existing portfolio companies with a weighted average yield on debt investments of 7.5%. PSLF’s sales and repayments of investments for the same period totaled $40.7 million.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions, including the credit worthiness of our portfolio companies and the global outbreak of COVID-19. We may reclassify certain prior period

amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to ASC serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements. We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the six months from those disclosed in our 2021 Annual Report on Form 10-K.

Investment Valuations

(1)

Our quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of our Investment Adviser responsible for the portfolio investment;

(2)

Preliminary valuation conclusions are then documented and discussed with the management of the Investment Adviser;

(3)

(4)

(5)

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


Level 1:	Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2:	Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3:	Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our Credit Facilities, 2026 Notes, 2026-2 Notes and our SBA debentures are classified as Level 3. Our 2024 Notes are classified as Level 1, as they were valued using the closing price from the primary exchange. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.

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

In addition to using the above inputs to value cash equivalents, investments, our SBA debentures, our 2024 Notes, our 2026 Notes, 2026 Notes-2 and our Credit Facilities, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Credit Facilities. We elected to use the fair value option for the Credit Facilities to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Credit Facilities for both the three months ended March 31, 2022 and 2021. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facilities are reported in our Consolidated Statements of Operations. We elect not to apply ASC 825-10 to any other financial assets or liabilities, including the 2024 Notes, 2026 Notes, 2026 Notes-2 and SBA debentures.

For the three and six months ended March 31, 2022, the Truist Credit Facility had a net change in unrealized depreciation of $1.3 million and $0.3 million, respectively. For the three and six months ended March 31, 2021, our Credit Facilities had a net change in unrealized appreciation of $3.8 million and $16.9 million, respectively. As of March 31, 2022 and September 30, 2021, the net unrealized depreciation on the Truist Credit Facility totaled $2.0 million and $1.7 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Credit Facilities in a manner consistent with the valuation process that the board of directors uses to value our investments.

Revenue Recognition

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

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

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

Foreign Currency Translation

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

Fair value of investment securities, other assets and liabilities – at the exchange rates prevailing at the end of the applicable period; and

Purchases and sales of investment securities, income and expenses – at the exchange rates prevailing on the respective dates of such transactions.

Payment-in-Kind, or PIK Interest

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

Federal Income Taxes

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

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

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

For the three and six months ended March 31, 2022, we recorded a provision for taxes on net investment income of $0.2 million and $0.4 million respectively, all of which pertains to U.S. federal excise tax. For the three and six months ended March 31, 2021, we recorded a provision for taxes on net investment income of $0.2 million and $0.3 million respectively, all of which pertains to U.S. federal excise tax.

We have formed the Taxable Subsidiary, which is subject to tax as a corporation. The Taxable Subsidiary allows us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.

RESULTS OF OPERATIONS

Set forth below are the results of operations for the three and six months ended March 31, 2022 and 2021.

Investment Income

Investment income for the three and six months ended March 31, 2022 was $24.3 million and $52.7 million, respectively, which was attributable to $14.5 million and $34.6 million from first lien secured debt, $6.3 million and $10.8 million from second lien secured debt, $0.4 million and $2.3 million from subordinated debt and $3.1 million and $4.9 million from preferred and common equity, respectively. This compares to Investment income for the three and six months ended March 31, 2021 was $19.2 million and $38.0 million, respectively, which was attributable to $10.9 million and $22.1 million from first lien secured debt, $5.8 million and $10.6 million from second lien secured debt, $1.7 million and $3.4 million from subordinated debt and $0.9 million and $1.9 million from preferred and common equity, respectively. The increase in investment income compared to the same periods in the prior year was primarily due to the increase in the size of our debt portfolio.

Expenses

Expenses for the three and six months ended March 31, 2022 totaled $12.7 million and $28.5 million, respectively. Base management fee for the same periods totaled $5.0 million and $10.1 million, performance base incentive fee for the same periods totaled zero and $2.7 million, debt related interest and expenses totaled $6.5 million and $13.4 million, general and administrative expenses totaled $1.0 million and $1.9 million and provision for taxes totaled $0.2 million and $0.4 million, respectively. This compares to net expenses for the three and six months ended March 31, 2021 totaled $10.5 million and $20.9 million, respectively. Base management fee for the same periods totaled $4.3 million and $8.4 million, debt related interest and expenses totaled $4.9 million and $9.9 million, general and administrative expenses totaled $1.1 million and $2.3 million and provision for taxes totaled $0.2 million and $0.3 million, respectively. The increase in expenses for the three months ended March 31, 2022 compared to the same period in the prior year was primarily due to increased financing costs .

Net Investment Income

Net investment income totaled $11.7 million and $24.2 million, or $0.18 and $0.36 per share, for the three and six months ended March 31, 2022, respectively. Net investment income totaled $8.8 million and $17.1 million, or $0.13 and $0.25 per share, for the three and six months ended March 31, 2021, respectively. The increase in net investment income compared to the same period in the prior year was primarily due to increased investment income.

Net Realized Gains or Losses

Sales and repayments of investments for the three and six months ended March 31, 2022 totaled $405.5 million and $537.7 million, respectively, and net realized gains totaled $142.8 million and $116.7 million, respectively. Sales and repayments of investments for the three and six months ended March 31, 2021 totaled $65.0 million and $167.6 million, respectively, and net realized gains (losses) totaled $0.3 million and ($17.3) million, respectively. The change in realized gains was primarily due to changes in the market conditions of our investments and the values at which they were realized.

Unrealized Appreciation or Depreciation on Investments and the Credit Facilities

For the three and six months ended March 31, 2022, we reported net change in unrealized depreciation on investments of $151.5 million and $104.7 million, respectively. For the three and six months ended March 31, 2021, we reported net change in unrealized appreciation on investments of $33.2 million and $126.7 million, respectively. As of March 31, 2022 and September 30, 2021, our net unrealized (depreciation) appreciation on investments totaled $(70.5) million and $34.2 million, respectively. The net change in unrealized depreciation on our investments compared to the same period in the prior year was primarily due to the reversal of the unrealized appreciation of PT Network Intermediate Holdings, LLC after realizing the investment.

For the three and six months ended March 31, 2022, the Truist Credit Facility had a net change in unrealized depreciation of $1.3 million and $0.3 million, respectively. For the three and six months ended March 31, 2021, the Truist Credit Facility had a net change in unrealized appreciation of $3.8 million and $16.9 million, respectively, respectively. As of March 31, 2022 and September 30, 2021, the net unrealized depreciation on the Credit Facilities totaled $2.0 million and $1.7 million, respectively. The net change in unrealized depreciation compared to the same periods in the prior year was primarily due to changes in the capital markets.

Net Change in Net Assets Resulting from Operations

Net change in net assets resulting from operations totaled $3.2 million and $28.7 million, or $0.05 and $0.43 per share, for the three and six months ended March 31, 2022, respectively. Net change in net assets resulting from operations totaled $38.5 million and $109.6 million, or $0.57 and $1.64 per share, for the three and six months ended March 31, 2021, respectively. The decrease in the net change in net assets from operations for the three and six months ended March 31, 2022 compared to the same periods in the prior year was primarily due to a decrease in unrealized appreciation.

LIQUIDITY AND CAPITAL RESOURCES

Our liquidity and capital resources are derived primarily from proceeds of securities offerings, debt capital and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives. As of March 31, 2022, in accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing, excluding SBA debentures pursuant to exemptive relief from the SEC received in June 2011. This “Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

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

As of March 31, 2022 and September 30, 2021, our asset coverage ratio, computed in accordance with the 1940 Act was 227% and 221%, respectively.

The annualized weighted average cost of debt for the six months ended March 31, 2022 and 2021, inclusive of the fee on the undrawn commitment and amendment costs on the Credit Facilities, amortized upfront fees on SBA debentures, was 4.8% and 3.5%, respectively.

As of March 31, 2022, we had the multi-currency Truist Credit Facility for up to $465.0 million (increased from $435.0 million in December 2021) in borrowings with certain lenders and Truist Bank, acting as administrative agent, and JPMorgan Chase Bank, N.A., acting as syndication agent for the lenders. As of March 31, 2022 and September 30, 2021, we had $217.9 million and $316.5 million, respectively, in outstanding borrowings under the Truist Credit Facility. The Truist Credit Facility had a weighted average interest rate of 2.8% and 2.4%, respectively, exclusive of the fee on undrawn commitments, as of March 31, 2022 and September 30, 2021. The Truist Credit Facility is a revolving facility with a stated maturity date of September 4, 2024, a one-year term-out period on September 4, 2023 and pricing set at 225 basis points over LIBOR (or an alternative risk-free floating interest rate index). As of March 31, 2022 and September 30, 2021, we had $247.1 million and $118.5 million of unused borrowing capacity under the Truist Credit Facility, respectively, subject to leverage and borrowing base restrictions. The Truist Credit Facility is secured by substantially all of our assets excluding assets held by SBIC II. As of March 31, 2022, we were in compliance with the terms of the Truist Credit Facility.

As of March 31, 2022, we had $150.0 million in aggregate principal amount of 2026 Notes outstanding. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1, at a rate of 4.50% per year, commencing November 1, 2021. The 2026 Notes mature on May 1, 2026, and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are direct unsecured obligations and rank pari passu in right of payment with future unsecured unsubordinated indebtedness. The 2026 Notes are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities.

As of March 31, 2022, we had $165.0 million in aggregate principal amount of 2026 Notes-2 outstanding. Interest on the 2026 Notes is paid semi-annually on May 1 and November 1, at a rate of 4.0% per year, commencing May 1, 2022. The 2026 Notes-2 mature on November 1, 2026, and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes-2 are direct unsecured obligations and rank pari passu in right of payment with future unsecured unsubordinated indebtedness. The 2026 Notes-2 are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities.

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

We have entered into certain contracts under which we have material future commitments. Under our Investment Management Agreement, which was reapproved by our board of directors (including a majority of our directors who are not interested persons of us or the Investment Adviser) in February 2022 PennantPark Investment Advisers serves as our investment adviser. PennantPark Investment, through the Investment Adviser, provides similar services to SBIC II under its investment management agreement with us. SBIC II’s investment management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. Payments under our Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our average adjusted gross assets and (2) an incentive fee based on our performance.

Under our Administration Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in February 2022 the Administrator furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. PennantPark Investment, through the Administrator, provides similar services to SBIC II under its administration agreements, which are intended to have no effect on the consolidated administration fee. If requested to provide significant managerial assistance to our portfolio companies, we or the Administrator will be paid an additional amount based on the services provided. Payment under our Administration Agreement is based upon our allocable portion of the Administrator’s overhead in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of our Chief Compliance Officer, Chief Financial Officer and their respective staffs.

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

SBIC II is able to borrow funds from the SBA against regulatory capital (which approximates equity capital) that is paid-in and is subject to customary regulatory requirements including an examination by the SBA. We have funded SBIC II with $75.0 million of equity capital and it had SBA debentures outstanding of $27.5 million and $63.5 million as of March 31, 2022 and September 30, 2021, respectively. SBA debentures are non-recourse to us and may be prepaid at any time without penalty. The interest rate of SBA debentures is fixed at the time of issuance, often referred to as pooling, at a market-driven spread over 10-year U.S. Treasury Notes. Under current SBA regulations, a SBIC may individually borrow up to a maximum of $175.0 million, which is up to twice its potential regulatory capital, and as part of a group of SBICs under common control may borrow a maximum of $350 million in the aggregate.

Our fixed-rate SBA debentures as of March 31, 2022 and September 30, 2021 were as follows:


Issuance Dates	Maturity	Fixed All-in Coupon Rate (1)			As of March 31, 2022 Principal Balance
September 20, 2017	September 1, 2027		2.9	%		27,500

Issuance Dates	Maturity	Fixed All-in Coupon Rate (1)			As of September 30, 2021 Principal Balance
September 20, 2017	September 1, 2027		2.9	%	$	27,500
March 21, 2018	March 1, 2028		3.5			36,000
Weighted Average Rate / Total			3.2	%	$	63,500

(1)

Excluding 3.4% of upfront fees.

The SBIC program is designed to stimulate the flow of capital into eligible businesses. Under SBA regulations, SBIC II is subject to regulatory requirements, including making investments in SBA eligible businesses, investing at least 25% of regulatory capital in eligible smaller businesses, as defined under the 1958 Act, placing certain limitations on the financing terms of investments, prohibiting investment in certain industries and requiring capitalization thresholds that limit distributions to us, and is subject to periodic audits and examinations of their financial statements that are prepared on a basis of accounting other than GAAP (for example, fair value, as defined under ASC 820, is not required to be used for assets or liabilities for such compliance reporting). As of March 31, 2022, SBIC II was in compliance with their regulatory requirements.

In accordance with the 1940 Act, with certain limited exceptions, PennantPark Investment is only allowed to borrow amounts such that our required 150% asset coverage ratio is met after such borrowing. As of March 31, 2022 and September 30, 2021, we excluded the principal amounts of our SBA debentures from our asset coverage ratio pursuant to SEC exemptive relief. In 2011, we received exemptive relief from the SEC allowing us to modify the asset coverage ratio requirement to exclude the SBA debentures from the calculation. Accordingly, our ratio of total assets on a consolidated basis to outstanding indebtedness may be less than 150% which, while providing increased investment flexibility, also increases our exposure to risks associated with leverage.

As of March 31, 2022 and September 30, 2021, we had cash and cash equivalents of $26.3 million and $20.4 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.

Our operating activities provided cash of $89.8 million for the six months ended March 31, 2022, and our financing activities used cash of $83.9 million for the same period. Our operating activities provided cash primarily due to our investment activities and our financing activities used cash primarily due to the repayments under the Truist Credit Facility.

Our operating activities provided cash of $46.8 million for the six months ended March 31, 2021 and our financing activities used cash of $38.8 million for the same period. Our operating activities provided cash primarily from our investment activities and our financing activities used cash primarily to pay down the Truist Credit Facility and our SBA Debentures.

PennantPark Senior Loan Fund, LLC

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


($ in thousands)	March 31, 2022			September 30, 2021
Total investments	$	446,088		$	405,232
Weighted average cost yield on income producing investments		7.2	%		7.1	%
Number of portfolio companies in PSLF		60			47
Largest portfolio company investment	$	16,727		$	16,817
Total of five largest portfolio company investments	$	73,858		$	74,445

Below is a listing of PSLF’s individual investments as of March 31, 2022:


Issuer Name	Maturity	Industry	Current Coupon			Basis Point Spread Above Index (1)		Par		Cost		Fair Value (2)
First Lien Secured Debt - 560.7%
Ad.net Acquisition, LLC	5/6/2026	Media		7.00	%	3M L+600			4,963	$	4,963	$	4,963
Altamira Technologies, LLC	7/24/2025	Aerospace and Defense		9.00	%	3M L+800			896		888		860
American Insulated Glass, LLC	12/21/2023	Building Materials		6.50	%	3M L+550			12,560		12,508		12,560
Any Hour Services	7/21/2027	Personal, Food and Miscellaneous Services		6.75	%	3M L+575			6,484		6,475		6,484
Apex Service Partners, LLC	7/31/2025	Personal, Food and Miscellaneous Services		6.27	%	1M L+550			6,569		6,492		6,569
Apex Service Partners, LLC Term Loan B	7/31/2025	Personal, Food and Miscellaneous Services		6.55	%		—		3,323		3,294		3,323
Applied Technical Services, LLC	12/29/2026	Environmental Services		6.75	%	3M L+575			7,406		7,313		7,314
Bottom Line Systems, LLC	2/13/2023	Healthcare, Education and Childcare		6.25	%	3M L+550			13,729		13,710		13,729
CF512, Inc.	8/20/2026	Media		7.00	%	3M L+600			2,992		2,963		2,963
Crash Champions, LLC	8/5/2025	Auto Sector		6.00	%	3M L+500			5,955		5,839		5,806
Dr. Squatch, LLC	8/27/2026	Personal and Non-Durable Consumer Products		7.00	%	3M L+600			6,484		6,357		6,484
DRS Holdings III, Inc.	11/3/2025	Consumer Products		6.75	%	3M L+575			13,360		13,280		13,293
Duraco Specialty Tapes, LLC	6/30/2024	Containers and Packaging		6.50	%	1M L+550			4,000		3,938		3,932
ECL Entertainment, LLC	3/31/2028	Hotels, Motels, Inns and Gaming		8.25	%	3M L+750			4,581		4,581		4,600
ECM Industries, LLC	12/23/2025	Electronics		5.75	%	3M L+475			2,827		2,758		2,770
Global Holdings InterCo LLC	3/16/2026	Banking, Finance, Insurance & Real Estate		7.00	%	3M L+600			7,425		7,392		7,351
Graffiti Buyer, Inc.	8/10/2027	Distribution		6.75	%	3M L+575			1,984		1,946		1,930
Hancock Roofing and Construction L.L.C.	12/31/2026	Insurance		6.26	%	3M L+500			5,925		5,925		5,925
Holdco Sands Intermediate, LLC	11/23/2028	Aerospace and Defense		7.00	%	3M L+600			4,000		3,926		3,920
HW Holdco, LLC	12/10/2024	Media		6.44	%	1M L+575			14,513		14,350		14,222
IG Investments Holdings, LLC	9/22/2028	Business Services		7.01	%	3M L+600			4,496		4,406		4,428
Imagine Acquisitionco, Inc.	11/15/2027	Software		6.50	%	3M L+550			3,678		3,610		3,605
Integrity Marketing Acquisition, LLC	8/27/2025	Insurance		6.75	%	1M L+575			7,828		7,785		7,753
K2 Pure Solutions NoCal, L.P.	12/20/2023	Chemicals, Plastics and Rubber		9.00	%	1M L+800			14,513		14,347		14,367
Lash OpCo, LLC	2/18/2027	Consumer Products		8.01	%	3M L+700			9,975		9,840		9,975
LAV Gear Holdings, Inc.	10/31/2024	Leisure, Amusement, Motion Pictures, Entertainment		8.50	%	3M L+750			2,131		2,120		2,082
Lightspeed Buyer Inc.	2/3/2026	Healthcare, Education and Childcare		6.50	%	1M L+575			12,408		12,153		12,284
Lombart Brothers, Inc.	4/13/2023	Healthcare, Education and Childcare		7.25	%	3M L+625			16,727		16,689		16,727
MAG DS Corp.	4/1/2027	Aerospace and Defense		6.50	%	3M L+550			5,600		5,117		5,040
Mars Acquisition Holdings Corp.	5/14/2026	Media		6.50	%	1M L+550			7,960		7,897		7,900
MBS Holdings, Inc.	4/16/2027	Telecommunications		6.75	%	3M L+575			7,444		7,359		7,369
MeritDirect, LLC	5/23/2024	Media		6.50	%	3M L+550			13,130		13,022		13,130
Municipal Emergency Services, Inc.	9/28/2027	Distribution		6.00	%	3M L+500			4,175		4,108		4,037
NBH Group LLC	8/19/2026	Healthcare, Education and Childcare		6.50	%	1M L+650			7,542		7,456		7,505
OIS Management Services, LLC	7/9/2026	Healthcare, Education and Childcare		5.75	%	3M L+475			3,883		3,845		3,844
PlayPower, Inc.	5/8/2026	Consumer Products		6.50	%	3M L+550			2,594		2,491		2,447
Quantic Electronics, LLC	11/19/2026	Aerospace and Defense		7.25	%	1M L+625			3,429		3,362		3,361
Radius Aerospace, Inc.	3/31/2025	Aerospace and Defense		6.75	%	3M L+575			12,784		12,665		12,656
Rancho Health MSO, Inc.	12/18/2025	Healthcare, Education and Childcare		6.75	%	3M L+575			5,207		5,207		5,207
Recteq, LLC	1/29/2026	Consumer Products		7.00	%	3M L+600			9,900		9,750		9,752
Research Now Group, LLC and Dynata, LLC	12/20/2024	Business Services		6.50	%	3M L+550			14,618		14,495		14,329
Riverpoint Medical, LLC	6/20/2025	Healthcare, Education and Childcare		6.75	%	3M L+575			3,229		3,207		3,220
Sales Benchmark Index LLC	1/3/2025	Business Services		7.75	%	3M L+600			7,267		7,164		7,267
Sargent & Greenleaf Inc.	12/20/2024	Electronics		7.00	%	3M L+550			5,137		5,137		5,137
Signature Systems Holding Company	5/3/2024	Chemicals, Plastics and Rubber		7.50	%	1M L+650			13,125		13,024		13,125
Solutionreach, Inc.	1/17/2024	Communications		6.75	%	1M L+575			11,815		11,767		11,295
STV Group Incorporated	12/11/2026	Transportation		5.71	%	1M L+525			12,099		12,024		11,736
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC)	8/16/2027	Aerospace and Defense		7.01	%	1M L+600			4,988		4,889		4,823
TAC LifePort Purchaser, LLC	3/1/2026	Aerospace and Defense		7.00	%	3M L+600			4,646		4,646		4,646
TeleGuam Holdings, LLC	11/20/2025	Telecommunications		5.50	%	1M L+450			4,566		4,544		4,521
Teneo Holdings LLC	7/18/2025	Financial Services		6.25	%	1M L+525			2,981		2,967		2,946
The Bluebird Group LLC	7/27/2026	Business Services		8.00	%	3M L+700			3,000		3,000		3,060
The Vertex Companies, LLC	8/30/2027	Business Services		6.50	%	1M L+550			4,554		4,505		4,495
TPC Canada Parent, Inc. and TPC US Parent, LLC	11/24/2025	Food		6.25	%	3M L+525			5,565		5,401		5,398
TVC Enterprises, LLC	3/26/2026	Transportation		7.00	%	1M L+575			12,709		12,654		12,455
TWS Acquisition Corporation	6/16/2025	Education		7.25	%	3M L+625			9,145		9,101		9,145
Tyto Athene, LLC	4/3/2028	Aerospace and Defense		6.25	%	3M L+550			9,925		9,846		9,677
UBEO, LLC	4/3/2024	Printing and Publishing		5.51	%	1M L+450			4,686		4,664		4,592
Vision Purchaser Corporation	6/10/2025	Media		7.75	%	6M L+675			14,212		14,054		14,212
Wildcat Buyerco, Inc.	2/27/2026	Electronics		6.76	%	3M L+575			10,120		10,023		10,120
Zips Car Wash, LLC	3/1/2024	Business Services		7.75	%	3M L+675			7,498		7,356		7,423

Total First Lien Secured Debt											446,592		446,088
Total Investments - 560.7%


Cash and Cash Equivalents - 22.5%
BlackRock Federal FD Institutional 30		17,862		17,862
Total Cash and Cash Equivalents		17,862		17,862
Total Investments and Cash Equivalents - 583.2%	$	464,454	$	463,950
Liabilities in Excess of Other Assets — (483.2)%				(384,398	)
Members' Equity—100.0%			$	79,552

(1)

Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR, or “L” or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day LIBOR rate (1M L, 2M L, 3M L, or 6M L, respectively), at the borrower’s option. All securities are subject to a LIBOR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.

(2)

Valued based on PSLF’s accounting policy.

(3)

Represents the purchase of a security with delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded.

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


Issuer Name	Maturity	Industry	Current Coupon	Basis Point Spread Above Index (1)		Par		Cost		Fair Value (2)
First Lien Secured Debt - 570.7%
Ad.net Acquisition, LLC	05/06/26	Media	7.00%	3M L + 600		$	4,988	$	4,920	$	4,913
Altamira Technologies, LLC	07/24/25	Aerospace and Defense	8.00%	3M L+700			921		912		864
American Insulated Glass, LLC	12/21/23	Building Materials	6.50%	3M L+550			14,625		14,481		14,479
Any Hour Services	07/21/27	Personal, Food and Miscellaneous Services	6.75%	1M L+525			6,500		6,378		6,370
Apex Service Partners, LLC	07/31/25	Personal, Food and Miscellaneous Services	6.25%	1M L+550			6,569		6,518		6,504
Apex Service Partners, LLC Term Loan B	07/31/25	Personal, Food and Miscellaneous Services	6.55%		—		3,347		3,313		3,313
Applied Technical Services, LLC	12/29/26	Environmental Services	6.75%	3M L+575			7,444		7,336		7,295
Bottom Line Systems, LLC	02/13/23	Healthcare, Education and Childcare	6.25%	1M L+550			13,729		13,674		13,729
Crash Champions, LLC	08/05/25	Auto Sector	6.00%	1M L+525			5,985		5,873		5,865
DRS Holdings III, Inc.	11/03/25	Consumer Products	7.25%	1M L+625			13,428		13,335		13,334
ECL Entertainment, LLC	03/31/28	Hotels, Motels, Inns and Gaming	8.25%	3M L+750			4,604		4,560		4,707
ECM Industries, LLC	12/23/25	Electronics	5.50%	3M L+450			2,827		2,805		2,770
Global Holdings InterCo LLC	03/16/26	Banking, Finance, Insurance & Real Estate	7.00%	3M L+600			7,463		7,360		7,425
Hancock Roofing and Construction L.L.C.	12/31/26	Insurance	6.00%	3M L+500			5,955		5,819		5,895
Holdco Sands Intermediate, LLC	12/19/25	Aerospace and Defense	7.50%	3M L+600			12,071		11,934		12,010
HW Holdco, LLC	12/10/24	Media	5.50%	3M L+450			14,588		14,499		14,442
IMIA Holdings, Inc.	04/09/27	Aerospace and Defense	6.75%	3M L+600			9,059		8,890		8,878
Integrity Marketing Acquisition, LLC	08/27/25	Insurance	6.50%	3M L+550			7,868		7,803		7,829
Juniper Landscaping of Florida, LLC	12/22/21	Personal, Food and Miscellaneous Services	6.50%	3M L+550			9,420		9,420		9,420
K2 Pure Solutions NoCal, L.P.	12/20/23	Chemicals, Plastics and Rubber	8.00%	1M L+700			14,588		14,479		14,199
LAV Gear Holdings, Inc.	10/31/24	Leisure, Amusement, Motion Pictures, Entertainment	8.50%	3M L+750			2,120		2,107		1,987
Lightspeed Buyer Inc.	02/03/26	Healthcare, Education and Childcare	6.75%	1M L+550			12,472		12,273		12,472
Lombart Brothers, Inc.	04/13/23	Healthcare, Education and Childcare	7.25%	1M L+825			16,817		16,729		16,817
MAG DS Corp.	04/01/27	Aerospace and Defense	6.50%	1M L+550			5,837		5,581		5,253
Mars Acquisition Holdings Corp.	05/14/26	Media	6.50%	1M L+575			8,000		7,852		7,920
MBS Holdings, Inc.	04/16/27	Telecommunications	6.75%	3M L+550			7,481		7,338		7,332
MeritDirect, LLC	05/23/24	Media	6.50%	3M L+550			13,386		13,272		13,252
PlayPower, Inc.	05/08/26	Consumer Products	5.65%	3M L+575			3,805		3,778		3,736
Radius Aerospace, Inc.	03/31/25	Aerospace and Defense	6.75%	3M L+600			13,335		13,202		13,068
Rancho Health MSO, Inc.	12/18/25	Healthcare, Education and Childcare	6.75%	3M L+550			5,232		5,140		5,232
Recteq, LLC	01/29/26	Consumer Products	7.00%	3M L+450			9,950		9,775		9,851
Research Now Group, LLC and Dynata, LLC	12/20/24	Business Services	6.50%	3M L+600			14,695		14,602		14,508
Riverpoint Medical, LLC	06/20/25	Healthcare, Education and Childcare	5.50%	1M L+550			3,246		3,217		3,206
Sales Benchmark Index LLC	01/03/25	Business Services	7.75%	3M L+750			7,632		7,526		7,442
Sargent & Greenleaf Inc.	12/20/24	Electronics	7.00%	3M L+575			5,232		5,181		5,232
Signature Systems Holding Company	05/03/24	Chemicals, Plastics and Rubber	8.50%	1M L+525			13,500		13,397		13,365
Solutionreach, Inc.	01/17/24	Communications	6.75%	1M L+600			11,882		11,758		11,882
STV Group Incorporated	12/11/26	Transportation	5.33%	1M L+450			12,099		12,003		12,038
TAC LifePort Purchaser, LLC	03/01/26	Aerospace and Defense	7.00%	1M L+525			4,967		4,891		4,966
TeleGuam Holdings, LLC	11/20/25	Telecommunications	5.50%	3M L+525			4,593		4,558		4,547
Teneo Holdings LLC	07/18/25	Financial Services	6.25%	1M L+575			2,997		2,884		2,981
TPC Canada Parent, Inc. and TPC US Parent, LLC	11/24/25	Food	6.25%	1M L+625			5,593		5,537		5,425
TVC Enterprises, LLC	03/26/26	Transportation	6.75%	3M L+550			12,773		12,643		12,773
TWS Acquisition Corporation	06/16/25	Education	7.25%	3M L+450			9,648		9,515		9,648
Tyto Athene, LLC	04/03/28	Aerospace and Defense	6.25%	1M L+675			9,950		9,853		9,950
UBEO, LLC	04/03/24	Printing and Publishing	5.50%	1M L+500			4,710		4,676		4,687
Vision Purchaser Corporation	06/10/25	Media	7.75%				14,249		14,056		14,035
Wildcat Buyerco, Inc.	02/27/26	Electronics	6.00%				7,425		7,360		7,388
									—		—
Total First Lien Secured Debt							409,602		405,009		405,232
Cash and Cash Equivalents—18.9%									-		-
BlackRock Federal FD Institutional 30									11,013		11,013
US Bank Cash									—		—
Total Cash and Cash Equivalents									11,013		11,013
Total Investments and Cash Equivalents—592.7%								$	416,023	$	416,246
Liabilities in Excess of Other Assets—(492.7)%											(348,213	)
Members' Equity—100.0%										$	68,032

(1)

(2)

Valued based on PSLF’s accounting policy.

Below is the financial information for PSLF:


Consolidated Statements of Assets and Liabilities
($ In thousands)

	March 31, 2022
	(Unaudited)		September 30, 2021
Assets
Investments at fair value (cost—$446,592 and $405,009, respectively)	$	446,088	$	405,232
Cash and cash equivalents (cost—$17,862 and $11,013, respectively)		17,862		11,013
Interest receivable		1,415		1,175
Prepaid expenses and other assets		921		—
Total assets		466,286		417,421
Liabilities
Distribution payable to Members		4,000		2,800
Payable for investments purchased		—		12,793
Credit facility payable		9,000		224,000
2034 Asset-backed debt, net (par—$246,000)		243,702		—
Notes payable to members		125,756		106,041
Interest payable on credit facility		1,995		1,499
Interest payable on notes to members		1,635		1,644
Accrued other expenses		645		612
Total liabilities		386,733		349,389
Members' equity		79,552		68,032
Total liabilities and members' equity	$	466,286	$	417,421

(1)

As of March 31, 2022 and September 30, 2021, PSLF did not have any unfunded commitments to fund investments.


Consolidated Statements of Operations
(Unaudited)
($ In thousands)

	Three Months Ended March 31,					Six Months Ended March 31,
	2022			2021		2022			2021
Investment income:
Interest	$	7,698		$	6,696	$	15,269		$	13,258
Other income		39			290		142			727
Total investment income		7,737			6,986		15,410			13,985
Expenses:
Interest expense on credit facility and asset-backed debt		2,046			1,498		3,654			3,250
Interest expense on notes to members		2,430			2,381		4,869			4,683
Administrative services expenses		293			293		586			586
Other general and administrative expenses		112			112		223			223
Total expenses		4,881			4,283		9,333			8,742
Net investment income		2,856			2,702		6,077			5,242
Realized and unrealized (loss) gain on investments and credit facility foreign currency translations:
Net realized (loss) gain on investments		387			—		386			464
Net change in unrealized (depreciation) appreciation on:
Investments		(1,233	)		1,744		(727	)		4,454
Net change in unrealized (depreciation) appreciation on investments		(1,233	)		1,744		(727	)		4,454
Net realized and unrealized (loss) gain from investments		(846	)		1,744		(341	)		4,919
Net increase in members' equity resulting from operations	$	2,010		$	4,446	$	5,736		$	10,161

(1)

No management or incentive fees are payable by PSLF.

Recent Developments

Distributions

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

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

During the three and six months ended March 31, 2022, we declared distributions of $0.14 and $0.26 per share, for total distributions of $9.4 million and $17.4 million, respectively. For the same periods in the prior year, we declared distributions of $0.12 and $0.24 per share, for total distributions of $8.0 million and $16.1 million, respectively. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.

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

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

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

Recent Accounting Pronouncements

Stock Repurchase Program

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are subject to financial market risks, including changes in interest rates. As of March 31, 2022, our debt portfolio consisted of 99% variable-rate investments and 5% fixed rate investments. The variable-rate loans are usually based on a LIBOR (or an alternative risk-free floating interest rate index) rate and typically have durations of three months after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.

Assuming that the most recent Consolidated Statements of Assets and Liabilities was to remain constant, and no actions were taken to alter the interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates:


Change in Interest Rates	Change in Interest Income, Net of Interest Expense (in thousands)		Change in Interest Income, Net of Interest Expense Per Share
Down 1%	$	835	$	0.01
Up 1%		2,808		0.04
Up 2%		9,328		0.14
Up 3%		15,848		0.24
Up 4%	$	22,368	$	0.34

Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect net increase in net assets resulting from operations, or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds as well as our level of leverage. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income or net assets.

We may hedge against interest rate and foreign currency fluctuations by using standard hedging instruments such as futures, options and forward contracts or our Truist Credit Facility subject to the requirements of the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates and foreign currencies, they may also limit our ability to participate in benefits of lower interest rates or higher exchange rates with respect to our portfolio of investments with fixed interest rates or investments denominated in foreign currencies. During the periods covered by this Report, we did not engage in interest rate hedging activities or foreign currency derivatives hedging activities.

Item 4. Controls and Procedures

As of the period covered by this Report, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange 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 filings with the SEC 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.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHE R INFORMATION

Item 1. Legal Proceedings

None of us, our Investment Adviser or our Administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Investment Adviser or Administrator. From time to time, we, our Investment Adviser or Administrator may be a party to certain legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Ri sk Factors

In addition to the other information set forth in this Report, you should consider carefully the factors discussed below, as well as in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2021 filed on November 17, 2021 which could materially affect our business, financial condition and/or operating results. The risks described below, as well as in our Annual Report on Form 10-K, are not the only risks facing PennantPark Investment. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

The ongoing invasion of Ukraine by Russia and related sanctions have increased global political and economic uncertainty, which may have a material impact on the Company's portfolio and the value of your investment in the Company .

The ongoing invasion of Ukraine by Russia and related sanctions have increased global political and economic uncertainty. In February 2022, Russia invaded Ukraine and, in response, the United States and many other countries placed economic sanctions on certain Russian entities and individuals. Because Russia is a major exporter of oil and natural gas, the invasion and related sanctions have reduced the supply, and increased the price, of energy, which is accelerating inflation and may exacerbate ongoing supply chain issues. There is also the risk of retaliatory actions by Russia against countries which have enacted sanctions, including cyberattacks against financial and governmental institutions, which could result in business disruptions and further economic turbulence. Although the Company has no direct exposure to Russia or Ukraine, the broader consequences of the invasion may have a material adverse impact on the Company's portfolio and the value of your investment in the Company. Because this is an uncertain and evolving situation, its full impact is unknown at this time.

Legislation enacted in 2018 allows us to incur additional leverage.

A BDC has historically been able to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that its asset coverage, as defined in Section 61(a)(2) of the 1940 Act, equals at least 200% after such incurrence or issuance. In March 2018, the Consolidated Appropriations Act of 2018 (which includes the SBCAA) was enacted which amended the 1940 Act to decrease this percentage from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity) for a BDC that has received either stockholder approval or approval of a “required majority” (as defined in Section 57(o) of the 1940 Act) of its board of directors of the application of such lower asset coverage ratio to the BDC. On February 5, 2019, our stockholders approved such reduction, as approved by our board of directors on November 13, 2018. As of February 5, 2019, we are able to incur additional indebtedness so long as we comply with the applicable disclosure requirements, which may increase the risk of investing in us. Under the 200% minimum asset coverage ratio, we were permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity and, under the 150% minimum asset coverage ratio, we are permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a)(2) of the 1940 Act permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1-to-1 to a maximum of 2-to-1. In addition, since our base management fee is determined and payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expense may increase if we incur additional leverage. Effective February 5, 2019, base management fees were reduced from 1.50% to 1.00% on gross assets that exceed 200% of the Company’s total net assets as of the immediately preceding quarter-end.

Because we intend to distribute substantially all of our income to our stockholders to maintain our ability to be subject to tax as a RIC, we may need to raise additional capital to finance our growth. If funds are not available to us, we may need to curtail new investments, and our common stock value could decline.

In connection with satisfying the requirements to be subject to tax as a RIC for federal income tax purposes, we intend to distribute to our stockholders substantially all of our investment company taxable income and net capital gains each taxable year. However, we may retain all or a portion of our net capital gains and incur applicable income taxes with respect thereto and elect to treat such retained net capital gains as deemed dividend distributions to our stockholders.

As noted above, on November 13, 2018 and February 5, 2019, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act), and our stockholders, respectively, approved a reduction of our asset coverage ratio from 200% to 150%. As a result, as of February 6, 2019, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). If we incur additional indebtedness under this provision, the risk of investing in us will increase. If the value of our assets declines, we may be unable to satisfy this asset coverage test. If that happens, we may be required to sell a portion of our investments or sell additional common stock and, depending on the nature of our leverage, to repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous. In addition, the issuance of additional securities could dilute the percentage ownership of our current stockholders in us.

We are partially dependent on our SBIC Fund for cash distributions to enable us to meet the distribution requirements in order to permit us to be subject to tax as a RIC. In this regard, our SBIC Fund is limited by the SBA regulations governing SBICs from making certain distributions to us that may be necessary to satisfy the requirements to be subject to tax as a RIC. In such a case, we would need to request a waiver of the SBA’s restrictions for our SBIC Fund to make certain distributions to enable us to be subject to tax as a RIC. We cannot assure you that the SBA will grant such waiver, and if our SBIC Fund is unable to obtain a waiver, compliance with the SBA regulations may cause us to incur a corporate-level income tax.

If we incur additional debt, it could increase the risk of investing in our shares.

We have indebtedness outstanding pursuant to the Truist Credit Facility, 2024 Notes, 2026 Notes, 2026 Notes-2 and SBA debentures and expect in the future to borrow additional amounts under the Truist Credit Facility or other debt securities, subject to market availability, and, may increase the size of the Truist Credit Facility. We cannot assure you that our leverage will remain at current levels. The amount of leverage that we employ will depend upon our assessment of the market and other factors at the time of any proposed borrowing. Lenders have fixed dollar claims on our assets that are superior to the claims of our common stockholders or preferred stockholders, if any, and we have granted a security interest in our assets, excluding those of SBIC II, in connection with borrowings under the Truist Credit Facility. In the case of a liquidation event, those lenders would receive proceeds before our stockholders. Additionally, the SBA, as a lender and an administrative agent, has a superior claim over the assets of SBIC II in relation to our other creditors. Any future debt issuance will increase our leverage and may be subordinate to the Truist Credit Facility and SBA debentures. In addition, borrowings or debt issuances and SBA debentures, also known as leverage, magnify the potential for loss or gain on amounts invested and,

therefore, increase the risks associated with investing in our securities. Leverage is generally considered a speculative investment technique. If the value of our assets decreases, then leveraging would cause the net asset value attributable to our common stock to decline more than it otherwise would have had we not utilized leverage. Similarly, any decrease in our revenue would cause our net income to decline more than it would have had we not borrowed funds and could negatively affect our ability to make distributions on our common or preferred stock. Our ability to service any debt that we incur depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures.

Item 2. Unregistered Sales of Equi ty Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Repurchases of our common stock under our share repurchase program are as follows:


Period	Total Number of Shares Purchased		Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands)
January 1, 2022 through March 31, 2022		913,454	$	7.72		913,454	$	17,944
Total investments		913,454	$	7.72		913,454	$	17,944

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(1)	On February 9, 2022, we announced a share repurchase program which allows us to repurchase up to $25.0 million of our outstanding commons stock. Unless extended by our board of directors, the program will expire on the earlier of March 31, 2021 and the repurchase of $25.0 million of common stock.

Item 3. Defaults Upo n Senior Securities

None.

Item 4. Mine Saf ety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Unless specifically indicated otherwise, the following exhibits are incorporated by reference to exhibits previously filed with the SEC:


3.1	Articles of Incorporation (Incorporated by reference to Exhibit 99(a) to the Registrant’s Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2/A (File No. 333-140092), filed on April 5, 2007).

3.2	Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 814-00736), filed on May 11, 2020).

4.1	Form of Share Certificate (Incorporated by reference to Exhibit 99(d)(1) to the Registrant’s Registration Statement on Form N-2 (File No. 333-150033), filed on April 2, 2008).

14.1*	Joint Code of Ethics of the Registrant

31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.

31.2*	Certification of Chief Financial Officer pursuant to Rule 13a-14 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.

32.2*	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1	Privacy Policy of the Registrant (Incorporated by reference to Exhibit 99.1 to the Registrant’s Annual Report on Form 10-K (File No. 814-00736), filed on November 16, 2011).

* Filed herewith.

SIGNA TURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.


	PENNANTPARK INVESTMENT CORPORATION

Date: May 4, 2022	By:	/s/ Arthur H. Penn
		Arthur H. Penn
		Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer)

Date: May 4, 2022	By:	/s/ Richard Cheung
		Richard Cheung
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

TABLE OF CONTENTS

Part I Consolidated Item 1. Consolidated Financial Statements Item 1. Consolidated Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 2. Management S Discussion and Analysis O Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Item 4. Controls Part II Other Information Part II Othe Item 1. Legal Proceedings Item 1. Legal Item 1A. Risk Factors Item 1A. Ri Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 2. Unregistered Sales Of Equi Item 3. Defaults Upon Senior Securities Item 3. Defaults Upo Item 4. Mine Safety Disclosures Item 4. Mine Saf Item 5. Other Information Item 5. Other Item 6. Exhibits

Exhibits

3.1 Articles of Incorporation (Incorporated by reference to Exhibit 99(a) to the Registrants Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2/A (File No. 333-140092), filed on April 5, 2007). 3.2 Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 814-00736), filed on May 11, 2020). 4.1 Form of Share Certificate (Incorporated by reference to Exhibit 99(d)(1) to the Registrants Registration Statement on Form N-2 (File No. 333-150033), filed on April 2, 2008). 14.1* Joint Code of Ethics of the Registrant 31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended. 31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14 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. 32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.1 Privacy Policy of the Registrant (Incorporated by reference to Exhibit 99.1 to the Registrants Annual Report on Form 10-K (File No. 814-00736), filed on November 16, 2011).

PNNT 10-Q Quarter ended March 31, 2022

Exhibits